-----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, NDV/C0dVQJHWR0vTSUVvTxNUVGsq/pXUxYv77/jpjh2+c+qZ/Fj812+m8P7ZkvDp XMk8OirEANdwrx7IdVFIFA== 0000898430-99-002132.txt : 19990518 0000898430-99-002132.hdr.sgml : 19990518 ACCESSION NUMBER: 0000898430-99-002132 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19990517 GROUP MEMBERS: IT GROUP INC GROUP MEMBERS: SEISMIC ACQUISITION CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: EMCON CENTRAL INDEX KEY: 0000819977 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 941738964 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-39060 FILM NUMBER: 99625777 BUSINESS ADDRESS: STREET 1: 1433 NORTH MARKET BLVD STE 2 STREET 2: P O BOX 349014 CITY: SACRAMENTO STATE: CA ZIP: 95834 BUSINESS PHONE: 9169281090 MAIL ADDRESS: STREET 1: P O BOX 349014 STREET 2: STE 1200 CITY: SACRAMENTO STATE: CA ZIP: 95834-9014 FORMER COMPANY: FORMER CONFORMED NAME: EMCON ASSOCIATES /CA/ DATE OF NAME CHANGE: 19910611 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: IT GROUP INC CENTRAL INDEX KEY: 0000731190 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 330001212 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 2790 MOSSIDE BLVD CITY: MONROEVILLE STATE: PA ZIP: 15146 BUSINESS PHONE: 4123727701 MAIL ADDRESS: STREET 1: 2790 MOSSIDE BLVD CITY: MONROEVILLE STATE: PA ZIP: 15146 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL TECHNOLOGY CORP DATE OF NAME CHANGE: 19920703 SC 14D1 1 TENDER OFFER STATEMENT ON SC 14D1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ----------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 EMCON (Name of Subject Company) THE IT GROUP, INC. SEISMIC ACQUISITION CORPORATION (Bidder) Common Stock, no par value per share (Title of Class of Securities) 290843 10 1 (CUSIP Number of Class of Securities) Anthony J. DeLuca President and Chief Executive Officer The IT Group, Inc. 2790 Mosside Boulevard Monroeville, Pennsylvania 15146-2792 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) COPIES TO: Peter F. Ziegler, Esq. Paul A. Blumenstein, Esq. Gibson, Dunn & Crutcher LLP Gerald S. Walters, Esq. 333 South Grand Avenue Gray Cary Ware & Freidenrich LLP Los Angeles, California 90071 400 Hamilton Avenue (213) 229-7000 Palo Alto, California 94301 (650) 328-6561
Calculation of Filing Fee ========================================================================================================================= Transaction valuation Amount of filing fee - ------------------------------------------------------------------------------------------------------------------------- $64,105,553* $12,821** - -------------------------------------------------------------------------------------------------------------------------
* For purposes of fee calculation only. The total transaction value assumes the purchase in cash, at an offer price of $6.75 per Share, an aggregate of (i) 8,340,669 Shares issued and outstanding and (ii) 1,156,450 Shares issuable pursuant to outstanding options with an exercise price less than the offer price of $6.75 per Share. ** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange Act of 1934, as amended, equals 1/50 of 1% of the value of the Shares to be purchased. [_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount previously paid: Not Applicable Filing party: Not Applicable Form or registration no.: Not Applicable Date filed: Not Applicable (Continued on the following pages) (Page 1 of 9) SCHEDULE 14D-1 CUSIP NO. 290843 10 1 Page 2 of 9 Pages - ------------------------------------------------------------------------------- NAME OF REPORTING PERSONS 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS The IT Group, Inc. - I.R.S. No.: 33-0001212 Seismic Acquisition Corporation - I.R.S. No.: 25-1835135 - ------------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [_] (b) [x] - ------------------------------------------------------------------------------- SEC USE ONLY 3 - ------------------------------------------------------------------------------- SOURCE OF FUNDS* 4 BK and/or WC - ------------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) 5 [_] - ------------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 The IT Group, Inc. - Incorporated in the State of Delaware Seismic Acquisition Corporation - Incorporated in the State of California - ------------------------------------------------------------------------------- AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7 None - ------------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES* 8 [_] N/A - ------------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 9 N/A - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 10 The IT Group, Inc. - CO Seismic Acquisition Corporation - CO - ------------------------------------------------------------------------------ 2 INTRODUCTION This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to the offer by Seismic Acquisition Corporation, a California corporation ("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), to purchase all of the issued and outstanding shares (the "Shares") of common stock, no par value per share (the "Company Common Stock"), of EMCON, a California corporation (the "Company"), at a price of $6.75 per Share, net to each seller in cash, without interest (such amount, or any greater amount per Share paid pursuant to the Offer (as defined below), being hereinafter referred to as the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated as of May 17, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (the "Letter of Transmittal," which, together with the Offer to Purchase, constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. The Offer is being made pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), dated as of May 10, 1999, by and among Parent, Purchaser and the Company, which provides, among other things, for the commencement of the Offer by Purchaser and further provides that, following the purchase of Shares pursuant to the Offer, Purchaser will be merged with and into the Company (the "Merger") with the Company continuing as the surviving corporation (the "Surviving Corporation"). At the election of Parent, to the extent that such action would not cause a failure of a condition to the Offer or the Merger, the Merger may be structured so that the Company shall be merged with and into Purchaser with the result that Purchaser shall be the Surviving Corporation. The consummation of the Merger is subject to the satisfaction or, if permissible, waiver of certain conditions, including, if required, approval of the adoption of the Merger Agreement by the requisite vote of the shareholders of the Company. If the Minimum Condition (as defined below) is satisfied, Purchaser would have acquired sufficient Shares in the Offer to assure such shareholder approval. If Purchaser acquires at least 90% of the Shares in the Offer, under the California General Corporation Law (the "CGCL") it will be able to consummate the Merger without a vote of the Company's shareholders. At the effective time of the Merger (the "Effective Time"), if Purchaser holds at least 90% of the Shares then outstanding, each Share issued and outstanding prior to the Effective Time (other than Shares held by Parent, Purchaser, the Company or any of their wholly owned subsidiaries (collectively, the "Excluded Shares"), and any Shares with respect to which the holder properly exercises such holder's appraisal rights in accordance with the CGCL (the "Dissenting Shares")) shall automatically be canceled and extinguished and shall be converted into the right to receive the Offer Price (the "Cash Merger Consideration"), in cash without interest thereon, subject to appropriate and proportionate adjustments in the event of any reclassification, recapitalization, stock split, stock dividend or similar transaction with respect to the Shares. If Purchaser does not hold at least 90% of the Shares then outstanding at the Effective Time, each Share issued and outstanding immediately prior to the Effective Time, other than Excluded Shares and any Dissenting Shares, shall automatically be canceled and extinguished and shall be converted into the right to receive that fraction of a fully paid and nonassessable share of common stock, par value $0.01 per share, of Parent (the "Parent Common Stock") equal to the Conversion Number (the "Stock Merger Consideration" and together with 3 the Cash Merger Consideration, the "Merger Consideration"). The Conversion Number shall be equal to a fraction (rounded to the nearest third decimal point), (a) the numerator of which shall be equal to the Cash Merger Consideration and (b) the denominator of which shall be equal to the average of the closing sales price of a share of Parent Common Stock as reported on the New York Stock Exchange for each of the ten (10) consecutive trading days ending on, and including, the second trading day immediately preceding the date on which a final vote of the shareholders of the Company on the adoption and approval of the Merger shall have been held (the "Parent Average Stock Price"); provided, however, that if the Parent Average Stock Price is equal to or less than $12.50, then the Conversion Number shall be 0.540. Each Excluded Share shall be canceled and extinguished and cease to exist without any conversion thereof, and no payment shall be made with respect thereto. Each holder (other than holders of Excluded Shares) of a certificate representing any Shares shall, after the Effective Time, cease to have any rights with respect to such Shares, except either to receive the Merger Consideration upon surrender of such certificate, or to exercise such holder's appraisal rights as provided in the Merger Agreement and the CGCL. The Offer is conditioned upon, among other things, there being validly tendered prior to the Expiration Date and not withdrawn at least a number of Shares equal to eighty percent (80%) of the Shares outstanding on a fully diluted basis (including for purposes of such calculation all Shares issuable upon exercise of all stock options that are vested or scheduled to vest on or before July 9, 1999 with an exercise price less than the Offer Price, and conversion of all convertible securities or other rights to purchase or acquire Shares with a conversion price less than the Offer Price (collectively, "Derivative Securities"); provided, however, that such calculation shall not include (a) Shares issuable pursuant to Derivative Securities that by their terms will terminate or be canceled upon consummation of the Offer, (b) Shares issuable pursuant to Derivative Securities as to which the Company has obtained a written consent from the holder that such Derivative Securities will not be converted prior to the Effective Time or (c) Shares issuable pursuant to Derivative Securities as to which the Company takes appropriate action to provide that such Derivative Securities shall automatically convert into the right to receive an amount in cash equal to the product of (i) the excess, if any, of the Cash Merger Consideration over the per Share exercise or conversion price of such Derivative Securities and (ii) the number of Shares subject to such Derivative Securities that are exercisable immediately prior to the consummation of the Offer) (the "Minimum Condition"). The Offer is also subject to certain other conditions set forth under the caption "THE TENDER OFFER--18. Certain Conditions of the Offer" in the Offer to Purchase. The information contained in this Schedule 14D-1 and the Offer to Purchase concerning the Company, including, without limitation, information concerning the deliberations, approvals and recommendations of the Board of Directors of the Company in connection with the transaction, the opinion of the financial advisor to the Board of Directors of the Company, and the Company's capital structure and historical and projected financial information, was supplied by the Company or has been taken from or based upon publicly available documents or records. The information contained in this Schedule 14D-1 and the Offer to Purchase concerning the Offer, the Merger, Parent and Purchaser was supplied by Purchaser. 4 ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION. (a) The name of the subject company is EMCON, a California corporation, which has its principal executive offices at 400 South Camino Real, Suite 1200, San Mateo, California 94402. (b) The class of equity securities being sought is the Company Common Stock. The information set forth in the Offer to Purchase under the caption "INTRODUCTION" is incorporated herein by reference. (c) The information concerning the principal market in which the Company Common Stock is traded and certain high and low sales prices for the Company Common Stock in such principal market set forth in the Offer to Purchase under the caption "THE TENDER OFFER--6. Price Range of the Shares" is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND (a) - (d), (g) This Schedule 14D-1 is filed by Purchaser and Parent. The information concerning the name, state or other place of organization, the principal business and the address of the principal office of Purchaser and Parent, and the name, business address, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment or occupation is conducted, material occupations, positions, offices or employment during the last five years and citizenship of each of the executive officers and directors of Purchaser and Parent are set forth in the Offer to Purchase under the captions "INTRODUCTION" and "THE TENDER OFFER--8. Certain Information Concerning Purchaser and Parent" and in Schedule II to the Offer to Purchase, and are incorporated herein by reference. (e) - (f) During the last five years, neither Purchaser, Parent, nor, to the knowledge of Purchaser or Parent, any of the persons listed in Schedule II to the Offer to Purchase has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) The information set forth in the Offer to Purchase under the captions "INTRODUCTION" and "THE TENDER OFFER--8. Certain Information Concerning Purchaser and Parent" is incorporated herein by reference. (b) The information set forth in the Offer to Purchase under the captions "INTRODUCTION," "THE TENDER OFFER--8. Certain Information Concerning Purchaser 5 and Parent" and "THE TENDER OFFER--10. Contacts with the Company; Background of the Offer and the Merger" is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS. (a) - (b) The information set forth in the Offer to Purchase under the caption "THE TENDER OFFER--9. Source and Amount of Funds" is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSAL OF THE BIDDER. (a) - (e) The information set forth in the Offer to Purchase under the captions "INTRODUCTION," "THE TENDER OFFER--11. Purpose of the Offer and the Merger" and "THE TENDER OFFER--12. Plans for the Company" is incorporated herein by reference. (f) - (g) The information set forth in the Offer to Purchase under the caption "THE TENDER OFFER--17. Effects of the Offer on the Market for Shares; Exchange Listing and Exchange Act Registration" is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) - (b) The information set forth in the Offer to Purchase under the caption "THE TENDER OFFER--8. Certain Information Concerning the Purchaser and Parent--Directors and Officers" is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Offer to Purchase under the captions "THE TENDER OFFER--2. Procedures for Accepting the Offer and Tendering Shares," "THE TENDER OFFER--11. Purpose of the Offer and the Merger," "THE TENDER OFFER--12. Plans for the Company" and "THE TENDER OFFER--13. The Merger Agreement and Related Agreements--Dissenters' Rights in the Merger" is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Offer to Purchase under the caption "THE TENDER OFFER--20. Fees and Expenses" is incorporated herein by reference. 6 ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in the Offer to Purchase under the caption "THE TENDER OFFER--8. Certain Information Concerning Purchaser and Parent" is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in the Offer to Purchase under the captions "THE TENDER OFFER--11. Purpose of the Offer and the Merger," "THE TENDER OFFER-- 12. Plans for the Company" and "THE TENDER OFFER--13. The Merger Agreement and Related Agreements--Dissenters' Rights in the Merger" is incorporated herein by reference. (b), (c) and (d) The information set forth in the Offer to Purchase under the captions "THE TENDER OFFER--17. Effects of the Offer on the Market for Shares, Exchange Listing and Exchange Act Registration--Margin Regulations" and "THE TENDER OFFER--19. Certain Legal Matters; Regulatory Approvals" is incorporated herein by reference. (e) Not applicable. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal, to the extent not otherwise incorporated by reference, is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated May 17, 1999. (a)(2) Letter of Transmittal, dated May 17, 1999. (a)(3) Notice of Guaranteed Delivery, dated May 17, 1999. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated May 17, 1999. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated May 17, 1999. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement, dated May 17, 1999. (a)(8) Joint Press Release, dated May 11, 1999, issued by Parent and the Company. (b)(1) Amended and Restated Credit Agreement, dated as of February 25, 1998, among Parent, IT Corporation ("ITC"), a wholly owned subsidiary of Parent, OHM Corporation ("OHM"), a wholly owned subsidiary of Parent, OHM Remediation Services Corp. ("OHMRSC"), a wholly owned subsidiary of OHM, Beneco Enterprises, Inc. ("Beneco"), a wholly owned subsidiary of OHM, and the institutions from time to time party thereto as Lenders 7 and Issuing Banks (the "Lenders and Issuing Banks"), Citicorp USA, Inc., as Administrative Agent (the "Administrative Agent"), BankBoston, N.A., as Documentation Agent (the "Documentation Agent"), and Royal Bank of Canada and Credit Lyonnais New York Branch, as Co-Agents (the "Co-Agents").(1) (b)(2) First Amendment to Credit Agreement, dated as of September 16, 1998, among Parent, ITC, OHM, OHMRSC, Beneco, the Lenders and Issuing Banks, the Administrative Agent, the Documentation Agent and the Co-Agents.(2) (b)(3) Second Amendment to Credit Agreement, dated as of October 26, 1998, among Parent, ITC, OHM, OHMRSC, Beneco, the Lenders and Issuing Banks, the Administrative Agent, the Documentation Agent and the Co-Agents.(3) (b)(4) Third Amendment to Credit Agreement, dated as of March 5, 1999, among Parent, ITC, OHM, OHMRSC, Beneco, the Lenders and Issuing Banks, the Administrative Agent, the Documentation Agent and the Co-Agents.(4) (b)(5) Consent to Waiver Letter Agreement, dated as of May 10, 1999, among Parent, ITC, OHM, OHMRSC, Beneco and the Administrative Agent, individually and on behalf of the Lenders and Issuing Banks, the Documentation Agent and the Co- Agents. (c)(1) Agreement and Plan of Merger, dated as of May 10, 1999, among Parent, Purchaser and the Company. (c)(2) Mutual Nondisclosure and Confidentiality Agreement, dated as of February 10, 1999, between Parent and Raymond James Associates, Inc. on behalf of the Company. (d) None. (e) Not Applicable. (f) None. _________________________________ (1) Filed as Exhibit 99.1 to the Current Report on Form 8-K filed by Parent on June 18, 1998 and incorporated herein by reference. (2) Filed as Exhibit (b)(3) to the Tender Offer Statement on Schedule 14D-1 filed by Parent on November 3, 1998 and incorporated herein by reference. (3) Filed as Exhibit (b)(4) to the Tender Offer Statement on Schedule 14D-1 filed by Parent on November 3, 1998 and incorporated herein by reference. (4) Filed as Exhibit 10(ii)(4) to the Transition Report on Form 10-K filed by Parent for the transition period from March 28, 1998 to December 25, 1998 and incorporated herein by reference. 8 SIGNATURE After due inquiry and to the best of his knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: May 17, 1999 SEISMIC ACQUISITION CORPORATION By: /s/ James G. Kirk -------------------------------------- James G. Kirk President and Chief Executive Officer SIGNATURE After due inquiry and to the best of his knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: May 17, 1999 THE IT GROUP, INC. By: /s/ Anthony J. DeLuca --------------------------------------- Anthony J. DeLuca President and Chief Executive Officer 9 EX-99.(A)(1) 2 OFFER TO PURCHASE DATED MAY 17, 1999 Offer to Purchase for Cash All Issued and Outstanding Shares of Common Stock of EMCON at $6.75 NET PER SHARE by SEISMIC ACQUISITION CORPORATION a wholly owned subsidiary of THE IT GROUP, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN AT LEAST A NUMBER OF SHARES (AS DEFINED HEREIN) OF EMCON, A CALIFORNIA CORPORATION (THE "COMPANY"), EQUAL TO EIGHTY PERCENT (80%) OF THE SHARES ISSUED AND OUTSTANDING ON A FULLY DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE "THE TENDER OFFER--18. CERTAIN CONDITIONS OF THE OFFER." THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES HEREUNDER. ----------- IMPORTANT Any shareholder of the Company desiring to tender all or any portion of their Shares should either (1) complete and sign the Letter of Transmittal dated as of May 17, 1999 (the "Letter of Transmittal"), or a facsimile copy thereof, in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary (as defined herein) and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal or tender such Shares pursuant to the procedure for book-entry transfer set forth in this Offer to Purchase under the caption "THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares" or (2) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the shareholder. Shareholders of the Company that have their Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender such Shares. A shareholder of the Company who desires to tender their Shares and whose certificates for Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer described in this Offer to Purchase on a timely basis, may tender such Shares by following the procedure for guaranteed delivery set forth in this Offer to Purchase under the caption "THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares." Questions and requests for assistance may be directed to the Information Agent (as defined herein) or the Dealer Manager (as defined herein) at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal or other Offer materials, may be directed to the Information Agent. Shareholders of the Company may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. ----------- The Dealer Manager for the Offer is: [LOGO OF CIBC WORLD MARKETS] May 17, 1999 TABLE OF CONTENTS
Page ---- INTRODUCTION............................................................ 1 THE TENDER OFFER........................................................ 4 1. Terms of the Offer; Expiration Date............................. 4 2. Procedure for Accepting the Offer and Tendering Shares.......... 5 3. Withdrawal Rights............................................... 7 4. Acceptance for Payment and Payment for Shares................... 8 5. Certain Federal Income Tax Consequences......................... 9 6. Price Range of the Shares....................................... 11 7. Certain Information Concerning the Company...................... 11 8. Certain Information Concerning Purchaser and Parent............. 15 9. Source and Amount of Funds...................................... 17 10. Contacts with the Company; Background of the Offer and the Merger......................................................... 18 11. Purpose of the Offer and the Merger............................. 21 12. Plans for the Company........................................... 22 13. The Merger Agreement and Related Agreements..................... 22 14. Going Private Transactions...................................... 32 15. Interests of Certain Persons in the Offer and the Merger........ 32 16. Dividends and Distributions..................................... 34 17. Effects of the Offer on the Market for Shares; Exchange Listing and Exchange Act Registration.................................. 34 18. Certain Conditions of the Offer................................. 36 19. Certain Legal Matters; Regulatory Approvals..................... 37 20. Fees and Expenses............................................... 38 21. Miscellaneous................................................... 39 SCHEDULE I Directors and Executive Officers of the Company.............. I-1 SCHEDULE II Directors and Executive Officers of Parent and Purchaser.... II-1 ANNEX A Text of Chapter 13 of the California General Corporation Law... A-1
i To the Shareholders of EMCON: INTRODUCTION Seismic Acquisition Corporation, a California corporation ("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), hereby offers to purchase all of the issued and outstanding shares (the "Shares") of common stock, no par value per share (the "Company Common Stock") of the Company, upon the terms and subject to the conditions set forth in this Offer to Purchase, dated as of May 17, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (the "Letter of Transmittal" and, together with the Offer to Purchase, the "Offer"), at a price of $6.75 per Share, net to each seller in cash, without interest (such amount or any greater amount per Share paid pursuant to the Offer being hereinafter referred to as the "Offer Price"). THE BOARD HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES HEREUNDER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED PRIOR TO THE EXPIRATION DATE AND NOT WITHDRAWN AT LEAST A NUMBER OF SHARES EQUAL TO EIGHTY PERCENT (80%) OF THE SHARES ISSUED AND OUTSTANDING ON A FULLY DILUTED BASIS (INCLUDING FOR PURPOSES OF SUCH CALCULATION ALL SHARES ISSUABLE UPON EXERCISE OF ALL STOCK OPTIONS WHICH ARE VESTED OR SCHEDULED TO VEST ON OR BEFORE JULY 9, 1999 WITH AN EXERCISE PRICE LESS THAN THE OFFER PRICE, AND CONVERSION OF ALL CONVERTIBLE SECURITIES OR OTHER RIGHTS TO PURCHASE OR ACQUIRE SHARES WITH A CONVERSION PRICE LESS THAN THE OFFER PRICE (COLLECTIVELY, "DERIVATIVE SECURITIES"); PROVIDED, HOWEVER, THAT SUCH CALCULATION SHALL NOT INCLUDE (A) SHARES ISSUABLE PURSUANT TO DERIVATIVE SECURITIES THAT BY THEIR TERMS WILL TERMINATE OR BE CANCELED UPON CONSUMMATION OF THE OFFER OR (B) SHARES ISSUABLE PURSUANT TO DERIVATIVE SECURITIES AS TO WHICH THE COMPANY HAS OBTAINED A WRITTEN CONSENT FROM THE HOLDER THAT SUCH DERIVATIVE SECURITIES WILL NOT BE CONVERTED PRIOR TO THE EFFECTIVE TIME (AS DEFINED HEREIN) OR (C) SHARES ISSUABLE PURSUANT TO DERIVATIVE SECURITIES AS TO WHICH THE COMPANY TAKES APPROPRIATE ACTION TO PROVIDE THAT SUCH DERIVATIVE SECURITIES SHALL AUTOMATICALLY CONVERT INTO THE RIGHT TO RECEIVE AN AMOUNT IN CASH EQUAL TO THE PRODUCT OF (i) THE EXCESS, IF ANY, OF THE CASH MERGER CONSIDERATION (AS DEFINED HEREIN) OVER THE PER SHARE EXERCISE OR CONVERSION PRICE OF SUCH DERIVATIVE SECURITIES AND (ii) THE NUMBER OF SHARES SUBJECT TO SUCH DERIVATIVE SECURITIES WHICH ARE EXERCISABLE IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE OFFER) (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH UNDER THE CAPTION "THE TENDER OFFER--18. CERTAIN CONDITIONS OF THE OFFER" IN THIS OFFER TO PURCHASE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS EXTENDED. SEE "THE TENDER OFFER-- 1. TERMS OF THE OFFER; EXPIRATION DATE." The Offer is being made pursuant to the terms of the Agreement and Plan of Merger, dated as of May 10, 1999 (the "Merger Agreement"), by and among the Company, Purchaser and Parent, which provides, among other things, for the commencement of the Offer by Purchaser and further provides that, following the purchase of Shares pursuant to the Offer, Purchaser will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation (the "Surviving Corporation"). At the election of Parent, to the extent that such action would not cause a failure of a condition to the Offer or the Merger, the Merger may be structured so that the Company shall be merged with and into Purchaser with the result that Purchaser shall become the Surviving Corporation. The consummation of the Merger is subject to the satisfaction or, if permissible, waiver of certain conditions, including the approval, if required, of the adoption of the Merger Agreement by the requisite vote of the shareholders of the Company. If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to approve and adopt the Merger Agreement and the Merger without the vote of any other shareholder of the Company. If Purchaser acquires at least 90% of the Shares in the Offer, under the California General Corporation Law (the "CGCL"), it will be able to consummate the Merger without a vote of the Company's shareholders. At the effective time of the Merger (the "Effective Time"), if Purchaser holds at least 90% of the Shares then outstanding, each Share issued and outstanding prior to the Effective Time (other than Shares held by Parent, Purchaser, the Company or any of their wholly owned subsidiaries (collectively, the "Excluded Shares"), and any Shares with respect to which the holder properly exercises such holder's appraisal rights in accordance with the CGCL (the "Dissenting Shares")) shall automatically be canceled and extinguished and shall be converted into the right to receive the Offer Price in cash, without interest thereon, subject to appropriate and proportionate adjustments in the event of any reclassification, recapitalization, stock split, stock dividend or similar transaction with respect to the Shares (the "Cash Merger Consideration"). If Purchaser does not hold at least 90% of the Shares then outstanding at the Effective Time, each Share issued and outstanding immediately prior to the Effective Time, other than Excluded Shares and any Dissenting Shares, shall automatically be canceled and extinguished and shall be converted into the right to receive that fraction of a fully paid and nonassessable share of common stock, par value $0.01 per share, of Parent (the "Parent Common Stock") equal to the Conversion Number (the "Stock Merger Consideration" and, together with the Cash Merger Consideration, the "Merger Consideration"). The Conversion Number shall be equal to a fraction (rounded to the nearest third decimal point), (a) the numerator of which shall be equal to the Cash Merger Consideration and (b) the denominator of which shall be equal to the average of the closing sales price of a share of Parent Common Stock as reported on the New York Stock Exchange ("NYSE") for each of the ten (10) consecutive trading days ending on, and including, the second trading day immediately preceding the date on which a final vote of the shareholders of the Company on the adoption and approval of the Merger shall have been held (the "Parent Average Stock Price"); provided, however, that if the Parent Average Stock Price is equal to or less than $12.50, then the Conversion Number shall be 0.540. Accordingly, the value of the Stock Merger Consideration may be less than the Offer Price received by holders of Shares that are purchased pursuant to the Offer if the market price of shares of Parent Common Stock is less than $12.50 at the Effective Time. Each Excluded Share shall be canceled and extinguished and cease to exist without any conversion thereof, and no payment shall be made with respect thereto. Each holder (other than holders of Excluded Shares) of a certificate representing any Shares shall, after the Effective Time, cease to have any rights with respect to such Shares, except either to receive the Merger Consideration upon surrender of such certificate, or to exercise such holder's appraisal rights as provided in the Merger Agreement and the CGCL. RAYMOND JAMES & ASSOCIATES, INC., FINANCIAL ADVISOR TO THE COMPANY ("RAYMOND JAMES"), HAS DELIVERED A WRITTEN OPINION TO THE BOARD, DATED MAY 10, 1999 (THE "OPINION"), TO THE EFFECT THAT, AS OF MAY 7, 1999, THE TERMS OF THE OFFER AND THE MERGER, TAKEN COLLECTIVELY, ARE FAIR FROM A FINANCIAL POINT OF VIEW TO THE COMPANY'S SHAREHOLDERS. THE FULL TEXT OF THE OPINION IS CONTAINED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE 2 "SCHEDULE 14D-9") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN CONNECTION WITH THE OFFER, A COPY OF WHICH IS BEING PROVIDED TO SHAREHOLDERS CONCURRENTLY WITH THIS OFFER TO PURCHASE. SHAREHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY AND IN ITS ENTIRETY. The Company has informed Purchaser that as of April 30, 1999 all of the executive officers and directors of the Company as a group owned 195,326 Shares and held options to purchase 423,750 Shares. See "THE TENDER OFFER--15. Interests in Certain Persons in the Offer and the Merger." THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF THE COMPANY'S SHAREHOLDERS OR AN OFFER TO SELL OR SOLICITATION OF OFFERS TO BUY PARENT COMMON STOCK OR OTHER SECURITIES. ANY SUCH SOLICITATION, IF REQUIRED, WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS (THE "PROXY STATEMENT") COMPLYING WITH THE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND ANY OFFER OF PARENT COMMON STOCK WILL BE MADE ONLY THROUGH A PROSPECTUS PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), WHICH FINAL PROSPECTUS SHALL ALSO BE A PART OF THE PROXY STATEMENT. Tendering shareholders will not be obligated to pay brokerage commissions, solicitation fees or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. However, any tendering shareholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a required backup federal income tax withholding of 31% of the gross proceeds payable to such shareholder or other payee pursuant to the Offer. See "THE TENDER OFFER--5. Certain Federal Income Tax Consequences." Purchaser will pay all charges and expenses of ChaseMellon Shareholder Services, L.L.C., as Depositary (in such capacity, the "Depositary"), MacKenzie Partners, Inc., as Information Agent (in such capacity, the "Information Agent"), and CIBC World Markets Corp., as Dealer Manager (in such capacity, the "Dealer Manager") incurred in connection with the Offer. For a description of the fees and expenses to be paid by Purchaser, see "THE TENDER OFFER--20. Fees and Expenses." Consummation of the Merger is subject to a number of conditions, including, if required, the approval of the Merger Agreement and the transactions contemplated thereby by the shareholders of the Company. See "THE TENDER OFFER--18. Certain Conditions of the Offer" and "THE TENDER OFFER--19. Certain Legal Matters; Regulatory Approvals." The Board has recommended that the Company's shareholders approve the Merger and has taken all lawful action to solicit such approval. If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to approve and adopt the Merger Agreement and the Merger without the vote of any other shareholder of the Company. If Purchaser acquires at least 90% of the Shares in the Offer, under the CGCL, it will be able to consummate the Merger without a vote of the Company's shareholders. The information contained in this Offer to Purchase concerning the Company, including, without limitation, information concerning the deliberations, approvals and recommendations of the Board in connection with the transaction, the Opinion and the Company's capital structure and historical and projected financial information, was supplied by the Company or has been taken from or based upon publicly available documents or records. The information contained in this Offer to Purchase concerning the Offer, the Merger, Parent and Purchaser was supplied by Purchaser. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. SEE ALSO "THE TENDER OFFER--21. MISCELLANEOUS" FOR INFORMATION REGARDING CERTAIN ADDITIONAL DOCUMENTS FILED WITH THE COMMISSION IN CONNECTION WITH THE OFFER. 3 THE TENDER OFFER 1. Terms of the Offer; Expiration Date. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for all of the Shares validly tendered pursuant to the Offer prior to the Expiration Date (as defined below) and not withdrawn in accordance with the provisions set forth in this Offer to Purchase under the caption "THE TENDER OFFER--3. Withdrawal Rights." The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Monday, June 14, 1999, unless and until Parent or Purchaser (subject to any restrictions contained in the Merger Agreement) shall from time to time have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Parent or Purchaser, shall expire. Any determination concerning the satisfaction of the terms and conditions of the Offer will be made by Purchaser in its good faith judgment and such determination will be final and binding on all tendering shareholders. Purchaser expressly reserves the right to waive any conditions of the Offer (except as otherwise provided in the Merger Agreement), to increase the Offer Price, to extend the duration of the Offer or to make any other changes in the terms and conditions of the Offer; provided, however, that without the Company's prior written consent, no change may be made that decreases the Offer Price, changes the form of consideration to be paid in the Offer, reduces the maximum number of Shares to be purchased in the Offer, imposes any conditions to the Offer in addition to the conditions set forth herein under the caption "THE TENDER OFFER--18. Certain Conditions of the Offer" or amends any other material terms of the Offer in a manner adverse to the Company's shareholders. Parent and Purchaser agree that if all of the conditions set forth herein under the caption "THE TENDER OFFER--18. Certain Conditions of the Offer" are not satisfied by the time of any scheduled termination of the Offer then, provided that all such conditions are reasonably capable of being satisfied, Purchaser shall extend the Offer until such conditions are satisfied or waived; provided further, that Purchaser shall not be required to extend the Offer beyond July 9, 1999. Purchaser may also (a) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or (b) extend the Offer for any reason on one or more occasions for an aggregate of not more than twenty (20) business days beyond the initial Expiration Date if more than the number of Shares sufficient to satisfy the Minimum Condition but less than 90% of the Shares issued and outstanding have been tendered. As used in this Offer to Purchase, "business day" means any day other than a day on which banks in the State of New York are authorized to close or the NYSE is closed. If Purchaser extends the Offer, or if Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in this Offer to Purchase under the caption "THE TENDER OFFER-- 3. Withdrawal Rights." However, the ability of Purchaser to delay payment for Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act. Any extension, amendment or termination of the Offer will be followed as promptly as practicable by a public announcement in accordance with the public announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to shareholders in connection with the Offer be promptly disseminated to shareholders in a manner reasonably designed to inform shareholders of such change) and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. 4 The Company has provided Purchaser with the Company shareholder list, a non- objecting beneficial owners list and security position listings for the purpose of disseminating the Offer to shareholders. This Offer to Purchase and the Letter of Transmittal and other relevant materials will be mailed to record shareholders and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. Procedure for Accepting the Offer and Tendering Shares. Valid Tender of Shares For a shareholder to validly tender Shares pursuant to the Offer, either (a)(i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or an Agent's Message (as defined herein) in connection with a book-entry delivery of Shares, and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and (ii) either certificates for tendered Shares ("Share Certificates") must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedure for book-entry transfer set forth below (and a Book-Entry Confirmation (as defined herein) received by the Depositary), in each case prior to the Expiration Date, or (b) the tendering shareholder must comply with the guaranteed delivery procedures set forth below. Book-Entry Transfers The Depositary will establish an account with respect to the Shares at The Depositary Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two (2) business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility may make book-entry delivery of the Shares by causing the book-entry transfer system to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedure for such transfer. Although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message (as defined herein) in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at a Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS BOOK-ENTRY PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" as used in this Offer to Purchase means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of the Book-Entry Confirmation, which states that a Book-Entry Transfer Facility has received an express acknowledgment from the participant in a Book-Entry Transfer Facility tendering the Shares that such participant has received the Letter of Transmittal and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING SHAREHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED AT THE DEPOSITARY. IF DELIVERY IS BY MAIL, THEN INSURED OR REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. 5 Signature Guarantees No signature guarantee on the Letter of Transmittal is required if (a) the Letter of Transmittal is signed by the registered holder of the Shares (which term, for purposes of this Section, includes any participant in a Book-Entry Transfer Facility system whose name appears on a security position listing as the owner of the Shares) tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in such Letter of Transmittal or (b) such Shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the Share Certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made to, or Share Certificates not validly tendered or not accepted for payment or not purchased are to be issued or returned to, a person other than the registered holder of the Share Certificates, the tendered Share Certificates must be endorsed in blank or accompanied by appropriate stock powers, signed exactly as the name of the registered holder appears on the Share Certificates with the signature on such Share Certificates or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's Share Certificates are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares may nevertheless be tendered; provided that such shareholder has duly complied with all of the following guaranteed delivery procedures: (a) such tender is made by or through an Eligible Institution; (b) the Depositary receives (by hand, mail, telegram or facsimile transmission) on or prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser; and (c) the Share Certificates representing all tendered Shares, in proper form for transfer (or Book-Entry Confirmation with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal, are received by the Depositary within three (3) NYSE trading days after the date of such Notice of Guaranteed Delivery. An "NYSE trading day" is any day on which securities are traded on the NYSE. The Notice of Guaranteed Delivery may be delivered by hand, or may be transmitted by telegram, facsimile transmission or mail, to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) Share Certificates for (or a timely Book- Entry Confirmation with respect to) such Shares, (b) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), or, in the case of book-entry transfer, an Agent's Message, and (c) any other documents required by the Letter of Transmittal. Accordingly, tendering shareholders may be paid at different times depending upon when Share Certificates, Book-Entry Confirmations and such other documents are actually received by the Depositary. Under no circumstances will interest on the purchase price of the Shares be paid by Purchaser to any tendering shareholders, regardless of any extension of the Offer or any delay in making such payment. 6 Determination of Validity All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination will be final and binding. Purchaser reserves the absolute right to reject any or all tenders of Shares that it determines are not in proper form or the acceptance for payment of or payment for which may be unlawful. Purchaser also reserves the absolute right to waive any of the conditions of the Offer (except as otherwise set forth in the Merger Agreement) or any defect or irregularity in the tender of any Shares with respect to any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. None of Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notice of any defects or irregularities in tenders or incur any liability for failure to give any such notice. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Other Requirements By executing the Letter of Transmittal as set forth herein, a tendering shareholder irrevocably appoints designees of Purchaser as such shareholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after the Expiration Date), effective when, if and to the extent that Purchaser accepts such Shares for payment pursuant to the Offer. All such proxies shall be considered coupled with an interest in the tendered Shares. Upon such acceptance for payment, all prior proxies given by such shareholder with respect to such Shares accepted for payment or other securities or rights will, without further action, be revoked, and no subsequent proxies may be given. Such designees of Purchaser will, with respect to such Shares for which the appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper in respect of any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares. Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described herein will constitute a binding agreement between the tendering shareholder and Purchaser upon the terms and subject to the conditions of the Offer. Backup Federal Income Tax Withholding To prevent backup federal income tax withholding on payments of cash pursuant to the Offer, a shareholder tendering Shares in the offer must provide the Depositary with such shareholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalty of perjury that such TIN is correct and that such shareholder is not subject to backup withholding. If a shareholder does not provide its correct TIN or fails to provide the certification described herein, under federal income tax laws, the Depositary will be required to withhold 31% of the amount of any payment made to such shareholder pursuant to the Offer. All shareholders tendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included as a part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding. Non-corporate foreign shareholders should complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 10 to the Letter of Transmittal. 3. Withdrawal Rights. Tenders of Shares made pursuant to the Offer will be irrevocable, except that tendered Shares may be withdrawn at any time prior to the Expiration Date, and, unless theretofore accepted for payment and paid for as 7 provided herein, may also be withdrawn at any time after July 15, 1999. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as described in this Section 3. Any such delay will be by an extension of the Offer to the extent required by law. The reservation by Purchaser of the right to delay the acceptance or purchase of or payment for Shares is subject to the provisions of Rule 14e- 1(c) under the Exchange Act, which requires Purchaser to pay the consideration offered or to return Shares deposited by or on behalf of shareholders promptly after the termination or withdrawal of the Offer. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn as set forth on such Share Certificates if different from the name of the person who tendered such Shares. If Share Certificates have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be furnished to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer set forth above in "THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares," any notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with such withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures for withdrawal, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the first sentence of this paragraph. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser in its sole discretion, and its determination will be final and binding. No withdrawal of Shares will be deemed to have been properly made until all defects and irregularities have been cured or waived. None of Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be obligated to give notice of any defects or irregularities in any notice of withdrawal, nor shall any of them incur any liability for failure to give any such notice. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by following one of the procedures described above in "THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares" at any time on or prior to the Expiration Date. 4. Acceptance for Payment and Payment for Shares. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), Purchaser will accept for payment and will pay for all of the Shares validly tendered on or prior to the Expiration Date and not properly withdrawn in accordance with the procedures set forth in "THE TENDER OFFER--3. Withdrawal Rights" promptly after the latest to occur of (a) the Expiration Date, (b) the expiration or termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act") and (c) the satisfaction or waiver of the other conditions to the Offer set forth under "THE TENDER OFFER--18. Certain Conditions of the Offer." Subject to applicable rules of the Commission and the terms and conditions of the Merger Agreement, Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law or governmental regulation. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) the Share Certificates (or timely Book-Entry Confirmation of the book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility pursuant to 8 the procedures set forth under "THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares"), (b) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer and (c) any other documents required by the Letter of Transmittal. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered to Purchaser and not properly withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Shares pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares so accepted for payment will be made by the deposit of the purchase price therefor with the Depositary, which will act as paying agent for tendering shareholders for the purpose of receiving payment from Purchaser and transmitting payment to validly tendering shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE PURCHASE PRICE OF THE SHARES TENDERED PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering shareholders, Purchaser's obligation to make such payments shall be satisfied and tendering shareholders thereafter must look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. Purchaser will pay any stock transfer taxes with respect to the transfer and sale to it or its order pursuant to the Offer, except as otherwise provided in Instruction 6 to the Letter of Transmittal, as well as any charges and expenses of the Depositary, the Information Agent and the Dealer Manager. If Purchaser is delayed in its acceptance for payment of, or payment for, tendered Shares or is unable to accept for payment or pay for such Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer (but subject to Purchaser's obligations under Rule 14e- 1(c) under the Exchange Act to pay for or return the tendered Shares promptly after the termination or withdrawal of the Offer), the Depositary may, nevertheless, retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to exercise, and duly exercise, withdrawal rights as described under "THE TENDER OFFER--3. Withdrawal Rights." If any tendered Shares are not purchased pursuant to the Offer because of an invalid tender or for any reason, Share Certificates for any such Shares will be returned, without expense, to the tendering shareholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedures set forth under "THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares" above, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility) as promptly as practicable following the expiration or termination of the Offer. Purchaser reserves the right to transfer or assign, in whole or, from time to time, in part, to one or more of Purchaser's subsidiaries or affiliates, the right to purchase all or any Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for purchase. 5. Certain Federal Income Tax Consequences. The following is a general summary of certain United States federal income tax consequences of the Offer and the Merger relevant to a beneficial holder of Shares whose Shares are tendered and accepted for payment pursuant to the Offer or whose Shares are converted into the right to receive the Cash Merger Consideration or are exchanged for the Stock Merger Consideration. The discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), regulations issued thereunder, judicial decisions and administrative rulings, all of which are subject to change, possibly with retroactive effect. The following does not address the United States federal income tax consequences to all categories of shareholders that may be subject to special rules (e.g., shareholders who acquired their Shares pursuant to the exercise of employee stock options or other compensation 9 arrangements with the Company, shareholders who perfect their appraisal rights under the CGCL, foreign shareholders, insurance companies, tax-exempt organizations, dealers in securities and persons who have acquired the Shares as part of a straddle, hedge, conversion transaction or other integrated investment), nor does it address the United States federal income tax consequences to persons who do not hold the Shares as "capital assets" within the meaning of Section 1221 of the Code (generally, property held for investment). ALL SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND OF CHANGES IN SUCH TAX LAWS. The receipt of cash for Shares tendered pursuant to the Offer will be a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. Generally, for United States federal income tax purposes, a shareholder who receives cash for Shares pursuant to the Offer or the Merger will recognize gain or loss for United States federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such shareholder's adjusted tax basis in such Shares. In addition, an exchange of Shares for the Stock Merger Consideration also will be a taxable transaction for United States federal income tax purposes. In this instance, an exchanging shareholder will recognize gain or loss in an amount equal to the difference between (a) the fair market value, determined as of the time of such exchange, of the shares of Parent Common Stock and (b) the adjusted tax basis in the relevant Shares exchanged therefor. Provided that the Shares constitute capital assets in the hands of the shareholder, such gain or loss will be capital gain or loss, and will be long term capital gain or loss if the holder has held the Shares for more than one year at the time of sale. Gain or loss will be calculated separately for each block of Shares (i.e., a group of Shares with the same tax basis and holding period) tendered pursuant to the Offer. The maximum federal income tax rate applicable to non-corporate taxpayers on long-term capital gains is generally 20%. A shareholder (other than certain exempt shareholders including, among others, all corporations and certain foreign individuals and entities) who tenders Shares may be subject to 31% backup withholding unless the shareholder provides its TIN and certifies that such number is correct or properly certifies that it is awaiting a TIN, or unless an exemption applies. A shareholder who does not furnish its TIN may be subject to a penalty imposed by the Internal Revenue Service (the "IRS"). See "THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares." If backup withholding applies to a shareholder, the Depositary is required to withhold 31% from payments to such shareholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the shareholder upon filing an appropriate income tax return. 10 6. Price Range of the Shares. The Company Common Stock are traded on the Nasdaq National Market System ("Nasdaq") under the symbol MCON. The following table sets forth, for the periods indicated, the high and low sales prices of the Company Common Stock as reported on Nasdaq:
High Low ----- ----- Year Ended December 31, 1997: First Quarter................................................. $3.75 $3.00 Second Quarter................................................ $4.06 $2.88 Third Quarter................................................. $5.50 $3.13 Fourth Quarter................................................ $6.88 $4.63 Year Ended December 31, 1998: First Quarter................................................. $5.13 $4.63 Second Quarter................................................ $5.25 $3.31 Third Quarter................................................. $5.13 $2.81 Fourth Quarter................................................ $3.50 $2.50 Year Ended December 31, 1999: First Quarter................................................. $4.75 $3.06 Second Quarter (through May 14, 1999)......................... $6.50 $3.25
On May 10, 1999, the last full day of trading prior to the public announcement of the execution of the Merger Agreement, according to published sources, the last reported sale quotation of the Shares on Nasdaq was $5.63 per Share. On May 14, 1999, the last full day of trading before the commencement of the Offer, according to published sources, the last reported sale quotation of the Shares on Nasdaq was $6.44 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE COMPANY COMMON STOCK. 7. Certain Information Concerning the Company. General The Company is a California corporation with its principal offices located at 400 South Camino Real, Suite 1200, San Mateo, California 94402. The Company provides comprehensive environmental engineering, design, construction, operations and maintenance, and equipment fabrication services to a variety of public and private industrial and solid waste clients. The Company is comprised of two reporting segments (the Operation and Construction Division and the Professional Services Division) and services three key service lines: Solid Waste, Site Restoration and Facility Services. The Company was incorporated in California in 1971. Company Available Information The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Certain information, as of particular dates, concerning the Company's directors and officers (including their remuneration, stock options granted to them and shares held by them), the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements and annual reports distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information are available for inspection and copying at the public reference facilities of the Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, and at the regional offices of the Commission located in Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of this material may also be 11 obtained by mail, upon payment of the Commission's customary fees from the Commission's principal office at 450 Fifth Street N.W., Washington, DC 20549. The Commission also maintains an Internet site on the World Wide Web at that contains reports, proxy statements and other information. Directors and Officers The name, address, principal occupation or employment, five-year employment history and citizenship of each director and executive officer of the Company is set forth in Schedule I hereto. Summary Financial Information The following tables set forth certain summary consolidated financial information with respect to the Company and its consolidated subsidiaries derived from the audited financial statements contained in the Company's 1998 Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and the unaudited financial statements contained in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and March 31, 1998. The following summary is qualified in its entirety by reference to the more comprehensive financial information included in such documents, including the financial statements and related notes contained therein as well as other documents filed by the Company with the Commission, which are available for inspection in the manner set forth above under "Company Available Information." 12 THE COMPANY AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL DATA (Amounts in thousands, except per share data)
Three Months Ended Fiscal Year Ended ---------------- ---------------------------------------- March March 31, 31, December 31, December 31, December 31, 1999 1998 1998 1997 1996 ------- ------- ------------ ------------ ------------ (Unaudited) Income Statement Data (a): Gross Revenue......... $30,226 $28,779 $151,348 $139,343 $137,626 Net Revenue........... 26,168 25,822 129,960 109,502 117,705 Direct Expenses....... 13,477 13,822 76,749 56,134 52,608 Indirect Expenses..... 13,239 11,857 49,373 49,782 65,844 Restructuring/other charges.............. -- -- (4)(b) (1,612) 8,197 Loss on disposition of laboratory........... -- -- -- 333 3,327 Income (loss) from operations........... (548) 143 3,842 4,865 (12,271) Interest Income....... 92 168 548 516 317 Interest Expense...... (337) (293) (1,234) (1,251) (1,112) Equity in income (loss) of affiliates........... 41 15 (15) (2) 227 Minority interest income/(expense)..... (11) 22 -- (810) (188) Income (loss) before provision (benefit) for income taxes..... (763) 55 3,141 3,318 (13,027) Provision (benefit) for income taxes..... (378) 35 1,508 1,161 (2,936) Net income (loss)..... (385) 20 1,633 2,157 (10,091) Per Share Data (a): Basic earnings (loss) per share............ $ (0.05) $ 0 $ 0.19 $ 0.25 $ (1.19) Diluted earnings per share................ N/A 0 0.19 0.25 N/A Shares used in computing basic earnings (loss) per share................ 8,318 8,573 8,648 8,549 8,485 Shares used in computing diluted earnings per share... N/A 8,827 8,795 8,693 -- Balance Sheet Data (a): Total assets.......... $90,769 $89,854 $ 95,889 $ 93,075 $ 90,912 Working capital....... 26,553 32,911 28,307 32,583 34,601 Noncurrent obligations and deferred income taxes................ 11,128 13,530 11,584 14,177 16,799 Shareholders' equity.. 58,822 58,124 59,137 58,100 55,812
- --------------------- (a) The Company was involved in several acquisitions, mergers and divestitures during the periods presented. (b) As of December 31, 1998, $367,000 of the 1996 restructuring charges were paid and $275,000 remains in other accrued liabilities. Net reductions of $4,000 and $586,000 to the reserve were recorded in 1998 and 1997, respectively, to reflect lower than anticipated costs associated with the abandonment and subsequent sublease of certain office space and lower than anticipated severance costs due to retaining certain previously identified personnel. Except as otherwise noted in this Offer to Purchase, all of the information, including the preceding financial information, with respect to the Company set forth in this Offer to Purchase has been supplied by the Company or derived from publicly available documents and records on file with the Commission or other public sources. Although Purchaser or Parent has no knowledge that any such information is untrue, Purchaser and Parent take no responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information. 13 Certain Company Projections In the course of discussions giving rise to the Merger Agreement (see "The TENDER OFFER--10. Contacts with the Company; Background of the Offer and the Merger"), representatives of the Company furnished representatives of Parent certain business and financial information that was not publicly available, including certain financial projections for 1999 (the "Company Projections"). The Company does not as a matter of course make public any estimates as to future performance or earnings. The Company Projections were prepared solely for the Company's internal purposes and capital budgeting and other management decision-making purposes and are subjective in many respects and thus susceptible to various interpretations and periodic revision based on actual experience and business developments. The Company projections were not prepared for publication or with a view to complying with the published guidelines of the Commission regarding projections or with the American Institute of Certified Public Accountants Guide for Prospective Financial Statements, and such information is being included in the Offer to Purchase solely because it was furnished to Parent in connection with the discussions giving rise to the Merger Agreement. The independent accountants of the Company have neither examined nor compiled the prospective financial information set forth below and, accordingly, do not express an opinion or any other form of assurance with respect thereto. THE PROJECTED FINANCIAL INFORMATION SET FORTH BELOW NECESSARILY REFLECTS NUMEROUS ASSUMPTIONS WITH RESPECT TO GENERAL BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS, MANY OF WHICH ARE INHERENTLY UNCERTAIN OR BEYOND THE COMPANY'S OR PARENT'S CONTROL, AND DOES NOT TAKE INTO ACCOUNT ANY CHANGES IN THE COMPANY'S OPERATIONS OR CAPITAL STRUCTURE THAT MAY RESULT FROM THE OFFER AND THE MERGER. SEE "THE TENDER OFFER--11. PURPOSE OF THE OFFER AND THE MERGER," "THE TENDER OFFER--12. PLANS FOR THE COMPANY" AND "THE TENDER OFFER-- 13. THE MERGER AGREEMENT AND RELATED AGREEMENTS." IT IS NOT POSSIBLE TO PREDICT WHETHER THE ASSUMPTIONS MADE IN PREPARING THE PROJECTED FINANCIAL INFORMATION WILL BE VALID, AND ACTUAL RESULTS MAY PROVE TO BE MATERIALLY HIGHER OR LOWER THAN THOSE CONTAINED IN THE COMPANY PROJECTIONS. THE INCLUSION OF THIS INFORMATION SHOULD NOT BE REGARDED AS AN INDICATION THAT THE COMPANY, PARENT OR ANYONE ELSE WHO RECEIVED THIS INFORMATION CONSIDERED IT A RELIABLE PREDICTOR OF FUTURE EVENTS, AND THIS INFORMATION SHOULD NOT BE RELIED ON AS SUCH. INFORMATION PERTINENT TO THE COMPANY PROJECTIONS WAS FURNISHED BY THE COMPANY AND NONE OF PARENT, PURCHASER OR ANY OF THEIR RESPECTIVE REPRESENTATIVES ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE COMPANY PROJECTIONS.
1999* -------------- (In thousands) Total Gross Sales........................................... 164,688 Net Sales................................................... 151,599 Gross Profit................................................ 60,474 Earnings Before Interest, Taxes, Amortization and Depreciation (after corporate expenses).................... 11,060 Earnings Before Interest and Taxes.......................... 5,033 Net Income.................................................. 2,199
- --------------------- * The foregoing information has been excerpted from the materials presented to Parent by the Company and does not reflect the consummation of the Offer or the Merger. The foregoing estimates constitute forward-looking statements that involve risks and uncertainties that could cause results to vary materially from those estimated. These risks and uncertainties are discussed in greater detail in the Company's periodic filings with the Commission, which are available for inspection in the manner set forth above under "Company Available Information." 14 8. Certain Information Concerning Purchaser and Parent. General Purchaser is a California corporation with its principal executive offices located at 2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792. Purchaser, incorporated in 1999, is a wholly owned subsidiary of Parent that was organized for the purpose of acquiring the Company and has not conducted any unrelated activities since its organization. Parent is a Delaware corporation with its principal office located at 2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792. Parent is a leading provider of diversified, value-added services in the areas of environmental consulting, engineering and construction and remediation. In addition, Parent is leveraging its core project management competencies to offer its clients a variety of outsourcing services such as facilities management. Parent was incorporated in 1983; the earliest antecedent of Parent commenced operations in California in 1926. Directors and Officers The name, business address, citizenship, present principal employment or occupation and five-year employment history of each of the executive officers of Parent and Purchaser are set forth in Schedule II hereto. None of Parent or Purchaser nor, to the best of Parent's knowledge, any of the persons listed in Schedule II hereto, or any associate or majority-owned subsidiary of Parent or any of the persons so listed, beneficially owns or has any right to acquire directly or indirectly any Shares or has any contract, arrangement, understanding or relationship with any other person with respect to any Shares, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any shares, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss, or the giving or withholding of proxies, and none of Parent or Purchaser, nor to the best knowledge of Parent, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any Shares during the past 60 days. Except as set forth in this Offer to Purchase, since January 1, 1995, neither Parent or Purchaser nor, to the best knowledge of Parent, any of the persons listed on Schedule II hereto has had any transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as set forth in this Offer to Purchase, since January 1, 1995, there have been no contracts, negotiations or transactions between Parent, Purchaser, or any of their subsidiaries or, to the best knowledge of Parent, any of the persons listed in Schedule II to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer for or other acquisition of securities of any class of the Company, an election of directors of the Company or a sale or other transfer of a material amount of assets of the Company or any of its subsidiaries. 15 Summary Financial Information The following tables set forth certain selected consolidated financial information with respect to Parent and its subsidiaries for the nine months ended December 25, 1998 (the transition period as a result of Parent's change in fiscal year), the twelve months ended March 27, 1998 and March 28, 1997 and the three months ended March 26, 1999 and March 27, 1998. The financial information below was excerpted from the information contained in Parent's Transition Report on Form 10-K for the transition period from March 28, 1998 to December 25, 1998 and Parent's Quarterly Report on Form 10-Q for the quarter ended March 26, 1999. The following summary is qualified in its entirety by reference to the more comprehensive financial information included in such documents, including the financial statements and related notes contained therein as well as other documents filed by Parent with the Commission, which are available for inspection in the manner set forth below under "Parent Available Information." PARENT AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL INFORMATION (Amounts in thousands, except per share data)
Three Months Nine Months Twelve Months Ended Ended Ended ---------------------- ------------ --------------------- March 26, March 27, December 25, March 27, March 28, 1999 1998 1998 1998 1997 ---------- ---------- ------------ ---------- ---------- (Unaudited) Summary of Earnings Data: Revenues................. $257,974 $136,038 $757,435 $442,216 $362,131 Gross margin............. 33,297 17,200 90,961 51,090 38,138 Special charges.......... -- 5,694 24,971 14,248 8,403 Net income (loss) from continuing operations (net of preferred stock dividends).............. 4,193 (5,086) (12,091) (12,527) (13,693) Earnings (loss) per common share diluted.... .17 (1.62) (0.63) (2.38) (1.48) Weighted average shares outstanding for dilutive earnings (loss) per share................... 29,273 9,733 19,149 9,737 9,227
Nine Months Three Months Ended Ended Twelve Months Ended ---------------------- ------------ ------------------- March 26, March 27, December 25, March 27, 1999 1998 1998 1998 ----------- ----------- ------------ ------------------- (Unaudited) Balance Sheet Data: Working capital.......... $140,902 74,924 120,260 74,924 Total assets............. 956,058 709,217 948,606 709,217 Long-term debt........... 426,802 284,697 405,059 284,697 Long-term accrued liabilities............. 25,847 27,528 31,979 27,528 Shareholders' equity..... 242,718 148,150 238,168 148,150
Parent Available Information Parent is subject to the informational requirements of the Exchange Act and, in accordance therewith, files reports relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, stock options and other matters, the principal holders of Parent's securities and any material interest of such persons in transactions with Parent is required to be disclosed in proxy statements distributed to Parent's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the Commission and copies thereof should be obtainable from the Commission in the same manner as is set forth with respect to the Company in "THE TENDER OFFER--7. Certain Information Concerning the Company." 16 9. Source and Amount of Funds. Purchaser estimates that the total amount of funds required to purchase Shares pursuant to the Offer and to complete the Merger will be approximately $64.4 million (which includes approximately $2.0 million for payment of estimated costs and expenses). Parent and IT Corporation, OHM Corporation, OHM Remediation Services Corp. and Beneco Enterprises, each of which is a direct or indirect subsidiary of Parent, are party to a credit agreement dated as of February 25, 1998 and amended and restated as of June 11, 1998 (as further amended, the "Credit Facility") with the institutions from time to time party thereto as Lenders and Issuing Banks, Citicorp USA, Inc., as Administrative Agent (the "Administrative Agent"), BankBoston, N.A., as Documentation Agent, and Royal Bank of Canada and Credit Lyonnais New York Branch, as Co-Agents. The Credit Facility provides for a term loan and revolving credit facilities of up to $413 million in the aggregate. The Credit Facility consists of an eight-year amortizing term loan of $228 million and a six-year revolving credit facility of up to $185 million that contains a sublimit of $50 million for letter of credit issuance. The proceeds of revolving credit loans made to Parent (or a subsidiary of Parent) under the Credit Facility will be made available to Purchaser and will be used to finance the Offer and the Merger and to pay certain expenses and costs related to the Offer and the Merger. The proceeds of revolving loans made under the Credit Facility also will be used to provide working capital for Parent and its subsidiaries (including, after the Merger, the Company and its subsidiaries) and for general corporate purposes of Parent and its subsidiaries. The availability of financing under the Credit Facility is subject to the following conditions: (a) continued accuracy of representations and warranties, (b) no default shall have occurred and be continuing, (c) no material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of certain operating subsidiaries of Parent, individually, or Parent and its subsidiaries taken as a whole, and (d) certain other conditions customary for credit facilities of this type. The Credit Facility also requires that, with respect to the Offer and the Merger, among other things, (a) revolving credit availability under the Credit Facility shall not be less than $25,000,000 (after giving effect to the purchase of Shares accepted for payment pursuant to the Offer and the payment of transaction costs related thereto paid on or prior to such date); (b)(i) the cash consideration paid to the shareholders of the Company (after giving effect to the purchase of the Shares pursuant to the Offer) shall not exceed an amount equal to $73,000,000 and (ii) the transaction costs incurred in connection with the Offer and the Merger shall not exceed $2,000,000; (c) the number of Shares accepted for payment in the Offer shall be equal to no less than the greater of (i) 80% of the issued and outstanding Shares on the date of the completion of the Offer and (ii) the minimum number of Shares, determined on a fully diluted basis, necessary to approve the consummation of the Merger in accordance with the provisions of any applicable corporate statute, anti-takeover statute or provision in the Company's articles of incorporation (the "Company's Articles") or bylaws (the "Company's Bylaws"); and (d) the Board shall have published its recommendation that the shareholders of the Company tender their Shares pursuant to the Offer, and such recommendation shall not have been withdrawn or adversely modified. The Credit Facility is secured by a security interest in substantially all of the assets of Parent and its material subsidiaries (including the Shares acquired by Purchaser upon completion of the Offer and, after the consummation of the Merger, the assets of the Company and its subsidiaries). The term loans made under the Credit Facility bear interest at a rate equal to LIBOR plus 2.75% as adjusted per annum (or the Administrative Agent's base rate plus 1.75% per annum) and the revolving loans made under the Credit Facility bear interest at a rate equal to LIBOR plus 2.25% per annum (or the Administrative Agent's base rate plus 1.25% per annum), subject to change on a quarterly basis pursuant to the Credit Facility related to the ratio of Parent's consolidated total debt to consolidated EBITDA. A commitment fee will accrue on the portion of the revolving credit facility that is unused from time to time at a rate initially equal to 0.50% per annum, subject to adjustment based on the ratio of Parent's consolidated total debt to consolidated EBITDA. As 17 of May 14, 1999, based on the prevailing one-month LIBOR rate of approximately 5%, the interest rate applicable to revolving loans under the Credit Facility is estimated to be approximately 7.25%. The term loans made under the Credit Facility amortize on a semi-annual basis in aggregate annual installments of $4.5 million until June 2004, with the remainder payable in eight equal quarterly installments after June 2004 until the term loan matures in June 2006. The revolving loans are scheduled to terminate in June 2004, without any reduction in availability before that date. Parent will also be required to prepay the loans under the Credit Facility with the net proceeds of asset sales and certain debt and equity financings, and loans under the Credit Facility will be required to be prepaid with a portion of Parent's consolidated excess cash flow. The Credit Facility includes certain representations and warranties and covenants customary for facilities of this type, including: (a) financial covenants consisting of a minimum fixed charge coverage ratio, a minimum interest expense coverage ratio, a maximum leverage ratio, a minimum liquidity requirement, a maximum capital expenditure limitation and a minimum net worth requirement; (b) maintenance of cash concentration accounts and lockboxes, (c) preservation of corporate existence, compliance with laws, payment of taxes, maintenance of properties and insurance and financial and other reporting requirements; and (d) limitations (subject to certain exceptions) on indebtedness, guarantees, liens, lease obligations, mergers and acquisitions, sales of assets and other fundamental changes, joint ventures and other investments, transactions with affiliates, dividends and stock repurchases and redemptions, prepayment or modification of debt, and certain hedging obligations. The Credit Facility also includes customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross defaults to other indebtedness, bankruptcy events, defaults in satisfaction of money judgments, material adverse change, certain events under the Employee Retirement Income Security Act of 1974, as amended, and a change of control of Parent. Purchaser's obligation to purchase Shares tendered pursuant to the Offer is not subject to financing. Parent expects that the Credit Facility will provide sufficient availability to finance the Offer and the Merger and related costs and expenses. 10. Contacts with the Company; Background of the Offer and the Merger. During 1997, Parent was actively exploring possible business combinations with companies in the solid waste industry, with a view to becoming the leading global provider of fully integrated solid waste services. In April 1997, Parent informally contacted the Company regarding Parent's possible interest in a transaction with the Company. Representatives of Parent met with certain executive officers of the Company to explore further the possibility of a transaction between Parent and the Company. From February 1997 to October 1998, Raymond James, on behalf of the Company, reviewed potential candidates and engaged in preliminary discussions with several potential strategic partners for the Company, including Parent. During this period, the Board periodically met with Raymond James to review the various strategic alternatives. On November 12, 1998, a meeting of the Board was held to review the status of the Company's search for potential strategic business combinations. At this meeting, members of senior management presented their analysis of the alternatives currently available to the Company. At the conclusion of this meeting, the Board decided to continue its relationship with Raymond James and directed senior management to focus its efforts on a discrete group of potential buyers that might be interested in purchasing the Company. The Board also appointed Douglas P. Crane, Chairman of the Board, and Dr. Franklin J. Agardy, a director of the Company, to a Special Committee to assist senior management in its review and negotiation of the terms of the proposed sale of the Company. From December 1998 to February 1999, Raymond James contacted 16 potential purchasers. A total of 11 potential buyers, including Parent, executed confidentiality agreements with the Company and received certain confidential information about the Company. Potential purchasers were instructed to submit initial indications of interest to Raymond James by February 26, 1999. Three parties, including Parent, submitted preliminary 18 indications of interest. The Company invited all three parties to participate in due diligence and management presentations at the offices of Gray Cary Ware & Freidenrich LLP ("Gray Cary"), the Company's legal counsel, in Palo Alto, California. Two of the three interested parties, including Parent, conducted this due diligence. In a letter submitted to Raymond James by Parent on February 26, 1999 (the "February Letter"), Parent estimated the enterprise value to acquire 100% of the business of the Company to be in a range of $55 million to $70 million and requested the Company to consider accepting a combination of cash and Parent Common Stock as consideration in an acquisition. Parent's representatives visited the Company's headquarters on March 9 and 10, 1999, to enable Parent to become better acquainted with the Company's operations, business and personnel. During the visit, representatives of Parent met with certain executive officers of the Company and representatives of Raymond James, attended a management presentation given by the Company and conducted a limited due diligence with respect to the Company's operations, business and personnel. On March 25, 1999, the Company Board received an offer to enter into a merger transaction from a company who had not participated in the due diligence process (the "Unsolicited Bidder"). On March 26, 1999, Parent submitted to Raymond James a preliminary, non- binding indication of value, and best and final offer with the intent of being invited to conduct further due diligence and negotiate a definitive purchase agreement on an exclusive basis (the "March Letter"). As set forth in the March Letter, Parent's estimate of the enterprise value to acquire 100% of the Company was a range of $65 million to $70 million. In the March Letter, Parent continued to propose that, in addition to cash, the Company accept 50% to 75% of the purchase price in the form of Parent Common Stock. On March 30, 1999, at a special meeting of the Board, senior management of the Company and representatives from Raymond James and Gray Cary reviewed and evaluated the terms of the March Letter in comparison with the terms of business combinations proposed by the other interested parties, and representatives of Raymond James reviewed the methodology used in their financial analyses of the various transactions. Representatives of Raymond James described the terms and conditions of each of the bids, the background of the bidders and the status of the due diligence performed by each of the bidders. The Board discussed each of the bids in detail, focusing on the terms and conditions of the bids and the likelihood of completing a transaction on the terms and conditions outlined. The Board decided that, in light of these factors, it was in the Company's best interest to focus its efforts on the bids from Parent and the other interested party and not to pursue the bid from the Unsolicited Bidder at that time. On April 7 and 8, 1999, Parent and the other interested party conducted additional due diligence. On April 10, 1999, the other interested party submitted a revised best and final offer to acquire 100% of the equity of the Company for $58 million. On April 12, 1999, the Board, senior management of the Company and representatives of Parent and Raymond James met in New York to attend a presentation by Parent's executive officers and discuss strategic issues associated with the proposed merger. On April 16, 1999, Parent submitted to Raymond James a revised version of the March Letter (the "April Letter"). In the April Letter, Parent estimated the value to acquire 100% of the equity of the Company, on a fully diluted basis, to be $62 million, assuming that the total debt reflected on the Company's December 31, 1998 balance sheet would not materially increase prior to the consummation of the Merger. The $62 million offer contained in the April Letter represented an enterprise value of approximately $70 million, including assumed liabilities. The terms of the April Letter provided that $2 million of the $62 million offer was contingent on the Company achieving certain financial milestones for the six months ended June 30, 1999 (the "Contingent Payment"). 19 On April 17, 1999, Raymond James informed the other interested party that the Board had decided not to pursue that party's offer. From April 19 to April 23, 1999, Parent conducted due diligence sessions at the Company's corporate headquarters and at other regional offices of the Company and its subsidiaries. Participants in these sessions included representatives of Parent's management, financial, legal and accounting advisors. Parent and its representatives continued to conduct off-site due diligence through May 10, 1999. On April 20, 1999, Gray Cary distributed a proposed first draft merger agreement to Parent and its legal counsel, Gibson, Dunn & Crutcher LLP ("GD&C"), and each of Gray Cary and GD&C began negotiating the form of a definitive merger agreement. From April 20 to May 10, 1999, representatives of the Company, Raymond James and Gray Cary held discussions with representatives of Parent and GD&C to negotiate various aspects of the acquisition proposal. At a scheduled telephonic meeting of Parent's Board of Directors (the "Parent Board") held on May 4, 1999, a full discussion of the proposed transaction took place. Following the discussions, the Parent Board approved, among other things, the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, provided that the final terms of the Merger Agreement were subsequently reviewed and approved by the Executive Committee of the Parent Board. Parent informed the Company that it had agreed to pay approximately $62 million in cash, or $6.75 net per Share, without interest, for all of the issued and outstanding Shares of the Company, on a fully diluted basis. The Contingent Payment proposal was eliminated from the offer. On May 6, 1999, at a special meeting of the Board, members of senior management and Gray Cary reported on the revised terms of the Merger Agreement. Representatives of Raymond James reviewed their financial analysis with respect to the proposed Merger and delivered an oral opinion (subsequently confirmed in writing) that the terms of the Offer and the Merger, taken collectively, were fair from a financial point of view, to the shareholders of the Company. Following this presentation, the Company Board asked the representatives from Raymond James and Gray Cary various questions about the terms of the transaction and the remaining open issues, and the Board and representatives of Gray Cary discussed the Board's fiduciary duties to the Company's shareholders. At the conclusion of this discussion, the Board (a) unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger and (b) authorized its senior management to complete the negotiations of the definitive Merger Agreement and to execute and deliver the Merger Agreement in substantially the form presented to the Board, subject to the receipt of Raymond James' written opinion as to the fairness of the Offer and the Merger to the Company's shareholders. On May 10, 1999, Parent advised the Company that it had received the necessary consent from its lender to enter into the Merger Agreement and to consummate the Offer. On May 10, 1999, GD&C and Gray Cary finalized their negotiations of the Merger Agreement. The Executive Committee of the Parent Board reviewed the final terms of the Merger Agreement and approved the final terms of the Merger Agreement by unanimous written consent in lieu of a meeting. Senior management of the Company reviewed the final terms of the Merger Agreement and notified representatives of Parent that such terms were acceptable. The Merger Agreement was executed on the evening of May 10, 1999, and a joint press release was issued by the parties announcing the execution of the Merger Agreement on the morning of May 11, 1999. On May 17, 1999, Purchaser commenced the Offer. 20 11. Purpose of the Offer and the Merger. The purpose of the Offer is for Purchaser to acquire all of the Shares. The purpose of the Merger is for Parent to acquire any remaining equity interest in the Company not acquired pursuant to the Offer. Upon consummation of the Merger, the Company will become a direct, wholly owned subsidiary of Parent. The acquisition of Shares has been structured as a cash tender offer followed by (a) a cash merger if, at the Effective Time, Purchaser holds at least 90% of the Shares then outstanding, or (b) a stock-for-stock merger if, at the Effective Time, Purchaser does not hold at least 90% of the Shares then outstanding. The acquisition of Shares was structured in such a manner in order to provide for a prompt and orderly cancellation of all Shares (other than the Excluded Shares) and the transfer of ownership of the equity interest in the Company held by the Company's shareholders (other than the Excluded Shares) from such shareholders to Parent, in accordance with applicable law. Under the CGCL, the approval of the Board and the affirmative vote of the holders of a majority of the outstanding Shares may be required to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. If a vote of the shareholders of the Company is required, the Company has agreed in the Merger Agreement to take all actions necessary to convene and hold a special meeting of its shareholders (the "Shareholder's Meeting") as soon as practicable after the Proxy Statement is cleared by the Commission for the purpose of considering and taking action to approve the Merger Agreement and the principal terms of the Merger. The Proxy Statement, containing detailed information concerning the Merger, will be furnished to shareholders of the Company in connection with any Shareholder's Meeting. Notwithstanding the foregoing, if Parent, Purchaser and/or any other subsidiary of Parent shall acquire at least 90% of the issued and outstanding Shares, the parties shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after consummation of the Offer without a Shareholders Meeting in accordance with Section 1110 of the CGCL. If Parent is required to issue shares of Parent Common Stock under the terms of the Merger Agreement, then Parent shall prepare and file with the Commission a registration statement on Form S-4 pursuant to which the issuance of the shares of Parent Common Stock in the Merger will be registered under the Securities Act (the "Registration Statement"). The final prospectus included in the Registration Statement as declared effective by the Commission shall be part of the Proxy Statement. The Board has unanimously determined that the transactions contemplated by the Merger Agreement are fair to, and in the best interests of, the Company's shareholders, and has approved and adopted the Merger Agreement and the transactions contemplated thereby. As described above, the only remaining corporate action of the Company that may be required is the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the holders of a majority of the Shares. If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to cause the approval and adoption of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other shareholder of the Company. If Purchaser acquires at least 90% of the Shares in the Offer, under the CGCL, it will be able to consummate the Merger without a vote of the Company's shareholders. Purchaser reserves the right to purchase additional Shares in the open market after termination of the Offer. 21 12. Plans for the Company. Following the consummation of the Offer, Parent intends to continue its evaluation and review of the Company's operations and the potential opportunities for synergies with Parent's operations, and consideration of what, if any, additional changes would be desirable in light of the results of such evaluations and reviews. It is anticipated that, following the consummation of the Merger, the Company's business will be integrated into Parent's operations. Parent plans to reorganize the Company into Parent's existing business line/project delivery organizational structure, which is expected to produce administrative and operational efficiencies resulting in the elimination of redundant positions in the combined organization and the closure or consolidation of certain Parent and Company locations. Such integration and reorganization is anticipated to result in approximately $12 million in net cost reductions, taking into account possible loss of revenue, with approximately 40% of the cost reductions expected to be realized in calendar 1999. Pursuant to the Merger Agreement, promptly upon delivery to the Depositary of Parent's notice of acceptance of Shares pursuant to the Offer (the "Notice of Acceptance"), Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board as is equal to the product of the total number of directors on the Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or its affiliates bears to the total number of Shares then outstanding; provided, however, that if Purchaser shall have acquired at least 90% of the outstanding Shares in the Offer, Parent shall be entitled to designate all of the members of the Board. The Company shall promptly take all actions necessary to cause Parent's designees to be so elected, including, if necessary, increasing the size of the Board (to the extent permitted by the Company's Articles and the Company's Bylaws) and/or seeking the resignations of one or more existing directors. If Purchaser shall not have acquired 90% of the outstanding Shares prior to the Effective Time, the Board shall at all times have at least two members who are members of the Board as of May 10, 1999 and are neither officers of the Company or any of its subsidiaries nor officers or directors of Purchaser or any of its affiliates (the "Independent Directors"). See "THE TENDER OFFER--13. Merger Agreement and Related Agreements--Board Representation." Except for the Merger and as otherwise described in this section and elsewhere in this Offer to Purchase, and except as may be effected in connection with the integration of operations referred to above, Purchaser and Parent have no current plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization or liquidation of the Company or any of its subsidiaries with or into any third entity, the sale or transfer of a material amount of the Company's or any of its subsidiaries' assets to a third party, a material change in the Company's capitalization or dividend structure or any other material change in the Company's corporate structure or business. 13. The Merger Agreement and Related Agreements. The Merger Agreement The following summary of certain provisions of the Merger Agreement is presented only as a summary and is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed with the Commission as an exhibit to Parent's Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"). The Merger Agreement may be examined and copies may be obtained at the places and in the manner set forth under the caption "THE TENDER OFFER--7. Certain Information Concerning the Company--Company Available Information." The Offer. The Merger Agreement provides for the making of the Offer. Pursuant to the Offer, each tendering shareholder shall receive the Offer Price for each Share tendered in the Offer. Purchaser's obligation to accept for payment or pay for Shares is subject to the satisfaction of the conditions that are described in "THE TENDER OFFER--18. Certain Conditions of the Offer," including the Minimum Condition. Any determination concerning the satisfaction of the terms and conditions of the Offer will be made by Purchaser in its good faith judgment and such determination will be final and binding on all tendering shareholders. Purchaser expressly reserves the right to waive any conditions of the Offer (except as otherwise provided in the Merger Agreement), to increase the Offer Price, to extend the duration of the Offer or to make any other changes in the terms and conditions of the Offer; provided, however, that without the Company's prior written consent, no change may be 22 made that decreases the Offer Price, changes the form of consideration to be paid in the Offer, reduces the maximum number of Shares to be purchased in the Offer, imposes any conditions to the Offer in addition to the conditions set forth herein under the caption "THE TENDER OFFER--18. Certain Conditions of the Offer" or amends any other material terms of the Offer in a manner adverse to the Company's shareholders. Parent and Purchaser have agreed that if all of the conditions set forth herein under the caption "THE TENDER OFFER--18. Certain Conditions of the Offer" are not satisfied by the time of any scheduled termination of the Offer then, provided that all such conditions are reasonably capable of being satisfied, Purchaser shall extend the Offer until such conditions are satisfied or waived; provided further, that Purchaser shall not be required to extend the Offer beyond July 9, 1999; provided further, however, that Purchaser may (a) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or (b) extend the Offer for any reason on one or more occasions for an aggregate of not more than twenty (20) business days beyond the initial Expiration Date if more than the number of Shares sufficient to satisfy the Minimum Condition but less than 90% of the Shares issued and outstanding have been tendered. Board Representation. Pursuant to the Merger Agreement and subject to compliance with applicable law, promptly upon delivery to the Depositary of the Notice of Acceptance, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board as is equal to the product of the total number of directors on the Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or its affiliates bears to the total number of Shares then outstanding; provided, however, that if Purchaser shall have acquired at least 90% of the outstanding Shares in the Offer, Parent shall be entitled to designate all of the members of the Board. If Purchaser shall not have acquired 90% of the outstanding Shares prior to the Effective Time, the Board shall at all times have at least two Independent Directors. If the number of Independent Directors is reduced below two prior to the Effective Time, the remaining Independent Director shall be entitled to designate a person to fill such vacancy who shall not be an officer or affiliate of the Company or any of its subsidiaries or an officer, director or affiliate of Parent or any of its subsidiaries, and such person shall be deemed an Independent Director for all purposes of the Merger Agreement. If no Independent Directors then remain, the other directors of the Company shall designate two persons to fill such vacancies who shall not be officers or affiliates of the Company or any of its subsidiaries, or officers, directors or affiliates of Parent or any of its subsidiaries, and such persons shall be deemed to be Independent Directors for all purposes of the Merger Agreement. Following the election or appointment of Parent's designees, pursuant to the Merger Agreement and prior to the Effective Time, any amendment or termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Purchaser or any waiver of any of the Company's rights hereunder shall require the concurrence of a majority of the Independent Directors (or in the case where there is only one Independent Director, the concurrence of such Independent Director). The Company's obligations to appoint the designees of Parent to the Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Merger. As soon as practicable after the satisfaction or waiver of the conditions to the Merger, Purchaser will be merged with and into the Company, the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation. At the election of Parent, to the extent that such action would not cause a failure of a condition to the Offer or the Merger, the Merger may be structured so that the Company will be merged with and into Purchaser with the result that Purchaser will become the Surviving Corporation. The Effective Time will occur at the date and time the Merger becomes effective in accordance with the CGCL. The Surviving Corporation shall continue its corporate existence under the laws of the State of California. The Company's Articles shall be amended and restated to contain the substantive provisions of the Articles of Incorporation of Purchaser, as in effect immediately prior to the Effective Time, and, as so amended and restated, shall be the Articles of Incorporation of the Surviving Corporation until thereafter duly amended in accordance with the provisions thereof and applicable law. The Bylaws of Purchaser in effect at the Effective Time shall be the Bylaws of the Surviving Corporation until thereafter duly amended in accordance with the provisions thereof and applicable law. The directors of Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal in accordance with the Articles and 23 Bylaws of the Surviving Corporation. The officers of Purchaser immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal in accordance with the Articles and Bylaws of the Surviving Corporation. Consideration to be Paid in the Merger. At the Effective Time, if the Purchaser holds at least 90% of the Shares then outstanding, each Share issued and outstanding prior to the Effective Time (other than Excluded Shares and any Dissenting Shares) shall automatically be canceled and extinguished and shall be converted into the right to receive the Cash Merger Consideration, without interest thereon, subject to appropriate and proportionate adjustments in the event of any reclassification, recapitalization, stock split, stock dividend or similar transaction with respect to the Shares. At the Effective Time, if Purchaser does not hold at least 90% of the Shares then outstanding, each Share issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and any Dissenting Shares) shall automatically be canceled and extinguished and shall be converted into the right to receive the Stock Merger Consideration. Employee/Director Stock Options. Pursuant to the Merger Agreement, Parent will not assume any option to purchase shares of the Company Common Stock (an "Option") outstanding under any option plans of the Company, including the 1986 Incentive Stock Option Plan, the 1988 Stock Option Plan or the 1998 Stock Option Plan (collectively, the "Company Stock Plans"). Pursuant to the terms of such Company Stock Plans, all outstanding Options under such plans will become fully vested and immediately exercisable immediately prior to a change of control. The parties to the Merger Agreement shall take all appropriate action to provide that, at or following the consummation of the Offer, each holder of an outstanding Option shall be entitled to receive an amount in cash equal to the product of (a) the excess, if any, of the Cash Merger Consideration over the per share exercise price of each such Option and (b) the number of Shares subject to such Option that are exercisable immediately prior to the Effective Time. Representations and Warranties. The Merger Agreement contains various representations and warranties of the parties thereto. These include representations and warranties of the Company with respect to corporate existence and power, subsidiaries, capitalization, corporate authorization relative to the Merger Agreement, governmental consents and approvals, Commission filings, financial statements, absence of undisclosed liabilities, absence of certain changes or events, taxes, real properties, intellectual property, litigation, environmental matters, employee benefit plans, compliance with laws, labor matters, insurance, customers' revenues, financial projections, government contracts and certain other matters. The Merger Agreement also includes representations and warranties of Parent and Purchaser with respect to corporate existence and power, corporate authorization relative to the Merger Agreement, governmental consents and approvals, available funds, the valid issuance of Parent Common Stock, if required, and certain other matters. No representations or warranties made by the Company, Parent or Purchaser will survive beyond the Effective Time, and no covenants or agreements made in the Merger Agreement will survive beyond the Effective Time, except for those covenants or agreements which by their terms contemplate performance after the Effective Time. Certain representations and warranties of the Company, Parent and Purchaser set forth in the Merger Agreement will not be breached unless the matter constituting the breach would have a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, operations or results of operations of the respective entity and its subsidiaries taken as a whole (a "Material Adverse Effect"); provided, however, that an adverse change in or effect on the revenues or gross margins of the Company, Parent or Purchaser (or the direct consequences thereof) following the date of the Merger Agreement to the extent attributable to a delay of, reduction in or cancellation or change in a material contract that is directly and primarily attributable to the transactions contemplated by the Merger Agreement shall not be deemed to constitute a Material Adverse Effect. Additionally, certain of the representations and warranties of the Company, Parent and Purchaser set forth in the Merger Agreement will not be breached unless the matter constituting the breach would have a material adverse effect on the ability of such entities to consummate the Offer or the Merger. Conduct of Business. During the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement or the Effective Time, the Company has agreed as to itself and its subsidiaries (except to the extent that Parent shall otherwise consent in writing, which consent shall not 24 be unreasonably withheld) to carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted, to pay its debts and taxes when due, subject to good faith disputes over such debts or taxes, to pay or perform its other obligations when due, and to use all reasonable efforts consistent with past practices and policies to (i) preserve intact its present business organization, (ii) keep available the services of its present officers and key employees and (iii) preserve its relationships with customers, suppliers, distributors, licensors, licensees and others having business dealings with it. Without limiting the generality of the foregoing, the Company shall not (and shall not permit any of its subsidiaries to), without the prior written consent of Parent, which consent shall not be unreasonably withheld: (a) accelerate, amend or change the period of exercisability of Options or restricted stock granted under any employee stock plan of the Company or authorize cash payments in exchange for any Options granted under any of such plans except as required by the terms of such plans or any related agreements in effect as of the date of the Merger Agreement, except as expressly contemplated by the Merger Agreement; (b) transfer or license to any person or entity or otherwise extend, amend or modify any rights to the Company's intellectual property other than in the ordinary course of business consistent with past practices; (c) declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock (other than distributions declared with respect to the capital stock of any subsidiary in the ordinary course of business consistent with past practice), or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or indirectly, any shares of its capital stock; (d) issue, deliver or sell, subject to any lien or authorize or propose any of the foregoing with respect to any shares of its capital stock or securities convertible into shares of its capital stock, or any bonds, debentures, notes or other obligations the holders of which have the right to vote (or are convertible into or exercisable for securities having the right to vote) with the shareholders of the Company on any matter, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities other than (i) the issuance of rights to purchase shares of the Company Common Stock as and to the extent required under the Company Option Plans as in effect as of the date of the Merger Agreement, (ii) the issuance of the Company Common Stock upon the exercise of Options outstanding on the date of the Merger Agreement in accordance with their present terms or pursuant to the Company's Employee Stock Purchase Plan or the Company's Restricted Stock Plan in accordance with their present terms and (iii) the granting, in the ordinary course of business consistent with past practice, pursuant to Company Stock Plans in effect on the date of the Merger Agreement, of Options to purchase up to a number of shares of the Company Common Stock as shall be agreed to by the Company and Parent, and the issuance of the Company Common Stock upon exercise thereof; (e) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership or other business organization or division; (f) adopt a plan of complete or partial liquidation or dissolution, merger or otherwise restructure or recapitalize or consolidate with any person other than Purchaser or another wholly owned subsidiary of Parent; (g) sell, lease, license or otherwise dispose of any of its properties or assets, except for transactions entered into in the ordinary course of business; (h) take any action to: (i) increase or agree to increase the compensation payable or to become payable to its officers or employees, except for increases in salary or wages of employees in accordance with agreements entered into before the date of the Merger Agreement and previously provided to Parent; (ii) grant any additional severance or termination pay to, or enter into any employment or severance agreements with, officers; (iii) grant any severance or termination pay to, or enter into any employment or 25 severance agreement, with any employee, except in accordance with agreements entered into before the date of the Merger Agreement and previously provided to Parent; (iv) enter into any collective bargaining agreement; or (v) establish, adopt, enter into or amend in any material respect any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, trust, fund, policy or arrangement for the benefit of any directors, officers or employees; (i) amend or propose to amend the Company's Articles or the Company's Bylaws, except as contemplated by the Merger Agreement; (j) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligation of any other person except in the ordinary course of business consistent with past practices and except for obligations of the Company or its subsidiaries incurred in the ordinary course of business and in an amount not to exceed $250,000; (k) make any loans to any other person (other than subsidiaries of the Company or customary loans or advances to employees in connection with business-related travel in the ordinary course of business consistent with past practices); (l) make, authorize or commit to make any capital expenditures except for capital expenditures in the ordinary course of business and consistent with past practice or in amounts less than $150,000 individually and $750,000 in the aggregate; (m) make any acquisition of, or investment in, assets or stock of any other person, by any means; (n) except as may be required as a result of change in law or to generally accepted accounting principles consistently applied, change any of the accounting principles or practices used by it or revalue in any respect any of its material assets, including writing down the value of inventory or writing-off notes or accounts receivable, other than in the ordinary course of business consistent with past practices; (o) settle or compromise any material claims or litigation or terminate or materially amend or modify any of its agreements, contracts or commitments (that have not expired or been terminated) filed as an exhibit to any forms, reports and documents required to be filed by the Company with the Commission or waive, release or assign any material rights or claims; (p) make, revoke or amend any tax election; (q) enter into or amend any agreement or settlement with any tax authority; or (r) take, or agree in writing or otherwise to take, any of the actions described in the foregoing clauses (a) through (q) or any action that is reasonably likely to make any of the Company's representations or warranties contained in the Merger Agreement untrue or incorrect in any material respect on the date made (to the extent so limited) or as of the Effective Time. Indemnification. Pursuant to the Merger Agreement, Parent agrees that all rights to indemnification now existing in favor of any of the current or former directors and officers of the Company (the "Indemnified Parties") as provided in the Company's Articles or the Company's Bylaws, in each case as of the date of the Merger Agreement, and all indemnification agreements between the Company and the Indemnified Parties shall survive the Merger and shall continue in full force and effect from and after consummation of the Offer in accordance with their terms, as such terms exist on the date of the Merger Agreement. After the Effective Time, Parent agrees to cause the Surviving Corporation to honor all rights to indemnification referred to in the preceding sentence. Additionally, Parent agrees to cause the Company and, from and after the Effective Time, the Surviving Corporation to purchase a six-year extended reporting period endorsement under the current policy of directors' and officers' liability insurance maintained by the Company; provided that (a) the Surviving Corporation may substitute therefor other policies not less advantageous (other than to a de minimus extent) to the beneficiaries of the current policies, (b) such substitution shall not result in any gaps or lapses in coverage with respect to matters occurring prior to the Effective Time and (c) the Surviving Corporation shall not be 26 required to pay an annual premium in excess of 150% of the last annual premium paid (the "Maximum Premium") by the Company prior to the date of the Merger Agreement (which the Company represents to be $58,000 for the twelve month period ending January 1, 2000). If the Surviving Corporation is unable to obtain the insurance required by this paragraph for the Maximum Premium, it shall obtain as much comparable insurance as possible for an annual premium equal to the Maximum Premium. Conditions to the Merger. Pursuant to the Merger Agreement, if Purchaser shall have purchased Shares pursuant to the Offer, the respective obligations of Parent, Purchaser and the Company to consummate the Merger are subject to the satisfaction, at or before the Effective Time, of each of the following conditions: (a) the Merger Agreement and the Merger shall have been duly approved and adopted by the shareholders of the Company, if required by applicable law; (b) Purchaser shall have delivered the Notice of Acceptance for the Shares to the Depositary pursuant to the Offer in accordance with the terms of the Merger Agreement; (c) the consummation of the Merger shall not be restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling of a governmental entity of competent jurisdiction and there shall not have been any statute, rule or regulation enacted, promulgated or issued by any governmental entity that prevents the consummation of the Merger or has the effect of making the purchase of Shares illegal, and no governmental entity shall have instituted any proceeding seeking any such order and such proceeding remains unresolved; and (d) the waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated and, other than filing the Certificate of Merger or the Certificate of Ownership in the State of California, all filings with any governmental entity required to be made prior to the Effective Time by the Company or Parent or any of their respective subsidiaries and all government consents required to be obtained prior to the Effective Time by the Company or Parent or any of their respective subsidiaries in connection with the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby by the Company, Parent and Purchaser shall have been made or obtained (as the case may be), except where the failure to so make or obtain will not result in either a Material Adverse Effect on the Company or have, or be reasonably likely to have, a material adverse effect on the ability of the parties hereto to consummate the transactions contemplated by the Merger Agreement. Acquisition Proposals. Pursuant to the Merger Agreement, from and after the date of the Merger Agreement until the earlier of the Effective Time or termination of the Merger Agreement, (a) the Company and its subsidiaries have agreed that they will not, and they will direct their respective Representatives (as defined herein) not to, directly or indirectly, (i) solicit, initiate or encourage the submission of any Alternative Proposal (as defined herein) or (ii) participate in any discussions or negotiations regarding, or furnish to any person any non-public information with respect to, or take any other action to facilitate the making of any proposal that constitutes or may reasonably be expected to lead to, an Alternative Proposal, and (b) neither the Board nor any committee thereof will (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or Purchaser, their approval or recommendation to the Company's shareholders of the Offer, the Merger Agreement or the Merger or (ii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (an "Acquisition Agreement") with respect to any Alternative Proposal. In addition, the Company and its subsidiaries will immediately cease, and will instruct and cause their respective Representatives to immediately cease, any and all existing activities, discussions or negotiations with any parties with respect to any Alternative Proposal and the Company and its subsidiaries will not, and they will direct their Representatives not to, directly or indirectly, make or authorize any public statement, recommendation or solicitation in support of any Alternative Proposal. Any violation of the restrictions set forth in (a)(i) and (ii) of this paragraph by any Representative of the Company or any of its subsidiaries will be deemed to be a material breach of the Merger Agreement by the Company. Notwithstanding the foregoing paragraph, if, at any time prior to the consummation of the Offer, the Board reasonably determines in good faith, after taking into account the advice of its outside legal counsel, that it is 27 necessary to do so in order to comply with its fiduciary duties to the Company's shareholders under applicable law, (a) the Company and its Representatives may, in response to a Superior Proposal (as defined herein) that was unsolicited or that did not otherwise result from a breach of the restrictions set forth in the preceding paragraph, and subject to compliance with certain other terms set forth in the Merger Agreement, furnish non-public information with respect to the Company pursuant to a non-disclosure agreement with terms at least as restrictive as such terms in the Confidentiality Agreement (as defined herein) and participate in discussions and negotiations regarding such Superior Proposal, and (b) the Board may, after terminating the Merger Agreement, withdraw or modify its approval or recommendation of the Offer, the Merger Agreement or the Merger, approve or recommend a Superior Proposal or enter into an Acquisition Agreement with respect to a Superior Proposal; provided that the Company shall have given Parent written notice (a "Notice of Superior Proposal") at least two (2) business days prior to entering into any such Acquisition Agreement and at least two (2) business days prior to public disclosure by the Board of such withdrawal, modification, approval or recommendation, advising Parent that the Board has received a Superior Proposal, specifying the material terms and conditions of the Superior Proposal (including the proposed financing) and identifying the person making such Superior Proposal. Any amendment to the price or material terms of a Superior Proposal shall require an additional Notice of Superior Proposal and an additional two (2) business day period thereafter, to the extent permitted under applicable law, prior to public disclosure by the Board of its recommendation with respect thereto. As used in this Offer to Purchase, (a) "Representative" means the officers, directors or employees or any investment banker, attorney, accountant or other advisor or representative retained by the Company or its subsidiaries, (b) "Alternative Proposal" means any inquiry, proposal or offer, whether written or oral, from any person or Group (as defined under Section 13(d) of the Exchange Act) relating to any direct or indirect acquisition or purchase of any product line or other material portion of the assets of the Company and its subsidiaries taken as a whole (other than the purchase of the Company's products or used equipment in the ordinary course of business), or more than a 20% interest in the total outstanding voting securities of the Company or any of its subsidiaries, or any tender offer or exchange offer that if consummated could result in any person or Group beneficially owning 10% or more of the total outstanding voting securities of the Company or any of its subsidiaries, or any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by the Merger Agreement, and (c) a "Superior Proposal" means a bona fide offer, whether written or oral, made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the total outstanding voting securities of the Company or all or substantially all of the assets of the Company, which offer is otherwise on terms which the Board determines in its good faith judgment (after consultation with a financial advisor of nationally recognized reputation) to be reasonably capable of being completed (taking into account all material legal, financial, regulatory and other aspects of the proposal) and more favorable to the Company's shareholders from a financial point of view than the Offer and the Merger, and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board, is capable of being obtained by such third party. In addition to the obligations of the Company set forth above in this section on "Acquisition Proposals", the Company as promptly as practicable, and in any event within 24 hours, will advise Parent orally and in writing of (a) any request for non-public information that the Company reasonably believes may lead to an Alternative Proposal, or of any Alternative Proposal, (b) the material terms and conditions of such information request or Alternative Proposal and (c) the identity of the person making any such information request or Alternative Proposal. The Company will keep Parent informed in all material respects of the status and details (including material amendments) of any such request or Alternative Proposal. Nothing contained in the Merger Agreement shall prohibit the Company from (a) taking and disclosing to its shareholders a position contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act or (b) making any disclosure to the Company's shareholders if, in the good faith judgment of the Board, after taking into account the advice of its outside legal counsel, failure to so disclose would be inconsistent with applicable laws; provided 28 that neither the Company nor the Board nor any committee thereof shall, except in accordance with the provisions of the Merger Agreement, withdraw or modify, or publicly propose to withdraw or modify, its position with respect to the Offer, the Merger Agreement or the Merger or approve or recommend, or propose to approve or recommend, an Alternative Proposal. Termination of the Merger Agreement. The Merger Agreement may be terminated and the Merger contemplated thereby may be abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the Company's shareholders (with any termination by Parent also being an effective termination by Purchaser): (a) by mutual written consent duly authorized by the Board and the Parent Board, subject to the concurrence of the Independent Directors to the extent required; (b) by either Parent or the Company if: (i) the Offer is terminated, withdrawn or expires pursuant to its terms without any Shares having been purchased thereunder; provided, however, that neither Parent nor the Company may terminate the Merger Agreement pursuant to this paragraph (b)(i) if such party is in material breach of the Merger Agreement or, in the case of Parent, if Parent or Purchaser is in material violation of the terms of the Offer; (ii) a governmental entity shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Offer or the Merger, which order, decree, ruling or other action is final and nonappealable; provided that the party seeking to terminate the Merger Agreement shall have used its reasonable efforts to remove or lift such order, decree or ruling; or (iii) prior to the purchase of Shares pursuant to the Offer, the Board has recommended, or the Company has entered into an Acquisition Agreement with respect to, a Superior Proposal after fully complying with the applicable procedures set forth in the Merger Agreement; provided, however, that termination by the Company pursuant to this paragraph (b)(iii) shall be conditioned upon concurrent payment by the Company to Parent in immediately available funds of $500,000 as reimbursement for all of Parent's costs and expenses in connection with the Merger Agreement, the Offer and the Merger (the "Transaction Expenses") and $1,750,000 as a termination fee (the "Termination Fee"); (c) by Parent prior to the purchase of Shares pursuant to the Offer if: (i) the Company shall have failed to include in the Schedule 14D-9 the recommendation of the Board that the shareholders of the Company accept the Offer; (ii) the Board or any committee thereof shall have (A) withdrawn or modified (including, but not limited to, by amendment of the Schedule 14D-9) in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger, (B) approved or recommended, taken no position with respect to, or failed to recommend against any Alternative Proposal, or (C) resolved to do any of the foregoing; (iii) the Company or any of its subsidiaries or any of their respective Representatives participates in any discussions or negotiations with or provide any non-public information to any third party in breach of the terms of the Merger Agreement summarized under "Acquisition Proposals" in this Section 13; or (iv) the Company is in material breach of any of its covenants or obligations under the Merger Agreement; provided that if such breach is curable through the exercise of the Company's commercially reasonable efforts, Parent may not terminate the Merger Agreement under this paragraph (c)(iv) unless such breach is not cured on or prior to the earlier of (A) twenty (20) days after written notice of such breach is given by Parent to the Company or (B) two (2) business days before the date on which the Offer expires; 29 (d) by the Company prior to the purchase of Shares pursuant to the Offer if: (i) the Offer shall not have been commenced in accordance with the Merger Agreement, or Parent or Purchaser shall have failed to purchase validly tendered Shares in violation of the terms of the Offer within ten (10) business days after the expiration of the Offer; provided, however, that the Company shall not be entitled to terminate this Agreement pursuant to this paragraph (d)(i) if it is in material breach of the Merger Agreement; or (ii) Parent or Purchaser is in material breach of any of its covenants or obligations under the Merger Agreement; provided that if such breach is curable through exercise of Parent's or Purchaser's commercially reasonable efforts, the Company may not terminate the Merger Agreement under this paragraph (d)(ii) unless such breach is not cured within the earlier of (A) twenty (20) days after written notice of such breach is given by the Company to Parent or (B) two (2) business days before the date on which the Offer expires. If the Merger Agreement is terminated for any of the above reasons, the Merger Agreement shall be of no further force or effect, except as otherwise set forth in the Merger Agreement. Additionally, any termination of the Merger Agreement shall not (a) relieve any party from liability for any willful breach of the Merger Agreement or (b) affect the obligations of the parties contained in the Confidentiality Agreement, all of which obligations shall survive the termination of the Merger Agreement. Furthermore, in the event the Merger Agreement is terminated pursuant to paragraph (b)(iii) or paragraphs (c)(i), (ii) or (iii) set forth above in this section on "Termination of Merger Agreement," the Company irrevocably waives any otherwise applicable standstill or other agreement or restrictions in favor of the Company (contractual or otherwise) on the ability and right of Parent, Purchaser or any of their affiliates to acquire Shares. If the Merger Agreement is terminated by Parent pursuant to paragraph (b)(iii) or paragraphs (c)(i), (ii), (iii) and (iv) set forth above in this section on "Termination of Merger Agreement," the Company shall reimburse Parent in an amount of $500,000 as reimbursement for Transaction Expenses. If the Merger Agreement is terminated by the Company pursuant to paragraph (d)(ii) above, Parent shall reimburse the Company in an amount of $500,000 as reimbursement for Transaction Expenses. Additionally, in the event the Merger Agreement is terminated pursuant to paragraphs (b)(iii) or (c)(ii) set forth above, the Company shall pay Parent the Termination Fee in immediately available funds. Furthermore, in the event that the Merger Agreement is terminated pursuant to paragraphs (c)(i), (iii) or (iv) set forth above and, within 12 months following such termination, any person other than Parent or any affiliate of Parent effects an acquisition relating to an Alternative Proposal, or enters into an agreement relating to an Alternative Proposal with the Company or commences a tender offer for a transaction relating to an Alternative Proposal and the transactions contemplated thereby are subsequently consummated at any time, the Company shall pay Parent the Termination Fee at or prior to the consummation of such transaction in immediately available funds. Amendment. The Merger Agreement can only be amended by a written agreement executed by the Company, Parent and Purchaser. Extension and Waiver. At any time prior to the Effective Time, the Company, Parent or Purchaser may, to the extent legally allowed and subject to the terms and conditions of the Merger Agreement, (a) extend the time for the performance of any of the obligations or other acts of the other parties to the Merger Agreement, (b) waive any inaccuracies in the representations and warranties made to such party contained therein or in any document delivered pursuant thereto and (c) waive compliance with any of the agreements or conditions for the benefit of such party contained therein. Any agreement on the part of the Company, Parent or Purchaser to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Delay in exercising any right under the Merger Agreement shall not constitute a waiver of such right. Expenses. Except as otherwise set forth in the Merger Agreement, whether or not the Merger is consummated, all costs and expenses incurred in connection with the negotiation, execution and delivery of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, including the 30 Offer, shall be paid by the party incurring such expense; provided, however, that any expenses incurred in connection with the filing fee for the Registration Statement and the printing and mailing of the final prospectus shall be borne by Parent. The Confidentiality Agreement Raymond James, on behalf of the Company, and Parent entered into a Mutual Nondisclosure and Confidentiality Agreement, dated as of February 10, 1999 (the "Confidentiality Agreement"). Pursuant to the Confidentiality Agreement, the Company and Parent agreed to make available to each other certain non- public information concerning their respective business, financial condition, operations, assets, properties, liabilities and prospects in order to facilitate discussions relating to a possible transaction involving the two companies. In accordance with the terms of the Confidentiality Agreement, the party receiving such non-public information in verbal, visual, written, electronic or other form has agreed to (a) use such information solely for the purpose of evaluating and considering any potential transaction, (b) keep such information strictly confidential and (c) provide such information only to its representatives to whom disclosure of such information is reasonably deemed to be required to facilitate the evaluation or consideration of any potential transaction. However, the Company's and Parent's obligations under the Confidentiality Agreement will not extend to information which the party receiving such information can demonstrate (a) was rightfully in the possession of the receiving party prior to disclosure by the furnishing party, (b) was or is independently developed by the receiving party without use of any information supplied by the furnishing party, (c) became available to the public other than as a result of disclosure by the receiving party or any of its representatives or (d) became available to the receiving party or any of its representatives on a non-confidential basis from a source other than the furnishing party or any of its respective representatives and such source is not, to the knowledge of the receiving party, under any obligation to the furnishing party or any of its representatives to keep such information confidential. For a period of two years subsequent to any termination of discussions regarding a potential transaction, Parent has agreed that it will not directly or indirectly solicit for hire any employee of the Company or any person who was an employee of the Company within six months of the date of such solicitation with whom it has first had contact or who first became known to it in connection with its consideration of a potential transaction; provided, however, that the foregoing sentence will not prevent Parent from employing any employee or former employee of the Company who contacts Parent, directly or indirectly at his or her own initiative without any direct or indirect solicitation by or encouragement from Parent. The foregoing summary of certain provisions of the Confidentiality Agreement is qualified in its entirety by reference to the full text thereof, a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Confidentiality Agreement may be examined and copies may be obtained at the places and in the manner set forth under the caption "THE TENDER OFFER--7. Certain Information Concerning the Company--Company Available Information." Dissenters' Rights in the Merger No appraisal rights are available in connection with the Offer. If the Merger is consummated, however, shareholders of the Company may have certain rights under Chapter 13 of the CGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. If the Surviving Corporation and a dissenting shareholder agree that his or her Shares are Dissenting Shares and agree upon the fair market value of the Shares, then the dissenting shareholder is entitled to receive a cash payment equal to the agreed fair market value and interest thereon at the legal rate on judgments from the date of such agreement. If, however, the Surviving Corporation denies that Shares are Dissenting Shares, or the Surviving Corporation and a dissenting shareholder fail to agree upon the fair market value of his or her Shares, then the dissenting shareholder may seek to have the applicable California superior court determine whether his or her Shares are Dissenting Shares or the fair market value of such Shares. If the status of such Shares as Dissenting Shares is in issue, the superior court shall determine that issue first, and if the fair market value of the Dissenting Shares is in issue, the superior court shall determine, or appoint one or more impartial appraiser to determine, the fair market value of such Shares. The fair market value shall be determined as of the day before the first announcement of the terms of the Merger, excluding any appreciation or depreciation as a result of the transactions contemplated by the Merger Agreement. 31 THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF CHAPTER 13 OF THE CGCL INCLUDED HEREWITH IN ANNEX A. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS ARE CONDITIONED ON STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE CGCL. 14. Going Private Transactions The Merger, or another business combination following the purchase of Shares pursuant to the Offer in which the Purchaser seeks to acquire the remaining Shares not held by it, would have to comply with any applicable federal law operating at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger, or such other business combination and the consideration offered to minority shareholders be filed with the Commission and disclosed to minority shareholders prior to the consummation of the Merger or such other business combination. However, Rule 13e-3 will not be applicable to the Merger or any such other business combination if (a) the Shares are deregistered under the Exchange Act prior to the Merger or other business combination or (b) the Merger or other business combination is consummated within one (1) year after the purchase of the Shares pursuant to the Offer and the value of the consideration paid per Share in the Merger or other business combination (measured at the time of consummation of the Merger) is at least equal to the amount paid per Share in the Offer. 15. Interests of Certain Persons in the Offer and the Merger Consummation of the Offer and the Merger will have certain effects under certain compensation and incentive plans and arrangements in which officers and directors of the Company are participants, as summarized below or in the Information Statement filed by the Company with the Commission pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder, a copy of which has been mailed to the Company's shareholders as Annex A to the Schedule 14D- 9. Agreements Relating to Outstanding Convertible Securities. The Company is a party to the Rescission and Reformation Agreement and the New Note Agreement each dated November 1, 1996 by and among the Company, Organic Waste Technologies, Inc. ("OWT") and certain of the former shareholders and option holders of OWT, pursuant to which OWT issued convertible promissory notes and unfunded contractual obligations to pay, in the aggregate, $1,716,887 (the "OWT Debt"). Under the original terms of the OWT Debt, upon consummation of the Offer, the OWT Debt would have become convertible into an aggregate of 264,136 Shares at a conversion price of $6.50 per Share. Each holder of the OWT Debt has agreed to cancel such holder's conversion right in exchange for either (i) the right to have such holder's portion of the OWT Debt cashed out upon consummation of the Offer or (ii) an increase in the interest rate applicable to the OWT Debt from 8% to 10% per annum. Any portion of the OWT Debt that is cashed out upon consummation of the Offer will be canceled in exchange for a cash payment equal to $6.75 multiplied by the number of Shares that would have been issuable upon conversion of such portion of the OWT Debt. Mark H. Shipps, Vice President of the Company, holds OWT Debt in the amount of $1,022,047. In addition, the Merger Agreement contains certain provisions with respect to indemnification of directors and executive officers and maintenance of current policies of directors' and officers' liability insurance maintained by the Company from and after the Effective Time. See "THE TENDER OFFER--13. The Merger Agreement and Related Agreements--Indemnification." 32 Beneficial Ownership of Shares The following table sets forth information as of April 30, 1999, concerning the ownership of Company Common Stock by each current member of the Board, each of the executive officers named in the Summary Compensation Table included in the Information Statement attached as Annex A to the Schedule 14D- 9, all current directors and executive officers of the Company as a group and each shareholder known by the Company to be the beneficial owner of more than five percent of the outstanding Company Common Stock. As of May 17, 1999, none of the members on the Parent Board owned any Shares. Except as otherwise noted, the persons or entities identified have sole voting and investment power with respect to such Shares.
Number of Shares Beneficially Name and Address Owned(1) Percent(1) ---------------- ---------------- ---------- Franklin Resources, Inc.(2).................... 1,125,400 13.5% 901 Mariners Island Blvd., 6th Floor San Mateo, CA 94404 Grace & White, Inc.(3)......................... 1,024,600 12.3% 515 Madison Avenue, Suite 1700 New York, NY 10022 T. Rowe Price Associates, Inc.(4).............. 715,000 8.6% 100 E. Pratt Street Baltimore, MD 21202 Dimension Fund Advisors, Inc.(5)............... 540,300 6.5% 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 Eugene M. Herson(6)............................ 247,854 2.9% Richard A. Peluso(6)........................... 146,485 1.7% R. Michael Momboisse(6)........................ 91,288 1.1% Peter Vardy(6)................................. 25,000 * Douglas P. Crane(6)............................ 19,000 * Mark H. Shipps(6).............................. 17,500 * Patrick Gillespie(6)........................... 16,751 * Donald R. Kerstetter(6)........................ 10,000 * Franklin J. Agardy(6).......................... 2,000 * All executive officers and directors as a group (13 persons)(6)............................... 619,076 7.1%
- --------------------- * Represents less than 1% (1) Beneficial ownership is determined in accordance with the rules of the Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Company Common Stock subject to options or warrants held by that person that are currently exercisable, or will become exercisable within 60 days of April 30, 1999 (without regard to the effects of the Offer), are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated in the footnotes to this table, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. (2) As reported in a Schedule 13G amendment filed jointly on September 10, 1997 by Franklin Resources, Inc. ("FRI"), Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisory Services, Inc. Consists of shares held in accounts that are managed by direct and indirect investment advisory subsidiaries of FRI ("Advisory Subsidiaries") pursuant to contracts that give such subsidiaries sole voting and investment power with respect to such shares. Charles B. Johnson and Rupert H. Johnson, Jr. are principal shareholders of FRI ("Principal Shareholders"). FRI, the Advisory Subsidiaries and the Principal Shareholders disclaim any economic interest or beneficial ownership of the shares. 33 (3) As reported in a Schedule 13G amendment filed on February 18, 1999 by Grace & White, Inc. ("G&W"). Includes 28,000 shares as to which G&W has sole voting power and 1,024,600 shares as to which G&W has sole dispositive power. (4) As reported in a Schedule 13G amendment filed jointly on February 12, 1999 by T. Rowe Price Associates, Inc. ("Price Associates") and T. Rowe Price Small Cap Value Fund, Inc. ("Price Small Cap Value"). These securities are owned by various individual and institutional investors including Price Small Cap Value (which owns 715,000 shares) which Price Associates serves as investment adviser with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. (5) As reported in a Schedule 13G amendment filed on February 11, 1999 by Dimensional Fund Advisors Inc. ("Dimensional"). Dimensional, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and services as investment manager to certain other investment vehicles, including commingled group trusts. (These investment companies and investment vehicles are the "Portfolios"). In its role as investment advisor and investment manager, Dimensional possesses both voting and investment power over the Company's shares owned by the Portfolios. All such securities are owned by the portfolios, and Dimensional disclaims beneficial ownership of such securities. (6) Includes the following numbers of shares of the Company Common Stock subject to outstanding options which are exercisable within 60 days of April 30, 1999 (without regard to the effects of the Offer): Eugene M. Herson, 187,500; Richard A. Peluso, 63,750; R. Michael Momboisse, 85,750; Peter Vardy, 8,000; Mark H. Shipps, 17,500; Patrick Gillespie, 15,000; Douglas P. Crane, 10,000; Donald R. Kerstetter, 8,000; Franklin J. Agardy, 2,000; and all executive officers and directors as a group 423,750. 16. Dividends and Distributions. According to the Company's 1998 Annual Report on Form 10-K filed with the Commission, although the Company has made annual distributions to a minority shareholder of one if its indirect subsidiaries, the Company did not declare or pay any cash dividends to its shareholders during the fiscal years ended December 31, 1997 and December 31, 1998 and does not plan to pay cash dividends to its shareholders in the near future. Furthermore, the payment of cash dividends is restricted by the Company's bank line of credit arrangement. The Company presently intends to retain earnings for further development of its business. In addition, pursuant to the terms of the Merger Agreement, the Company is not permitted, without the consent of Parent (which consent shall not be unreasonably withheld) to declare or pay dividends on or make any other distributions (whether in cash or property) in respect of any of its capital stock (other than distributions declared with respect to the capital stock of any subsidiary of the Company in the ordinary course of business consistent with past practice), or split, combine, reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or indirectly, any shares of its capital stock. 17. Effects of the Offer on the Market for Shares; Exchange Listing and Exchange Act Registration. Possible Effects of the Offer on the Market for the Shares The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. It is expected that, following the Offer, a large percentage of the Shares will be owned by Purchaser. Purchaser cannot predict whether the reduction in the number of Shares 34 that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Offer Price therefor. Stock Quotation Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers, Inc. (the "NASD") for continued inclusion on the Nasdaq. The maintenance for continued inclusion requires the Company to substantially meet one of two maintenance standards. The Company must have either (a)(i) at least 750,000 publicly held shares, (ii) at least 400 shareholders of round lots, (iii) a market value of at least $5 million, (iv) a minimum bid price per Share of $1.00, (v) at least two registered and active market makers for its Shares and (vi) net tangible assets of at least $4 million, or (b)(i) at least 1,100,000 publicly held shares, (ii) at least 400 shareholders of round lots, (iii) a market value of at least $15 million, and (iv) either (x) a market capitalization of at least $50 million or (y) total assets and total revenue of at least $50 million each for the most recently completed fiscal year or two of the last three most recently completed fiscal years, (v) a minimum bid price per Share of $5.00 and (vi) at least four registered and active market makers. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. If, as a result of the purchase of the Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in the Nasdaq or in any other tier of the Nasdaq Stock Market, and the Shares are, in fact, no longer included in the Nasdaq or in any other tier of the Nasdaq Stock Market, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of the Nasdaq Stock Market, it may be possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interest in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. Exchange Act Registration The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirements of furnishing a proxy statement in connection with shareholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for Nasdaq market reporting. Parent currently intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act promptly after the Effective Time as the requirements for termination of registration are met. Margin Regulations The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares for the purpose of buying, carrying or trading in securities ("Purpose Loans"). Depending upon factors similar to those described above regarding the continued listing, 35 public trading and market quotations of the Shares, it is possible that, following the consummation of the transactions contemplated by the Merger Agreement, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and, therefore, could no longer be used as collateral for Purpose Loans made by brokers. 18. Certain Conditions of the Offer. Notwithstanding any other provisions of the Offer or the Merger Agreement, and subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to Parent's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer), Purchaser shall not be required to accept for payment or pay for any tendered Shares, shall delay the acceptance for payment of any tendered Shares, and (subject to the terms of the Merger Agreement) shall extend the Offer by one or more extensions, if (i) the Minimum Condition is not satisfied prior to the Expiration Date; (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the Expiration Date, or (iii) at any time after the date of the Merger Agreement, and prior to the Expiration Date, any of the following conditions exist: (a) any statute, rule, regulation, legislation, ruling, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer or the Merger, by any governmental entity of competent jurisdiction that (i) makes illegal or otherwise prohibits consummation of the Offer or the Merger, (ii) prohibits or materially limits the ownership or operation by Parent or Purchaser of all or any substantial portion of the business or assets of the Company (or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole), or compels Parent or Purchaser to dispose of, divest or hold separately all or any substantial portion of the business or assets of Parent, Purchaser or the Company or its subsidiaries, individually or taken as a whole, or imposes any material limitation on the ability of Parent or Purchaser to conduct its business or own such assets, (iii) imposes any material limitation on the ability of Parent or Purchaser effectively to acquire, hold or exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Purchaser or Parent on the adoption of the Merger Agreement and all other matters properly presented to the Company's shareholders, (iv) requires divestiture by Parent or Purchaser of any Shares or (v) results in a Material Adverse Effect on the Company; (b) there shall be instituted and pending any action or proceeding by any governmental entity that would reasonably be expected to result in any of the consequences referred to in clauses (i) through (v) of the preceding paragraph (a); (c) the Merger Agreement shall have been terminated in accordance with its terms; (d) any of the representations and warranties of the Company set forth in the Merger Agreement, when read without any exception or qualification as to materiality or Material Adverse Effect, shall not be true and correct, as if such representations and warranties were made immediately prior to the consummation of the Offer (except as to any such representation or warranty which speaks as of a specific date, which must be untrue or incorrect as of such specific date), except where the failure or failures to be so true and correct, individually or in the aggregate, do not and would not reasonably be expected to have a Material Adverse Effect on the Company; (e) the Company shall have failed to perform or to comply with any of its obligations, covenants or agreements under the Merger Agreement in any material respect; (f) there shall have occurred any events or changes which have had or which are likely to have a Material Adverse Effect on the Company, or (g) the Board shall have withdrawn, or modified or changed in a manner adverse to Parent (including by amendment of the Schedule 14D-9), its recommendation of the Offer, the Merger Agreement or the Merger, or recommended another proposal or offer for the acquisition of the Company, or the Board shall have resolved to do any of the foregoing. 36 The foregoing conditions are for the benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to any such conditions (except for any action or inaction in material breach of the Merger Agreement by Parent or Purchaser) and, except for the Minimum Condition, may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time in their sole discretion, in each case, subject to the terms of the Merger Agreement. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 19. Certain Legal Matters; Regulatory Approvals. General Except as described below, based upon an examination of publicly available filings made by the Company with the Commission, other publicly available information about the Company and the representations and warranties of the Company in the Merger Agreement, neither Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of Shares pursuant to the Offer, or of any approval or other action by any governmental, administrative or regulatory agency or authority or public body, domestic or foreign, that would be required for the acquisition or ownership of Shares by Purchaser pursuant to the Offer. Should any such approval or other action be required, it is presently contemplated that such approval or action would be sought except as described below in this Section 19 under "State Takeover Statutes." While, except as otherwise expressly described herein, Purchaser currently does not intend to delay acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the Company's business or that certain parts of the Company's business might not have to be disposed of in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action, any of which could cause Purchaser to decline to accept for payment or pay for any Shares tendered. Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to the conditions set forth in "THE TENDER OFFER--18. Certain Conditions of the Offer," including conditions relating to legal matters discussed in this Section 19. Antitrust Under the HSR Act and the rules that have been promulgated thereunder by the Federal Trade Commission ("FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares pursuant to the Offer is subject to such requirements. Purchaser expects to file a Notification and Report Form with the FTC and the Antitrust Division with respect to the Offer under the HSR Act as soon as practicable following commencement of the Offer. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., Washington D.C. time, on the 15th day after the date such form is filed, unless early termination of the waiting period is granted. In addition, the Antitrust Division or the FTC may extend such waiting period by requesting additional information or documentary material from Purchaser. If such a request is made with respect to the Offer, the waiting period related to the Offer will expire at 11:59 p.m. Washington D.C. time on the 10th day after substantial compliance by Purchaser with such request. With respect to each acquisition, the Antitrust Division or the FTC may issue only one request for additional information. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties may engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. Expiration or termination of applicable waiting periods under the HSR Act is a condition to Purchaser's obligation to accept for payment and pay for Shares tendered pursuant to the Offer. 37 The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the proposed purchase of the Shares by Purchaser pursuant to the Offer. At any time before or after such purchase, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the transaction or seeking divestiture of the Shares so acquired or divestiture of substantial assets of Purchaser, Parent or the Company. Litigation seeking similar relief could be brought by private parties. Purchaser does not believe that consummation of the Offer and the other transactions contemplated by the Merger Agreement will result in violation of any applicable antitrust laws. However, there can be no assurance that a challenge to the Offer and the other transactions contemplated by the Merger Agreement on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See "TENDER OFFER--18. Certain Conditions of the Offer" for certain conditions to the purchase of the Shares in the Offer, including conditions with respect to litigation and certain other governmental actions. State Takeover Statutes A number of states have adopted "takeover" statutes that purport to apply to attempts to acquire corporations that are incorporated in such states, or whose business operations have substantial economic effects in such states, or that have substantial assets, security holders, employees, principal executive offices or places of business in such states. In Edgar v. MITE Corporation, the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Act, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without prior approval of the remaining shareholders, provided that such laws were applicable under certain conditions, in particular, that the corporation has a substantial number of shareholders in the state and is incorporated there. Since January 1, 1999, the Company, directly or through subsidiaries, has leased space in 20 states and performed work in 44 states in the United States, and some of these states have enacted takeover statutes. Purchaser does not know whether any of these statutes will, by their terms, apply to the Offer, and Purchaser has not complied with any such statutes. To the extent that certain provisions of these statutes purport to apply to the Offer, Purchaser believes that there are reasonable bases for contesting such statutes. If any person should seek to apply any state takeover statute, Purchaser would take such action as then appears desirable, which action may include challenging the validity or applicability of any such statute in appropriate court proceedings. If it is asserted that one or more takeover statutes apply to the Offer and it is not determined by an appropriate court that such statute or statutes do not apply or are invalid as applied to the Offer, Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer. In such case, Purchaser may not be obligated to accept for payment or pay for Shares tendered pursuant to the Offer. 20. Fees and Expenses. CIBC World Markets Corp. ("CIBC World Markets") is acting as Dealer Manager for the Offer and as Parent's exclusive financial advisor in connection with Parent's proposed acquisition of the Company, for which services CIBC World Markets will receive customary compensation. Parent also has agreed to reimburse CIBC World Markets for reasonable out-of-pocket expenses (including reasonable fees and expenses of its legal counsel), and to indemnify CIBC World Markets and certain related parties against certain liabilities, including liabilities under the federal securities laws, arising out of its engagement. In the ordinary course of business, CIBC World Markets and its affiliates may actively trade or hold the securities of Parent and the Company for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. 38 Purchaser has retained MacKenzie Partners, Inc. to act as the Information Agent and ChaseMellon Shareholder Services, L.L.C. to act as the Depositary in connection with the Offer. The Information Agent and the Dealer Manager may contact holders of Shares by mail, telephone, telegraph and personal interview and may communicate with brokers, dealers, commercial banks and trust companies and other nominee shareholders with respect to the Offer or to request such brokers, dealers, commercial banks and trust companies and other nominee shareholders to forward the Offer materials to beneficial owners of the Shares. The Information Agent will receive a fee for services as Information Agent not to exceed $7,500 and will be reimbursed for certain out- of-pocket expenses. The Depositary will receive reasonable and customary compensation for services relating to the Offer and will be reimbursed for certain out-of-pocket expenses. Purchaser has also agreed to indemnify the Information Agent and the Depositary against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. Purchaser will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares pursuant to the Offer (other than to the Information Agent or the Dealer Manager). Brokers, dealers, commercial banks, trust companies and other nominees will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 21. Miscellaneous. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. Purchaser may, in its discretion, however, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in any such jurisdiction. Except for the Depositary's authorization to enter into agreements or arrangements with the Book-Entry Transfer Facility, no person has been authorized to give any information or to make any representation on behalf of Purchaser not contained herein or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. Neither the delivery of this Offer to Purchase nor any purchase pursuant to the Offer shall, under any circumstances, create any implication that there has been no change in the affairs of Purchaser or the Company since the date as of which information is furnished or the date of this Offer to Purchase. Purchaser and Parent have filed with the Commission the Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. In addition, the Company has filed with the Commission the Schedule 14D-9, together with exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the recommendations of the Board with respect to the Offer and the reasons for such recommendations and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, may be inspected and copies may be obtained from the Commission in the manner set forth in "THE TENDER OFFER--7. Certain Information Concerning the Company--Company Available Information" (except that they will not be available at the regional offices of the Commission). SEISMIC ACQUISITION CORPORATION May 17, 1999 39 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The following table sets forth the name, principal occupation or employment at the present time and during the last five years, and the name of any corporation or other organization in which such employment is conducted or was conducted of each executive officer and director of the Company. Except as otherwise indicated, all of the persons listed below are citizens of the United States. The business address of each director and executive officer of the Company is 400 South Camino Real, Suite 1200, San Mateo California 99402, unless otherwise set forth below. Directors of the Company are indicated with an asterisk. Unless otherwise indicated, none of the persons listed below have bought or sold any Company Common Stock within the past 60 days.
Name, Citizenship and Present Occupation Material Positions Held Current Business Address or Employment During The Past Five Years ------------------------ ------------------ -------------------------- *Dr. Franklin J. Agardy... President of Forensic President of FMA from 1988 to Management Associates, Inc. present. ("FMA"). Member of the Audit Committee and Director of the Company since 1998. *Douglas P. Crane......... Chairman of CJM Associates, Chairman of CJM from February Inc. ("CJM"). Chairman of the 1989 to present. Board, member of the Executive Committee, Audit Committee, Compensation Committee and Director of the Company since 1992. *Eugene M. Herson......... President and Chief Executive President and Chief Executive Officer of the Company. Member Officer of the Company from of the Executive Committee and October 1994 to present; Vice Director of the Company since President--Special Operations 1985. of the Company from April 1993 to October 1994. *Donald R. Kerstetter..... Member of the Audit Committee, President of ET Environmental Compensation Committee and Corporation from May 1994 to Director of the Company since December 1997; was an employee 1994. of Turner Construction Company since 1956 and served as an officer of Turner from 1976 until his retirement in 1996 from his position as Executive Vice President of Turner. *Richard A. Peluso........ Vice President and Director of Vice President of the Company the Company since 1996. from April 1994 to present; Senior Vice President of Wehran Envirotech, Inc. from June 1972 to April 1994. *Peter Vardy.............. Managing Director of Peter Managing Director of PV&A from Vardy & Associates ("PV&A"). June 1990 to present. Member of the Executive Committee, Compensation Committee and Director of the Company since 1994.
I-1 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY--(Continued)
Name, Citizenship and Present Occupation Material Positions Held Current Business Address or Employment During The Past Five Years ------------------------ ------------------ -------------------------- R. Michael Momboisse..... Chief Financial Officer, Vice Chief Financial Officer and President--Legal and Secretary Vice President--Legal of the of the Company Company from July 1993 to present and Secretary of the Company from 1996 to present. Vincent Franceschi....... Vice President of the Company Vice President of the Company from May 1998 to present and Area Operations Manager of the Southwest areas of the Company's Professional Services Division ("PSD") from April 1998 to present; President and Chief Operating Officer of Vectra Technologies, Inc. ("Vectra") from April 1997 to December 1997; Vice President and General Manager of Vectra from January 1994 to March 1997. Patrick Gillespie........ Vice President of the Company Vice President of the Company from May 1998 to present and Area Operations Manager of the North areas of the Company's PSD from April 1994 to present. John Kinsella............ Vice President of the Company Vice President of the Company (citizen of the United Kingdom) from May 1998 to present and Area Operations Manager of the Northwest areas of the Company's PSD from April 1998 to present; Vice President of SCS Engineers from January 1992 to April 1998. Gary McEntee............. Vice President of the Company Vice President of the Company in charge of business development from February 1997 to present; Manager of the Company's Northeast and East Consulting areas from April 1994 to February 1997. Alan Ortiz............... Vice President of the Company Vice President of the Company from May 1998 to present and Area Operations Manager of the South areas of the Company's PSD from September 1996 to present; Senior Manager at KPMG Peat Marwick Consulting from September 1995 to September 1996; Vice President of Golder Associates from October 1991 to August 1995. Mark A. Shipps........... Vice President of the Company Vice President of the Company from May 1998 to present; President of Organic Waste Technologies, Inc., a wholly owned subsidiary of the Company, from 1990 to present.
I-2 SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER The following table sets forth the name, principal occupation or employment at the present time and during the last five years, and the name of any corporation or other organization in which such employment is conducted or was conducted of each executive officer or director of Parent. Except as otherwise indicated, all of the persons listed below are citizens of the United States of America. Unless otherwise indicated, the principal business address of each director or executive officer of Parent is 2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792. Directors of Parent are indicated with an asterisk. None of the persons listed below have bought or sold any Company Common Stock within the past 60 days.
Name, Citizenship and Present Occupation Material Positions Held Current Business Address or Employment During the Past Five Years ------------------------ ------------------ -------------------------- *Daniel A. D'Aniello...... Managing Director of the Managing Director of Carlyle Carlyle Group ("Carlyle"). from 1987 to the present. Chairman of the Executive Committee, member of the Compensation Committee and Director of Parent since 1996. *Anthony J. DeLuca........ Chief Executive Officer and Chief Executive Officer and President of Parent. Member of President of Parent from July the Executive Committee and 1997 to the present; President Director of Parent since 1996. and acting Chief Executive Officer of Parent from July 1996 to July 1997; Senior Vice President and Chief Financial Officer of Parent from March 1990 to July 1997. *Philip B. Dolan.......... Principal of Carlyle. Member Principal of Carlyle from 1998 of the Executive Committee, to the present; Vice President Compensation Committee and of Carlyle from 1992 to 1998. Director of Parent since 1996. *E. Martin Gibson......... Chairman of the Audit Chairman of the Board of Committee and Director of Directors of Parent from April Parent since 1994. 1995 to November 1996; Chairman of Corning Life Sciences, Inc. from 1992 to December 1994. *James C. McGill.......... Director and Private Investor. Director of Parent from 1990 Member of the Audit Committee to the present; Private and Director of Parent since investor for the last 5 years. 1990. *Richard W. Pogue......... Member of the Audit Committee A consultant with Dix & Eaton; and Director of Parent since Lawyer with the law firm June 1998. Jones, Day, Reavis & Pogue from 1961 to June 1994. *Robert F. Pugliese....... Special Counsel to Eckert Special Counsel to Eckert from Seamans Cherin & Mellott 1993 to the present. ("Eckert"). Member of the Audit Committee and Director of Parent since 1996. *Charles W. Schmidt....... Member of the Compensation Senior Vice President, Committee and Director of External Affairs of Raytheon Parent since June 1998. Company, and President and Chief Executive Officer of SCA Services, Inc.
II-1 SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER--(Continued)
Name, Citizenship and Current Present Occupation Material Positions Held Business Address or Employment During the Past Five Years ----------------------------- ------------------ -------------------------- *Admiral James David Watkins.. President of the Joint President of JOI from 1993 to Oceanographic Institutions, the present; President of Inc. ("JOI"). Member of the Consortium Oceanographic Compensation Committee and Research and Education from Director of Parent since 1996. 1994 to the present; Secretary of Energy under President Bush from 1989 to 1993. David L. Backus........... Senior Vice President, Senior Vice President, Outsourced Services and Outsourced Services and International of Parent. International of Parent from December 1998 to the present; Vice President, Western Operations of Fluor Daniel GTI, Inc. from 1992 to December 1998. James G. Kirk............. Vice President, General Vice President, General Counsel and Secretary of Counsel and Secretary of Parent. Parent from September 1996 to the present; General Counsel, Eastern Operations of Parent from 1991 to September 1996. James R. Mahoney.......... Senior Vice President, Senior Vice President, Consulting and Ventures of Consulting and Ventures of Parent. Parent from July 1996 to the present; Senior Vice President, Technical Operations and Corporate Development of Parent from March 1995 to July 1996; Senior Vice President, Corporate Development and Sales of Parent from April 1992 to March 1995. Raymond J. Pompe.......... Senior Vice President, Senior Vice President, Engineering and Construction Engineering and Construction of Parent. of Parent from July 1996 to the present; Senior Vice President, Project Operations of Parent from March 1995 to July 1996; Vice President, Construction and Remediation of Parent from 1988 to March 1995. Philip O. Strawbridge..... Senior Vice President and Senior Vice President and Chief Administrative Officer Chief Administrative Officer of Parent. of Parent from May 1998 to the present; Senior Vice President, Chief Financial and Administrative Officer of OHM Corporation from February 1996 to May 1998; Senior Director of Contracts and Finance of Fluor Daniel, Inc. prior to February 1996.
II-2 SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER--(Continued) The following table sets forth the name, principal occupation or employment at the present time and during the last five years, and the name of any corporation or other organization in which such employment is conducted or was conducted of each executive officer or director of Purchaser. Except as otherwise indicated, all of the persons listed below are citizens of the United States of America. Unless otherwise indicated, the principal business address of each director or executive officer of Purchaser is 2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792. Directors of Purchaser are indicated with an asterisk. None of the persons listed below have bought or sold any Company Common Stock within the past 60 days.
Name, Citizenship and Present Occupation Material Positions Held Current Business Address or Employment During the Past Five Years ------------------------ ------------------ -------------------------- *James G. Kirk............ Chief Executive Officer and Vice President, General President of Purchaser. Vice Counsel and Secretary of President, General Counsel and Parent from September 1996 to Secretary of Parent. Director the present; General Counsel, of Purchaser since 1999. Eastern Operations of Parent from 1991 to September 1996. *James M. Redwine......... Secretary of Purchaser. Senior Currently Senior Corporate Corporate Counsel and Counsel and Assistant Assistant Secretary of Parent. Secretary of Parent and has Director of Purchaser since been an employee of Parent for 1999. the past five years. He has held the positions of Corporate Counsel and Associate Counsel of Parent. *Harry J. Soose........... Chief Financial Officer and Currently Vice President, Vice President of Purchaser. Finance and Controller of Vice President, Finance and Parent and has been an Controller of Parent. Director employee of Parent since 1991. of Purchaser since 1999. He has held positions of Vice President and Controller and Controller, Construction and Remediation Division of Parent. Richard R. Conte.......... Treasurer of Purchaser. Vice Vice President and Treasurer President and Treasurer of of Parent from June 1997 to Parent. present; Chairman, President and Principal Financial Officer of Rymac Mortgage Investment Corporation, a publicly traded REIT, which in 1996 became known as Core Materials Corporation, from 1992 to May 1997. James R. Mahoney.......... Vice President of Purchaser. Senior Vice President, Senior Vice President, Consulting and Ventures of Consulting and Ventures of Parent from July 1996 to the Parent. present; Senior Vice President, Technical Operations and Corporate Development of Parent from March 1995 to July 1996; Senior Vice President, Corporate Development and Sales of Parent from April 1992 to March 1995.
II-3 ANNEX A TEXT OF CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW Section ------- 1300. Reorganization or short-form merger; dissenting shares; corporate purchase at fair market value; definitions. 1301. Notice to holders of dissenting shares in reorganizations; demand for purchase; time; contents. 1302. Submission of share certificates for endorsement; uncertificated securities. 1303. Payment of agreed price with interest; agreement fixing fair market value; filing; time of payment. 1304. Action to determine whether shares are dissenting shares or fair market value; limitation; joinder; consolidation; determination of issues; appointment of appraisers. 1305. Report of appraisers; confirmation; determination by court; judgment; payment; appeal; costs. 1306. Prevention of immediate payment; status as creditors; interest.
Section ------- 1307. Dividends on dissenting shares. 1308. Rights of dissenting shareholders pending valuation; withdrawal of demand for payment. 1309. Termination of dissenting share and shareholder status. 1310. Suspension of right to compensation or valuation proceedings; litigation of shareholders' approval. 1311. Exempt shares. 1312. Right of dissenting shareholder to attack, set aside or rescind merger or reorganization; restraining order or injunction; conditions.
(S) 1300. Reorganization or short-form merger; dissenting shares; corporate purchase at fair market value; definitions (a) If the approval of the outstanding shares (Section 152) of a corporation is required for a reorganization under subdivisions (a) and (b) or subdivision (e) or (f) of Section 1201, each shareholder of the corporation entitled to vote on the transaction and each shareholder of a subsidiary corporation in a short-form merger may, by complying with this chapter, require the corporation in which the shareholder holds shares to purchase for cash at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b). The fair market value shall be determined as of the day before the first announcement of the terms of the proposed reorganization or short-form merger, excluding any appreciation or depreciation in consequence of the proposed action, but adjusted for any stock split, reverse stock split, or share dividend which becomes effective thereafter. (b) As used in this chapter, "dissenting shares" means shares which come within all of the following descriptions: (1) Which were not immediately prior to the reorganization or short-form merger either (A) listed on any national securities exchange certified by the Commissioner of Corporations under subdivision (o) of Section 25100 or (B) listed on the list of OTC margin stocks issued by the Board of Governors of the Federal Reserve System, and the notice of meeting of shareholders to act upon the reorganization summarizes this section and Sections 1301, 1302, 1303 and 1304; provided, however, that this provision does not apply to any shares with respect to which there exists any restriction on transfer imposed by the corporation or by any law or regulation; and provided, further, that this provision does not apply to any A-1 class of shares described in subparagraph (A) or (B) if demands for payment are filed with respect to 5 percent or more of the outstanding shares of that class. (2) Which were outstanding on the date for the determination of shareholders entitled to vote on the reorganization and (A) were not voted in favor of the reorganization or, (B) if described in subparagraph (A) or (B) of paragraph (1) (without regard to the provisos in that paragraph), were voted against the reorganization, or which were held of record on the effective date of a short-form merger; provided, however, that subparagraph (A) rather than subparagraph (B) of this paragraph applies in any case where the approval required by Section 1201 is sought by written consent rather than at a meeting. (3) Which the dissenting shareholder has demanded that the corporation purchase at their fair market value, in accordance with Section 1301. (4) Which the dissenting shareholder has submitted for endorsement, in accordance with Section 1302. (c) As used in this chapter, "dissenting shareholder" means the recordholder of dissenting shares and includes a transferee of record. (Added by Stats.1975, c. 682, (S) 7, eff. Jan. 1, 1977. Amended by Stats.1976, c. 641, (S) 21.3, eff. Jan. 1, 1977; Stats.1982, c. 36, p. 69, (S) 3, eff. Feb. 17, 1982; Stats.1990, c. 1018 (A.B.2259), (S) 2; Stats.1993, c. 543 (A.B.2063), (S) 13.) (S) 1301. Notice to holders of dissenting shares in reorganizations; demand for purchase; time; contents (a) If, in the case of a reorganization, any shareholders of a corporation have a right under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to purchase their shares for cash, such corporation shall mail to each such shareholder a notice of the approval of the reorganization by its outstanding shares (Section 152) within 10 days after the date of such approval, accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of the price determined by the corporation to represent the fair market value of the dissenting shares, and a brief description of the procedure to be followed if the shareholder desires to exercise the shareholder's right under such sections. The statement of price constitutes an offer by the corporation to purchase at the price stated any dissenting shares as defined in subdivision (b) of Section 1300, unless they lose their status as dissenting shares under Section 1309. (b) Any shareholder who has a right to require the corporation to purchase the shareholder's shares for cash under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the corporation to purchase such shares shall make written demand upon the corporation for the purchase of such shares and payment to the shareholder in cash of their fair market value. The demand is not effective for any purpose unless it is received by the corporation or any transfer agent thereof (1) in the case of shares described in clause (i) or (ii) of paragraph (1) of subdivision (b) of Section 1300 (without regard to the provisos in that paragraph), not later than the date of the shareholders' meeting to vote upon the reorganization, or (2) in any other case within 30 days after the date on which the notice of the approval by the outstanding shares pursuant to subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder. (c) The demand shall state the number and class of the shares held of record by the shareholder which the shareholder demands that the corporation purchase and shall contain a statement of what such shareholder claims to be the fair market value of those shares as of the day before the announcement of the proposed reorganization or short-form merger. The statement of fair market value constitutes an offer by the shareholder to sell the shares at such price. (Added by Stats.1975, c. 682, (S) 7, eff. Jan. 1, 1977. Amended by Stats.1976, c. 641, (S) 21.6, eff. Jan. 1, 1997; Stats.1980, c. 501, p. 1052, (S) 5; Stats.1980, c. 1155, p. 3831, (S) 1.) (S) 1302. Submission of share certificates for endorsement; uncertificated securities Within 30 days after the date on which notice of the approval by the outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, the shareholder shall submit to the corporation at its principal office or at the office of any transfer agent thereof, (a) if the shares are certificated securities, the shareholder's certificates representing any shares which the shareholder demands that the A-2 corporation purchase, to be stamped or endorsed with a statement that the shares are dissenting shares or to be exchanged for certificates of appropriate denomination so stamped or endorsed or (b) if the shares are uncertificated securities, written notice of the number of shares which the shareholder demands that the corporation purchase. Upon subsequent transfers of the dissenting shares on the books of the corporation, the new certificates, initial transaction statement, and other written statements issued therefor shall bear a like statement, together with the name of the original dissenting holder of the shares. (Added by Stats.1975, c. 682, (S) 7, eff. Jan. 1, 1977. Amended by Stats.1986, c. 766, (S) 23.) (S) 1303. Payment of agreed price with interest; agreement fixing fair market value; filing, time of payment (a) If the corporation and the shareholder agree that the shares are dissenting shares and agree upon the price of the shares, the dissenting shareholder is entitled to the agreed price with interest thereon at the legal rate on judgments from the date of the agreement. Any agreements fixing the fair market value of any dissenting shares as between the corporation and the holders thereof shall be filed with the secretary of the corporation. (b) Subject to the provisions of Section 1306, payment of the fair market value of dissenting shares shall be made within 30 days after the amount thereof has been agreed or within 30 days after any statutory or contractual conditions to the reorganization are satisfied, whichever is later, and in the case of certificated securities, subject to surrender of the certificates therefor, unless provided otherwise by agreement. (Added by Stats.1975, c. 682, (S) 7, eff. Jan. 1, 1977. Amended by Stats.1980, c. 501, p. 1053, (S) 6; Stats.1986, c. 766, (S) 24.) (S) 1304. Action to determine whether shares are dissenting shares or fair market value; limitation; joinder; consolidation; determination of issues; appointment of appraisers (a) If the corporation denies that the shares are dissenting shares, or the corporation and the shareholder fail to agree upon the fair market value of the shares, then the shareholder demanding purchase of such shares as dissenting shares or any interested corporation, within six months after the date on which notice of the approval by the outstanding shares (Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but not thereafter, may file a complaint in the superior court of the proper county praying the court to determine whether the shares are dissenting shares or the fair market value of the dissenting shares or both or may intervene in any action pending on such a complaint. (b) Two or more dissenting shareholders may join as plaintiffs or be joined as defendants in any such action and two or more such actions may be consolidated. (c) On the trial of the action, the court shall determine the issues. If the status of the shares as dissenting shares is in issue, the court shall first determine that issue. If the fair market value of the dissenting shares is in issue, the court shall determine, or shall appoint one or more impartial appraisers to determine, the fair market value of the shares. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.) (S) 1305. Report of appraisers; confirmation; determination of court; judgment; payment; appeal; costs (a) If the court appoints an appraiser or appraisers, they shall proceed forthwith to determine the fair market value per share. Within the time fixed by the court, the appraisers, or a majority of them, shall make and file a report in the office of the clerk of the court. Thereupon, on the motion of any party, the report shall be submitted to the court and considered on such evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it. (b) If a majority of the appraisers appointed fail to make and file a report within 10 days from the date of their appointment or within such further time as may be allowed by the court or the report is not confirmed by the court, the court shall determine the fair market value of the dissenting shares. (c) Subject to the provisions of Section 1306, judgment shall be rendered against the corporation for payment of an amount equal to the fair market value of each dissenting share multiplied by the number of A-3 dissenting shares which any dissenting shareholder who is a party, or who has intervened, is entitled to require the corporation to purchase, with interest thereon at the legal rate from the date on which judgment was entered. (d) Any such judgment shall be payable forthwith with respect to uncertificated securities and, with respect to certificated securities, only upon the endorsement and delivery to the corporation of the certificates for the shares described in the judgment. Any party may appeal from the judgment. (e) The costs of the action, including reasonable compensation to the appraisers to be fixed by the court, shall be assessed or apportioned as the court considers equitable, but, if the appraisal exceeds the price offered by the corporation, the corporation shall pay the costs (including in the discretion of the court attorneys' fees, fees of expert witnesses and interest at the legal rate on judgments from the date of compliance with Sections 1300, 1301 and 1302 if the value awarded by the court for the shares is more than 125 percent of the price offered by the corporation under subdivision (a) of Section 1301). (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977. Amended by Stats.1976, c. 641, (S) 22, eff Jan. 1, 1977; Stats.1977, c. 235, p. 1068, (S) 16; Stats.1986, c. 766, (S) 25.) (S) 1306. Prevention of immediate payment; status as creditors; interest To the extent that the provisions of Chapter 5 prevent the payment to any holders of dissenting shares of their fair market value, they shall become creditors of the corporation for the amount thereof together with interest at the legal rate on judgments until the date of payment, but subordinate to all other creditors in any liquidation proceeding, such debt to be payable when permissible under the provisions of Chapter 5. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.) (S) 1307. Dividends on dissenting shares Cash dividends declared and paid by the corporation upon the dissenting shares after the date of approval of the reorganization by the outstanding shares (Section 152) and prior to payment for the shares by the corporation shall be credited against the total amount to be paid by the corporation therefor. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.) (S) 1308. Rights of dissenting shareholders pending valuation; withdrawal of demand for payment Except as expressly limited in this chapter, holders of dissenting shares continue to have all the rights and privileges incident to their shares, until the fair market value of their shares is agreed upon or determined. A dissenting shareholder may not withdraw a demand for payment unless the corporation consents thereto. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.) (S) 1309. Termination of dissenting share and shareholder status Dissenting shares lose their status as dissenting shares and the holders thereof cease to be dissenting shareholders and cease to be entitled to require the corporation to purchase their shares upon the happening of any of the following: (a) The corporation abandons the reorganization. Upon abandonment of the reorganization, the corporation shall pay on demand to any dissenting shareholder who has initiated proceedings in good faith under this chapter all necessary expenses incurred in such proceedings and reasonable attorneys' fees. (b) The shares are transferred prior to their submission for endorsement in accordance with Section 1302 or are surrendered for conversion into shares of another class in accordance with the articles. (c) The dissenting shareholder and the corporation do not agree upon the status of the shares as dissenting shares or upon the purchase price of the shares, and neither files a complaint or intervenes in a pending action as provided in Section 1304, within six months after the date on which notice of the approval by the outstanding shares or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder. A-4 (d) The dissenting shareholder, with the consent of the corporation, withdraws the shareholder's demand for purchase of the dissenting, shares. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.) (S) 1310. Suspension of right to compensation or valuation proceedings; litigation of shareholders' approval If litigation is instituted to test the sufficiency or regularity of the votes of the shareholders in authorizing a reorganization, any proceedings under Sections 1304 and 1305 shall be suspended until final determination of such litigation. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.) (S) 1311. Exempt shares This chapter, except Section 1312, does not apply to classes of shares whose terms and provisions specifically set forth the amount to be paid in respect to such shares in the event of a reorganization or merger. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977. Amended by Stats.1988, c. 919, (S) 8.) (S) 1312. Right of dissenting shareholder to attack, set aside or rescind merger or reorganization; restraining order or injunction; conditions (a) No shareholder of a corporation who has a right under this chapter to demand payment of cash for the shares held by the shareholder shall have any right at law or in equity to attack the validity of the reorganization or short-form merger, or to have the reorganization or short-form merger set aside or rescinded, except in an action to test whether the number of shares required to authorize or approve the reorganization have been legally voted in favor thereof; but any holder of shares of a class whose terms and provisions specifically set forth the amount to be paid in respect to them in the event of a reorganization or short-form merger is entitled to payment in accordance with those terms and provisions or, if the principal terms of the reorganization are approved pursuant to subdivision (b) of Section 1202, is entitled to payment in accordance with the terms and provisions of the approved reorganization. (b) If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, subdivision (a) shall not apply to any shareholder of such party who has not demanded payment of cash for such shareholder's shares pursuant to this chapter; but if the shareholder institutes any action to attack the validity of the reorganization or short- form merger or to have the reorganization or short-form merger set aside or rescinded, the shareholder shall not thereafter have any right to demand payment of cash for the shareholder's shares pursuant to this chapter. The court in any action attacking the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded shall not restrain or enjoin the consummation of the transaction except upon 10 days' prior notice to the corporation and upon a determination by the court that clearly no other remedy will adequately protect the complaining shareholder or the class of shareholders of which such shareholder is a member. (c) If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, in any action to attack the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded, (1) a party to a reorganization or short-form merger which controls another party to the reorganization or short-form merger shall have the burden of proving that the transaction is just and reasonable as to the shareholders of the controlled party, and (2) a person who controls two or more parties to a reorganization shall have the burden of proving that the transaction is just and reasonable as to the shareholders of any party so controlled. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977. Amended by Stats.1976, c. 641, (S) 22.5, eff Jan. 1, 1977; Stats.1988, c. 919, (S) 9.) A-5 Manually signed facsimile copies of the Letter of Transmittal will be accepted. Letters of Transmittal and Share Certificates should be sent or delivered by each shareholder of the Company or his or her broker, dealer, commercial bank or trust company to the Depositary at one of its addresses set forth below: The Depositary for the Offer is: ChaseMellon Shareholder Services, L.L.C. By First Class Mail: By Overnight Delivery: By Hand: P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor South Hackensack, New Jersey 07606 Mail Drop-Reorg New York, New York 10271 Attn: Reorganization Department Ridgefield Park, New Jersey 07660 Attn: Reorganization Department Attn: Reorganization Department By Facsimile Transmission: To Confirm Facsimile Transmission Only, Call: (For Eligible Institutions Only) (201) 296-4860 (201) 296-4293
Any questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below. Requests for additional copies of this Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent. Shareholders may also contact their brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: [LOGO OF MACKENZIE PARTNERS, INC.] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or Call Toll-Free (800) 322-2885 The Dealer Manager for the Offer is: [LOGO OF CIBC WORLD MARKETS] One World Financial Center New York, New York 10281 (212) 856-3540 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL DATED MAY 17, 1999 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF EMCON AT $6.75 NET PER SHARE PURSUANT TO THE OFFER TO PURCHASE DATED MAY 17, 1999 BY SEISMIC ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF THE IT GROUP, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By First Class Mail: By Overnight Delivery: By Hand: P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor South Hackensack, New Jersey 07606 Mail Drop-Reorg New York, New York 10271 Attn: Reorganization Department Ridgefield Park, New Jersey 07660 Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission: To Confirm Facsimile Transmission Only, Call: (For Eligible Institutions Only) (201) 296-4860 (201) 296-4293
DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED (PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)* CERTIFICATE(S) TENDERED** ----------------------------------------- ----------------------------------------- ----------------------------------------- ----------------------------------------- TOTAL SHARES - -------------------------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares delivered to the Depositary are being tendered. See Instruction 4 accompanying this Letter of Transmittal. DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR, WITH SIGNATURE GUARANTEE IF REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH IN THIS LETTER OF TRANSMITTAL. SEE INSTRUCTIONS 1, 5 AND 10 ACCOMPANYING THIS LETTER OF TRANSMITTAL. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY AND IN THEIR ENTIRETY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used either if certificates are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized if delivery is to be made by book-entry transfer to the account maintained by the Depositary at The Depositary Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 2 of the Offer to Purchase. Shareholders whose certificates are not immediately available or who cannot deliver their certificates or deliver confirmation of the book-entry transfer of their Shares (as defined below) into the Depositary's account at the Book-Entry Transfer Facility ("Book-Entry Confirmation") and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________________________ Account Number: ____________________________________________________________ Transaction Code Number: ___________________________________________________ [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s): ____________________________________________ Window Ticket Number (if any): _____________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution that Guaranteed Delivery: ______________________________ If Delivered by Book-Entry Transfer, Check box: [ ] Account Number: ____________________________________________________________ Transaction Code Number: ___________________________________________________ 2 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS TO THIS LETTER OF TRANSMITTAL CAREFULLY AND IN ITS ENTIRETY. Ladies and Gentlemen: The undersigned hereby tenders to Seismic Acquisition Corporation, a California corporation ("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), the above-described shares of common stock, no par value per share (the "Company Common Stock"), of EMCON, a California corporation (the "Company"), pursuant to Purchaser's offer to purchase all of the issued and outstanding shares (the "Shares") of the Company Common Stock upon the terms and subject to the conditions set forth in the Offer to Purchase dated May 17, 1999 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"), at the purchase price of $6.75 per Share, net to each tendering shareholder in cash, without interest (the "Offer Price"). Subject to, and effective upon, acceptance for payment of the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, and transfers to, upon the order of Purchaser, all right, title and interest in and to all the Shares that are being tendered hereby and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares, or transfer ownership of such Shares (and any such other Shares or securities) on the account books maintained by the Book- Entry Transfer Facility, together, in either such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (b) present such Shares for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints each designee of Purchaser as the attorney-in-fact and proxy of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his or her substitute shall in his or her sole discretion deem proper, and otherwise act (including pursuant to written consent) with respect to all the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or action, which the undersigned is entitled to vote at any meeting of shareholders (whether annual or special and whether or not an adjourned meeting) of the Company, or consent in lieu of any such meeting, or otherwise. This proxy is coupled with an interest in the Company and in the Shares and is irrevocable and is granted in consideration of the deposit by Purchaser with the Depositary of the Offer Price for such Shares in accordance with the terms of the Offer. Purchaser's acceptance for payment of the Shares shall revoke all proxies granted by the undersigned at any time with respect to such Shares and no subsequent proxies will be given (and if given will be deemed not to be effective) with respect thereto by the undersigned. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and that, when the same are accepted for payment by Purchaser, Purchaser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby. All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall not be affected by, and shall survive, the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. 3 The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 2 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," the undersigned hereby directs that the check for the total purchase price or any certificates for Shares not tendered or accepted for payment be issued in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," the undersigned hereby directs that the check for the total purchase price or the return of any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) be mailed to the undersigned at the address shown below the undersigned's signature. In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, the undersigned hereby directs the check for the total purchase price or any certificates for Shares not tendered or accepted for payment be issued in the name of, and such check or such certificates be mailed to, the person or persons so indicated. Shareholders delivering Shares by book-entry transfer may request that any Shares not accepted for payment be returned by crediting such account maintained at the Book-Entry Transfer Facility by making an appropriate entry under "Special Payment Instructions." The undersigned recognizes that Purchaser has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered holder thereof if Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 4, 5, 6 AND 7) To be completed ONLY if certif- icates for Shares not tendered To be completed ONLY if certif- or not purchased and/or the icates for Shares not tendered check for the Offer Price of or not purchased and/or the Shares purchased are to be is- check for the Offer Price of sued in the name of someone Shares purchased are to be sent other than the undersigned, or to someone other than the under- if Shares delivered by book-en- signed, or to the undersigned at try transfer which are not pur- an address other than that shown chased are to be returned by above. credit to an account maintained at the Book-Entry Transfer Fa- cility other than that desig- nated above. Issue check and/or certifi- cate(s) to: Name: ___________________________ (PLEASE PRINT) Issue check and/or certifi- Address: ________________________ cate(s) to: _________________________________ (INCLUDE ZIP CODE) Name: ___________________________ _________________________________ (PLEASE PRINT) (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) Address: ________________________ _________________________________ (INCLUDE ZIP CODE) _________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) [ ] Credit unpurchased Shares delivered by book-entry transfer to the Book-Entry Transfer Facility account. _________________________________ (ACCOUNT NUMBER) 4 SIGN HERE (Complete Substitute Form W-9 included herewith) X ---------------------------------------------------------------------------- X ---------------------------------------------------------------------------- Signature(s) Of Owner(s) Dated: ________________________________________________________________, 1999 (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information. See Instructions 1 and 5.) Name(s) _____________________________________________________________________ (Please Print) ----------------------------------------------------------------------------- Capacity (Full Title) _______________________________________________________ (See Instruction 5) Address _____________________________________________________________________ ----------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number ______________________________________________ Tax Identification or Social Security No. ___________________________________ (Complete Substitute Form W-9 included herewith) GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) Authorized Signature ________________________________________________________ Name ________________________________________________________________________ (Please Print) Title _______________________________________________________________________ Name of Firm ________________________________________________________________ Address _____________________________________________________________________ ----------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number ______________________________________________ Dated: ______________________________________________________________________ 5 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required (a) if this Letter of Transmittal is signed by the registered holder of the Shares (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" above, or (b) if such Shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Certificates. This Letter of Transmittal is to be completed by shareholders either if certificates are to be forwarded herewith or if tenders of Shares are to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 2 of the Offer to Purchase. Certificates for all physically tendered Shares, or any Book-Entry Confirmation of Shares, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof), unless an Agent's Message (as defined in the Offer to Purchase) is utilized, and any other documents required by this Letter of Transmittal must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in the Offer to Purchase). Shareholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary prior to the Expiration Date may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. Pursuant to such procedure, (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, must be received by the Depositary prior to the Expiration Date and (c) the certificates for all physically tendered Shares or Book-Entry Confirmation of Shares, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), unless an Agent's Message is utilized, and any other documents required by this Letter of Transmittal, must be received by the Depositary within three (3) New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK- ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule attached hereto. 4. Partial Tenders. (Not applicable to shareholders who tender by book-entry transfer.) If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered" on the front cover page of this Letter of Transmittal. In such case, new certificate(s) for the remainder of the Shares that were evidenced by your old certificate(s) will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as 6 practicable after the Expiration Date. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsement(s) of certificate(s) or separate stock power(s) are required unless payment or certificate(s) for Shares not tendered or purchased are to be issued to a person other than the registered owner(s). Signatures on such certificate(s) or stock power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Shares listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Except as set forth in this Instruction 6, Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer. If payment of the purchase price is to be made to, or if certificates for Shares not tendered or purchased are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person will be deducted from the total purchase price for all tendered Shares unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF TRANSMITTAL. 7. Special Payment and Delivery Instructions. If a check or certificate(s) for unpurchased Shares are to be issued in the name of a person other than the signer of this Letter of Transmittal or if a check is to be sent or such certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the boxes entitled "Special Payment Instructions" or "Special Delivery Instructions" (whichever the case may be) in this Letter of Transmittal should be completed. Shareholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account maintained at the Book-Entry Transfer Facility. If no such instructions are given, such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility. 8. Requests for Assistance or Additional Copies. Requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below. Additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from the Information Agent or from your broker, dealer, commercial bank or trust company. 7 9. Waiver of Conditions. Subject to the terms of the Merger Agreement (as defined in the Offer to Purchase), the conditions of the Offer may be waived by Purchaser, in whole or in part, at any time and from time to time in the Purchaser's sole discretion, in the case of any Shares tendered. 10. Substitute Form W-9. The tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify whether the shareholder is subject to backup withholding of federal income tax. If a tendering shareholder is subject to backup withholding, the shareholder must cross out Item (2) of the Certification box of the Substitute Form W-9. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to 31% federal income tax withholding on the payment of all reportable payments made to such shareholder. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I, the Depositary will withhold 31% on all payments of the purchase price until a TIN is provided to the Depositary. 11. Lost, Destroyed or Stolen Certificates. If any certificate(s) representing Shares has been lost, destroyed or stolen, the shareholder should promptly notify the Depositary. The shareholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under federal income tax law, a shareholder whose tendered Shares are accepted for payment is required to provide the Depositary with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is his or her social security number. If a tendering shareholder is subject to backup withholding, he or she must cross out Item (2) of the Certification box on the Substitute Form W-9. Failure to provide the requisite information on the Substitute Form W-9 may cause the tendering shareholder to be subject to backup withholding. In addition, failure to provide the correct information, including the correct TIN, on the Substitute Form W-9 may cause the shareholder to be subject to various penalties, including a $50 penalty for each such failure, unless such failure is due to reasonable cause and not willful neglect. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements may be obtained from the Depositary. Exempt shareholders, other than foreign individuals, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax owed by persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to (1) notify the Depositary of his or her correct TIN by 8 completing the form below certifying that the TIN provided on the Substitute Form W-9 is correct and (2) certify that he or she is not subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the shareholder should write "Applied For" in the space provided for in the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I, the Depositary will withhold 31% on all payments of the purchase price until a TIN is provided to the Depositary. 9 - ------------------------------------------------------------------------------- PAYER'S NAME: PART I--Please provide ------------------------- your TIN in the box at Social Security Number right and certify by or Employer signing and dating Identification Number below. (if awaiting TIN write "Applied For") SUBSTITUTE FORM W-9 DEPARTMENT OF THE TREASURY INTERNAL ----------------------------------------------------- REVENUE SERVICE PART II--For Payees exempt from backup withholding, see the attached Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as instructed therein. PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) ----------------------------------------------------- CERTIFICATION--Under the penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number; or a Taxpayer Identification Number has not been issued to me and either (a) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service ("IRS") center or Social Security Administration office or (b) I intend to mail or deliver an application in the near future. (I understand that if I do not provide a Taxpayer Identification Number within 60 days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number); and (2) I am not subject to backup withholding either because I have not been notified by the IRS that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding be- cause of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup with- holding you received another notification from the IRS that you are no longer subject to backup with- holding, do not cross out item (2). (Also see in- structions in the enclosed Guidelines.) ----------------------------------------------------- SIGNATURE __________________ DATE _________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 10 The Information Agent for the Offer is: [LOGO OF MACKENZIE PARTNERS, INC.] 156 FIFTH AVENUE NEW YORK, NEW YORK 10010 (212) 929-5500 (CALL COLLECT) OR CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: [LOGO OF CIBC WORLD MARKETS] ONE WORLD FINANCIAL CENTER NEW YORK, NEW YORK 10281 (212) 856-3540 EX-99.(A)(3) 4 NOTICE OF GUARANTEED DELIVERY DATED MAY 17, 1999 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF EMCON TO SEISMIC ACQUISITION CORPORATION a wholly owned subsidiary OF THE IT GROUP, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED. This form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates representing issued and outstanding shares of common stock, no par value per share (the "Shares"), of EMCON, a California corporation (the "Company"), are not immediately available, if the procedure for book-entry transfer cannot be completed on a timely basis or if time will not permit all required documents to reach the Depositary (as defined in the Offer to Purchase) prior to the Expiration Date (as defined in the Offer to Purchase). This form may be delivered by hand, overnight delivery or by first class mail or transmitted by telegram or facsimile transmission to the Depositary. See Section 2 of the Offer to Purchase. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By First Class Mail: By Overnight Delivery: By Hand: P.O. Box 3301 85 Challenger Road 120 Broadway, 13th South Hackensack, New Mail Drop-Reorg Floor Jersey 07606 Ridgefield Park, New Jersey New York, New York Attn: Reorganization 07660 Attn: Reorganization 10271 Department Department Attn: Reorganization Department By Facsimile Transmission: (For Eligible Institutions Only) To Confirm Facsimile Transmission Only, Call: (201) 296-4293 (201) 296-4860 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: The undersigned hereby tenders to Seismic Acquisition Corporation, a California corporation ("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated May 17, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"), receipt of which is hereby acknowledged. The information regarding the number of Shares indicated below is provided pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Certificate No(s): Name(s) of Record Holder(s): _______ (if available) _____________________ ____________________________________ Number of Shares: __________________ ____________________________________ ____________________________________ (Please Type or Print) Check box if Shares will be Address(es): _______________________ tendered by book-entry transfer: [_] Area Code and Tel. No.: ____________ Account Number: ____________________ Signature(s): ______________________ Dated: _______________________, 1999 GUARANTEE (Not To Be Used For Signature Guarantee) The undersigned, a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program, (a) represents that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule l4e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (b) represents that such tender of Shares complies with Rule 14e-4 under the Exchange Act, and (c) guarantees delivery to the Depositary, at one of its addresses set forth above, of certificates representing the Shares tendered hereby in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depositary Trust Company, in each case with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof), and any other required documents, within three (3) New York Stock Exchange trading days after the date hereof. ____________________________________ ____________________________________ Name of Firm Authorized Signature ____________________________________ ____________________________________ Address Title ____________________________________ Name _______________________________ Zip Code Please Type or Print Area Code and Tel. No. _____________ Date _________________________, 1999 NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 2 EX-99.(A)(4) 5 LETTER TO BROKERS, DEALERS DATED MAY 17, 1999 One World Financial Center New York, New York 10281 OFFER TO PURCHASE FOR CASH ALL ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF EMCON AT $6.75 NET PER SHARE BY SEISMIC ACQUISITION CORPORATION a wholly owned subsidiary OF THE IT GROUP, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED. May 17, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been engaged to act as Dealer Manager in connection with the offer by Seismic Acquisition Corporation, a California corporation ("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), to purchase all of the issued and outstanding shares of common stock, no par value per share (the "Shares"), of EMCON, a California corporation (the "Company"), at $6.75 per Share, net to each tendering shareholder in cash, without interest, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated May 17, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED BY THE EXPIRATION DATE (AS DEFINED HEREIN) AND NOT WITHDRAWN, AT LEAST A NUMBER OF SHARES OF THE COMPANY EQUAL TO EIGHTY PERCENT (80%) OF THE SHARES ISSUED AND OUTSTANDING ON A FULLY DILUTED BASIS. SEE "INTRODUCTION" OF THE OFFER TO PURCHASE. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS, INCLUDING, BUT NOT LIMITED TO, RECEIPT BY PURCHASER AND THE COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY APPROVALS. SEE SECTION 18 OF THE OFFER TO PURCHASE. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, or who hold Shares registered in their own names, we are enclosing the following documents: 1. Offer to Purchase, dated May 17, 1999; 2. Letter of Transmittal, to be used by shareholders of the Company in accepting the Offer and tendering Shares; 3. Letter to Clients, which may be sent to your clients for whose account you hold Shares in your name or in the name of your nominees, with space provided for obtaining such clients' instructions with regard to the Offer; 4. Notice of Guaranteed Delivery, to be used to accept the Offer if certificates for Shares are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date or if the procedures for book-entry transfer, as set forth in the Offer to Purchase, cannot be completed in a timely manner; 5. A letter to the shareholders of the Company from Douglas P. Crane, Chairman of the Company, and Eugene M. Herson, President, Chief Executive Officer and Director of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9, dated May 17, 1999, which has been filed by the Company with the Securities and Exchange Commission; 6. Guidelines for certification of taxpayer identification number on Substitute Form W-9; and 7. Return envelope addressed to ChaseMellon Shareholders Services, L.L.C., as Depositary. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for all of the Shares validly tendered pursuant to the Offer prior to the Expiration Date and not withdrawn in accordance with the provisions set forth in the Offer to Purchase. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Monday, June 14, 1999, unless and until Parent or Purchaser (subject to any restrictions set forth in the Offer to Purchase) shall from time to time have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Parent or Purchaser, shall expire. Purchaser expressly reserves the right to waive any conditions of the Offer (subject to certain restrictions set forth in the Offer to Purchase), to increase the Offer Price, to extend the duration of the Offer or to make any other changes in the terms and conditions of the Offer; provided, however, that without the Company's prior written consent, no change may be made which decreases the Offer Price, changes the form of consideration to be paid in the Offer, reduces the maximum number of Shares to be purchased in the Offer, imposes any conditions to the Offer in addition to the conditions set forth in Section 18 of the Offer to Purchase or amends any other material terms of the Offer in a manner adverse to the Company's shareholders. If all of the conditions set forth in Section 18 of the Offer to Purchase are not satisfied by the time of any scheduled termination of the Offer then; provided that all such conditions are reasonably capable of being satisfied, Purchaser shall extend the Offer until such conditions are satisfied or waived; provided further, that Purchaser shall not be required to extend the Offer beyond July 9, 1999. Purchaser may also (a) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission or (b) extend the Offer for any reason on one or more occasions for an aggregate of not more than twenty (20) business days beyond the initial Expiration Date if more than the number of Shares sufficient to satisfy the Minimum Condition (as defined in the Offer to Purchase) but less than 90% of the Shares issued and outstanding have been tendered. Any extension by Parent shall be effective by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Shares. If Parent extends the Offer, or if Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in the Offer to Purchase. However, the ability of Purchaser to delay payment for Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after either (a)(i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares and any other required documents, has been timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase and (ii) either Share certificates for tendered Shares have been timely received by the Depositary at one of such addresses or such Shares have been timely delivered pursuant to the procedure for book-entry transfer set forth in the Offer to Purchase (and a Book-Entry Confirmation (as defined in the Offer to Purchase) timely received by the Depositary) or (b) the tendering shareholder has complied with the guaranteed delivery procedures set forth in the Offer to Purchase. Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Depositary, the Dealer Manager and the Information Agent as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. However, Purchaser will upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the enclosed Letter of Transmittal. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal and any other required documents should be sent to the Depositary and certificates representing the tendered Shares should be delivered, or such Shares should be tendered by book-entry transfer, all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedures specified under Section 2 in the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to either CIBC World Markets Corp., as the Dealer Manager, or MacKenzie Partners, Inc., as the Information Agent, at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed materials may be obtained from the Information Agent at (212) 929-5500 or call toll free (800) 322-2885. Very truly yours, CIBC WORLD MARKETS CORP. Enclosures NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON BEING DEEMED AN AGENT OF PURCHASER, PARENT, THE DEPOSITARY, THE DEALER MANAGER OR THE INFORMATION AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN. EX-99.(A)(5) 6 LETTER TO CLIENTS DATED MAY 17, 1999 OFFER TO PURCHASE FOR CASH ALL ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF EMCON AT $6.75 NET PER SHARE BY SEISMIC ACQUISITION CORPORATION a wholly owned subsidiary OF THE IT GROUP, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED. May 17, 1999 To Our Clients: Enclosed for your consideration is an Offer to Purchase dated May 17, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer") relating to an offer by Seismic Acquisition Corporation, a California corporation ("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), to purchase all of the issued and outstanding shares of common stock, no par value per share (the "Shares"), of EMCON, a California corporation (the "Company"), at a purchase price of $6.75 per Share, net to each tendering shareholder in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase (the "Offer Price"). We are the holder of record of Shares held by us for your account. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares. A tender of Shares can be made only by us as the holder of record of your Shares and pursuant to your instructions. We request instructions as to whether you wish to tender any or all of the Shares held by us for your account, pursuant to the terms and conditions set forth in the Offer to Purchase. Your attention is directed to the following: 1. The Offer Price is $6.75 per Share, net to each tendering shareholder in cash, without interest. 2. The Offer is being made for all of the Shares. 3. The Offer is being made pursuant to the terms of an Agreement and Plan of Merger, dated as of May 10, 1999 (the "Merger Agreement"), by and among the Company, Purchaser and Parent. The Merger Agreement provides, among other things, for the commencement of the Offer by Purchaser, and further provides that, following the purchase of Shares pursuant to the Offer and promptly after the satisfaction or, if permissible, waiver of certain other conditions, Purchaser will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation (the "Surviving Corporation"). At the election of Parent, to the extent that such action would not cause a failure of a condition to the Offer or the Merger, the Merger may be structured so that the Company shall be merged with and into Purchaser with the result that Purchaser shall become the Surviving Corporation. At the effective time of the Merger (the "Effective Time"), if the Purchaser holds at least 90% of the Shares then outstanding, each Share issued and outstanding prior to the Effective Time (other than Shares held by Parent, Purchaser, the Company or any of their wholly owned subsidiaries (collectively, the "Excluded Shares"), and any Shares with respect to which the holder properly exercises such holder's appraisal rights in accordance with the California General Corporation Law (the "Dissenting Shares")) shall automatically be canceled and extinguished and shall be converted into the right to receive the Offer Price in cash, without interest thereon, subject to appropriate and proportionate adjustments in the event of any reclassification, recapitalization, stock split, stock dividend or similar transactions with respect to the Shares (the "Cash Merger Consideration"). If, however, Purchaser does not hold at least 90% of the Shares then outstanding at the Effective Time, each Share issued and outstanding immediately prior to the Effective Time, other than Excluded Shares and any Dissenting Shares, shall automatically be canceled and extinguished and shall be converted into the right to receive that fraction of a fully paid and nonassessable share of common stock, par value $0.01 per share, of Parent (the "Parent Common Stock") equal to the Conversion Number (the "Stock Merger Consideration" and, together with the Cash Merger Consideration, the "Merger Consideration"). The Conversion Number shall be equal to a fraction (rounded to the nearest third decimal point), (a) the numerator of which shall be equal to the Cash Merger Consideration and (b) the denominator of which shall be equal to the average of the closing sales price of a share of Parent Common Stock as reported on the New York Stock Exchange for each of the ten (10) consecutive trading days ending on, and including, the second trading day immediately preceding the date on which a final vote of the shareholders of the Company on the adoption and approval of the Merger shall have been held (the "Parent Average Stock Price"); provided, however, that if the Parent Average Stock Price is equal to or less than $12.50, then the Conversion Number shall be 0.540. Each Excluded Share shall be canceled and extinguished and cease to exist without any conversion thereof, and no payment shall be made with respect thereto. Each holder (other than holders of Excluded Shares) of a certificate representing any Shares shall, after the Effective Time, cease to have any rights with respect to such Shares, except either to receive the Merger Consideration upon surrender of such certificate, or to exercise such holder's appraisal rights as provided in the Merger Agreement and the applicable California law. 4. The Company's Board of Directors has unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to and in the best interests of the shareholders of the Company, has unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and recommends that the shareholders accept the Offer and tender their Shares thereunder. Raymond James & Associates, Inc. ("Raymond James"), financial advisor to the Company, has delivered a written opinion to the Company's Board of Directors, dated as of May 10, 1999 (the "Opinion"), to the effect that, as of May 7, 1999, the terms of the Offer and the Merger are fair from a financial point of view to the shareholders of the Company. The full text of the Opinion is contained in the Company's solicitation/recommendation statement on Schedule 14D-9 filed with the Securities and Exchange Commission in connection with the Offer. Shareholders are urged to read the Opinion carefully and in its entirety for assumptions made, matters considered and limits of the review of Raymond James. 5. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Monday, June 14, 1999, unless extended. 6. The Offer is conditioned upon, among other things, there being validly tendered by the expiration date and not withdrawn at least a number of Shares of the Company equal to eighty percent (80%) of the Shares issued and outstanding on a fully diluted basis. The Offer is subject to certain other conditions, including, but not limited to, receipt by Purchaser and the Company of certain governmental and regulatory approvals. 7. Shareholders who tender Shares will not be obligated to pay brokerage commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. If you wish to have us tender any or all of your Shares, please complete, sign and return the form set forth on the next page. Your instructions to us should be forwarded in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF EMCON BY SEISMIC ACQUISITION CORPORATION a wholly owned subsidiary OF THE IT GROUP, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase of Seismic Acquisition Corporation, a California corporation ("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), dated May 17, 1999, and the related Letter of Transmittal relating to the issued and outstanding shares of common stock, no par value per share (the "Shares"), of EMCON, a California corporation (the "Company"). This will instruct you to tender to Purchaser the number of Shares indicated below held by you for the account of the undersigned, on the terms and subject to the conditions set forth in the Offer to Purchase and Letter of Transmittal. NUMBER OF SHARES TO BE TENDERED: SIGN HERE [______] SHARES* _____________________________________ _____________________________________ Signature(s) _____________________________________ _____________________________________ Account Number: _____________________ Please print name(s) and address(es) here Dated: _______________________ , 1999 _____________________________________ Tax Identification or Social Security Number * Unless otherwise indicated, it will be assumed that all of your Shares held by us for your account are to be tendered. EX-99.(A)(6) 7 GUIDELINES FOR CERTIFICATION OF TAXPAYER ID GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number to Give the Payer-- Social Security numbers have nine digits separated by two hyphens: i.e. 000- 00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ----------------------------------- -----------------------------------
Give the SOCIAL SECURITY For this type of account: number of-- - -------------------------------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of the account or, account) if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or incompetent committee for a designated ward, person(3) minor, or incompetent person 7. a The usual revocable savings trust The grantor-trustee(1) account (grantor is also trustee) b So-called trust account that is The actual owner(1) not a legal or valid trust under State law 8. Sole proprietorship account The owner(4) - -------------------------------------------------------------------------------- Give the EMPLOYER IDENTIFICATION For this type of account: number of-- - -------------------------------------------------------------------------------- 9. A valid trust, estate, or pension The legal entity (Do not furnish the trust identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or educational The organization organization 12. Partnership account held in the name The partnership of the business 13. Association, club, or other tax-exempt The organization organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Page 2 Obtaining a Number If you do not have a taxpayer identification number or you do not know your number, obtain Form 55-5, Application for a Social Security Number Card, or Form 55-4, Application for an Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. Payees Exempt From Backup Withholding Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under Section 501(a), or an individual retirement plan. . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency, or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under Section 584(a). . An exempt charitable remainder trust, or a non-exempt trust described in Section 4947(a)(1). . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under Section 1441. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in Section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under Section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. Privacy Act Notice--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. Penalties (1) Penalty for Failure to Furnish Taxpayer Identification Number--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Failure to Report Certain Dividend and Interest Payments--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an underpayment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) Civil Penalty for False Information With Respect To Withholding--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) Criminal Penalty for Falsifying Information--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(7) 8 SUMMARY ADVERTISEMENT DATED MAY 17, 1999 EXHIBIT (a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase, dated May 17, 1999, and the related Letter of Transmittal, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. Purchaser (as defined below) may, in its discretion, however, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by the Dealer Manager (as defined below) or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF EMCON AT $6.75 NET PER SHARE BY SEISMIC ACQUISITION CORPORATION A Wholly Owned Subsidiary OF THE IT GROUP, INC. Seismic Acquisition Corporation, a California corporation ("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), is offering to purchase all of the issued and outstanding shares of common stock, no par value per share (the "Shares"), of EMCON, a California corporation (the "Company"), at a price of $6.75 per Share, net to each tendering shareholder in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated May 17, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). The Offer is being made pursuant to the terms of an Agreement and Plan of Merger (the "Merger Agreement"), dated as of May 10, 1999, by and among the Company, Purchaser and Parent. The Merger Agreement provides, among other things, for the commencement of the Offer by Purchaser, and further provides that, following the purchase of Shares pursuant to the Offer and promptly after the satisfaction or, if permissible, waiver of certain other conditions, Purchaser will be merged with and into the Company (the "Merger"). The Company will continue as the surviving corporation after the Merger. At the election of Parent, to the extent that such action would not cause a failure of a condition to the Offer or the Merger, the Merger may be structured so that the Company shall be merged with and into Purchaser with the result that Purchaser shall become the surviving corporation. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED At the effective time of the Merger (the "Effective Time"), if the Purchaser holds at least 90% of the Shares then outstanding, each Share issued and outstanding prior to the Effective Time (other than Shares held by Parent, Purchaser, the Company or any of their wholly-owned subsidiaries (collectively, the "Excluded Shares"), and any Shares with respect to which the holder properly exercises such holder's appraisal rights in accordance with the applicable California General Corporation Law (the "Dissenting Shares")) shall automatically be canceled and extinguished and shall be converted into the right to receive the Offer Price, or the greatest amount per Share as is paid pursuant to the Offer, (the "Cash Merger Consideration") in cash, without interest thereon. If Purchaser does not hold at least 90% of the Shares then outstanding at the Effective Time, each Share issued and outstanding immediately prior to the Effective Time, other than Excluded Shares and any Dissenting Shares, shall automatically be canceled and extinguished and shall be converted into the right to receive that fraction of a fully paid and nonassessable share of common stock, par value $0.01 per share, of Parent (the "Parent Common Stock") equal to the Conversion Number (the "Stock Merger Consideration" and together with the Cash Merger Consideration, the "Merger Consideration"). The Conversion Number shall be equal to a fraction (rounded to the nearest third decimal point), (a) the numerator of which shall be equal to the Cash Merger Consideration and (b) the denominator of which shall be equal to the average of the closing sales price of a share of Parent Common Stock as reported on the New York Stock Exchange for each of the ten (10) consecutive trading days ending on, and including, the second trading day immediately preceding the date on which a final vote of the shareholders of the Company on the adoption and approval of the Merger shall have been held (the "Parent Average Stock Price"); provided, however, if the Parent Average Stock Price is equal to or less than $12.50, then the Conversion Number shall be 0.540. At the Effective Time, each Excluded Share shall be canceled and extinguished and cease to exist without any conversion thereof, and no payment shall be made with respect thereto. Each holder (other than holders of Excluded Shares) of a certificate representing any Shares shall, after the Effective Time, cease to have any rights with respect to such Shares, except either to receive the Merger Consideration upon surrender of such certificate, or to exercise such holder's appraisal rights as provided in the Merger Agreement and the California General Corporation Law. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. The Offer is conditioned upon, among other things, there being validly tendered prior to the Expiration Date and not withdrawn, at least a number of Shares equal to eighty percent (80%) of the Shares issued and outstanding on a fully diluted basis (the "Minimum Condition"). The Offer is also conditioned on the satisfaction or waiver of certain other conditions, including receipt by Purchaser and the Company of certain governmental and regulatory approvals. Any determination concerning the satisfaction of such terms and conditions will be made by Purchaser in its good faith judgment and such determination will be final and binding on all tendering shareholders. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for all of the Shares validly tendered pursuant to the Offer prior to the Expiration Date and not withdrawn in accordance with the provisions set forth in the Offer to Purchase. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on the twentieth business day following the commencement of the Offer, unless and until Purchaser, in its sole discretion (subject to any restrictions contained in the Merger Agreement), shall from, time to time, extend the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date to which the Offer is extended. If all of the conditions to the Offer are not satisfied on any scheduled Expiration Date of the Offer then, provided that all such conditions are reasonably capable of being satisfied, Purchaser shall extend the Offer until such conditions are satisfied or waived; provided further, that Purchaser shall not be required to extend the Offer beyond July 9, 1999; and provided further, however, that Purchaser may (i) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission or (ii) extend the Offer for any reason on one or more occasions for an aggregate of not more than twenty (20) business days beyond 2 the initial Expiration Date if more than the number of Shares sufficient to satisfy the Minimum Condition but less than 90% of the Shares issued and outstanding have been tendered. Any extension by Purchaser shall be effective by giving oral or written notice of such extension to ChaseMellon Shareholder Services, L.L.C., as Depositary (the "Depositary"). During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Shares. If Purchaser extends the Offer, or (whether before or after its acceptance for payment of Shares) is delayed in its payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in the Offer to Purchase. However, the ability of Purchaser to delay payment for Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after either (a)(i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares and any other required documents, has been timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase and (ii) either Share certificates for tendered Shares have been timely received by the Depositary at one of such addresses or such Shares have been timely delivered pursuant to the procedure for book-entry transfer set forth in the Offer to Purchase (and a Book-Entry Confirmation (as defined in the Offer to Purchase) timely received by the Depositary) or (b) the tendering shareholder has complied with the guaranteed delivery procedures set forth in the Offer to Purchase. Purchaser expressly reserves the right to waive any conditions to the Offer (except as otherwise provided in the Merger Agreement), to increase the Offer Price, to extend the duration of the Offer, or to make any other changes in the terms and conditions of the Offer; provided, however, that, without the Company's prior written consent, no such change may be made which decreases the Offer Price, changes the form of consideration to be paid in the Offer, reduces the maximum number of Shares to be purchased in the Offer, imposes conditions to the Offer in addition to the conditions set forth in the Merger Agreement or amends any other material terms of the Offer in a manner adverse to the Company's shareholders. Tenders of Shares made pursuant to the Offer will be irrevocable, except that Shares tendered may be withdrawn at any time prior to the Expiration Date, and, unless theretofore accepted for payment and paid for as provided herein, may also be withdrawn at any time on or after July 15, 1999. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn as set forth on such Share certificates if different from the name of the person who tendered such Shares. If Share certificates have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share certificates, the serial numbers shown on such Share certificates must be furnished to the Depositary and, unless such Shares have been tendered by an Eligible Institution (as defined in the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer set forth in the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with such withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures for withdrawal, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the second sentence of this paragraph. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser in its sole discretion, and its determination will be final and binding. No withdrawal of Shares will be deemed to have been properly made until all defects and irregularities have been cured or waived. Withdrawals of tendered Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by following one of the procedures described in the Offer to Purchase at any time prior to the Expiration Date. 3 The Company has provided Purchaser with the Company shareholder list, a nonobjecting beneficial owners list, and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the Letter of Transmittal and other material relevant to the Offer will be mailed to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Requests for copies of the Offer to Purchase, the Letter of Transmittal and other materials related to the Offer may be directed to the Information Agent as set forth below, and copies will be furnished promptly at Purchaser's expense. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below. The Information Agent for the Offer is: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: CIBC World Markets One World Financial Center New York, New York 10281 (212) 856-3540 May 17, 1999 4 EX-99.(A)(8) 9 JOINT PRESS RELEASE DATED MAY 11, 1999 Exhibit (a)(8) Tuesday May 11, 7:31 am Eastern Time Company Press Release SOURCE: IT Group, Inc. The IT Group to Acquire EMCON for $6.75 Per Share in Cash Establishes Leadership Position in the Solid Waste Services Market $0.15 Earnings Per Share Accretion Driven by Synergies PITTSBURGH, May 11 /PRNewswire/ -- The IT Group, Inc. (NYSE: ITX; the Company) --- and EMCON (Nasdaq: MCON) announced today that they have signed a definitive ---- agreement under which The IT Group will acquire EMCON for $6.75 per share in cash, or a total of approximately $62 million, plus the assumption of approximately $8 million in debt, for a total transaction value of $70 million. The acquisition is anticipated to add $130 million in revenue and $0.15 earnings per share on an annual basis in year 2000 after synergies. The transaction is expected to add $0.05 earnings per share in 1999. The transaction has been approved unanimously by the boards of both companies. EMCON is a fully integrated environmental consulting, engineering, design, construction and related outsourcing services firm, serving primarily the private sector with a focus in the solid waste services market. EMCON has annual revenues of approximately $150 million, and employs about 1,000 employees in 40 offices throughout the United States. The addition of EMCON establishes The IT Group as a market leader within the solid waste services sector. Anthony J. DeLuca, chief executive officer and president of The IT Group, said, "EMCON solidifies The IT Group's leadership position in the solid waste services market. Our combined resources will allow us to provide the full range of integrated services to our solid waste clients. EMCON enjoys tremendous recognition in the solid waste services market and is known in the industry for its broad-ranging and specialized capabilities. We are confident that our $12 million synergy plan will be fully realized by year 2000, generating $20 million of operating cash flow." "We each have respective strengths in different service areas," DeLuca added. "EMCON is a leader in the design-build of solid waste infrastructure facilities, including landfills, transfer stations and material recovery facilities. They are also strong in landfill gas and leachate control technologies. Our strengths in cell construction, groundwater, and remediation/closure services round out the full spectrum of solid waste capabilities. The prospect of the combined companies' clients gaining greater access to technical depth, broader geographical reach, and integrated capabilities will be very compelling in the marketplace. The IT Group will also benefit from EMCON's added capabilities in air quality, health and safety, and environmental information management systems. And our revenue mix is further balanced by EMCON, increasing the private sector from 35% to 40% of revenues." Gene Herson, president and chief executive officer of EMCON, stated, "Becoming part of The IT Group provides EMCON with the strategic combination we were actively seeking to capitalize on our greatest strengths. We will now be better positioned to support the rapidly consolidating solid waste industry by expanding our integrated services strategy through more design-build services. The IT Group provides a larger revenue base to support delivery of services on a national and global basis, as well as a stronger capital base to support future growth and expansion. With The IT Group, we will offer our industrial clients more value-added solutions by combining their extensive remedial construction services with EMCON's expertise in regulatory, compliance, and site investigation services. Our employees will also enjoy greater career development opportunities." The transaction is structured as a cash tender offer at $6.75 per EMCON share. Assuming that The IT Group receives at least 90% of the outstanding EMCON shares in the tender offer, the balance of the shares will be acquired in a short form merger at $6.75 cash per EMCON share. In the event The IT Group receives less than 90% of the outstanding EMCON shares in the tender offer, the balance of the EMCON shares will be acquired in a merger in which each EMCON share will be converted into shares of The IT Group Common Stock at a value of $6.75 per share. The exchange rate would be based on the 10 trading day average closing price ending two days prior to the merger. The exchange rate will have a floor at an average price for The IT Group's Common Stock of $12.50. The minimum share condition in the tender offer will be 80% of the issued and outstanding EMCON shares. The IT Group expects to commence a tender offer for all EMCON's common stock within the next five business days. The acquisition of EMCON is subject to certain customary closing conditions, including receiving required clearances under the Hart-Scott-Rodino Act. The IT Group intends to finance the transaction through its revolving credit facilities under which it had $106 million in availability on April 30, 1999. The IT Group, Inc. is a leading provider of diversified, value-added services, with more than 6,700 employees in more than 80 offices, offering a full range of consulting, facilities management, engineering and construction and remediation. The IT Group's common stock and depository shares are traded on the New York Stock Exchange under the symbols ITX and ITXpr, respectively. More information on The IT Group can be found on the Internet at www.theitgroup.com. ------------------ Statements regarding the intentions, beliefs, expectations or predictions of The IT Group and its management, including, but not limited to, those statements denoted by the words "anticipate," "believe," "expect," "should" and similar expressions (including "confidence") are forward-looking statements that reflect the current views of The IT Group its management about future events and are subject to certain risks, uncertainties and assumptions. Actual results could differ materially from those projected in such forward-looking statements as a result of a number of factors, including, but not limited to, competition and pricing pressures, bidding opportunities and success, project results, funding of backlog, the success of the tender offer for EMCON, the effects of the integration of EMCON and the Company's other major acquisitions and the achievement of expected synergies there from, and industry-wide factors. SOURCE: IT Group, Inc. 2 EX-99.(B)(5) 10 CONSENT TO WAIVER LETTER AGMT. DATED MAY 10, 1999 EXHIBIT (b)(5) FORM OF EXECUTION COPY May 10, 1999 The IT Group, Inc. IT Corporation OHM Corporation OHM Remediation Services Corp. Beneco Enterprises, Inc. 2790 Mosside Boulevard Monroeville, Pennsylvania 15146-2792 Attention: Philip O. Strawbridge Chief Administrative Officer Ladies and Gentlemen: In this consent dated as of May 10, 1999 (this "Consent") we refer to the Credit Agreement dated as of February 25, 1998, as amended and restated as of June 11, 1998, and as further amended pursuant to the First Amendment to Credit Agreement dated as of September 16, 1998, the Second Amendment to Credit Agreement dated as of October 26, 1998 and the Third Amendment to Credit Agreement dated as of March 5, 1999 (as so amended, the "Credit Agreement"), by and among The IT Group, Inc. (formerly International Technology Corporation), a Delaware corporation (the "Company"), IT Corporation, a California corporation ("ITC"), OHM Corporation, an Ohio corporation ("OHM"), OHM Remediation Services Corp., an Ohio corporation ("OHM Remediation"), and Beneco Enterprises, Inc., a Utah corporation ("Beneco"; together with the Company, ITC, OHM and OHM Remediation, the "Borrowers"), the institutions from time to time party thereto as lenders (the "Lenders"), the institutions from time to time party thereto as issuing banks (the "Issuing Banks"), Citicorp USA, Inc., in its capacity as administrative agent and collateral agent for the Lenders and Issuing Banks (the "Administrative Agent"), BankBoston, N.A., in its capacity as documentation agent for the Lenders and Issuing Banks (the "Documentation Agent"; together with the Administrative Agent, the "Agents"), and Royal Bank of Canada and Credit Lyonnais New York Branch, as co-agents. Capitalized terms used herein and not defined herein are used herein as defined in the Credit Agreement. You have informed the Administrative Agent that the Company intends to acquire all of the issued and outstanding shares of the common stock of a target company previously identified to the Administrative Agent (the "Target") in a two step transaction for a purchase price of approximately $73,000,000 (the "Proposed Acquisition"). The terms of the Proposed Acquisition would be set forth in a definitive merger agreement (the "Merger Agreement") and would provide for a cash tender offer (the "Tender Offer") for all outstanding common stock of the Target at a purchase price of $6.75 per share, subject to the condition that the Company acquire at least 80% of the voting power of the Target upon the closing of the Tender Offer. Following the consummation of the Tender Offer the Target would be merged with a wholly-owned Subsidiary of the Company (the "Proposed Merger") and the remaining shareholders of the Target (other than the Company) would receive solely Company Common Stock in consideration for the Shares that were not purchased in the Tender Offer; provided, however, in the event the Company acquires more than 90% -------- ------- of the voting power of the Target upon the closing of the Tender Offer, the remaining shareholders of the Target would receive cash only upon the consummation of the Proposed Merger as required by Requirements of Law applicable to short-form mergers. With respect to the Proposed Acquisition and the transactions contemplated thereby you have requested the Requisite Lenders (i) to waive compliance with clause (i)(e) of the definition of Permitted Acquisition in respect of the Proposed Acquisition and (ii) with respect to clause (i)(g) of the definition of Permitted Acquisition, to waive compliance with such clause (A) for a period of no more than 10 Business Days after the consummation of the Tender Offer, solely with respect to the requirement to deliver a stock certificate and stock power in respect of the Shares purchased by the Company in the Tender Offer to the Administrative Agent and (B) for a period beginning on the date of the consummation of the Tender Offer and ending no more than three Business Days after the consummation of the Proposed Merger, solely with respect to the requirement to make the Target a party to a Subsidiary Guaranty and a Subsidiary Guarantor Security Agreement and to perfect the Agent's Lien on the Collateral covered by such Subsidiary Guarantor Security Agreement, it being understood and agreed that on such third Business Day such requirement shall have been met as long as the surviving corporation of the Proposed Merger has complied therewith. Except as expressly waived in this paragraph, the Borrowers shall, in connection with the Proposed Acquisition, comply with all requirements for a Permitted Acquisition on or prior to the consummation of each of the Tender Offer and the Proposed Merger. In accordance with Section 13.07 of the Credit Agreement, by its execution of this Consent, each of the undersigned Lenders and the Agents hereby consent and agree to the requests made by you in the preceding paragraph; provided, -------- however, this Consent shall not become effective unless and until the - ------- Administrative Agent shall have received all of the following, all of which shall be in form and substance satisfactory to the Administrative Agent, in sufficient originally executed copies for each of the Lenders: (A) this Consent executed by the Borrowers and Lenders constituting the Requisite Lenders; (B) an execution copy of the Merger Agreement for the Proposed Acquisition; and (C) such additional documentation as the Agents or the Requisite Lenders may reasonably require. Notwithstanding anything herein to the contrary, (i) this Consent shall cease to be effective (and the Revolving Loans shall not be permitted to be used for the purpose of funding the purchase of Shares in the Tender Offer) if any of the following conditions shall not have been 2 satisfied on or prior to the date of the consummation of the purchase of Shares in the Tender Offer: (A) the Revolving Credit Availability on the date of such purchase (after giving effect to the purchase of Shares accepted for payment in the Tender Offer and the payment of transaction costs related thereto paid on or prior to such date), shall not be less than $25,000,000; (B) (I) the cash consideration paid to the shareholders of the Target (after giving effect to the purchase of the Shares in the Tender Offer) shall not exceed an amount equal to $73,000,000 and (II) the transaction costs incurred in connection with the Proposed Acquisition shall not exceed $2,000,000; (C) the number of Shares accepted for payment in the Tender Offer by the Company shall be equal to no less than the greater of (I) 80% of the issued and outstanding Shares on the date of the consummation of the Tender Offer and (II) the minimum number of shares, determined on a fully diluted basis, necessary to approve the consummation of the Proposed Acquisition in accordance with the provisions of any applicable corporate statute, anti- takeover statute or provision in the Target's certificate of incorporation, by-laws, etc.; (D) the Board of Directors of the Target shall have published its recommendation that the shareholders of the Target tender their Shares pursuant to the Tender Offer, and such recommendation shall not have been withdrawn or adversely modified; (E) all documentation and other requirements set forth in the definition of "Permitted Acquisition" (to the extent not waived in this Consent) shall have been satisfied with respect to the purchase of the Shares in the Tender Offer; (F) no Event of Default or Default shall have occurred and be continuing on the date of the purchase of the Shares in the Tender Offer or would result from the consummation of such purchase; (G) to the extent required under Regulation U, the Agent and the Company shall have executed and delivered a Form U-1 in respect of the Shares purchased in the Tender Offer; and (H) the Tender Offer shall have been consummated on or prior to July 1, 1999; and (ii) this Consent shall cease to be effective if any of the following conditions shall not have been satisfied on or prior to the date of the consummation of Proposed Merger (it being understood and agreed that the failure to meet any of the following conditions on or prior to such date shall constitute an Event of Default): 3 (A) all documentation and other requirements set forth in the definition of "Permitted Acquisition" (to the extent not waived in this Consent) shall have been satisfied with respect to the Proposed Merger; and (B) no Event of Default or Default shall have occurred and be continuing on the date of the consummation of the Proposed Merger or would result from the consummation of the Proposed Merger. The execution and delivery of this Consent shall in no way affect any right, power or remedy of the Agent or any Lender with respect to any Event of Default nor constitute a waiver of any provision of the Credit Agreement or any of the other Loan Documents, except as expressly set forth above. Except as expressly set forth above, the Credit Agreement, the other Loan Documents and all other documents, instruments, amendments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. 4 This Consent may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same document. Very truly yours, CITICORP USA, INC. By________________________________ Name: Title: 5 ACKNOWLEDGED AND AGREED TO BY: THE IT GROUP, INC. (f/k/a INTERNATIONAL TECHNOLOGY CORPORATION) By_____________________________ Name: Title: IT CORPORATION By_____________________________ Name: Title: OHM CORPORATION By_____________________________ Name: Title: OHM REMEDIATION SERVICES CORP. By_____________________________ Name: Title: BENECO ENTERPRISES, INC. By_____________________________ Name: Title: 6 EX-99.(C)(1) 11 AGREEMENT AND PLAN OF MERGER DATED MAY 10, 1999 EXHIBIT (c)(1) AGREEMENT AND PLAN OF MERGER by and among THE IT GROUP, INC. SEISMIC ACQUISITION CORPORATION and EMCON dated as of May 10, 1999 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered --------- into as of May 10, 1999, by and among The IT Group, Inc., a Delaware corporation ("Parent"), Seismic Acquisition Corporation, a California corporation and a ------ wholly-owned subsidiary of Parent ("Purchaser"), and EMCON, a California --------- corporation (the "Company"). ------- RECITALS -------- A. The respective Boards of Directors of Parent, Purchaser and the Company and the sole stockholder of Purchaser have unanimously approved the acquisition of the Company by the Purchaser on the terms and subject to the conditions set forth in this Agreement; B. Pursuant to this Agreement, Purchaser has agreed to commence a tender offer (the "Offer") to purchase all of the outstanding shares of the Company's ----- common stock (the "Common Stock"), no par value per share (the "Shares"), at a ------------ ------ price per Share of $6.75 (the "Offer Price"); ----------- C. The Board of Directors of the Company (the "Company Board") has (i) ------------- unanimously approved the Offer and (ii) adopted and approved this Agreement and is recommending that the Company's shareholders accept the Offer, tender their Shares to Purchaser and, if necessary, approve this Agreement; D. The Board of Directors of Purchaser and the Company Board have unanimously approved the merger of the Purchaser with and into the Company, as set forth in this Agreement (the "Merger"), in accordance with the California ------ General Corporation Law (the "CGCL") and upon the terms and subject to the ---- conditions set forth in this Agreement, whereby each of the issued and outstanding Shares not owned directly or indirectly by Parent, Purchaser or the Company (other than Excluded Shares as defined below) will be converted into the right to receive the Cash Merger Consideration (as defined below) or the Stock Merger Consideration (as defined below) as provided for in Section 2.7; and F. Parent, Purchaser and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and to prescribe various conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, Parent, Purchaser and the Company agree as follows: 1 ARTICLE I THE OFFER Section 1.1. The Offer. --------- (a) Provided that this Agreement shall not have been terminated in accordance with Article VII hereof, as promptly as practicable, but in no event later than the fifth business day following the date of the public announcement of the execution of this Agreement by the parties, Purchaser shall, and Parent shall cause Purchaser to, commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) the Offer at ------------ the Offer Price. (b) The obligations of Purchaser to consummate the Offer and to accept for payment and pay for any of the Shares tendered shall be subject to the conditions set forth on Annex I hereto (the "Tender Offer Conditions"), ------- ----------------------- including the condition that a number of Shares equal to eighty percent (80%) of the Shares issued and outstanding on a fully diluted basis (including for purposes of such calculation all Shares issuable upon exercise of all stock options which are vested or scheduled to vest on or before July 9, 1999 with an exercise price less than the Offer Price, and conversion of all convertible securities or other rights to purchase or acquire Shares with a conversion price less than the Offer Price (collectively, "Derivative Securities"); provided, --------------------- however, that such calculation shall not include (A) Shares issuable pursuant to Derivative Securities that by their terms will terminate or be canceled upon consummation of the Offer or (B) shares issuable pursuant to Derivative Securities as to which the Company has obtained a written consent from the holder that such Derivative Securities will not be converted prior to the Effective Time, or (C) Shares issuable pursuant to Derivative Securities as to which the Company takes appropriate action to provide that such Derivative Securities shall automatically convert into the right to receive an amount in cash equal to the product of (i) the excess, if any, of the Cash Merger Consideration (as defined below) over the per share exercise or conversion price of such Derivative Securities and (ii) the number of Shares subject to such Derivative Securities which are exercisable immediately prior to the consummation of the Offer) shall be validly tendered and not withdrawn prior to the Expiration Date or shall be held by Parent, Purchaser or any affiliate thereof (the "Minimum Condition"). The amount of the Offer Price shall be net to ----------------- the seller in cash, without interest, upon the terms and subject to the conditions of the Offer and subject to reduction for any applicable federal back-up or other applicable withholding or stock transfer taxes. The Offer shall remain open until 12:00 Midnight, New York City time, on the twentieth business day following the commencement of the Offer. Parent and Purchaser agree that if all of the conditions set forth in Annex I hereto are not satisfied by the time ------- of scheduled termination of the Offer then, provided that all such conditions are reasonably capable of being satisfied, Purchaser shall extend the Offer until such conditions are satisfied or waived; provided further, that Purchaser shall not be required to extend the Offer beyond July 9, 1999; provided further, however, that Purchaser may (x) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or (y) extend the Offer for any reason on one or more --- occasions for an aggregate of not more than twenty (20) business days beyond the initial Expiration Date if more than the number of Shares sufficient to satisfy the Minimum Condition but less than 90% of the Shares issued and 2 outstanding have been tendered. As used in this Agreement, the "Expiration Date" --------------- means 12:00 Midnight, New York City time, on the twentieth business day following the commencement of this Offer, unless Purchaser extends the Offer as permitted or required by this Agreement, in which case the "Expiration Date" --------------- means the latest time and date to which the Offer is extended. (c) Purchaser expressly reserves the right to waive any conditions to the Offer (other than the conditions set forth in clauses (a)(1) or (c) of Annex I), ------- to increase the price per Share payable in the Offer, to extend the duration of the Offer, or to make any other changes in the terms and conditions of the Offer; provided, however, that, without the Company's prior written consent, no such change may be made which decreases the Offer Price, changes the form of consideration to be paid in the Offer, reduces the maximum number of Shares to be purchased in the Offer, imposes conditions to the Offer in addition to the Tender Offer Conditions or amends any other material terms of the Offer in a manner adverse to the Company's shareholders. (d) The Offer shall be made by means of an offer to purchase to which the Company shall not have reasonably objected (the "Offer to Purchase") containing ----------------- the terms set forth in this Agreement and the Tender Offer Conditions. As soon as practicable on the date the Offer is commenced, Parent and Purchaser shall file with the SEC a tender offer statement on Schedule 14D-1 under the Exchange Act to which the Company shall not have reasonably objected reflecting the Offer (together with all exhibits, amendments and supplements thereto, the "Schedule -------- 14D-1"). The Schedule 14D-1 will contain or will incorporate by reference the - ----- Offer to Purchase (or portions thereof) and forms of the related letter of transmittal, notice of guaranteed delivery and summary advertisements (which Schedule 14D-1, Offer to Purchase and other documents, together with any supplements or amendments thereto, are referred to herein collectively as the "Offer Documents"). The Company and its counsel shall be given a reasonable --------------- opportunity to review and comment on the Offer Documents prior to their filing with the SEC or dissemination to the shareholders of the Company. Parent and Purchaser agree to provide the Company and its counsel with any comments which Parent, Purchaser or their counsel may receive from the SEC or the staff of the SEC with respect to such documents promptly after receipt thereof. Parent and Purchaser further agree that the Offer Documents will, on the date filed with the SEC and on the date first published, sent or given to the Company's shareholders, comply in all material respects with all provisions of applicable federal securities laws and the rules and regulations promulgated thereunder. Parent, Purchaser and the Company agree promptly to correct any information provided by any of them for use in the Offer Documents that shall be or have become false or misleading in any material respect, and Parent and Purchaser further agree to take all steps necessary to cause the Schedule 14D-1, as so corrected, to be filed with the SEC and the other Offer Documents, as so corrected, to be disseminated to the holders of Shares, in each case as and to the extent required by applicable federal securities laws, except that no representation or warranty is made by Parent or Purchaser with respect to information supplied by the Company or any of its stockholders in writing specifically for inclusion or incorporation by reference in the Offer Documents. (e) Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), 3 Purchaser will purchase by accepting for payment and will pay for Shares validly tendered and not properly withdrawn, as promptly as practicable after the Expiration Date. Parent shall provide or cause to be provided to Purchaser on a timely basis the funds necessary to pay for any Shares that Purchaser becomes obligated to accept for payment, and pay for, pursuant to the Offer. Section 1.2. Company Actions. --------------- (a) The Company hereby approves of and consents to the Offer and represents and warrants that (i) the Company Board has unanimously (A) determined that this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger, are fair to and in the best interests of the holders of the Shares, (B) approved and adopted this Agreement and the transactions contemplated hereby and (C) resolved to recommend that the shareholders of the Company accept the Offer and approve and adopt this Agreement and approve the transactions contemplated hereby; provided, however, that subject to the provisions of Section 5.9, such recommendation may be withdrawn, modified or amended in connection with a Superior Proposal (as defined in Section 5.9) and (ii) Raymond James & Associates, Inc. ("Raymond ------- James"), the Company's financial advisor, has rendered to the Company Board its - ----- written opinion to the effect that the terms of the Offer and the Merger are fair, from a financial point of view, to the shareholders of the Company. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Company Board described in clause (i) of the first sentence of this Section 1.2(a), and represents and warrants that it has obtained the consent of Raymond James to the inclusion in the Offer Documents and the Schedule 14D-9 (as defined in Section 1.2(b)) of a copy of the written opinion referred to in clause (ii) of the first sentence of this Section 1.2(a). (b) The Company shall file with the SEC, concurrently with the filing by Parent and Purchaser of the Schedule 14D-1, or promptly thereafter on the same day, a Solicitation/Recommendation Statement on Schedule 14D-9 under the Exchange Act, to which Parent shall not have reasonably objected, relating to the Offer (together with all exhibits, amendments and supplements thereto, the "Schedule 14D-9"), which shall, subject to Section 5.9, contain the -------------- recommendation of the Company Board described in Section 1.2(a) and the information required pursuant to Section 14(f) of the Exchange Act and Rule 14f- 1 thereunder, and shall disseminate the Schedule 14D-9 as required by Rule 14D-9 under the Exchange Act. Parent and Purchaser each will supply to the Company any information with respect to itself and its officers, directors and affiliates required to be provided in the Schedule 14D-9. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its filing with the SEC or dissemination to the shareholders of the Company. The Company agrees to provide Purchaser and its counsel with any comments the Company or its counsel may receive from the SEC with respect to the Schedule 14D-9 promptly after receipt thereof. The Company further agrees that the Schedule 14D-9 will, on the date filed with the SEC and on the date first published, sent or given to the Company's shareholders, comply in all material respects with all provisions of applicable federal securities laws and the rules and regulations promulgated thereunder. The Company, Parent and Purchaser agree promptly to correct any information provided by any of them for use 4 in the Schedule 14D-9 that shall be or have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9, as so corrected, to be filed with the SEC and disseminated to the holders of Shares, in each case as and to the extent required by applicable federal securities laws, except that no representation or warranty is made by the Company with respect to information supplied by either Parent or Purchaser or any of their stockholders in writing specifically for inclusion or incorporation by reference in the Offer Documents. (c) The Company shall promptly furnish Purchaser with mailing labels containing the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories, each of a recent date, and shall promptly furnish Purchaser with such additional information, including updated lists of shareholders, mailing labels and security position listings, and such other assistance as Parent, Purchaser or their agents may reasonably request in connection with communicating the Offer and any amendments or supplements thereto to the Company's shareholders. Subject to the requirements of applicable laws and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Purchaser (and their agents) shall hold in confidence the information contained in any of such labels and lists and, if this Agreement shall be terminated, will promptly deliver to the Company all copies, extracts, or summaries of such information then in their possession or control or in the possession of their agents. Section 1.3. Directors. --------- (a) Subject to compliance with applicable law, promptly upon the delivery to ChaseMellon Shareholder Services, L.L.C., as the paying agent (the "Paying ------ Agent"), of Parent's notice of acceptance of Shares pursuant to the Offer (the - ----- "Notice of Acceptance"), and from time to time thereafter, Parent shall be -------------------- entitled to designate such number of directors, rounded up to the next whole number, on the Company Board as is equal to the product of the total number of directors on the Company Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or its affiliates bears to the total number of Shares then outstanding; provided, however, if Purchaser shall have acquired at least 90% of the outstanding Shares in the Offer, Parent shall be entitled to designate all of the members of the Company Board (the "Parent Directors"). The Company shall, upon request of Parent, promptly take ---------------- all actions necessary to cause the Parent Directors to be so elected, including, if necessary, increasing the size of the Company Board (to the extent permitted by the Company's Articles of Incorporation and By-laws) and/or seeking the resignations of one or more existing directors, provided, however, that if Purchaser shall not have acquired at least 90% of the outstanding Shares prior to the Effective Time (as defined in Section 2.2), the Company Board shall at all times have at least two members who are members of the Company Board on the date of this Agreement and are neither officers of the Company or any of its subsidiaries, or officers or directors of Purchaser or any of its affiliates ("Independent Directors"). If the number of Independent Directors is reduced --------------------- below two prior to the Effective Time, the remaining Independent Director shall be entitled to designate a person to fill such vacancy who shall not be an officer or affiliate of the Company or any of its subsidiaries or an officer, director, or affiliate of Parent or any of its subsidiaries, and such person 5 shall be deemed an Independent Director for all purposes of this Agreement. If no Independent Directors then remain, the other directors of the Company on the date hereof shall designate two persons to fill such vacancies who shall not be officers or affiliates of the Company or any of its subsidiaries, or officers, directors or affiliates of Parent or any of its subsidiaries, and such persons shall be deemed to be Independent Directors for all purposes of this Agreement. (b) The Company's obligations to appoint Parent's designees to the Company Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall, at its expense, promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this Section 1.3 and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under such Section and Rule in order to fulfill its obligations under this Section 1.3. Parent will supply any information with respect to itself, and its officers, directors and affiliates required by such Section and Rule to the Company. (c) Following the election or appointment of the Parent Directors pursuant to this Section 1.3 and prior to the Effective Time (as defined in Section 2.2), any amendment or termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Purchaser or any waiver of any of the Company's rights hereunder, shall require the concurrence of a majority of the Independent Directors (or in the case where there is only one Independent Director, the concurrence of such Independent Director). ARTICLE II THE MERGER Section 2.1. The Merger. Upon the terms and subject to the satisfaction or ---------- waiver of the conditions hereof, and in accordance with the applicable provisions of this Agreement and the CGCL, Purchaser shall be merged with and into the Company. Following the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation"). At the election of Parent, to the --------------------- extent that such action would not cause a failure of a condition to the Offer or the Merger, the Merger may be structured so that the Company shall be merged with and into Purchaser with the result that Purchaser shall become the "Surviving Corporation." Parent, as the sole stockholder of Purchaser, hereby --------------------- approves the Merger and this Agreement. Section 2.2. Effective Time; Closing. As soon as practicable after the ----------------------- satisfaction of the conditions set forth in Article VI, the Company shall duly execute and file with the Secretary of State of the State of California a certificate of ownership (the "Certificate of Ownership") or such other ------------------------ documents or certificates as may be required under the CGCL to effect the Merger. In addition, the parties shall take such other and further actions as may be required by law to make the Merger effective. Contemporaneous with such filing, a closing (the "Closing") will be held at 9:00 a.m., Pacific time, at ------- the offices of Gibson, Dunn & Crutcher LLP, 333 S. Grand Avenue, Los Angeles, California 90071 or at such other location as the parties may establish for the 6 purpose of confirming the foregoing. The time the Merger becomes effective in accordance with applicable law is referred to herein as the "Effective Time." -------------- Section 2.3. Effects of the Merger. The Merger shall have the effects set --------------------- forth in the applicable provisions of the CGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Purchaser shall become the debts, liabilities and duties of the Surviving Corporation. Section 2.4. Articles of Incorporation and By-Laws of the Surviving ------------------------------------------------------ Corporation. - ----------- (a) The Articles of Incorporation (the "Articles") of the Company shall be -------- amended and restated to contain the substantive provisions of the Articles of Purchaser, as in effect immediately prior to the Effective Time, and, as so amended and restated, shall be the Articles of the Surviving Corporation until thereafter duly amended in accordance with the provisions thereof and applicable law. (b) Subject to the provisions of Section 5.6, the By-Laws (the "Bylaws") ------ of Purchaser, as in effect at the Effective Time, shall be the By-Laws of the Surviving Corporation until thereafter duly amended in accordance with the provisions thereof and applicable law. Section 2.5. Directors. Subject to applicable law, the directors of --------- Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal in accordance with the Articles and Bylaws of the Surviving Corporation. Section 2.6. Officers. The officers of Purchaser immediately prior to the -------- Effective Time shall be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal in accordance with the Articles and Bylaws of the Surviving Corporation. Section 2.7. Conversion of Shares. At the Effective Time, by virtue of the -------------------- Merger and without any action on the part of Parent, Purchaser, the Company or the holders of the Shares: (a) if Purchaser holds at least 90% of the Shares then outstanding, each Share issued and outstanding immediately prior to the Effective Time, other than Shares held by Parent, Purchaser, the Company or any of their wholly-owned subsidiaries (collectively, the "Excluded Shares") and any Dissenting Shares (as --------------- defined in Section 2.12)), shall automatically be canceled and extinguished and shall be converted into the right to receive $6.75, or the greatest amount per Share as is paid pursuant to the Offer (the "Cash Merger Consideration"), in ------------------------- cash without interest thereon (in the event of any reclassification, recapitalization, stock split, stock dividend or similar transaction with respect to the Shares, appropriate and proportionate adjustments, if any, shall be made to the amount of the Offer Price and Cash Merger Consideration, and all references to the 7 Offer Price or the Cash Merger Consideration in this Agreement shall be deemed to be to the Offer Price or the Cash Merger Consideration as so adjusted). (b) if Purchaser does not hold at least 90% of the Shares then outstanding, each Share issued and outstanding immediately prior to the Effective Time, other than Excluded Shares and any Dissenting Shares, shall automatically be canceled and extinguished and shall be converted into the right to receive that fraction of a fully paid and nonassessable share of the common stock, $.01 par value, of Parent ("Parent Common Stock") equal to the Conversion ------------------- Number (the "Stock Merger Consideration" and together with the Cash Merger -------------------------- Consideration, the "Merger Consideration"). The "Conversion Number" shall be -------------------- ----------------- equal to a fraction (rounded to the nearest third decimal point), (A) the numerator of which shall be equal to the Cash Merger Consideration and (B) the denominator of which shall be equal to the Parent Average Stock Price (as defined in Section 8.10); provided, however, that if the Parent Average Stock Price is equal to or less than $12.50, then the Conversion Number shall be 0.540. (c) each Excluded Share shall be canceled and extinguished and cease to exist, without any conversion thereof, and no payment shall be made with respect thereto; (d) each holder (other than holders referred to in Section 2.7(c)) of a certificate representing any Shares shall after the Effective Time cease to have any rights with respect to such Shares, except either to receive the Merger Consideration upon surrender of such certificate, or to exercise such holder's appraisal rights as provided in Section 2.12 and the CGCL; and (e) each share of Common Stock of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and thereafter represent one validly issued, fully paid and nonassessable share of Common Stock of the Surviving Corporation. Section 2.8. Options; Company Stock Plans. Parent shall not assume any ---------------------------- option to purchase shares of Company Common Stock (an "Option") outstanding ------ under any option plans of the Company, including the 1986 Incentive Stock Option Plan, the 1988 Stock Option Plan or the 1998 Stock Option Plan (collectively the "Company Stock Plans"). The parties hereto shall take all appropriate action to ------------------- provide that, at or following the consummation of the Offer, each holder of an outstanding Option shall be entitled to receive an amount in cash equal to the product of (i) the excess, if any, of the Cash Merger Consideration over the per share exercise price of each such Option and (ii) the number of Shares subject to such Option which are exercisable immediately prior to the Effective Time. Section 2.9. Shareholders' Meeting. --------------------- (a) If required by applicable law in order to consummate the Merger, the Company, acting through the Company Board, shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its shareholders (the "Special Meeting") as soon as practicable after the --------------- Proxy Statement (as defined below) is cleared by the SEC for the purpose of considering and taking action to approve the adoption of this Agreement and the principal terms of the Merger; 8 (ii) prepare and file with the SEC a preliminary proxy statement, and any amendment or supplement thereto (the "Proxy Statement") relating to the --------------- Merger and this Agreement, and use its best efforts (A) to obtain and furnish the information required to be included by the SEC in the Proxy Statement and, after consultation with Parent, to respond as soon as practicable to any comments made by the SEC with respect to the preliminary Proxy Statement and cause a definitive Proxy Statement to be mailed to its shareholders and (B) to obtain the necessary approvals of the principal terms of the Merger and adoption of this Agreement by its shareholders; and (iii) include in the Proxy Statement the recommendation of the Company Board that shareholders of the Company vote in favor of the approval of the principal terms of the Merger and the adoption of this Agreement and the written opinion of Raymond James that the terms of the Merger are fair, from a financial point of view, to the shareholders of the Company. (b) Parent agrees that it will vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of its other subsidiaries in favor of the approval of the principal terms of the Merger and adoption of this Agreement. Section 2.10. Proxy Statement/Prospectus. If Parent is required to issue -------------------------- shares of Parent Common Stock pursuant to Section 2.7(b), then Parent shall prepare and file with the SEC a registration statement on Form S-4 pursuant to which the issuance of the shares of Parent Common Stock in the Merger will be registered under the Securities Act of 1933, as amended (the "Securities Act") -------------- (the "Registration Statement"). The final prospectus included in the ---------------------- Registration Statement as declared effective by the SEC shall be part of the Proxy Statement. Section 2.11. Merger Without Meeting of Shareholders. Notwithstanding the -------------------------------------- provisions of Section 2.9, in the event that Purchaser shall acquire at least 90% of the outstanding Shares pursuant to the Offer, the parties hereto agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the Purchaser delivers to the Paying Agent its Notice of Acceptance without a meeting of shareholders of the Company, in accordance with the provisions of Section 1110 of the CGCL. Section 2.12. Dissenting Shares. Notwithstanding any provision of this ----------------- Agreement to the contrary, each outstanding share of Company Common Stock held by a holder exercising dissenter's, appraisal or other similar rights ("Dissenter's Rights") with respect to such shares pursuant to Chapter 13 or ------------------ other applicable provisions of the CGCL, who has not effectively withdrawn or lost such rights (a "Dissenting Share"), shall not be converted into or ---------------- represent a right to receive the Merger Consideration pursuant to this Article II, but the holder thereof shall be entitled only to such rights as are granted by the applicable provisions of the CGCL; provided, however, that each Dissenting Share held by a person at the Effective Time who shall, after the Effective Time, lose such Dissenter's Rights or withdraw such demand for appraisal or payment of fair market value pursuant to the CGCL, shall be deemed to be converted, as of the Effective Time, into the right to receive the Merger Consideration pursuant to this Article II. The Company shall give Parent (A) prompt notice and copies of all notices of dissent, demands for 9 appraisal or payment of fair market value, withdrawals of demands for appraisal or payment of fair market value, and other instruments received by the Company relating to the exercise of Dissenter's Rights received by the Company and (B) the opportunity to direct all negotiations and proceedings with respect thereto under the CGCL. The Company will not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal or payment of fair market value and will not, except with the prior written consent of Parent, settle or offer to settle any such demands. Section 2.13. Payment for Shares. ------------------ (a) Prior to the Effective Time, Purchaser shall select and appoint a bank or trust company having net capital of not less than $100,000,000 to act as Paying Agent to effect the payment of the Merger Consideration in respect of certificates (the "Certificates") that, prior to the Effective Time, represented ------------ Shares entitled to payment of the Merger Consideration pursuant to Section 2.7. At the Effective Time, Parent or Purchaser shall deposit, or cause to be deposited, in trust with the Paying Agent for the benefit of the holders of Shares the aggregate Merger Consideration to which holders of Shares shall be entitled at the Effective Time pursuant to Section 2.7. (b) Promptly after the Effective Time, Purchaser or Parent shall cause the Paying Agent to mail to each record holder of Certificates (other than the holders of Certificates representing Excluded Shares) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use of such letter of transmittal in surrendering the Certificates for payment. Upon the surrender of each Certificate, together with a completed and duly executed letter of transmittal and such other documents as may be requested in connection therewith, the Paying Agent shall pay the holder of such Certificate the Cash Merger Consideration or the Stock Merger Consideration, as the case may be, multiplied (after giving effect to any required tax withholdings) by the number of Shares formerly represented by such Certificate, in consideration therefor, and such Certificate shall forthwith be canceled. Until so surrendered, each Certificate shall represent solely the right to receive the aggregate Cash Merger Consideration or Stock Merger Consideration, as the case may be, relating thereto. No interest or dividends shall be paid or accrued on the Merger Consideration. All Merger Consideration paid upon surrender for exchange of any Certificate in accordance with the terms of this Agreement shall be deemed to have been paid in full satisfaction of all rights pertaining to such Certificate. (c) In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, the Merger Consideration (or any portion thereof) may be paid and delivered to any person other than the person in whose name the Certificate surrendered is registered, so long as the Certificate so surrendered is properly endorsed or otherwise is in proper form for transfer and the person requesting such payment pays to the Paying Agent any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered, or establishes to the satisfaction of the Paying Agent that such taxes have been paid or are not applicable. In the event any Certificate shall have been lost, stolen or 10 destroyed, the Paying Agent shall be required to pay the full Merger Consideration in respect of any Shares represented by such Certificate; provided, however, if required by Parent, the owner of such lost, stolen or destroyed Certificate shall execute and deliver to the Paying Agent a form of affidavit claiming such Certificate to be lost, stolen or destroyed in form and substance satisfactory to Parent and the posting by such owner of a bond in such amount as Parent may determine is necessary as indemnity against any claim that may be made against Parent or the Paying Agent. (d) Promptly following the date which is 180 days after the Effective Time, the Paying Agent shall deliver to the Surviving Corporation all cash, Parent Common Stock, Certificates and other documents in its possession relating to the transactions described in this Agreement, and the Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in exchange therefor the aggregate Merger Consideration relating thereto, without any interest thereon. Notwithstanding the foregoing, none of Parent, Purchaser, the Surviving Corporation or the Paying Agent shall be liable to any person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered immediately prior to such date on which any payment with respect thereto would otherwise escheat to or become the property of any court, administrative agency, commission, or other governmental authority or instrumentality ("Governmental Entity"), the cash payment in respect of such ------------------- Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interests of any person previously entitled thereto. (e) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and canceled, and, in Parent's sole discretion, the holders of such Certificates shall receive in return for the payment of the aggregate Merger Consideration relating thereto, as provided in this Article II. Section 2.14. Supplementary Action. If at any time after the Effective --------------------- Time, any further assignments or assurances in law or any other things are necessary or desirable to vest or to perfect or confirm of record in the Surviving Corporation the title to any property or rights of either the Company or Purchaser, or otherwise to carry out the provisions of this Agreement, the officers and directors of the Surviving Corporation are hereby authorized and empowered, in the name of and on behalf of the Company and Purchaser, to execute and deliver any and all documents and instruments and to take all other action necessary or proper to vest or to perfect or confirm title to such property or rights in the Surviving Corporation, and otherwise to carry out the purposes and provisions of this Agreement. 11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Purchaser that the statements contained in this Article III are true and correct, except (i) as disclosed in the Company SEC Reports (as defined in Section 3.5(a)) filed prior to the date of this Agreement or (ii) as set forth in the written disclosure schedules delivered by the Company to Parent on or before the date of this Agreement (the "Disclosure Schedule"). ------------------- Section 3.1. Organization and Qualification of the Company and its ----------------------------------------------------- Subsidiaries. Each of the Company and its Subsidiaries is a corporation duly - ------------ organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified could have a Material Adverse Effect on the Company. Except as set forth on the Disclosure Schedule, neither the Company nor any of its Subsidiaries directly or indirectly owns any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any such equity or similar interest in, any corporation, limited liability company, partnership, joint venture or other business association or entity, excluding securities of any publicly traded company held for investment by the Company and comprising less than five percent (5%) of the outstanding stock of such company. Section 3.2. Subsidiaries. ------------ (a) Except as set forth in Section 3.2(a) of the Disclosure Schedule, all of the issued and outstanding shares of capital stock of each Subsidiary are owned by the Company or by a Subsidiary of the Company free and clear of all liens or encumbrances, and are validly issued, fully paid, and nonassessable, and there are no outstanding subscriptions, options, calls, contracts, registration rights, voting trusts, proxies or other commitments, understandings, restrictions, arrangements, rights or warrants with respect to any such Subsidiary's capital stock, including any right obligating any such Subsidiary to issue, deliver, or sell additional shares of its capital stock. (b) Section 3.2(a) of the Disclosure Schedule sets forth all subsidiaries of the Company. Section 3.3. Capital Structure. ----------------- (a) The authorized capital stock of the Company consists of 15,000,000 shares of Common Stock, no par value per share ("Company Common Stock") and -------------------- 5,000,000 shares of Preferred Stock ("Company Preferred Stock") no par value per ----------------------- share. As of the date hereof, (i) 8,340,669 shares of Company Common Stock and no shares of Company Preferred Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable; (ii) no shares of Company Common Stock or Company Preferred Stock are held in the treasury of the Company or by Subsidiaries of the Company; and (iii) 2,960,372 shares of Company Common Stock are reserved for issuance under Company Stock Plans (including (A) no shares reserved 12 for issuance under the 1986 Incentive Stock Option Plan, (B) 1,628,333 shares of Company Common Stock reserved for issuance under the 1988 Option Plan, 1,628,333 of which are subject to outstanding options and none of which are reserved for future option grants, (C) 1,000,000 shares of Company Common Stock are reserved for issuance under the 1998 Stock Option Plan, 554,500 of which are subject to outstanding options and 445,500 of which are reserved for future option grants, (D) 212,466 shares of Company Common Stock are reserved for future issuance pursuant to the Employee Stock Purchase Plan (the "Company Purchase Plan"), none --------------------- of which are subject to outstanding purchase rights, (E) 119,573 shares of Company Common Stock are reserved for future issuance pursuant the Restricted Stock Plan (the "Company Restricted Plan"), none of which are subject to the ----------------------- outstanding purchase rights, (F) 264,136 shares of Company Common Stock are reserved for future issuance pursuant to the conversion of all convertible notes and all unfunded contractual obligations to pay created by that certain Rescission and Reformation Agreement and that New Note Agreement each dated effective November 1, 1996 by and among the Company, the Company's subsidiary, Organic Waste Technologies, Inc. ("OWT") and certain of the former shareholders --- and optionholders of OWT (the "OWT Debt"), and (G) 123,077 shares of Company -------- Common Stock are reserved for future issuance pursuant to the conversion of the Convertible Notes dated April 30, 1997 in the aggregate principal amount of $800,000 ("NEP Notes"). Section 3.3(a) of the Disclosure Schedule contains a --------- correct and complete list as of May 7, 1999 of each outstanding purchase right or option (each a "Company Option") to purchase Shares including the holder, -------------- date of grant, exercise price and number of Shares subject thereto. All shares of Company Common Stock subject to issuance as specified above, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no obligations, contingent or otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company Common Stock or the capital stock of any Company Subsidiary or make any investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations of such Subsidiaries entered into in the ordinary course of business and disclosed to the Parent prior to the date hereof. Except as set forth in Section 3.3(a) of the Disclosure Schedule, all of the outstanding shares of capital stock of each Subsidiary of the Company are duly authorized, validly issued, fully paid and nonassessable, and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are owned by the Company or another Company Subsidiary free and clear of all security interests, liens, claims, pledges, agreements, limitations on the Company's voting rights, charges or other encumbrances of any nature. (b) Except as set forth in Section 3.3(a), there are no equity securities of any class of the Company or any of its Subsidiaries, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding. Except as set forth in Section 3.3(a), there are no options, warrants, equity securities, calls, rights, registration rights, commitments, agreements or preemptive rights of any character to which the Company or any of its Subsidiaries is a party or by which it is bound obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered, registered or sold, additional shares of capital stock of the Company or any of its Subsidiaries or obligating the Company or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any 13 such option, warrant, equity security, call, right, commitment or agreement, and, except for the Support Agreements and related proxies contemplated by this Agreement, there are no voting trusts, proxies or other agreements or understandings with respect to the shares of capital stock of the Company. Except as described in Section 3.3(a), the Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or are convertible into or exercisable for securities having the right to vote) with the shareholders of the Company on any matter ("Voting ------ Debt"). The Shares constitute the only class of securities of the Company or any - ---- of its Subsidiaries registered or required to be registered under the Exchange Act. Section 3.4. Authority; No Conflict; Required Filings and Consents. ----------------------------------------------------- (a) The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company, subject (if required by law) only to approval of this Agreement by the holders of a majority of the outstanding Shares (the "Company Requisite ----------------- Vote"). This Agreement has been duly executed and delivered by the Company ---- and, assuming the due authorization, execution and delivery by Parent and Purchaser, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) the remedy of specific performance and injunctive relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (b) The execution and delivery of this Agreement by the Company does not, and the consummation of the transactions contemplated by this Agreement will not, (i) conflict with or violate any provision of the Articles or Bylaws of the Company or any of its Subsidiaries (in each case as heretofore amended), (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or by which any of their respective properties is bound or affected other than such conflict or violations which, individually or in the aggregate, do not and could not reasonably be expected to have a Material Adverse Effect on the Company or an adverse effect on the ability of the parties hereto to consummate the Offer or the Merger, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair the rights of the Company or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or any of their respective properties are bound or affected which has or could reasonably be expected to have a Material Adverse Effect on the Company or an adverse effect on the ability of the parties hereto to consummate the Offer or the Merger. 14 (c) No consent, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity is required to be obtained or made by the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the Offer or the Merger, except for (i) the filings referred to in Section 1.2(b), (ii) the filing of the California Agreement of Merger and Certificate of Ownership with the Secretary of State of the State of California in accordance with the CGCL to affect the Merger or such other documents or forms as may be necessary to affect the Merger, (iii) the filing of the Proxy Statement, if applicable, with the SEC in accordance with the Exchange Act, (iv) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities (or related) laws and the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the ------- securities or antitrust laws of any foreign country, and (v) such other consents, authorizations, filings, approvals and registrations which if not obtained or made could not reasonably be expected to have a Material Adverse Effect on the Company or a material adverse effect on the ability of the parties hereto to consummate the Merger. Section 3.5. SEC Filings; Financial Statements. --------------------------------- (a) The Company has filed and made available to Parent all forms, reports and documents required to be filed by the Company with the SEC (collectively, the "Company SEC Reports"). The Company SEC Reports (i) at the time filed, (or ------------------- if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Company SEC Reports or necessary in order to make the statements in such Company SEC Reports, in the light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is required to file any forms, reports or other documents (other than those previously filed, except for those documents required to be filed as a result of this Agreement and the transactions contemplated hereby) with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes) contained in the Company SEC Reports, including any Company SEC Reports filed after the date of this Agreement until the Closing (the "Company Financial Statements"), complied or will comply as to form in all ---------------------------- material respects with the applicable published rules and regulations of the SEC with respect thereto, was or will be prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis ("GAAP") throughout ---- the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q promulgated by the SEC), and fairly presented or will fairly present the consolidated financial position of the Company and its subsidiaries as of its date. The Company has heretofore made available or promptly will make available to Parent a complete and correct copy of all amendments or modifications (in draft or final form) which are required to be filed with the SEC but have not yet been filed with the SEC to the Company Financial Reports. 15 (c) Section 3.5(c) of the Disclosure Schedule sets forth an accurate list of all international letters of credit and bonds and all other letters of credit and bonds issued for the benefit of the Company in an amount greater than $100,000. Section 3.6. Absence of Undisclosed Liabilities. The Company and its ---------------------------------- Subsidiaries do not have any liabilities, either accrued or contingent (whether or not required to be reflected in financial statements in accordance with GAAP), including liabilities arising under any Environmental Law, and whether due or to become due, which individually or in the aggregate, are or could be reasonably likely to have a Material Adverse Effect on the Company, other than (i) liabilities reflected in the consolidated balance sheet of the Company as of December 31, 1998 (the "Company Balance Sheet"), and (ii) normal or recurring --------------------- liabilities incurred since December 31, 1998 in the ordinary course of business consistent with past practices. Section 3.7. Absence of Certain Changes or Events. Except as set forth in ------------------------------------ Section 3.7 of the Disclosure Schedule, since the date of the Company Balance Sheet, the Company and its Subsidiaries have conducted their respective businesses in all respects only in, and have not engaged in any transaction other than according to, the ordinary and usual course of such businesses consistent with past practices, and there has not been any Material Adverse Effect on the Company or on the ability of the parties hereto to consummate the Offer or the Merger. Section 3.8. Taxes. ----- (a) For purposes of this Agreement, a "Tax" or, collectively, "Taxes" --- ----- means any and all material federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity. (b) The Company and its Subsidiaries have accurately prepared and timely filed all material federal, state, local and foreign returns, estimates, information statements and reports required to be filed at or before the Effective Time ("Returns") relating to any and all Taxes concerning or ------- attributable to the Company or any of its Subsidiaries or to their operations, and such Returns are true and correct in all material respects. (c) The Company and its Subsidiaries as of the Effective Time: (i) will have paid all Taxes it is required to pay prior to the Effective Time and (ii) will have withheld with respect to its employees all federal and state income taxes, FICA, FUTA and other Taxes required to be withheld. (d) There is no Tax deficiency outstanding, proposed or assessed against the Company or any of its Subsidiaries that is not reflected as a liability on the Company Balance Sheet nor has the Company or any of its Subsidiaries executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax (other than 16 state Taxes in the ordinary course of business in an amount that is not material to the Company and its Subsidiaries taken together as a whole). (e) Neither the Company nor any of its Subsidiaries has any material liability for unpaid federal, state, local or foreign Taxes that has not been accrued for or reserved on the Company Balance Sheet, whether asserted or unasserted, contingent or otherwise. (f) Neither the Company nor any of its Subsidiaries is a party to or bound by any tax indemnity, tax sharing or tax allocation agreement. (g) Neither the Company nor any of its Subsidiaries has been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"), or a member of a ---- combined, consolidated or unitary group for state, local or foreign Tax purposes (other than the group the common parent of which is the Company), and neither the Company nor any of its Subsidiaries has any liability for Taxes of any person (other than the Company and its Subsidiaries), whether under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign law), as transferee or successor, by reason of any tax sharing or tax allocation agreement, or otherwise. (h) Neither the Company nor any of its Subsidiaries has any excess loss account (as defined in Treasury Regulations Section 1.1502-19) with respect to the stock of any Subsidiary. (i) Neither the Company nor any of its Subsidiaries has filed a consent pursuant to the collapsible corporation provisions of Section 341(f) of the Code (or any corresponding provision of state, local or foreign law) or agreed to have Section 341(f)(2) of the Code (or any corresponding provision of state, local or foreign law) apply to any disposition of any asset owned by any of them. (j) Neither the Company nor any of its Subsidiaries is a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code (or any similar provision of state, local or foreign law) either as a result of the transaction contemplated hereunder or otherwise. Section 3.9. Properties. All real property leases of the Company or any of ---------- its Subsidiaries ("Real Property Lease(s)") are in good standing, valid and ---------------------- effective in accordance with their respective terms, and neither the Company nor its Subsidiaries, nor, to the Company's knowledge, any other party, is in default under any of such leases, other than defaults which, individually or in the aggregate, do not and could not reasonably be expected to have a Material Adverse Effect on the Company or an adverse effect on the ability of the parties hereto to consummate the Offer or the Merger. Section 3.10. Intellectual Property. ------------------------------------ (a) The Company and its Subsidiaries own, or are licensed or otherwise possess legally enforceable rights to use, all patents, trademarks, trade names, service marks, copyrights 17 and mask works, any applications for and registrations of such patents, trademarks, trade names, service marks, copyrights and mask works, and all processes, formulae, methods, schematics, technology, know-how, computer software programs or applications and tangible or intangible proprietary information or material (collectively, the "Intellectual Property") that are --------------------- necessary to conduct the business of the Company and its Subsidiaries as currently conducted, or planned to be conducted, except where the absence of the right to use such Intellectual Property has not had or could not reasonably be expected to have a Material Adverse Effect on the Company. (b) Neither the Company nor any of its Subsidiaries is, or will as a result of the execution and delivery of this Agreement or the performance of the Company's obligations under this Agreement be, in breach of any license, sublicense or other agreement relating to the Intellectual Property, or any licenses, sublicenses and other agreements or arrangements as to which the Company or any of its Subsidiaries is a party and pursuant to which the Company or any of its Subsidiaries is authorized to use any third party patents, trademarks or copyrights, including software which is used in the manufacture of, incorporated in, or forms a part of any product of the Company or any of its Subsidiaries the breach of which, individually or in the aggregate, has had or could be reasonably likely to have a Material Adverse Effect on the Company. (c) All of the patents and registered trademarks, service marks and copyrights which are held by the Company or any of its Subsidiaries, and which are material to the business of the Company and its Subsidiaries, taken as a whole, as it is currently conducted, are valid and subsisting and are set forth in Section 3.10 of the Disclosure Schedule. The Company is not named in any pending suit, action or proceeding which involves a claim of infringement of any rights relating to any Intellectual Property of any third party. The manufacturing, marketing, licensing or sale of the Company's products do not infringe any rights relating to any Intellectual Property of any third party which infringement could reasonably be expected to have a Material Adverse Effect on the Company. Section 3.11. Agreements, Contracts and Commitments. Neither the Company ------------------------------------- nor any of its Subsidiaries has breached, or to the Company's knowledge, received any claim or threat, whether orally or in writing, that it has breached any of the terms or conditions of any agreement, contract or commitment (that has not expired or been terminated) filed as an exhibit to the Company SEC Reports ("Company Material Contracts") in such a manner as could permit any -------------------------- other party to cancel or terminate the same, or could permit any other party to collect material damages from the Company or any of its Subsidiaries under any Company Material Contract. The Company Material Contracts constitute all contracts, documents, instruments and agreements required to be filed under the Exchange Act and the Securities Act with the SEC. Each Company Material Contract that has not expired or been terminated is in full force and effect and is not subject to any material default thereunder of which the Company is aware by any party obligated to the Company or any of its Subsidiaries pursuant to such Company Material Contract. To the Company's knowledge, none of the parties to the Company Material Contracts have terminated, or in any way expressed, whether orally or in writing, an intent to reduce or terminate the amount of business with the Company and its Subsidiaries in the future, whether as a result of the Offer, the Merger or otherwise. 18 Section 3.12. Litigation. To the Company's knowledge, except as set forth ---------- in Section 3.12 of the Disclosure Schedule, there is no action, suit or proceeding, claim, arbitration or investigation against the Company or any of its Subsidiaries pending or, to the Company's knowledge, threatened, or as to which the Company or any of its Subsidiaries has received any notice of assertion, whether orally or in writing, which, if decided adversely to the Company or such Subsidiary, could have a Material Adverse Effect on the Company or a material adverse effect on the ability of the Company to consummate the transactions contemplated by this Agreement. Section 3.13. Environmental Matters. --------------------- (a) The Company and its Subsidiaries are and have been operated in compliance with all Environmental Laws and have been and are in compliance with all of their respective Environmental Permits, not including non-compliance with Environmental Laws or Environmental Permits that would not constitute a Material Adverse Effect on the Company. The Company and its Subsidiaries have obtained all Environmental Permits necessary to the current conduct of their businesses and such Environmental Permits are valid and in full force and effect, not including those Environmental Permits where the absence, invalidity, or lack of full force or effect of which would not constitute a Material Adverse Effect on the Company. (b) To the Company's knowledge, in connection with the Company, its Subsidiaries and the conduct of the business of each, no written notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, claim, proceeding or review is pending or, threatened relating to or arising out of the alleged violation of or alleged liability under any Environmental Law by the Company or its Subsidiaries (collectively, "Written Environmental Claims"), where such Written Environmental Claims are ---------------------------- currently outstanding, and would have a Material Adverse Effect on the Company. (c) To the Company's knowledge, neither the Company nor any of its Subsidiaries has exposed any employee or any other individual to any Hazardous Material in violation of Environmental Laws, where such violation is not covered by worker's compensation insurance, and that is currently outstanding, and that would have a Material Adverse Effect on the Company. (d) To the Company's knowledge, there have been no releases or spills of any Hazardous Material directly caused by the acts or omissions of the Company or its subsidiaries in reportable quantities under Environmental Law, and that would have a Material Adverse Effect on the Company. (e) Neither the Company nor any Subsidiary has entered into any indemnity agreement or other contract in settlement of any claims against the Company or a Subsidiary, in which it has agreed to assume the liabilities of any other party under any Environmental Law, not including such indemnity agreements or such other contracts in settlement of claims against the Company or a Subsidiary where, if all or any of such liabilities have come or may come to 19 fruition, such assumption of same does not, or would not be likely to, constitute a Material Adverse Effect on the Company. (f) Neither the Company nor any Subsidiary is currently engaged in the business of owning or operating any treatment, storage or disposal facility, as defined in Part 264 of Title 40 of the Code of Federal Regulations, involved in the on-going commercial disposal of hazardous waste, as defined in RCRA Section 1004, and neither the Company nor any Subsidiary currently owns any site or facility engaged in the foregoing. (g) Section 3.13(g) of the Disclosure Schedule lists each site at which the Company or any Subsidiary currently owns or operates any leachate treatment system using the Company's proprietary leachate evaporation system (LES) technology. Section 3.14. Employee Benefit Plans. ---------------------- (a) The Company has made available to Parent all documents and governing instruments or descriptions pertaining to all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all employment, bonus, stock option, stock purchase, ----- incentive, deferred compensation, supplemental retirement, severance and other similar employee benefit plans, and all unexpired severance agreements (pursuant to which payments are still payable by the Company), written or otherwise, for the benefit of, or relating to, any current or former employee of the Company or any of its Subsidiaries or any trade or business (whether or not incorporated) which is a member or which is under common control with the Company within the meaning of Section 414 of the Code (an "ERISA Affiliate") (together, the --------------- "Company Employee Plans"). ---------------------- (b) With respect to each Company Employee Plan, the Company has made available to Parent, a true and correct copy of (i) the three most recent annual reports (Form 5500) filed with the Internal Revenue Service ("IRS") with respect --- to a Company Employee Plan subject to such filing requirement, and (ii) each trust agreement and group annuity contract, if any, relating to such Company Employee Plan. (c) All Company Employee Plans intended to be qualified under Code Section 401 have been the subject of determination letters from the Internal Revenue Service to the effect that such plans are qualified and exempt from Federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor has any event occurred since the date of its most recent determination letter or application therefor that could adversely affect its qualification or materially increase its costs. Each Company Employee Plan is in substantial compliance with all reporting and disclosure requirements of ERISA and the Code and the Company and each of its ERISA Affiliates is, in respect of each such plan, in substantial compliance with the fiduciary responsibility provisions of ERISA, Code Sections 4980B, 9801, 9802, 9811 and 9812. (d) Neither the company, nor any of its ERISA Affiliates has maintained, contributed or been obligated to contribute to any plan that is subject to Title IV of ERISA or Code 20 Section 412 or to any plan providing welfare benefits to former employees other than as required by Code Section 4980B. (e) With respect to the Company Employee Plans, individually and in the aggregate, there are no funded benefit obligations for which contributions have not been made or properly accrued and there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with U.S. generally accepted accounting principles, on the Company Financial Statements. (f) Except as provided for in this Agreement or as set forth in Section 3.14(f) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any oral or written (i) agreement with any officer or other key employee of the Company or any of its Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of the nature contemplated by this Agreement, (ii) agreement with any officer of the Company or any of its Subsidiaries providing any term of employment or compensation guarantee extending for a period longer than one year from the date hereof or for the payment of compensation in excess of one hundred thousand dollars ($100,000) per annum, or (iii) agreement or plan, including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Section 3.15. Compliance with Laws. Except as set forth in Section 3.15 of -------------------- the Disclosure Schedule, each of the Company and its Subsidiaries has complied in all material respects with all applicable federal, state, local and foreign statutes, laws and regulations and to the Company's knowledge has not received any notices, whether written or oral, of any material violation or potential material violation with respect to any such statute, law or regulation, with respect to the conduct of its business or the ownership or operation of its business, including the federal Foreign Corrupt Practices Act. Except as set forth in the Company SEC Reports filed prior to the date hereof, no investigation or review of any court or other governmental or regulatory authority, agency, commission, body or other governmental entity (each a "Governmental Entity") with respect to the Company or any of its Subsidiaries is ------------------- pending or, to the Company's knowledge, threatened, nor has any Governmental Entity indicated an intention to conduct the same. Section 3.16. Labor Matters. Except as set forth in Section 3.16 of the ------------- Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is the Company or any of its Subsidiaries the subject of any material proceeding asserting that the Company or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization, nor is there pending or, to the Company's knowledge, threatened, any material labor strike, dispute, walkout, work stoppage, slow- down or lockout involving the Company or any of its Subsidiaries. 21 Section 3.17. Interested Party Transactions. Since the date of the ----------------------------- Company's most recent proxy statement to its shareholders, no event has occurred that could be required to be reported by the Company as a Certain Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC. Section 3.18. Information. None of the information supplied by the Company ----------- for inclusion or incorporation by reference in the Offer Documents, the Registration Statement (if applicable) or any other document to be filed with the SEC or any other Governmental Entity in connection with the transactions contemplated by this Agreement (the "Other Filings") will, at the respective ------------- times such documents are filed with the SEC or other Governmental Entity, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Section 3.19. Payments Resulting from Mergers. Except as set forth in ------------------------------- Section 3.19 of the Disclosure Schedule, the consummation or announcement of any transaction contemplated by this Agreement will not (either alone or upon the occurrence of any additional or further acts or events) result in any material payment (whether of severance pay or otherwise) becoming due from the Company or any of its Subsidiaries to any officer, employee, former employee or director thereof under (i) any management, employment, deferred compensation, severance (including any payment, right or benefit resulting from a change in control), bonus or other contract for personal services with any officer, director or employee or any plan, agreement or understanding similar to any of the foregoing, or any "rabbi trust" or similar arrangement, or (ii) material benefit under any of the Company Employee Plans being established or becoming accelerated, vested or payable. Section 3.20. Opinion of Financial Advisor. Raymond James has delivered to ---------------------------- the Company a written opinion dated the date of this Agreement to the effect that the terms of the Offer and the Merger are fair, from a financial point of view, to the shareholders of the Company. Section 3.21. Insurance. The Company maintains insurance policies (the --------- "Insurance Policies") against all risks of a character and in such amounts as ------------------ are usually insured against by similarly situated companies in the same or similar businesses. Each Insurance Policy is in full force and effect and is valid, outstanding and enforceable, and all premiums due thereon have been paid in full. None of the Insurance Policies will terminate or lapse (or be affected in any other materially adverse manner) by reason of the transactions contemplated by this Agreement. The Company and its Subsidiaries have complied in all material respects with the provisions of each Insurance Policy under which it is the insured party. No insurer under any Insurance Policy has canceled or generally disclaimed liability under any such policy or, to the Company's knowledge, indicated any intent to do so or not to renew any such policy. All material claims under the Insurance Policies have been filed in a timely fashion. Section 3.22. Brokers and Finders. Neither the Company nor any of its ------------------- Subsidiaries, officers, directors, or employees or other affiliates has employed any broker or finder or incurred 22 any liability for any brokerage fees, commissions or finders' fees in connection with the Offer, the Merger or the other transactions contemplated by this Agreement, except that the Company has employed Raymond James, the arrangements with which have been disclosed to Parent prior to the date hereof. Section 3.23. Certain Business Practices. Neither the Company, any of its -------------------------- Subsidiaries nor any directors, officers, agents or employees of the Company or any of its Subsidiaries has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii) made any other payment prohibited by applicable Law. Section 3.24. Customers. The written reports supplied by the Company to --------- Parent in connection with this Agreement with respect to revenues by customer for 1998 were accurate in all material respects. Section 3.25. Projections. Management has no reason to believe that the ----------- financial projections and forecasts included in the Company's 1999 business plan and provided to Parent are incorrect or inaccurate, in any material respect; provided, however, that these projections and forecasts did not take into account the short term disruption to the business of the Company or other potential adverse effects on revenues that may be attributable to the transactions contemplated by this Agreement. Section 3.26. Government Contracts. Except as set forth in Section 3.26 of -------------------- the Disclosure Schedule: (i) With respect to each Government Contract or Bid to which the Company and/or any of its Subsidiaries is a party: (1) to the Company's knowledge, all representations and certifications were current, accurate and complete when made, and the Company and its Subsidiaries have fully complied with all such representations and certifications; (2) since April 1, 1996, no allegation has been made by a representative of the U.S. Government, either orally or in writing, that the Company or any of its Subsidiaries is in breach or violation of any material statutory, regulatory or contractual requirement; (3) since April 1, 1996, no termination for convenience, termination for default, cure notice or show cause notice has been issued or to the Company's knowledge, threatened; (4) since April 1, 1996, no cost in excess of $200,000 incurred by the Company, any of its Subsidiaries or any of their respective subcontractors has been questioned or disallowed by a representative of the U.S. Government; and (5) since April 1, 1996, no money due to the Company or any of its Subsidiaries under a Government Contract has been (or to the Company's knowledge is presently threatened to be) withheld or set off. (ii) To the Company's knowledge, neither the Company, any of its Subsidiaries, any of their respective affiliates, nor any of the Company's or any of its Subsidiaries' directors, officers, employees, agents or consultants is (or for the last three years has been) (1) under administrative, civil or criminal investigation, indictment or information, 23 audit or internal investigation with respect to any alleged irregularity, misstatement or omission regarding a Government Contract or Bid; or (2) suspended or debarred from doing business with any governmental authority or declared nonresponsible or ineligible for government contracting, nor to the Company's knowledge, is there any valid basis for such an investigation, suspension or debarment. Neither the Company, nor any of its Subsidiaries or any of their respective affiliates have made a voluntary disclosure to any Federal Governmental Entity with respect to any alleged material irregularity, misstatement or omission arising under or relating to any Government Contract or Bid. (iii) Since April 1, 1996, no governmental authority or any prime contractor, subcontractor or vendor has asserted any claim or initiated any dispute proceeding against the Company or any of its Subsidiaries, nor has the Company or any of its Subsidiaries asserted any claim or initiated any dispute proceeding, directly or indirectly, against any such party, concerning any Government Contract or Bid, in each case involving an amount in excess of $100,000. There are no facts of which the executive officers of the Company are aware upon which such a claim or dispute proceeding may be based in the future. (iv) Definitions. The following terms, as used herein, ----------- shall have the following meanings: "Bid" means any quotation, bid or proposal by the Company, any of its --- Subsidiaries or any of their respective affiliates which, if accepted or awarded, could lead to a contract with a governmental authority or any other entity, including a prime contractor or a higher tier subcontractor to a governmental authority, for the design, manufacture or sale of products or the provision of services by the Company or any of its Subsidiaries. "Governmental Contract" means any prime contract, subcontract, --------------------- teaming agreement or arrangement, joint venture, basic ordering agreement, letter contract, purchase order, delivery order, Bid, change order, arrangement or other commitment of any kind relating to the business of the Company or any of its Subsidiaries between the Company and/or any of its Subsidiaries and (1) any Federal Governmental Entity, (2) any prime contractor to a Federal Governmental Entity or (3) any subcontractor with respect to any contract described in clause (1) or (2). Section 3.27. Material Disclosure. No statement, representation or warranty ------------------- made by the Company in this Agreement, or in any certificate, statement, list, schedule or other document furnished or to be furnished to Parent or Purchaser hereunder, contains, or when so furnished will contain, any untrue statement of a material fact, or fails to state, or when so furnished will fail to state, a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they are or will be made, not misleading. Section 3.28. Y2K Compliance. The Company has established and is -------------- implementing an enterprise-wide program to provide that the change of the year from 1999 to the year 2000 would not have a Material Adverse Effect on the Company. 24 Section 3.29. Corporate Minutes. The copies of the minutes of the meetings ----------------- of the Board of Directors of the Company from February 9, 1996 through April 12, 1999 which were provided to Parent were complete and accurate in all material respects, except that matters pertaining to the potential acquisition of the Company by third parties and potential acquisitions of third parties by the Company that were not consummated were redacted. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Parent and Purchaser, jointly and severally, represent and warrant to the Company as follows: Section 4.1. Organization and Qualification of Parent and Purchaser. Each ------------------------------------------------------ of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified could have a Material Adverse Effect on Parent. Section 4.2. Authority. --------- (a) Each of Parent and Purchaser has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Purchaser and the consummation by them of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Parent and Purchaser. This Agreement has been duly executed and delivered by each of Parent and Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes the valid and binding obligation of Parent and Purchaser, enforceable against Parent and Purchaser in accordance with its terms, except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) the remedy of specific performance and injunctive relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (b) The execution and delivery of this Agreement by each of Parent and Purchaser does not, and the consummation of the transactions contemplated by this Agreement will not, (i) conflict with or violate the charter documents or Bylaws of Parent or Purchaser, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Parent or Purchaser or by which any of their respective properties is bound or affected, other than such conflicts or violations which, individually or in the aggregate, do not and could not reasonably be expected to have a Material Adverse Effect on Parent or a material adverse effect on the ability of the parties hereto to consummate the Offer or the Merger, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both could become a default) under, or impair the rights of Parent or Purchaser or alter the rights or obligations of any third 25 party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of Parent or Purchaser pursuant to, any material note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Purchaser is a party or by which Parent or Purchaser or any of their respective properties are bound or affected, which would have or could be reasonably expected to have a material adverse effect on the ability of the parties hereto to consummate the Offer or the Merger. (c) No consent, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity is required to be obtained or made by Parent or Purchaser in connection with the execution and delivery of this Agreement or the consummation of the Offer or the Merger, except for (i) the filing of the Schedule 14D-1 with the SEC in accordance with the Exchange Act, (ii) the filing of the Registration Statement, as required, with the SEC in accordance with the Securities Act, (iii) the filing of the Certificate of Merger and the Certificate of Ownership with the Secretary of State of the State of California to affect the Merger, or such other documents or forms as may be necessary to affect the Merger, (iv) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities (or related) laws and the HSR Act and the securities or antitrust laws of any foreign country, and (v) such other consents, authorizations, filings, approvals and registrations which if not obtained or made could not reasonably be expected to have a Material Adverse Effect on Parent or a material adverse effect on the ability of the parties hereto to consummate the Merger. Section 4.3. Information. Neither the Schedule 14D-1, the Offer Documents ----------- and the Registration Statement, nor any of the information supplied by Parent or Purchaser for inclusion in the Schedule 14D-9, shall at the respective times they are filed with the SEC or are first published, sent or given to shareholders or upon the expiration of the Offer, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein in the light of the circumstances under which they were made not misleading (except for information supplied by the Company for inclusion in the Schedule 14D-1, the Offer Documents and the Registration Statement, as to which Parent and Purchaser make no representation). None of the information supplied by Parent or Purchaser for inclusion in the Proxy Statement shall, at the date the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to shareholders, at the time of the Special Meeting or at the Effective Time, contain any untrue statement of a material fact required to be stated therein or necessary in order to make the statements made therein in light of the circumstances under which they were made, not misleading. Section 4.4. Available Funds. Parent has or has available to it, and will --------------- make available to Purchaser, all funds necessary to satisfy all of Parent's and Purchaser's obligations under this Agreement and in connection with the transaction contemplated hereby, including, without limitation, the obligation to purchase all outstanding Shares pursuant to the Offer and the Merger and to pay all related fees and expenses in connection with Offer and the Merger. 26 Section 4.5. Litigation. There is no action or suit pending or, to ---------- Parent's knowledge, threatened against Parent or Purchaser or any of their directors or officers or any judgment decree or order issued against Parent or Purchaser or any of their directors or officers that has had or could be reasonably expected to have a material adverse effect on the consummation of the Offer or the Merger. Section 4.6. Valid Issuance. The Parent Common Stock to be issued in the -------------- Merger pursuant to Section 2.7(b), if applicable, will when issued in accordance with the provisions of this Agreement, be validly issued, fully paid and nonassessable. ARTICLE V COVENANTS Section 5.1. Conduct of Business by the Company. Except as expressly ---------------------------------- contemplated by this Agreement, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, the Company agrees as to itself and its Subsidiaries, except to the extent that Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld), to carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted, to pay its debts and Taxes when due, subject to good faith disputes over such debts or Taxes, to pay or perform its other obligations when due, and to use all reasonable efforts to (i) preserve intact its present business organization, (ii) keep available the services of its present officers and key employees and (iii) preserve its relationships with customers, suppliers, distributors, licensors, licensees and others having business dealings with it. Without limiting the generality of the foregoing, the Company shall not (and shall not permit any of its Subsidiaries, directors or officers to), without the prior written consent of Parent (which consent shall not be unreasonably withheld): (a) accelerate, amend or change the period of exercisability of options or restricted stock granted under any employee stock plan of the Company or authorize cash payments in exchange for any options granted under any of such plans except as required by the terms of such plans or any related agreements in effect as of the date of this Agreement, except as expressly contemplated by this Agreement; (b) transfer or license to any person or entity or otherwise extend, amend or modify any rights to the Company Intellectual Property Rights other than in the ordinary course of business consistent with past practices; (c) declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock (other than distributions declared with respect to the capital stock of any Subsidiary in the ordinary course of business consistent with past practice), or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or indirectly, any shares of its capital stock; 27 (d) issue, deliver or sell, subject to any lien or authorize or propose any of the foregoing with respect to any shares of its capital stock or securities convertible into shares of its capital stock, Voting Debt or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities other than (i) the issuance of rights to purchase shares of Company Common Stock as and to the extent required under the Company Option Plans as in effect as of the date hereof; and (ii) the issuance of Company Common Stock upon the exercise of Company Stock Options outstanding on the date of this Agreement in accordance with their present terms or pursuant to the Company Purchase Plan or Company Restricted Plan in accordance with their present terms, and (iii) the granting, in the ordinary course of business consistent with past practice, pursuant to Company Stock Plans in effect on the date of this Agreement, of Company Options to purchase up to a number of shares of Company Common Stock as shall be agreed to by the Company and Parent, and the issuance of Company Common Stock upon exercise thereof; (e) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership or other business organization or division; (f) adopt a plan of complete or partial liquidation or dissolution, merger or otherwise restructure or recapitalize or consolidate with any Person other than Purchaser or another wholly owned Subsidiary of Parent; (g) sell, lease, license or otherwise dispose of any of its properties or assets except for transactions entered into in the ordinary course of business; (h) take any action to: (i) increase or agree to increase the compensation payable or to become payable to its officers or employees, except for increases in salary or wages of employees in accordance with agreements entered into before the date of this Agreement and previously provided to Parent, (ii) grant any additional severance or termination pay to, or enter into any employment or severance agreements with, officers, (iii) grant any severance or termination pay to, or enter into any employment or severance agreement, with any employee, except in accordance with agreements entered into before the date of this Agreement and previously provided to Parent, (iv) enter into any collective bargaining agreement, or (v) establish, adopt, enter into or amend in any material respect any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, trust, fund, policy or arrangement for the benefit of any directors, officers or employees; (i) amend or propose to amend its Articles or Bylaws, except as contemplated by this Agreement; (j) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person except in the ordinary course of business consistent with past practices and except for obligations of the Company or its Subsidiaries incurred in the ordinary course of business and in an amount not to exceed $250,000; 28 (k) make any loans to any other Person (other than to Subsidiaries of the Company or, customary loans or advances to employees in connection with business-related travel in the ordinary course of business consistent with past practices); (l) make, authorize or commit to make any capital expenditures except for capital expenditures in the ordinary course of business and consistent with past practice or in amounts less than $150,000 individually and $750,000 in the aggregate; (m) by any means, make any acquisition of, or investment in, assets or stock of any other Person; (n) except as may be required as a result of a change in law or in GAAP, change any of the accounting principles or practices used by it or revalue in any respect any of its material assets, including writing down the value of inventory or writing-off notes or accounts receivable, other than in the ordinary course of business consistent with past practices; (o) settle or compromise any material claims or litigation or terminate or materially amend or modify any of its Material Contracts or waive, release or assign any material rights or claims; (p) make, revoke or amend any Tax election; (q) enter into or amend any agreement or settlement with any Tax authority; or (r) take, or agree in writing or otherwise to take, any of the actions described in the foregoing clauses (a) through (q), or any action which is reasonably likely to make any of the Company's representations or warranties contained in this Agreement untrue or incorrect in any material respect on the date made (to the extent so limited) or as of the Effective Time. Section 5.2. Access to Information. --------------------- (a) From the date of this Agreement until the Effective Time, the Company will give, and will cause its subsidiaries, and each of their respective officers, directors, employees, counsel, advisors and representatives (collectively, the "Company Representatives") to give Parent and Purchaser and ----------------------- their respective officers, employees, counsel, advisors and representatives (collectively, the "Parent Representatives") access, upon reasonable notice and ---------------------- during normal business hours, to the offices and other facilities and to the books and records of the Company and its Subsidiaries and will cause the Company Representatives and the Company's subsidiaries to furnish Parent, Purchaser and Parent Representatives, to the extent available, with such financial and operating data and such other information with respect to the business and operations of the Company and its subsidiaries as Parent and Purchaser may from time to time reasonably request subject, in each case, to the continuing obligations of the parties under the Confidentiality Agreement between Parent and the Company dated February 10, 1999 (the "Confidentiality Agreement"), which ------------------------- agreement shall survive until termination pursuant to the terms thereof. The Company shall furnish promptly to Parent and Purchaser a copy of each 29 report, schedule, registration statement and other document filed by it or its subsidiaries during such period pursuant to the requirements of federal, state or foreign securities laws. (b) No investigation made by Parent, Purchaser or any Parent Representative pursuant to this Section 5.2 shall affect any representations or warranties of the parties contained in this Agreement or any conditions to their obligations hereunder. Section 5.3. Efforts. ------- (a) Subject to the terms and conditions hereof, each of the Company, Parent and Purchaser shall, and the Company shall cause each of its subsidiaries to, cooperate and use their respective reasonable commercial efforts to take, or cause to be taken, all actions reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement as promptly as is practicable, including but not limited to cooperation in the preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy Statement, the Registration Statement, any required filings under the HSR Act, or other foreign filings and any amendments to any of the foregoing. (b) If at any time prior to the Effective Time any event or circumstance relating to the Company, Parent or Purchaser, or any of their respective subsidiaries, should be discovered by the Company or Parent, as the case may be, which is required to be set forth in an amendment to the Offer Documents, the Schedule 14D-9 or the Registration Statement, the discovering party will promptly, but in no event more than two (2) days, inform the other party of such event or circumstance. (c) Each of the parties will use its reasonable commercial efforts to obtain as promptly as practicable all consents of any Governmental Entity or any other person required in connection with, and waivers of any violations that may be caused by, the consummation of the transactions contemplated by the Offer, the Merger and this Agreement. Section 5.4. Public Announcements. The Company, on the one hand, and -------------------- Parent and the Purchaser, on the other hand, agree to consult with each other prior to issuing any press release or otherwise making any public statement with respect to this Agreement, the Offer, the Merger or the other transactions contemplated hereby, agree to provide to the other party for review prior to filing a copy of any such press release or statement, and shall not issue any such press release or make any such public statement prior to attempting in good faith such consultation and review, unless required by applicable law or any listing agreement with a securities exchange. This Section 5.4 shall supersede any conflicting provisions of the Confidentiality Agreement. Section 5.5. Employee Benefit Arrangements. ----------------------------- (a) The Company shall, and from and after consummation of the Offer Parent agrees to cause the Company to, honor and, from and after the Effective Time, the Surviving Corporation to honor, all obligations under the employment and severance agreements and the Change of Control Policy to which the Company or any of its subsidiaries is presently a party all 30 of which are listed in the Disclosure Schedule. Notwithstanding the foregoing, from and after the Effective Time, the Surviving Corporation shall have the right to amend, modify, alter or terminate any Company Employee Plan, provided that any such action shall not affect any rights for which the agreement or consent of the other party or a beneficiary is required; provided further that, except as prohibited by the Company's 401(k) plan or Organic Waste Technologies, Inc. 401(k) Profit Sharing Plan (collectively the "Company 401(k) Plans") or -------------------- applicable law, the Company will promptly take any and all actions necessary and appropriate to terminate the Company 401(k) Plans, including without limitation (i) adoption of resolutions by the Company Board terminating the Company 401(k) Plans immediately prior to consummation of the Offer and (ii) timely delivery of any notices required under the terms of the Company 401(k) Plans. Participants with loans under the Company 401(k) Plans (other than loans that are in default under the terms of the Company 401(k) Plans) who continue employment with Parent or Surviving Corporation shall be permitted to continue making payments on such loans notwithstanding the terms of the loan or the terms of the Company 401(k) Plans until such date that the loan is due and payable under the terms of the loan. Further, such participants will be given the option of rolling over any outstanding loans under Company 401(k) Plans at the same time that they roll over their Company 401(k) Plans' accounts to Parent's 401(k) Plan. Parent agrees to continue the EMCON Deferred Compensation Plan until at least January 2, 2000 and shall not amend such plan so as to accelerate the distribution of any participant's plan benefits prior to January 2, 2000. (b) Any pre-existing condition exclusion under a benefit plan of Parent providing medical or dental benefits shall be waived for any Company employee who becomes an employee of Surviving Corporation or Parent (each such employee a "Continuing Employee"), and who immediately prior to ------------------- commencing participation in such Parent benefit plan, was participating in a Company Employee Plan providing medical or dental benefits and had satisfied any pre-existing condition under such Company Employee Plan. Any medical or dental expenses that were taken into account under a Company Employee Plan providing medical or dental benefits in which the Continuing Employee participated immediately prior to commencing participation in a Parent benefit plan providing medical or dental benefits shall be taken into account to the same extent under such Parent benefit plan, in accordance with the terms of such Parent benefit plan, for purposes of satisfying applicable deductible, coinsurance maximum out- of-pocket provisions and life-time benefit limits. No Continuing Employee will experience a gap in medical or dental coverage under any Parent benefit plan providing medical or dental benefits as a result of the transaction contemplated by this Agreement. (c) Parent agrees that from and after the Effective Time, any Continuing Employee shall become eligible to participate in the employee benefit plans and arrangements maintained by Parent or Surviving Corporation including, without limitation, severance plans, which are at least as favorable as those provided by Parent to similarly situated employees of Parent. Parent, or Surviving Corporation shall grant the Continuing Employees credit for all service credited by the Company for purposes of eligibility, vesting and the determination of the level of benefits (but not benefit accrual under any defined benefit plan) under any benefit plan of Parent or Surviving Corporation including, without limitation, vacation, severance and 401(k) plan. Continuing Employees will be eligible to participate in Parent's 401(k) Plan as soon as 31 administratively feasible following the Effective Time. Parent shall, and shall cause Surviving Corporation to, honor in accordance with their terms all employee benefit obligations to current and former employees under the Company Employee Plans, including, without limitation, obligations under the Consolidated Omnibus Reconciliation Act ("COBRA"), in existence on the date ----- hereof. (d) Parent shall only be required to afford employees of the Company and its subsidiaries who are terminated within sixty (60) days after consummation of the Offer with severance benefits provided for under the Company Employee Plans (including but not limited to those rights contemplated in Section 3.14(f)). Thereafter, any Continuing Employee will be eligible to receive severance benefits under the severance plan of Parent and in accordance with Section 5.5(c), service with the Company will be counted in determining the amount of severance benefits to which the Continuing Employee is entitled under the Parent's severance plan. Section 5.6. Indemnification. --------------- (a) Parent agrees that all rights to indemnification now existing in favor of any of the current or former directors and officers of the Company (the "Indemnified Parties") as provided in its Articles or By-Laws, in each case as ------------------- of the date of this Agreement, and all indemnification agreements between the Company and the Indemnified Parties described in Section 5.6 of the Disclosure Schedule shall survive the Merger and shall continue in full force and effect from and after consummation of the Offer in accordance with their terms, as such terms exist on the date hereof. After the Effective Time, Parent agrees to cause the Surviving Corporation to honor all rights to indemnification referred to in the preceding sentence. (b) Parent agrees to cause the Company, and from and after the Effective Time, the Surviving Corporation, to purchase a six year extended reporting period endorsement under the current policy of directors' and officers' liability insurance maintained by the Company; provided that (i) the Surviving Corporation may substitute therefor other policies not less advantageous (other than to a de minimus extent) to the beneficiaries of the current policies, (ii) such substitution shall not result in any gaps or lapses in coverage with respect to matters occurring prior to the Effective Time and (iii) the Surviving Corporation shall not be required to pay an annual premium for such coverage in excess of 150% of the last annual premium paid (the "Maximum Premium") by the --------------- Company prior to the date hereof (which the Company represents to be $58,000 for the 12-month period ending January 1, 2000). If the Surviving Corporation is unable to obtain the insurance required by this Section 5.6(b) for the Maximum Premium it shall obtain as much comparable insurance as possible for an annual premium equal to the Maximum Premium. Section 5.7. Notification of Certain Matters. ------------------------------- (a) Parent and the Company shall give prompt notice, but in no event more than two (2) business days, in writing to the other of the occurrence or non- occurrence of any fact or event which causes or could be reasonably likely to (i) cause any representation or warranty made by such party in this Agreement to be untrue or inaccurate in any material respect at any time from 32 the date hereof to the Effective Time or (ii) cause any covenant or agreement made by such party under this Agreement not to be complied with or satisfied in any material respect. (b) Each of the Company, Parent and Purchaser shall give prompt notice, but in no event more than two (2) business days, in writing to the other parties hereto of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement. (c) The Company shall give prompt notice, but in no event more than two (2) business days, in writing to Parent of any act, omission to act, event or occurrence which has or, with the passage of time or otherwise, could be reasonably expected to have a Material Adverse Effect on the Company; provided, however, that no such notification shall affect the representations or warranties of any party or the conditions to the obligations of any party hereunder. Section 5.8. State Takeover Laws. The Company shall, upon the request of ------------------- the Purchaser, take all reasonable steps to assist in any challenge by the Purchaser to the validity or applicability to the transactions contemplated by this Agreement, including the Offer and the Merger, of any state takeover law. Section 5.9. No Solicitation. --------------- (a) For purposes of this Agreement: (i) "Alternative Proposal" means any inquiry, proposal or offer, -------------------- whether written or oral, from any person or Group relating to any direct or indirect acquisition or purchase of any product line or other material portion of the assets of the Company and its subsidiaries taken as a whole (other than the purchase of the Company's products or used equipment in the ordinary course of business), or more than a 20% interest in the total outstanding voting securities of the Company or any of its subsidiaries, or any tender offer or exchange offer that if consummated could result in any person or Group beneficially owning 10% or more of the total outstanding voting securities of the Company or any of its subsidiaries, or any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by this Agreement. (ii) "Superior Proposal" means a bona fide offer, whether written ----------------- or oral, made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the total outstanding voting securities of the Company or all or substantially all the assets of the Company, which offer is otherwise on terms which the Company Board determines in its good faith judgment (after consultation with a financial advisor of nationally recognized reputation) to be reasonably capable of being completed (taking into account all material legal, financial, regulatory and other aspects of the proposal) and more favorable to the Company's shareholders from a financial point of view than the Offer and the Merger, and for which 33 financing, to the extent required, is then committed or which, in the good faith judgment of the Company Board is capable of being obtained by such third party. (iii) "Representative" means the officers, directors or employees -------------- or any investment banker, attorney, accountant or other advisor or representative retained by the Company or its subsidiaries. (iv) "Group" means any group as defined under Section 13(d) of the ----- Exchange Act and the rules and regulations thereunder. (b) (i) From and after the date of this Agreement until the earlier of the Effective Time or termination of this Agreement pursuant to its terms, the Company and its subsidiaries will not, and they will direct their respective Representatives not to, directly or indirectly, (A) solicit, initiate or encourage the submission of any Alternative Proposal or (B) participate in any discussions or negotiations regarding, or furnish to any person any non-public information with respect to, or take any other action to facilitate the making of any proposal that constitutes or may reasonably be expected to lead to, an Alternative Proposal. The Company and its subsidiaries will immediately cease, and will instruct and cause their respective Representatives to immediately cease, any and all existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Alternative Proposal. Any violation of the restrictions set forth in this Section 5.9(b)(i) by any Representative of the Company or any of its subsidiaries will be deemed to be a material breach of this Agreement by the Company. (ii) Notwithstanding the provisions of Section 5.9(b)(i), if, at any time prior to the consummation of the Offer, the Company Board reasonably determines in good faith, after taking into account the advice of its outside legal counsel, that it is necessary to do so in order to comply with its fiduciary duties to the Company's shareholders under applicable law, the Company and its Representatives may, in response to a Superior Proposal that was unsolicited or that did not otherwise result from a breach of this Section 5.9, and subject to compliance with Sections 5.9(d) and 5.9(f), furnish non-public information with respect to the Company and participate in discussions and negotiations regarding such Superior Proposal. (c) (i) From and after the date of this Agreement until the earlier of the Effective Time or termination of this Agreement pursuant to its terms, including the payment of the fees set forth in Section 7.3, neither the Company Board nor any committee thereof shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or Purchaser, their approval or recommendation to the Company's shareholders of the Offer, this Agreement or the Merger or (B) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (an "Acquisition Agreement") with respect to any Alternative Proposal. --------------------- In addition, from and after the date of this Agreement until the earlier of the Effective Time and termination of this Agreement pursuant to its terms, the Company and its subsidiaries will not, and they will direct their Representatives not to, directly or indirectly, make or authorize any public statement, recommendation or solicitation in support of any Alternative Proposal. (ii) Notwithstanding the provisions of Section 5.9(c)(i), if, at any time prior to 34 the consummation of the Offer, the Company Board reasonably determines in good faith, after taking into account the advice of its outside legal counsel, that it is necessary to do so in order to comply with its fiduciary duties to the Company's shareholders under applicable law, after terminating this Agreement pursuant to its terms, including the payment of the fees set forth in Section 7.3, the Company Board may withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger, approve or recommend a Superior Proposal, or enter into an Acquisition Agreement with respect to a Superior Proposal, provided, that the Company shall have given Parent written notice (a "Notice of Superior Proposal") at least two business days prior to entering into --------------------------- any such Acquisition Agreement and at least two business days prior to public disclosure by the Company Board of such withdrawal, modification, approval or recommendation, advising Parent that the Company Board has received a Superior Proposal, specifying the material terms and conditions of the Superior Proposal (including the proposed financing) and identifying the person making such Superior Proposal. Any amendment to the price or material terms of a Superior Proposal shall require an additional Notice of Superior Proposal and an additional two business day period thereafter, to the extent permitted under applicable law, prior to public disclosure by the Company Board of its recommendation with respect thereto. (d) In addition to the obligations of the Company set forth in Sections 5.9(b) and 5.9(c), the Company as promptly as practicable, and in any event within 24 hours, shall advise Parent orally and in writing of (i) any request for non-public information which the Company reasonably believes may lead to an Alternative Proposal, or of any Alternative Proposal, (ii) the material terms and conditions of such information request or Alternative Proposal, and (iii) the identity of the person making any such information request or Alternative Proposal. The Company will keep Parent informed in all material respects of the status and details (including material amendments) of any such request or Alternative Proposal. (e) Nothing contained in this Section 5.9 or elsewhere in this Agreement shall prohibit the Company from (i) taking and disclosing to its shareholders a position contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act or (ii) making any disclosure to the Company's shareholders if, in the good faith judgment of the Company Board, after taking into account the advice of its outside legal counsel, failure to so disclose would be inconsistent with applicable laws; provided, that neither the Company nor the Company Board nor any committee thereof shall, except in accordance with the provisions of Section 5.9(c)(ii), withdraw or modify, or publicly propose to withdraw or modify, its position with respect to the Offer, this Agreement or the Merger or approve or recommend, or propose to approve or recommend, an Alternative Proposal. (f) Notwithstanding anything to the contrary in this Section 5.9, the Company will not provide any non-public information to a third party unless: (i) the Company provides such non-public information pursuant to a nondisclosure agreement with terms regarding the protection of confidential information at least as restrictive as such terms in the Confidentiality Agreement; and (ii) such non-public information has been previously or is contemporaneously delivered to Parent. 35 ARTICLE VI MERGER CONDITIONS Section 6.1. Conditions. The respective obligations of Parent, the ---------- Purchaser and the Company to consummate the Merger are subject to the satisfaction, at or before the Effective Time, of each of the following conditions: (a) Shareholder Approval. The shareholders of the Company shall have duly -------------------- approved and adopted this Agreement, if required by applicable law. (b) Acceptance for Payment of Shares. The Purchaser shall have delivered -------------------------------- the Notice of Acceptance for the Shares to the Paying Agent pursuant to the Offer in accordance with the terms hereof. (c) Injunctions; Illegality. The consummation of the Merger shall not be ----------------------- restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling of a Governmental Entity of competent jurisdiction, there shall not have been any statute, rule or regulation enacted, promulgated or issued by any Governmental Entity which prevents the consummation of the Merger or has the effect of making the purchase of Shares illegal, and no Governmental Entity shall have instituted any proceeding seeking any such Order and such proceeding remains unresolved. (d) Regulatory Consents. The waiting period applicable to the ------------------- consummation of the Merger under the HSR Act shall have expired or been terminated and, other than filing the Certificate of Merger or Certificate of Ownership in the State of California, all filings with any governmental entity required to be made prior to the Effective Time by the Company or Parent or any of their respective Subsidiaries, with, and all government consents required to be obtained prior to the Effective Time by the Company or Parent or any of their respective Subsidiaries in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Company, Parent and Purchaser shall have been made or obtained (as the case may be), except where the failure to so make or obtain will not result in either a Material Adverse Effect on the Company or have, or be reasonably likely to have, a material adverse effect on the ability of the parties hereto to consummate the transactions contemplated by this Agreement. ARTICLE VII TERMINATION; AMENDMENTS; WAIVER Section 7.1. Termination. This Agreement may be terminated and the Merger ----------- contemplated hereby may be abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the shareholders of the Company (with any termination by Parent also being an effective termination by Purchaser): 36 (a) by mutual written consent duly authorized by the Board of Directors of Parent and the Company Board, subject to the concurrence of the Independent Directors to the extent required by Section 1.3; (b) by either Parent or the Company if: (i) the Offer is terminated, withdrawn or expires pursuant to its terms without any Shares having been purchased thereunder; provided, however, that neither Parent nor the Company may terminate this Agreement pursuant to this Section 7.1(b)(i) if such party is in material breach of this Agreement (including if Parent or Purchaser is in breach of Section 1.1 of this Agreement) or, in the case of Parent, if Parent or Purchaser is in material violation of the terms of the Offer; (ii) a Governmental Entity shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Offer or the Merger, which order, decree, ruling or other action is final and nonappealable; provided, that the party seeking to terminate this Agreement shall have used its reasonable efforts to remove or lift such order, decree or ruling; or (iii) prior to the purchase of Shares pursuant to the Offer, the Company Board has recommended, or the Company has entered into an Acquisition Agreement with respect to, a Superior Proposal after fully complying with the procedures set forth in Section 5.9; provided, however, that termination by the Company pursuant to this Section 7.1(b)(iii) shall be conditioned upon concurrent payment by the Company in immediately available funds of the Transaction Expenses and the Termination Fee pursuant to Section 7.3. (c) by Parent prior to the purchase of Shares pursuant to the Offer if: (i) the Company shall have failed to include in the Schedule 14D- 9 the recommendation of the Company Board that the shareholders of the Company accept the Offer; (ii) the Company Board or any committee thereof shall have (A) withdrawn or modified (including but not limited to by amendment of the Schedule 14D-9) in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, this Agreement or the Merger, (B) approved or recommended, taken no position with respect to, or failed to recommend against any Alternative Proposal, or (C) resolved to do any of the foregoing; (iii) the Company or any of its subsidiaries or any of their respective Representatives participate in any discussions or negotiations with or provide any non-public information to any third party in breach of the provisions of Section 5.9; or (iv) the Company is in material breach of any of its covenants or obligations under this Agreement; provided that if such breach is curable through the exercise of the Company's commercially reasonable efforts, Parent may not terminate this Agreement under this Section 7.1(c)(iv) unless such breach is not cured on or prior to the earlier of (i) twenty (20) days 37 after written notice of such breach is given by Parent to the Company and (ii) two (2) business days before the date on which the Offer expires. (d) by the Company prior to the purchase of Shares pursuant to the Offer if: (i) the Offer shall not have been commenced in accordance with Section 1.1, or Parent or Purchaser shall have failed to purchase validly tendered Shares in violation of the terms of the Offer within 10 business days after the expiration of the Offer; provided, however, that the Company shall not be entitled to terminate this Agreement pursuant to this Section 7.1(d)(i) if it in material breach of this Agreement; or (ii) Parent or Purchaser is in material breach of any of its covenants or obligations under this Agreement; provided that if such breach is curable through exercise of Parent's or Purchaser's commercially reasonable efforts, the Company may not terminate this Agreement under this Section 7.1(d)(ii) unless such breach is not cured within the earlier of (i) twenty (20) days after written notice of such breach is given by the Company to Parent and (ii) two (2) business days before the date on which the Offer expires. Section 7.2. Notice of Termination; Effect of Termination. -------------------------------------------- (a) Any termination of this Agreement under Section 7.1 above will be effective immediately upon the delivery of written notice by the terminating party to the other parties hereto. (b) In the event of the termination of this Agreement as provided in Section 7.1, this Agreement shall be of no further force or effect, except (i) as set forth in this Section 7.2, Section 7.3 and Article VIII (miscellaneous), each of which shall survive the termination of this Agreement, and (ii) nothing herein shall relieve any party from liability for any willful breach of this Agreement. (c) Except as provided in Section 7.2(d), no termination of this Agreement shall affect the obligations of the parties contained in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms. (d) In the event this Agreement is terminated pursuant to Section 7.1(b)(iii) or Section 7.1(c)(i), (ii) or (iii), the Company irrevocably waives any otherwise applicable standstill or other agreement or restrictions in favor of the Company (contractual or otherwise) on the ability and right of Parent, Purchaser or any of their affiliates to acquire Shares. Section 7.3. Fees and Expenses. ----------------- (a) The Company shall reimburse Parent in the amount of $500,000 as reimbursement for all of its costs and expenses in connection with this Agreement, the Offer and the Merger ("Transaction Expenses") if the Agreement -------------------- has been terminated by the parties pursuant to Section 7.1(b)(iii) or Section 7.1(c) and Parent shall reimburse the Company in an 38 amount of $500,000 as reimbursement for Transaction Expenses if the Company has terminated this Agreement pursuant to Section 7.1(d)(ii). (b) In addition to the Company's obligations under Section 7.3(a), in the event that this Agreement is terminated pursuant to Section 7.1(b)(iii) or Section 7.1(c)(ii), the Company shall, concurrently with such termination, pay Parent a termination fee of $1,750,000 (the "Termination Fee") in immediately --------------- available funds by wire transfer to an account designated by Parent. In the event that this Agreement is terminated pursuant to Section 7.1(c)(i), (iii), or (iv), and, within 12 months following such termination, any person other than Parent or any affiliate of Parent effects an acquisition relating to an Alternative Proposal, or enters into an agreement relating to an Alternative Proposal with the Company or commences a tender offer for a transaction relating to an Alternative Proposal and the transactions contemplated thereby are subsequently consummated at any time, the Company shall pay Parent the Termination Fee at or prior to the consummation of such transaction in immediately available funds by wire transfer to an account designated by Parent. (c) The Company acknowledges that the agreements contained in Section 7.3(a) and (b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent would not enter into this Agreement; accordingly, if the Company fails promptly to pay any amount due pursuant to Section 7.3(a) and (b), and, in order to obtain such payment, Parent commences a suit which results in a judgment against the Company or its Successor for the amounts set forth in Section 7.3(a) or (b), the Company or its Successor shall pay to Parent its reasonable costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amounts set forth in Section 7.3(a) and (b) at the prime rate of Citibank, N.A., in effect on the date such payment was required to be made. (d) The Transaction Expenses and the Termination Fee shall not be deemed to be liquidated damages, and the right to the payment of the Transaction Expenses and the Termination Fee shall be in addition to (and not a maximum payment in respect of) any other damages or remedies at law or in equity to which Parent or Purchaser may be entitled as a result of the willful violation or willful breach of any term or provision of this Agreement or any Support Agreement. Section 7.4. Amendment. Subject to applicable law, this Agreement may be --------- amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of each of Parent and Company. Section 7.5. Extension; Waiver. At any time prior to the Effective Time ----------------- any party hereto may, to the extent legally allowed and subject to the terms and conditions of Section 1.3 hereof, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set 39 forth in an instrument in writing signed on behalf of such party. Delay in exercising any right under this Agreement shall not constitute a waiver of such right. ARTICLE VIII MISCELLANEOUS Section 8.1. Non-Survival of Representations and Warranties. The ---------------------------------------------- representations and warranties by the Company made in Article III shall not survive beyond the consummation of the Offer, and the representations and warranties made by Parent and Purchaser in Article IV shall not survive beyond the Effective Time. Section 8.2. Entire Agreement; Assignment. ---------------------------- (a) This Agreement (including the documents and the instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, and simultaneous oral agreements and understandings, among the parties with respect to the subject matter hereof and thereof. (b) Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of each other party (except that Parent may assign its rights and Purchaser may assign its rights, interest and obligations to any wholly owned subsidiary of Parent without the consent of the Company provided that no such assignment shall relieve Parent of any liability for any breach by such assignee). Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 8.3. Validity. The invalidity or unenforceability of any provision -------- of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. Section 8.4. Notices. All notices, requests, claims, demands and other ------- communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by overnight courier or facsimile to the respective parties as follows: If to Parent or the Purchaser: The IT Group, Inc. 2790 Mosside Blvd. Monroeville, PA 15146-2792 Attn: Anthony J. DeLuca, President Fax: (412) 858-3311 40 with a copy to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA 90071-3197 Attn: Peter F. Ziegler, Esq. Fax: (213) 229-6595 If to the Company: EMCON 400 South El Camino Real, Suite 1200 San Mateo, California 94402 Attention: Eugene M. Herson, Chief Executive Officer R. Michael Momboisse, Chief Financial Officer with a copy to: Gray Cary Ware & Freidenrich LLP 400 Hamilton Avenue Palo Alto, California 94301 Attn: Paul Blumenstein, Esq. Gerald S. Walters, Esq. Fax: (650) 327-3699 or to such other address as the person to whom notice is given may have previously furnished to the other in writing in the manner set forth above; provided that notice of any change of address shall be effective only upon receipt thereof. Section 8.5. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of California, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Section 8.6. Interpretation. The headings contained in this Agreement are -------------- for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When reference is made in this Agreement to a Section or Article, such reference shall be to a Section or Article of this Agreement, unless otherwise indicated. Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "herein," "hereby," "hereof," "hereto," "hereunder" and words of similar import refer to this Agreement. Section 8.7. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 41 Section 8.8. Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby, subject to the terms and conditions hereof, are fulfilled to the fullest extent possible. Section 8.9. Parties in Interest. This Agreement shall be binding upon ------------------- and inure solely to the benefit of each party hereto, and, except with respect to Sections 5.5 and 5.6 and the obligations of the parties following consummation of the Offer which are intended for the benefit of the Company's shareholders, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 8.10. Certain Definitions. As used in this Agreement: ------------------- (a) the term "affiliate", as applied to any Person, shall mean any other --------- person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" ------- (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise; (b) "Environmental Law" means all applicable federal, state, local or ----------------- foreign laws, statutes, ordinances, rules, or regulations pertaining to air and water quality, Hazardous Materials, waste disposal, or the protection of the environment, including without limitation the Clean Water Act, the Clean Air Act, the Solid Waste Disposal Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Occupational Safety and Health Act, and the Price-Anderson Act. (c) "Environmental Permits" means all approvals, permits, licenses, --------------------- certificates, consents, and similar authorizations required by any Environmental Law. (d) "Hazardous Material" means any substance that has been designated by ------------------ any Governmental Entity or by applicable Environmental Law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous substances pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to the United States Resource Conservation and Recovery Act of 1976, as amended, and the regulations promulgated pursuant to said laws. (e) the term "Material Adverse Effect" when used in connection with an ----------------------- entity means any change, event or effect that is materially adverse to the business, assets (including intangible 42 assets), liabilities, financial condition, operations or results of operations of the such entity and its subsidiaries taken as a whole; provided, however, that the following shall not be deemed to constitute a "Material Adverse Effect" an adverse change in or effect on the revenues or gross margins of such entity (or the direct consequences thereof) following the date of this Agreement to the extent attributable to a delay of, reduction in or cancellation or change in a material contract which is directly and primarily attributable to the transactions contemplated by this Agreement. (f) "Parent Average Stock Price" means the average of the closing sales -------------------------- price of a share of Parent Common Stock as reported on the New York Stock Exchange for each of the ten consecutive trading days ending on and including the second trading day immediately preceding the date on which a final vote of the stockholders of the Company on the adoption and approval of the Merger shall have been held. (g) the term "Person" or "person" shall include individuals, ------ ------ corporations, partnerships, trusts, other entities and groups (which term shall include a "group" as such term is defined in Section 13(d)(3) of the Exchange Act); (h) the term "Subsidiary" or "Subsidiaries" or "subsidiary" or ---------- ------------ "subsidiaries" means, with respect to Parent, the Company or any other person, any corporation, partnership, joint venture or other legal entity of which Parent, the Company or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, stock or other equity interests the holders of which are generally entitled to 50% or more of the vote for the election of the board of directors or other governing body of such corporation or other legal entity; (i) the phrase "to the Company's knowledge" refers to the actual -------------------------- knowledge of any of the following officers and employees of the Company: Eugene M. Herson, R. Michael Momboisse, Richard A. Peluso, Mark H. Shipps and Nat Chang. Specific Performance. The parties hereto agree that irreparable damage -------------------- would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity, without posting any bond or proving that damages would be inadequate. 43 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its respective officer thereunto duly authorized, all as of the day and year first above written. The IT Group, Inc. By: /s/ Anthony J. DeLuca ----------------------------------------- Name: Anthony J. DeLuca Title: President and Chief Executive Officer Seismic Acquisition Corporation By: /s/ James G. Kirk ----------------------------------------- Name: James G. Kirk Title: President EMCON By: /s/ Douglas P. Crane ----------------------------------------- Name: Douglas P. Crane Title: Chairman of the Board By: /s/ Eugene M. Herson ----------------------------------------- Name: Eugene M. Herson Title: President and Chief Executive Officer Annex I TENDER OFFER CONDITIONS The capitalized terms used in this Annex I shall have the meanings set forth in the Agreement and Plan of Merger to which this Annex is attached, except that the term "Merger Agreement" shall be deemed to refer to such ---------------- Agreement and Plan of Merger. Notwithstanding any other provisions of the Offer, Purchaser shall not be required to accept for payment or pay for any tendered Shares, if at the Expiration Date (i) the Minimum Condition is not satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated, or (iii) any of the following exist: (a) any statute, rule, regulation, legislation, ruling, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer or the Merger, by any Governmental Entity of competent jurisdiction that (1) makes illegal or otherwise prohibits consummation of the Offer or the Merger, (2) prohibits or materially limits the ownership or operation by Parent or Purchaser of all or any substantial portion of the business or assets of the Company (or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole), or compels Parent or Purchaser to dispose of, divest or hold separately all or any substantial portion of the business or assets of Parent, Purchaser or the Company or its subsidiaries, individually or taken as a whole, or imposes any material limitation on the ability of Parent or Purchaser to conduct its business or own such assets, (3) imposes any material limitation on the ability of Parent or Purchaser effectively to acquire, hold or exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Purchaser or Parent on the adoption of the Merger Agreement and all other matters properly presented to the Company's shareholders, (4) requires divestiture by Parent or Purchaser of any Shares, or (5) results in a Material Adverse Effect on the Company; (b) there shall be instituted and pending any action or proceeding by any Governmental Entity that could reasonably be expected to result in any of the consequences referred to in clauses (1) through (5) of paragraph (a) above; (c) the Merger Agreement shall have been terminated in accordance with its terms; (d) any of the representations and warranties of the Company set forth in the Merger Agreement, when read without any exception or qualification as to materiality or Material Adverse Effect, shall not be true and correct, as if such representations and warranties were made immediately prior to the consummation of the Offer (except as to any such representation or warranty which speaks as of a specific date, which must be untrue or incorrect as of such specific date), except where the failure or failures to be so true and correct, individually or in the aggregate, do not and could reasonably be expected to have a Material Adverse Effect on the Company; 1 (e) the Company shall have failed to perform or to comply with any of its obligations, covenants or agreements under the Merger Agreement in any material respect; (f) there shall have occurred any events or changes which have had or which are likely to have a Material Adverse Effect on the Company; or (g) the Company Board shall have withdrawn, or modified or changed in a manner adverse to Parent (including by amendment of the Schedule 14D-9), its recommendation of the Offer, this Agreement or the Merger, or recommended another proposal or offer for the acquisition of the Company, or the Company Board shall have resolved to do any of the foregoing. The foregoing conditions (including those set forth in clauses (i) and (ii) of the initial paragraph) are for the benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to any such conditions (except for any action or inaction in material breach of the Merger Agreement by Parent or Purchaser) and, except for the Minimum Condition, may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time in their sole discretion, in each case, subject to the terms of the Merger Agreement. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 2 EX-99.(C)(2) 12 MUTUAL NONDISCLOSURE AND CONFIDENTIALITY AGREEMENT EXHIBIT(c)(2) [Raymond James & Associates, Inc. Logo] [RAYMOND JAMES & ASSOCIATES, INC. LETTERHEAD] MUTUAL NONDISCLOSURE AND CONFIDENTIALITY AGREEMENT -------------------------------------------------- CONFIDENTIAL February 10, 1999 Mr. David Igata The IT Group, Inc. 16775 Von Karman Avenue, Suite 100 Irvine, California 92606 Dear Mr. Igata: To facilitate discussions relating to a potential acquisition (the "Transaction") between our client (the "Client") and your company (the "Company"), our Client and the Company will each be expected to make available to each other certain nonpublic information concerning their respective businesses, financial condition, operations, assets, properties, liabilities, and prospects. As a condition to such information being made available by our client, the Company agrees, and as a condition to such information being made available by our Company, our Client agrees, that all Evaluation Material (as hereinafter defined) received from the other party or any of its directors, officers, employees, agents or advisors (including, without limitation, attorneys, accountants, investment bankers, and other consultants and advisors) (collectively, "Representatives") shall be treated in accordance with this Agreement. As used in this Agreement, the term "Receiving Party" means the party receiving Evaluation Material and the term "Furnishing Party" means the party providing Evaluation Material or causing Evaluation Material to be provided. 1. Definition of "Evaluation Material". The term "Evaluation Material" ----------------------------------- shall mean all information concerning the Furnishing Party or any of its subsidiaries or affiliates, whether in verbal, visual, written, electronic or other form, which is made available by the Furnishing Party or any of its Representatives to the Receiving Party or any of its Representatives ("Primary Evaluation Material"), together, in each case, with all notes, memoranda, summaries, analyses, studies, compilations and other writings relating thereto or based thereon prepared by the Receiving Party or any of its Representatives ("Derivative Evaluation Material"). Notwithstanding the foregoing, the term "Evaluation Material" shall not include, and the parties' obligations herein (other than their obligations under Paragraph 5 of this Agreement) shall not extent to, information which the Receiving Party can demonstrate (a) was rightfully in the possession of the Receiving Party prior to disclosures by the Furnishing Party; (b) was or is independently developed by the Receiving Party without use of the Evaluation Material; (c) is now or hereafter becomes available to the public other than as a result of disclosure by the Receiving Party or any of the Receiving Party's Representatives in violation of this Agreement; or (d) becomes available to the Receiving Party or any of its Representatives on a non- confidential basis from a source other than the Furnishing Party or any of its Representatives and such source is not, to the knowledge of the Mr. David Igata CONFIDENTIAL February 10, 1999 IT Group, Inc. Page 2 Receiving Party, under any obligation to the Furnishing Party or any of its Representatives (whether contractual, legal or fiduciary) to keep such information confidential. 2. Confidentiality and Use of Evaluation Material. ---------------------------------------------- (a) Confidentiality of Evaluation Material. All Evaluation Material (i) -------------------------------------- shall be used solely for the purpose of evaluating and considering the Transaction; (ii) shall be kept strictly confidential by the Receiving Party; and (iii) shall be provided by the Receiving Party solely to those of its Representatives to whom disclosure is reasonably deemed to be required to facilitate the Receiving Party's evaluation or consideration of the Transaction. The parties agree that all Evaluation Material is and shall remain the property of the Furnishing Party. Before providing access to Evaluation Material to any Representative, the Receiving Party shall inform such Representative of the contents of this Agreement and the confidentiality of the Evaluation Material, and shall advise such Representative that, by accepting possession of or access to such information, such Representative is agreeing to be bound by this Agreement. Each party shall instruct its Representatives to observe the terms of this Agreement and shall be responsible for any breach of this Agreement by any of its Representatives. (b) Compulsory Disclosure of Evaluation Material. If the Receiving Party -------------------------------------------- is requested in any judicial or administrative proceeding or by any governmental or regulatory authority to disclose any Evaluation Material (whether by deposition, interrogatory, request for documents, subpoena, civil investigative demand, or otherwise), the Receiving Party shall give the Furnishing Party prompt notice of such request so that the Furnishing Party may seek an appropriate protective order, and, upon the Furnishing Party's request and at the Furnishing Party's expense, shall cooperate with the Furnishing Party in seeking such an order. If the Receiving Party is nonetheless compelled to disclose Evaluation Material, the Receiving Party shall disclose only that portion of the Evaluation Material which the Receiving Party is legally required to disclose and, upon the Furnishing Party's request and at the Furnishing Party's expense, shall use its reasonable best efforts to obtain assurances that confidential treatment will be accorded to such Evaluation Material to the extent such assurances are available. Subject to the foregoing conditions and limitations, the Receiving Party may disclose Evaluation Material without liability hereunder. (c) Other Public Disclosure. Except (i) for such public disclosure as ----------------------- may be necessary, in the good faith judgment of the disclosing party following consultation with outside counsel, for the disclosing party not to be in violation of any applicable law, regulation or order, or (ii) with the prior written consent of the other party, neither party shall: (x) make any disclosure (and each party shall direct its Representatives not to make any disclosure) to any person of (A) the fact that discussions, negotiations or investigations are taking or have taken place concerning a Transaction, (B) the Mr. David Igata CONFIDENTIAL February 10, 1999 IT Group, Inc. Page 3 existence or covenants of this Agreement, or the fact that either party has requested or received Evaluation Material from the other party, or (C) any of the terms, conditions or other facts with respect to any proposal Transactions, including the status thereof, or (y) make any public statement concerning a proposed Transaction. If either party proposes to make any disclosure in reliance on clause (i) above, the disclosing party shall, if practicable, provide the other party with the text of the proposed disclosure as far in advance of its disclosure as is practicable and shall in good faith consult with and consider the suggestions of the other party concerning the nature and scope of the information it proposes to disclose. 3. Accuracy of Evaluation Material; No Representations of Warranties. Each ----------------------------------------------------------------- party acknowledges and agrees (a) that no representation of warranty, express or implied, is made by either party or any of its respective Representatives as to the accuracy or completeness of the Evaluation Material, and (b) that the parties shall be entitled to rely only on those representations and warranties (if any) that may be made in a definitive written Transaction agreement, signed and delivered by both parties, and then only to the extent, and subject to the limitations, provided therein. Unless otherwise provided in the definitive written Transaction Agreement, neither the Furnishing Party nor any of its Representatives shall have any liability to the Receiving Party or any of its Representatives on account of the use of any Evaluation Material by the Receiving Party or any of its Representatives or any inaccuracy therein or omission therefrom. 4. No Solicitation. For a period of two years subsequent to the --------------- termination of discussions regarding a Transaction, the Company shall not directly or indirectly solicit for hire any employee of the Client or any person who was an employee of the Client within six months of the date of such solicitation with whom it has first had contact or who first became known to it in connection with its consideration of a Transaction; provided, however, that the foregoing provision shall not prevent the Company from employing any employee or former employee of the Client who contacts the Company, directly or indirectly through an intermediary, at his or her own initiative without any direct or indirect solicitation by or encouragement from the Company. 5. Return and Destruction of Evaluation Material. At any time after --------------------------------------------- termination of discussions by either party to this Agreement with respect to the Transaction, upon the request of the Furnishing Party, the Receiving Party shall promptly (and in no event later than five (5) business days after such request) (a) redeliver or cause to be redelivered to the Furnishing Party all copies of all Primary Evaluation Material in the possession or control of the Receiving Party or its Representatives which is in a visual or written format and erase or destroy all copies of such Primary Evaluation Material which is stored in electronic format, and (b) destroy or cause to be destroyed all Derivative Evaluation Material in the Mr. David Igata CONFIDENTIAL February 10, 1999 IT Group, Inc. Page 4 possession or control of the Receiving Party or any of its Representatives. Nothing herein shall obligate the Receiving Party to provide any Derivative Evaluation Material to the Furnishing Party. Notwithstanding the return, destruction or erasure of Evaluation Material hereunder, the Receiving Party and its Representatives shall continue to be bound by their confidentiality or other obligations hereunder. 6. Remedies. Each party agrees that money damages would not be a -------- sufficient remedy for any breach of any provision of this Agreement by the other party or any of its Representatives, and that in addition to all other remedies which any party hereto may have, each party shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach. Such remedies shall not be deemed to be the exclusive remedies for a breach of this Agreement but shall be in addition to all other remedies available at law or in equity. No failure or delay by any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. 7. Miscellaneous. ------------- (a) Neither party grants a license, by implication or otherwise, under any of its trade secrets or other intellectual property rights to the Receiving Party. (b) This Agreement contains the sole and entire agreement between the parties with respect to the confidentiality of the Evaluation Material and the confidentiality of their discussions, negotiations and investigations concerning a Transaction. (c) This Agreement may be amended, modified or waived only by a separate written instrument duly signed and delivered by or on behalf of both parties. (d) The invalidity or unenforceability of any provision of this Agreement shall not impair or affect the validity or enforceability of any other provision of this Agreement unless the enforcement of such provision in such circumstances would be inequitable. (e) It is expressly understood that this Agreement is not intended to, and does not, constitute an agreement to consummate a Transaction, to conduct or continue negotiations with respect to a Transaction, or to enter into a definitive Transaction agreement, and neither party shall have any rights or obligations of any kind whatsoever with respect to such a Transaction by virtue of this Agreement or by virtue of any other written or oral expression by the parties' respect Representatives unless and until a definitive Transaction agreement between the parties is executed and delivered by both parties, other than for the matters specifically agreed to herein. Both parties further acknowledge Mr. David Igata CONFIDENTIAL February 10, 1999 IT Group, Inc. Page 5 and agree that each party reserves the right, in its sole discretion, to provide or not to provide Evaluation Material to the Receiving Party under this Agreement, to reject any and all proposals made by the other party or any of its Representatives with regard to a Transaction, and to terminate discussions and negotiations at any time. (f) This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without giving effect to the conflicts of laws principles thereof. Each party hereto consents and submits to the jurisdiction of the courts of the State of California and the courts of the United States located in the Northern District of California for the adjudication of any action, suit, or proceeding arising out of or otherwise relating to this Agreement. If the foregoing correctly sets forth our agreement with respect to the matters set forth herein, please so indicate by signing two copies of this Agreement and returning one signed copy to me, whereupon this Agreement shall constitute our binding agreement with respect to the matters set forth herein. Sincerely, RAYMOND JAMES & ASSOCIATES, INC. On behalf of our Client By: /s/ J. Davenport Mosby, III --------------------------- J. Davenport Mosby, III Managing Director CONFIRMED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN THE IT GROUP, INC. By: /s/ James M. Redwine ---------------------------- Name: James M. Redwine Title: Sr. Corp. Counsel; Ass't Secretary -----END PRIVACY-ENHANCED MESSAGE-----