UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Amendment
No. 1
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
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URS CORPORATION
WASHINGTON GROUP INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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AMENDED
MERGER PROPOSAL YOUR VOTE IS VERY
IMPORTANT
On or about October 1, 2007, URS Corporation and
Washington Group International, Inc. mailed to each URS and
Washington Group stockholder a joint proxy statement/prospectus,
dated September 28, 2007, relating to special meetings of
stockholders of URS and Washington Group, originally scheduled
for October 30, 2007, to approve a merger that combines URS
and Washington Group. On November 4, 2007, URS and Washington
Group amended the terms of the merger agreement. This amendment
has the effect of increasing the merger consideration to be paid
to Washington Group stockholders for their shares and of
providing Washington Group stockholders the additional
flexibility to elect to receive the merger consideration either
all in shares of URS common stock or all in cash (subject to
proration as descried below). More specifically, under the
amended merger agreement, each Washington Group stockholder will
have the right to elect to receive, for each share of Washington
Group common stock (other than those shares held by URS, any
subsidiary of URS, Elk Merger Corporation or Bear Merger Sub and
other than treasury shares and shares as to which a Washington
Group stockholder has validly demanded and perfected appraisal
rights under Delaware law) (a) 0.90 of a share of URS
common stock and $43.80 in cash, without interest and without
being subject to proration, (b) an amount in cash, without
interest, equal to the sum of (i) $43.80 and (ii) 0.90
multiplied by the volume weighted average of the trading prices
of URS common stock during the five trading days ending on the
trading day that is one day prior to the date of the Washington
Group special meeting at which stockholder approval is received,
or (c) a number of shares equal to the sum of (i) 0.90
and (ii) $43.80 divided by the volume weighted average of
the trading prices of URS common stock during the five trading
days ending on the trading day that is one day prior to the date
of the Washington Group special meeting at which stockholder
approval is received. Note that all-cash and all-stock elections
are subject to proration in order to preserve an overall per
share mix of 0.90 of a share of URS common stock and $43.80 in
cash for all of the outstanding shares of Washington Group
common stock taken together.
Based on the outstanding shares and equity awards of Washington
Group as of November 2, 2007, in the aggregate, Washington
Group shares and equity awards will be converted into
approximately $1.4 billion in cash and approximately
29.4 million shares of URS common stock. Under the modified
terms of the merger, Washington Group stockholders are expected
to own approximately 35% of the shares of URS common stock
outstanding after the merger. URS stockholders will continue to
own their existing shares of URS common stock, which generally
should not be affected by the merger, other than by the dilution
resulting from the issuance of URS common stock in the merger.
URS common stock is traded on the New York Stock Exchange under
the trading symbol URS. On November 2, 2007,
URS common stock closed at $60.10 per share as reported on the
New York Stock Exchange Composite Transaction Tape.
The merger cannot be completed unless URS stockholders approve
the issuance of shares of URS common stock in the merger and
Washington Group stockholders adopt the merger agreement, as
amended, and approve the merger. The boards of directors of URS
and Washington Group unanimously recommend that their respective
stockholders vote FOR these proposals. Dennis R.
Washington, founder and Chairman of the Washington Group board
of directors, has executed a binding agreement to exercise all
of his beneficially owned stock options for 3.224 million
shares of Washington Group stock (or approximately 10% of
outstanding Washington Group stock) and vote his shares in favor
of the revised merger agreement if necessary to receive the
required Washington Group stockholder approval. If it is
necessary for Mr. Washington to exercise his options and
vote his shares, a new record date and meeting date for the
Washington Group special meeting will be set.
The proposals are being presented to the respective stockholders
of each company at their special meetings. The dates, times and
places of the meetings are as follows:
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For URS stockholders:
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For Washington Group stockholders:
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November 15, 2007, 9:00 a.m., local time, at the
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November 15, 2007, 7:00 a.m., local time, at
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offices of Cooley Godward Kronish LLP, located at
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Washington Groups offices located at
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1114 Avenue of the Americas
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720 Park Boulevard
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New York, New York
10036-7798
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Boise, Idaho 83729
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This supplement to the September 28, 2007 joint proxy
statement/prospectus contains important information about URS,
Washington Group, the amendment to the merger agreement, the
modified terms of the proposed merger and the special meetings
of the respective stockholders of URS and Washington Group.
We encourage you to read carefully this supplement and the
September 28 joint proxy statement/prospectus before voting,
including the section entitled Risk Factors
beginning on page 19 of the September 28 joint proxy
statement/prospectus.
Your vote is very important.
Whether or not you plan to
attend your companys special meeting, please take the time
to vote by completing and mailing to us the enclosed proxy card
or, if the option is available to you, by granting your proxy
electronically over the Internet or by telephone.
Sincerely,
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Martin M. Koffel
Chairman of the Board of Directors and
Chief Executive Officer
URS Corporation
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Stephen G. Hanks
President and Chief Executive Officer
Washington Group International, Inc.
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Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved of the
transactions described in this supplement or the securities to
be issued pursuant to the merger or determined if the
information contained in this supplement is accurate or
adequate. Any representation to the contrary is a criminal
offense.
This supplement is dated November 5, 2007, and is being mailed
to stockholders of URS and Washington Group on or about
November 6, 2007.
URS CORPORATION
600 Montgomery Street,
26
th
Floor
San Francisco, California
94111-2728
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON NOVEMBER 15,
2007
To the Stockholders of URS Corporation:
We will hold a special meeting of stockholders of URS at the
offices of Cooley Godward Kronish LLP, located at
1114 Avenue of the Americas, New York, NY
10036-7798,
on November 15, 2007, at 9:00 a.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to approve the
issuance of shares of URS common stock pursuant to the Agreement
and Plan of Merger, dated as of May 27, 2007, as amended,
by and among URS, Elk Merger Corporation, a wholly owned
subsidiary of URS, Bear Merger Sub, Inc., a wholly owned
subsidiary of URS, and Washington Group International, Inc.,
pursuant to which Elk Merger Corporation will merge with and
into Washington Group. Each Washington Group stockholder would
have the right to elect to receive, for each outstanding share
of Washington Group common stock, other than those shares held
by URS, any subsidiary of URS, Elk Merger Corporation or Bear
Merger Sub and other than treasury shares and shares as to which
a Washington Group stockholder has validly demanded and
perfected appraisal rights under Delaware law, (a) 0.90 of
a share of URS common stock and $43.80 in cash, without
interest, (b) an amount in cash, without interest, equal to
the sum of (i) $43.80 and (ii) 0.90 multiplied by the
volume weighted average of the trading prices of URS common
stock during the five trading days ending on the trading day
that is one day prior to the date of the Washington Group
special meeting at which stockholder approval is received, or
(c) a number of shares equal to the sum of (i) 0.90
and (ii) $43.80 divided by the volume weighted average of
the trading prices of URS common stock during the five trading
days ending on the trading day that is one day prior to the date
of the Washington Group special meeting at which stockholder
approval is received; provided, however, that all-cash and
all-stock elections are subject to proration in order to
preserve an overall per share mix of 0.90 of a share of URS
common stock and $43.80 in cash for all of the outstanding
shares of Washington Group common stock taken together.
2. To consider and vote upon a proposal to authorize the
proxyholders to vote to adjourn the special meeting, in their
sole discretion, to solicit additional proxies if there are not
sufficient votes in favor of the foregoing.
3. To transact any other business as may properly come
before the special meeting or any adjournments or postponements
of the special meeting.
These items of business are described in the attached supplement
and in the joint proxy statement/prospectus dated
September 28, 2007. Only URS stockholders of record at the
close of business on September 21, 2007, the record date
for the special meeting, are entitled to notice of and to vote
at the special meeting and any adjournments of the special
meeting.
The URS board of directors unanimously recommends that you
vote FOR the proposal to approve the issuance of
shares of URS common stock pursuant to the merger agreement, as
amended, and FOR the proposal to authorize the
adjournment the URS special meeting.
A list of stockholders eligible to vote at the URS special
meeting will be available for inspection at the special meeting,
and at the executive offices of URS during regular business
hours for a period of no less than ten days prior to the special
meeting.
Your vote is very important.
It is important that
your shares be represented and voted whether or not you plan to
attend the special meeting in person. Instructions regarding the
different methods for voting your shares are provided under the
section entitled Questions and Answers About the Special
Meetings of Stockholders of URS and Washington Group on
page ii.
By Order of the Board of Directors,
Martin M. Koffel
Chairman of the Board of Directors and
Chief Executive Officer
URS Corporation
November 5, 2007
WASHINGTON
GROUP INTERNATIONAL, INC.
720 Park Boulevard, P.O. Box 73
Boise, Idaho 83729
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 15, 2007
To the Stockholders of Washington Group International, Inc.:
We will hold a special meeting of stockholders of Washington
Group at Washington Groups offices located at 720 Park
Boulevard, Boise, Idaho 83712, on November 15, 2007, at
7:00 a.m. local time, for the following purposes:
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To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of May 27, 2007, as amended, by
and among URS, Elk Merger Corporation, a wholly owned subsidiary
of URS, Bear Merger Sub, Inc., a wholly owned subsidiary of URS,
and Washington Group, pursuant to which Elk Merger Corporation
will merge with and into Washington Group. Each Washington Group
stockholder would have the right to elect to receive, for each
outstanding share of Washington Group common stock, other than
those shares held by URS, any subsidiary of URS, Elk Merger
Corporation or Bear Merger Sub and other than treasury shares
and shares as to which a Washington Group stockholder has
validly demanded and perfected appraisal rights under Delaware
law, (a) 0.90 of a share of URS common stock and $43.80 in
cash, without interest, (b) an amount in cash, without
interest, equal to the sum of (i) $43.80 and (ii) 0.90
multiplied by the volume weighted average of the trading prices
of URS common stock during the five trading days ending on the
trading day that is one day prior to the date of the Washington
Group special meeting at which stockholder approval is received,
or (c) a number of shares equal to the sum of (i) 0.90
and (ii) $43.80 divided by the volume weighted average of
the trading prices of URS common stock during the five trading
days ending on the trading day that is one day prior to the date
of the Washington Group special meeting at which stockholder
approval is received; provided, however, that all-cash and
all-stock elections are subject to proration in order to
preserve an overall per share mix of 0.90 of a share of URS
common stock and $43.80 in cash for all of the outstanding
shares of Washington Group common stock taken together.
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2.
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To consider and vote upon a proposal to authorize the
proxyholders to vote to adjourn the special meeting, in their
sole discretion, to solicit additional proxies if there are not
sufficient votes in favor of the foregoing.
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3.
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To transact any other business as may properly come before the
special meeting or any adjournments or postponements of the
special meeting.
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These items of business are described in the attached supplement
and in the joint proxy statement/prospectus dated
September 28, 2007. Only Washington Group stockholders of
record at the close of business on September 21, 2007, the
record date for the special meeting, are entitled to notice of
and to vote at the special meeting and any adjournments of the
special meeting.
The Washington Group board of directors has approved the
merger agreement, as amended, and the transactions contemplated
by the merger agreement, as amended, including the merger, and
unanimously recommends that you vote FOR the
proposal to adopt the merger agreement, as amended, and approve
the merger and FOR the proposal to authorize the
adjournment of the Washington Group special meeting.
A list of stockholders eligible to vote at the Washington Group
special meeting will be available for inspection at the special
meeting, and at the executive offices of Washington Group during
regular business hours for a period of no less than ten days
prior to the special meeting.
Your vote is very important.
It is important that your
shares be represented and voted whether or not you plan to
attend the special meeting in person. Instructions regarding the
different methods for voting your shares are provided under the
section entitled Questions and Answers About the Special
Meetings of Stockholders of URS and Washington Group on
page ii.
By Order of the Board of Directors,
Stephen G. Hanks
President and Chief Executive Officer
Washington Group International, Inc.
November 5, 2007
TABLE OF
CONTENTS
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Page
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ii
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S-1
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S-1
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S-2
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S-2
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S-3
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S-3
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S-4
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S-5
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S-7
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S-7
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S-7
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S-10
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S-11
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S-13
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S-21
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S-28
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S-29
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S-29
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S-31
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S-31
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S-31
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S-33
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S-33
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S-36
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S-37
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S-38
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Annexes
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Annex A Amendment No. 1 to Agreement and
Plan of Merger
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Annex B Option Exercise and Transaction Support
Agreement
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Annex C Opinion of Morgan Stanley &
Co. Incorporated
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Annex D Opinion of Goldman, Sachs &
Co.
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i
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETINGS OF STOCKHOLDERS
OF URS AND WASHINGTON GROUP
The following are some questions that you, as a stockholder
of URS or Washington Group, may have regarding the respective
special meetings of stockholders of URS and Washington Group and
brief answers to those questions. They may not include all of
the information that is important to you. URS and Washington
Group recommend that you read carefully this entire supplement,
including the annexes, the September 28 joint proxy
statement/prospectus and the other documents we refer to in this
supplement and in the September 28 joint proxy
statement/prospectus.
About the
Merger
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Q:
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Why are you sending me this supplement to the September 28
joint proxy statement/prospectus?
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A:
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We are sending you this supplement to the September 28 joint
proxy statement/prospectus because on November 4, 2007, URS and
Washington Group amended the original merger agreement dated
May 27, 2007. This supplement provides information on the
amended transaction and updates the September 28, 2007
joint proxy statement/prospectus that was previously mailed to
you.
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Q:
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How does the board of directors of URS recommend that URS
stockholders vote?
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A:
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The board of directors of URS unanimously recommends that
URS stockholders vote
FOR
the proposal to approve
the issuance of shares of URS common stock to Washington Group
stockholders pursuant to the merger agreement, as amended, and
FOR
the proposal to authorize the adjournment of the
special meeting.
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Q:
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How does the board of directors of Washington Group recommend
that Washington Group stockholders vote?
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A:
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The board of directors of Washington Group unanimously
recommends that Washington Groups stockholders vote
FOR
the proposal to adopt the merger agreement, as amended, and
approve the merger and
FOR
the proposal to authorize the
adjournment of the special meeting.
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Q:
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What will I now receive in exchange for my Washington Group
shares?
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A:
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Pursuant to the amended merger agreement, you may elect to
receive, for each Washington Group common share that you own,
either:
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a combination of 0.90 of a share of URS common stock and $43.80
in cash, referred to as the mixed merger
consideration;
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an amount in cash, without interest, equal to the sum of
(i) $43.80 and (ii) 0.90 multiplied by the volume
weighted average of the trading prices of URS common stock
during the five trading days ending on the trading day that is
one day prior to the date of the Washington Group special
meeting at which stockholder approval is received calculated
using VWAP in the Bloomberg function VAP (the
Volume Weighted Average Price); or
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a number of shares equal to the sum of (i) 0.90 and
(ii) $43.80 divided by the Volume Weighted Average Price.
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Unless you make an all-cash or an all-stock election, but not
the mixed election, you will receive the mixed merger
consideration in the merger. In addition, the all-cash and
all-stock elections are subject to proration in order to
preserve an overall per share mix of 0.90 of a share of URS
common stock and $43.80 in cash for all of the outstanding
shares of Washington Group common stock taken together.
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Q:
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How has Dennis Washington agreed to support the merger?
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A:
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Dennis R. Washington, founder and Chairman of the Board of
Washington Group, has agreed to exercise his options and vote in
favor of the merger if necessary to receive the required
Washington Group stockholder approval. On November 5, 2007,
he and Washington Group filed notifications under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (which, together
with the rules and regulations promulgated thereunder, is
referred to as the HSR Act), in connection with the exercise of
his options. Mr. Washington has options to purchase
approximately 10% of the shares of Washington Group on an
as-executed basis. He will be
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eligible to vote those shares on any proposals at the special
meeting if the special meeting is postponed again and a new
record date is set for the meeting.
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Q:
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When do you expect to complete the merger?
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A:
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URS and Washington Group currently expect to complete the merger
promptly after URS stockholders approve the issuance of shares
under the terms of the merger agreement, as amended, and
Washington Group stockholders approve and adopt the amended
merger agreement and the merger at the special meeting,
currently scheduled to be held on November 15, 2007, and
after the satisfaction or waiver of all other conditions to the
merger. We currently expect the closing to occur shortly after
the special meeting. However, there can be no assurance that the
conditions to closing will be met or that the merger will be
completed shortly after the special meeting.
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Q:
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Do I have dissenters or appraisal rights with respect
to the merger?
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A:
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Yes. Under Delaware law, you have the right to dissent from the
merger and, in lieu of receiving the merger consideration,
obtain payment in cash of the fair value of your shares of
Washington Group stock as determined by the Delaware Chancery
Court. To exercise appraisal rights, you must strictly follow
the procedures prescribed by Delaware law. These procedures are
summarized under The Modified Terms of the
Merger Appraisal Rights on
page S-29
and The Merger Appraisal Rights
beginning on page 91 of the September 28 joint proxy
statement/prospectus. In addition, the text of the applicable
provisions of Delaware law is included as Annex D to the
September 28 joint proxy statement/prospectus.
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About the
Special Stockholders Meeting
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Q:
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When and where will the special meetings of stockholders now
be held?
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A:
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The URS special meeting will take place at the offices of Cooley
Godward Kronish LLP, located at 1114 Avenue of the Americas, New
York, New York
10036-7798,
on November 15, 2007 at 9:00 a.m., local time. The
Washington Group special meeting will take place at Washington
Groups offices located at 720 Park Boulevard, Boise,
Idaho 83712, on November 15, 2007 at 7:00 a.m., local
time.
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Q:
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Who is entitled to vote at the special meetings?
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A:
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The record dates for determining who is entitled to vote at the
special meetings have not changed. Holders of record of URS
common stock at the close of business on September 21, 2007
are entitled to vote at the URS special meeting. Holders of
record of Washington Group common stock at the close of business
on September 21, 2007 are entitled to vote at the
Washington Group special meeting.
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Q:
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What vote of URS stockholders is required to approve the
issuance of shares of URS common stock in the merger?
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A:
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The required vote of URS stockholders to approve the issuance of
shares in the merger has not changed. In accordance with NYSE
listing requirements and the amended merger agreement, the
approval by URS stockholders of the issuance of shares of URS
common stock pursuant to the amended merger agreement requires a
majority of the votes cast on the proposal, provided that the
total votes cast on the proposal represent over 50% of the
outstanding shares of URS common stock entitled to vote on the
proposal.
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Q:
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What vote of Washington Group stockholders is required to
adopt the merger agreement and approve the merger?
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A:
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The required vote of Washington Group stockholders to adopt the
merger agreement, as amended, and approve the merger has not
changed. Under Delaware law and the amended merger agreement,
approval of the proposal to adopt the merger agreement, as
amended, and approve the merger requires the affirmative vote of
the holders of a majority of the outstanding shares of
Washington Group common stock entitled to vote at the special
meeting.
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iii
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Q:
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What if I already voted using the proxy you sent me
earlier?
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A:
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First, carefully read this supplement, including the annexes,
and the September 28 joint proxy statement/prospectus. If
you have already delivered a properly executed proxy, you will
be considered to have voted on the proposals, and you do not
need to do anything unless you wish to change your vote. If you
are a stockholder of record of URS or Washington Group as of the
record date for the respective special meetings and you have not
already delivered a properly executed proxy, or if you wish to
change your vote, please complete, sign and date the enclosed
proxy card and return it in the accompanying pre-addressed
postage paid envelope or submit a proxy by telephone or on the
Internet to ensure that your shares will be represented at the
special meeting. If you hold URS shares or Washington Group
shares in street name, that is, if your shares are
held of record by a broker, bank or nominee, and you have not
already delivered a properly executed proxy, or wish to change
your vote, you must provide the broker, bank or nominee with
instructions on how to vote your shares. Please refer to your
voting card or other information forwarded by your broker, bank
or other holder of record to determine whether you may vote by
telephone or on the Internet and follow the instructions on the
card or other information provided by the record holder.
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Q:
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What do I do if I want to change my vote?
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A:
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You may change your vote at any time before your proxy is voted
at the special meeting by:
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delivering a signed notice of revocation to the corporate
secretary of your company at:
|
|
|
|
URS Corporation
600 Montgomery Street
26th Floor
San Francisco, California
94111-2728
Attn: Corporate Secretary
|
|
Washington Group International, Inc.
720 Park Boulevard
P.O. Box 73
Boise, Idaho 83729
Attn: Corporate Secretary
|
|
|
|
|
|
signing and delivering a new, valid proxy bearing a later date,
and if it is a written proxy, it must be signed and delivered to
the attention of your companys corporate secretary;
|
|
|
|
submitting another proxy by telephone or on the Internet (by
following your latest telephone or Internet voting
instructions); or
|
|
|
|
attending the special meeting and voting in person, although
your attendance alone will not revoke your proxy.
|
If your shares are held in a street name account,
you must contact your broker, bank or other nominee to change
your vote.
About the
Merger Consideration Election Available to Washington Group
Stockholders
|
|
Q:
|
How do I elect the type of the merger consideration that I
prefer to receive?
|
|
A:
|
If you are a Washington Group stockholder, election materials
are included in this package. These election materials must be
properly completed and delivered to the exchange agent, The Bank
of New York Mellon Corporation. A pre-addressed, postage prepaid
return envelope is enclosed for submitting your election form to
the exchange agent.
Please note that the envelope that you
will use to return your election materials to the exchange agent
is different from the envelope you will use to return your
completed proxy card. Please do not send your form of election
with your proxy card.
|
Election forms must be
RECEIVED
by the exchange agent by
the election deadline,
which is 5:00 p.m.
,
eastern time
,
on the date that is three business days
after the closing date of the merger.
If you hold Washington Group shares in street name,
you should receive instructions from the broker, bank or nominee
that is holding your shares advising you of the procedures for
making your election. If these instructions are not received,
you should contact the broker, bank or nominee holding your
shares. Election forms must be returned to the broker, bank or
nominee in time for it to respond to the election deadline.
iv
If you do not properly submit an election form, then, promptly
after the closing date of the merger, the exchange agent will
mail you a letter of transmittal and instructions for
surrendering your stock certificates for use in exchanging your
stock certificates for the mixed merger consideration.
|
|
Q:
|
Can I make one election for some of my Washington Group
shares and another election for the rest?
|
|
A:
|
Yes. The election form permits you to specify, among the shares
you are submitting, how many you are allocating to
|
|
|
|
|
|
a mixed election,
|
|
|
|
an all-cash election,
|
|
|
|
an all-stock election or
|
|
|
|
no election.
|
|
|
Q:
|
What if I do not make an election?
|
|
A:
|
If you do not submit a properly completed and signed election
form to the exchange agent by the election deadline (or if you
submit a properly completed election form indicating no
election), then you will be deemed to have elected to receive
the mixed merger consideration and would therefore receive
$43.80 in cash and 0.90 of a share of URS common stock in
exchange for each of your shares of Washington Group common
stock, except with respect to shares as to which you have
validly demanded and perfected appraisal rights under Delaware
law.
|
|
Q:
|
Can I change my election after I submit an election form?
|
|
A:
|
Yes. You may revoke your election of merger consideration with
respect to all or a portion of your shares of Washington Group
common stock by delivering written notice of your revocation to
the exchange agent prior to the election deadline. If you
instructed a broker, bank or nominee to submit an election for
your shares, you must follow its directions for changing those
instructions. In addition, any election of merger consideration
you make will automatically be revoked if the merger agreement
is terminated.
|
Washington Group stockholders will not be entitled to revoke or
change their election following the election deadline. As a
result, if you make an election, you will be unable to revoke
your election or sell your shares of Washington Group common
stock during the interval between the election deadline and the
date of completion of the merger.
|
|
Q:
|
May I submit a consideration election form even if I vote
against the merger?
|
|
A:
|
Yes. You may submit an election form even if you vote against
the proposal adopting the amended merger agreement and approving
the merger. However, if you submit a properly executed election
form, you will thereby withdraw any previously filed written
demand for appraisal and will not be entitled to appraisal
rights. See The Modified Terms of the Merger
Appraisal Rights beginning on
page S-29.
|
How to
Get More Information
|
|
Q:
|
Where can I find more information about URS and Washington
Group?
|
|
A:
|
You can find more information about URS and Washington Group
from various sources described under the heading
Additional Information for Stockholders Where
You Can Find More Information beginning on page 146
of the September 28 joint proxy statement/prospectus.
|
v
|
|
Q:
|
Whom do I call if I have questions about the meeting or the
merger?
|
|
A:
|
If you have any questions about the amended merger agreement or
if you need additional copies of this supplement, the September
28 joint proxy statement/prospectus or the enclosed election
materials, you should contact:
|
if you are a URS stockholder:
|
|
|
URS Corporation
600 Montgomery Street
26th Floor
San Francisco, California
94111-2728
Attn: Investor Relations
(877)
877-8970
|
|
or:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
(800) 829-6551 (toll free)
(212) 269-5550 (collect)
urs@dfking.com
|
if you are a Washington Group stockholder:
|
|
|
Washington Group International, Inc.
720 Park Boulevard
P.O. Box 73
Boise, Idaho 83729
Attn: Investor Relations
(866)
964-4636
|
|
or:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
(800) 322-2885 (toll-free)
(212) 929-5500 (collect)
proxy@mackenziepartners.com
|
vi
The following is a summary that highlights information
contained in this supplement. This summary may not contain all
of the information that may be important to you. For a more
complete description of the amendment to the merger agreement
and the transactions contemplated by the amended merger
agreement, we encourage you to read carefully this entire
supplement and the entire September 28 joint proxy
statement/prospectus, including the attached annexes. In
addition, we encourage you to read the information incorporated
by reference into this supplement and the September 28 joint
proxy statement/prospectus, which includes important business
and financial information about URS and Washington Group that
has been filed with the SEC. You may obtain the information
incorporated by reference into this supplement without charge by
following the instructions in the section entitled
Additional Information Where You Can Find More
Information beginning on page 146 of the September 28
joint proxy statement/prospectus.
The
Amended Merger Agreement (see
page S-31)
On November 4, 2007, URS and Washington Group amended the
terms of the merger agreement. This amendment has the effect of
increasing the merger consideration to be paid to Washington
Group stockholders for their shares and of providing Washington
Group stockholders the additional flexibility to elect to
receive the merger consideration either all in shares of URS
common stock or all in cash (subject to proration as described
below) or, as originally provided, as mixed merger
consideration. We have attached the amendment to the merger
agreement as Annex A to this supplement. We encourage you
to carefully read the amendment to the merger agreement, and the
original merger agreement attached as an annex to the September
28 joint proxy statement/prospectus, in their entirety.
Merger
Consideration
The amendment to the merger agreement provides for an increase
in the merger consideration to be received by Washington Group
stockholders in the merger. In addition, under the merger
agreement, as amended, Washington Group stockholders will have
the right to elect to receive, for each Washington Group shares
owned:
|
|
|
|
|
a combination of 0.90 of a share of URS common stock and $43.80
in cash;
|
|
|
|
an amount in cash, without interest, equal to the sum of
(i) $43.80 and (ii) 0.90 multiplied by the Volume
Weighted Average Price; or
|
|
|
|
a number of shares equal to the sum of (i) 0.90 and
(ii) $43.80 divided by the Volume Weighted Average Price.
|
Washington Group stockholders may elect to receive one of these
three categories of consideration. Unless you make an all-cash
or an all-stock election, you will receive the mixed merger
consideration. Election materials are included in this package.
The all-cash and all-stock elections are subject to proration in
order to preserve an overall per share mix of 0.90 of a share of
URS common stock and $43.80 in cash for all of the outstanding
shares of Washington Group common stock taken together,
providing a blended merger consideration value of $98.98 per
share of Washington Group common stock based on the volume
weighted average price of URS common stock on November 2,
2007. The following table shows the blended merger consideration
value based on assumed Volume Weighted Average Prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Cash
|
|
Value of Stock
|
|
|
Volume Weighted
|
|
Portion of Merger
|
|
Portion of Merger
|
|
|
Average Price
|
|
Consideration
|
|
Consideration
|
|
Blended Value
|
|
|
$56.3165
|
|
|
$43.80
|
|
$50.68
|
|
|
$94.48
|
|
|
$61.3165
|
|
|
$43.80
|
|
$55.18
|
|
|
$98.98
|
|
|
$66.3165
|
|
|
$43.80
|
|
$59.68
|
|
|
$103.68
|
|
We will announce the Volume Weighted Average Price by press
release the day of the Washington Group special meeting.
S-1
Washington
Group Stock Options
The amendment to the merger agreement provides that, immediately
following the completion of the merger, each outstanding option
to acquire shares of Washington Group common stock, whether or
not vested, that remains outstanding as of the effective time of
the merger will be cancelled and converted into the right to
receive the option consideration, which equals the
product of (1) the number of shares of Washington Group
common stock subject to such option and (2) the excess, if
any, of $97.89 over the exercise price per share of Washington
Group common stock subject to the option. Each Washington Group
optionholder, other than Dennis Washington, will have the right
to elect to receive the option consideration, for each cancelled
Washington Group option owned, in:
|
|
|
|
|
a combination of (i) an amount in cash, without interest,
equal to the option consideration multiplied by 0.4474 and
(ii) a number of shares of URS common stock equal to the
option consideration less the cash payable pursuant to the
preceding clause (i), divided by $60.10;
|
|
|
|
an amount in cash, without interest, equal to the option
consideration; or
|
|
|
|
a number of shares of URS common stock equal to the option
consideration divided by $60.10;
|
provided, however, that all-cash and all-stock elections are
subject to proration in order to preserve an overall option
consideration value mix of 44.74% cash and 55.26% URS common
stock. Any cancelled option held by Mr. Washington will be
exchanged only for the combination of cash and stock, as if
Mr. Washington had made a mixed option election.
Option
Exercise and Transaction Support Agreement (see
page S-36)
On November 4, 2007, Dennis Washington entered into an
agreement with URS and Washington Group to exercise all of his
options and to vote in favor of the merger if necessary to
achieve the required Washington Group shareholder approval. The
exercise price of the options will be paid in cash, with the
result that, following the exercise, he will have record and
beneficial ownership of 3,224,100 shares of Washington
Group common stock. He will be eligible to vote those shares on
any proposals at the special meeting if the special meeting is
postponed again and a new record date is set for the meeting. On
November 5, 2007, Mr. Washington and Washington Group
filed notifications under the HSR Act in connection with the
exercise of his options.
Opinions
of Financial Advisors (see pages S-13 and S-21)
URS
On November 4, 2007, Morgan Stanley & Co.
Incorporated, which is referred to as Morgan Stanley, financial
advisor to URS, delivered to the URS board of directors its oral
opinion, which was subsequently confirmed in writing that, as of
that date, and based upon and subject to the considerations
described in its opinion and based upon such other matters as
Morgan Stanley considered relevant, the merger consideration to
be paid by URS pursuant to the amended merger agreement was fair
from a financial point of view to URS.
The full text of Morgan Stanleys written opinion is
attached to this supplement as Annex C. We encourage you to
read this opinion carefully in its entirety for a description of
the procedures followed, assumptions made, matters considered
and limitations on the review undertaken. Morgan Stanleys
opinion is directed to the URS board of directors and does not
constitute a recommendation to any stockholder as to how to vote
or any other matters relating to the merger. Pursuant to an
engagement letter between URS and Morgan Stanley, URS has agreed
to pay Morgan Stanley a transaction fee based upon the aggregate
consideration for the transaction, a substantial portion of
which fee is contingent upon consummation of the transaction.
URS also has entered into a financing commitment letter with an
affiliate of Morgan Stanley to provide 50% of a senior secured
debt financing in connection with the merger, for which the
affiliate will receive a substantial fee, which is also
contingent upon the consummation of the transaction.
Washington
Group
At the meeting of Washington Groups board of directors on
November 4, 2007, Goldman, Sachs & Co., which is
referred to as Goldman Sachs, financial advisor to Washington
Group, delivered its oral opinion, which opinion was later
confirmed in writing, that as of that date, and based upon and
subject to the factors and assumptions set
S-2
forth therein, the consideration to be received by holders of
shares of Washington Group common stock, taken in the aggregate,
pursuant to the amended merger agreement was fair from a
financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated
November 4, 2007, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex D. Goldman Sachs provided its opinion for the
information and assistance of the board of directors of
Washington Group in connection with its consideration of the
transaction. The Goldman Sachs opinion is not a recommendation
as to how any holder of shares of Washington Group common stock
should vote with respect to the transaction. Pursuant to an
engagement letter between Washington Group and Goldman Sachs,
Washington Group has agreed to pay Goldman Sachs a transaction
fee based upon the aggregate consideration for the transaction,
a substantial portion of which is contingent upon consummation
of the transaction.
Ownership
of URS After the Merger
Based on the outstanding shares and equity awards of Washington
Group as of November 2, 2007, in the aggregate, Washington
Group shares and equity awards will be converted into
approximately $1.4 billion in cash and approximately
29.4 million shares of URS common stock. Washington Group
stockholders are expected to own approximately 35% of the shares
of URS common stock outstanding after the merger. In comparison,
under the original merger agreement, URS expected to pay
approximately $1.4 billion in cash and to issue
approximately 24.9 million shares of URS common stock,
based on Washington Groups shares of common stock and
equity awards outstanding as of September 21, 2007. Under
the original terms of the merger, Washington Group stockholders
were expected to own approximately 32% of the shares of URS
common stock outstanding after the merger. URS stockholders will
continue to own their existing shares of URS common stock, which
will not be affected by the merger, other than by the dilution
resulting from the issuance of URS common stock in the merger.
Selected
Unaudited Pro Forma Condensed Combined Financial
Information
The following selected unaudited pro forma condensed combined
financial information (a) has been derived from, and should
be read in conjunction with, the unaudited pro forma condensed
combined financial statements and the accompanying notes
included in this supplement beginning on
page S-38
and (b) should be read in conjunction with the consolidated
financial statements of URS and Washington Group and other
information filed by URS and Washington Group with the SEC and
incorporated by reference into this supplement. See
Additional Information Where You Can Find More
Information on page 146 of the September 28 joint
proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Year Ended
|
|
|
|
Ended June 29,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except
|
|
|
|
per share amounts)
|
|
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
4,183,154
|
|
|
$
|
7,629,723
|
|
Operating income
|
|
|
182,902
|
|
|
|
305,004
|
|
Net income
|
|
|
64,937
|
|
|
|
117,896
|
|
Net income per share of common stock:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.80
|
|
|
$
|
1.47
|
|
Diluted
|
|
$
|
0.79
|
|
|
$
|
1.46
|
|
|
|
|
|
|
|
|
June 29, 2007
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
63,511
|
|
Total assets
|
|
|
6,713,952
|
|
Long-term debt
|
|
|
1,388,916
|
|
Stockholders equity
|
|
|
3,360,383
|
|
S-3
Unaudited
Comparative Per Share Information
The following table summarizes unaudited per share information
for URS and Washington Group on a historical basis, on an
unaudited pro forma combined basis for URS, taking into account
the pro forma effects of the merger, and an equivalent pro forma
combined basis for Washington Group. It has been assumed for
purposes of the pro forma financial information provided below
that the merger and related events had been consummated on
December 31, 2005 for income statement purposes, and on
June 29, 2007 for balance sheet purposes.
The following information should be read together with the
audited consolidated financial statements of URS and Washington
Group as of and for the fiscal year ended December 29,
2006, which are incorporated by reference into this supplement,
and the unaudited consolidated financial statements of URS and
Washington Group as of and for the six-month period ended
June 29, 2007, which are also incorporated by reference
into this supplement, and the unaudited pro forma condensed
combined financial information for the fiscal year ended
December 29, 2006 and as of and for the six-month period
ended June 29, 2007 set forth in the section entitled
Unaudited Pro Forma Condensed Combined Financial
Statements beginning on
page S-38.
The pro forma information below is presented for illustrative
purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the
acquisition had been completed on December 31, 2005 for
statement of operations purposes and on June 29, 2007 for
balance sheet purposes, nor is it necessarily indicative of the
future operating results or financial position of the combined
company.
The historical book value per share is computed by dividing
total stockholders equity by the number of shares of
common stock outstanding at the end of the period. The pro forma
per share income of the combined company is computed by dividing
the pro forma net income of the combined company by the pro
forma weighted-average number of shares of common stock of the
combined company outstanding over the period. The pro forma
combined book value per share is computed by dividing total pro
forma stockholders equity of the combined company by the
pro forma number of shares of common stock of the combined
company outstanding at the end of the period. Washington Group
equivalent pro forma combined per share amounts are calculated
by multiplying the pro forma combined per share amounts by 0.90,
the fraction of a share of URS common stock that would be
exchanged for each share of Washington Group common stock in the
acquisition. The Washington Group equivalent per share amounts
do not include the benefits of the cash portion of the
acquisition consideration. There were no cash dividends declared
on URS common stock or Washington Group common stock during any
period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
URS
|
|
|
Washington Group
|
|
|
Pro Forma
|
|
|
Washington Group
|
|
|
|
Historical
|
|
|
Historical
|
|
|
Combined
|
|
|
Equivalents(1)
|
|
|
Year Ended December 29, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$ 2.23
|
|
|
|
$ 2.83
|
|
|
|
$ 1.47
|
|
|
|
$ 1.32
|
|
Diluted
|
|
|
$ 2.19
|
|
|
|
$ 2.64
|
|
|
|
$ 1.46
|
|
|
|
$ 1.31
|
|
Six Months Ended June 29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$ 1.31
|
|
|
|
$ 0.83
|
|
|
|
$ 0.80
|
|
|
|
$ 0.72
|
|
Diluted
|
|
|
$ 1.28
|
|
|
|
$ 0.77
|
|
|
|
$ 0.79
|
|
|
|
$ 0.71
|
|
As of June 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
|
$ 30.13
|
|
|
|
$ 28.93
|
|
|
|
$ 40.77
|
|
|
|
$ 36.69
|
|
|
|
|
(1)
|
|
Washington Group equivalent per share amounts are calculated by
multiplying pro forma per share amounts by the exchange ratio of
0.90, the portion of the acquisition consideration to be paid in
shares of URS common stock.
|
S-4
Comparative
Per Share Market Price Data
URS common stock trades on the NYSE under the symbol
URS. From March 6, 2003 to March 27, 2007,
Washington Group common stock traded on the NASDAQ Global Select
Market
®
(or its predecessor) under the ticker symbol WGII.
Since March 27, 2007, Washington Group common stock has
traded on the NYSE under the symbol WNG. The table
below sets forth, for the periods indicated, dividends and the
range of high and low per share closing sales prices for URS
common stock as reported on the NYSE and Washington Group common
stock as reported on the NASDAQ Global Select
Market
®
(or its predecessor) and the NYSE. For current price
information, you should consult publicly available sources. For
more information on URS and Washington Group payment of
dividends, see Summary Dividend Policies
on page 9 of the September 28 joint proxy
statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
URS Common Stock
|
|
|
|
High
|
|
|
Low
|
|
|
Dividends Paid
|
|
|
Fiscal Year 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
31.53
|
|
|
$
|
27.21
|
|
|
|
|
|
Second quarter
|
|
$
|
37.73
|
|
|
$
|
28.15
|
|
|
|
|
|
Third quarter
|
|
$
|
40.39
|
|
|
$
|
36.45
|
|
|
|
|
|
Fourth quarter
|
|
$
|
43.29
|
|
|
$
|
37.06
|
|
|
|
|
|
Fiscal Year 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
44.75
|
|
|
$
|
38.26
|
|
|
|
|
|
Second quarter
|
|
$
|
48.87
|
|
|
$
|
37.78
|
|
|
|
|
|
Third quarter
|
|
$
|
41.99
|
|
|
$
|
36.79
|
|
|
|
|
|
Fourth quarter
|
|
$
|
44.25
|
|
|
$
|
38.14
|
|
|
|
|
|
Fiscal Year 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
45.98
|
|
|
$
|
40.83
|
|
|
|
|
|
Second quarter
|
|
$
|
50.50
|
|
|
$
|
42.15
|
|
|
|
|
|
Third quarter
|
|
$
|
58.25
|
|
|
$
|
46.06
|
|
|
|
|
|
Fourth quarter (through November 2, 2007)
|
|
$
|
62.37
|
|
|
$
|
58.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington Group Common Stock
|
|
|
|
High
|
|
|
Low
|
|
|
Dividends Paid
|
|
|
Fiscal Year 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
46.70
|
|
|
$
|
38.21
|
|
|
|
|
|
Second quarter
|
|
$
|
52.14
|
|
|
$
|
41.23
|
|
|
|
|
|
Third quarter
|
|
$
|
54.16
|
|
|
$
|
49.28
|
|
|
|
|
|
Fourth quarter
|
|
$
|
53.99
|
|
|
$
|
48.04
|
|
|
|
|
|
Fiscal Year 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
59.35
|
|
|
$
|
53.13
|
|
|
|
|
|
Second quarter
|
|
$
|
61.21
|
|
|
$
|
48.02
|
|
|
|
|
|
Third quarter
|
|
$
|
59.80
|
|
|
$
|
50.93
|
|
|
|
|
|
Fourth quarter
|
|
$
|
61.79
|
|
|
$
|
54.47
|
|
|
|
|
|
Fiscal Year 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
66.42
|
|
|
$
|
56.40
|
|
|
|
|
|
Second quarter
|
|
$
|
85.04
|
|
|
$
|
64.74
|
|
|
|
|
|
Third quarter
|
|
$
|
88.50
|
|
|
$
|
77.75
|
|
|
|
|
|
Fourth quarter (through November 2, 2007)
|
|
$
|
97.35
|
|
|
$
|
90.50
|
|
|
|
|
|
The following table presents:
|
|
|
|
|
the last reported sale price of a share of URS common stock, as
reported on the NYSE; and
|
|
|
|
the last reported sale price of a share of Washington Group
common stock, as reported on the NYSE;
|
S-5
in each case, on May 25, 2007, the last full trading day
prior to the public announcement of the proposed merger, and on
November 2, 2007, the last practicable trading day prior to
the date of this supplement and the announcement of the amended
merger agreement.
|
|
|
|
|
|
|
|
|
|
|
URS
|
|
|
Washington Group
|
|
Date
|
|
Common Stock
|
|
|
Common Stock
|
|
|
May 25, 2007
|
|
$
|
46.89
|
|
|
$
|
69.97
|
|
November 2, 2007
|
|
$
|
60.10
|
|
|
$
|
96.15
|
|
The market value of the shares of URS common stock to be issued
in exchange for shares of Washington Group common stock upon the
completion of the merger will not be known at the time
Washington Group stockholders vote on the proposal to adopt the
merger agreement and approve the merger or at the time URS
stockholders vote on the proposal to approve the issuance of
shares of URS common stock in the merger because the merger will
not be completed by the time of the respective stockholder votes.
The above tables show only historical comparisons. Because the
market prices of URS common stock and Washington Group common
stock will likely fluctuate prior to the merger, these
comparisons may not provide meaningful information to URS
stockholders in determining whether to approve the issuance of
shares of URS common stock in the merger or to Washington Group
stockholders in determining whether to adopt the merger
agreement and approve the merger. URS and Washington Group
stockholders are encouraged to obtain current market quotations
for URS and Washington Group common stock and to review
carefully the other information contained in this supplement or
incorporated by reference into this supplement in considering
whether to approve the respective proposals before them. See the
section entitled Additional Information Where
You Can Find More Information on page 146 of the
joint proxy statement/prospectus.
S-6
THE
MODIFIED TERMS OF THE MERGER
The following is a description of the material changes to the
terms of the merger resulting from the amendment of the merger
agreement, including a description of the background of the
amendment of the merger agreement and related matters. While we
believe that the following description covers the material
changes to the material terms of the merger, the description may
not contain all of the information that is important to you. We
encourage you to read carefully this entire supplement,
including the amendment to the merger agreement attached to this
supplement as Annex A, for a more complete understanding of
the changes to the terms of the merger.
On November 4, 2007, the board of directors of URS and
Washington Group each unanimously voted to approve an amendment
to the terms of the merger agreement. This amendment has the
effect of increasing the merger consideration to be paid to
Washington Group stockholders for their shares and of providing
Washington Group stockholders the additional flexibility to
elect to receive the merger consideration either all in shares
of URS common stock or all in cash (subject to proration as
described below). More specifically, under the amended merger
agreement, each Washington Group stockholder would have the
right to elect to receive, for each share of Washington Group
common stock held, other than those shares held by URS, any
subsidiary of URS, Elk Merger Corporation or Bear Merger Sub and
other than treasury shares and shares as to which a Washington
Group stockholder has validly demanded and perfected appraisal
rights under Delaware law, (a) 0.90 of a share of URS
common stock and $43.80 in cash, without interest (and without
being subject to proration), (b) an amount in cash, without
interest, equal to the sum of (i) $43.80 and (ii) 0.90
multiplied by the Volume Weighted Average Price, or (c) a
number of shares equal to the sum of (i) 0.90 and
(ii) $43.80 divided by the Volume Weighted Average Price,
upon the terms and subject to adjustments as provided in the
amended merger agreement and as further described below under
The Amendment to the Merger Agreement Increase
in Merger Consideration; Stock and Cash Elections on
page S-31
and The Amendment to the Merger Agreement
Proration of the Stock and Cash Elections on
page S-31.
Background
of the Amendment to the Merger Agreement
On or about October 1, 2007, URS and Washington Group
mailed a definitive joint proxy statement/prospectus to their
respective stockholders. The definitive joint proxy
statement/prospectus describes the background of the proposed
transaction up to and including September 28, 2007. The
discussion below supplements that description.
During October and November, Washington Group and its proxy
solicitor MacKenzie Partners, Inc. (MacKenzie)
communicated with Washington Groups stockholders, and URS
and its proxy solicitor D.F. King & Co., Inc.
(D.F. King) communicated with URS
stockholders, regarding the proposed transaction and monitored
the votes cast by stockholders who had submitted their proxies.
The Washington Group and the URS boards of directors held
periodic meetings throughout this time to discuss with their
advisors their respective proxy solicitation efforts.
On October 1, 2007, a Washington Group stockholder filed a
putative class action in Delaware against Washington Group, URS,
and each of Washington Groups directors seeking to enjoin
the Washington Group special meeting of stockholders. On
October 18, 2007, Washington Group, URS, and each of
Washington Groups directors and the plaintiff entered into
a memorandum of understanding settling the litigation. As part
of the settlement, Washington Group agreed to provide additional
disclosures, which were made in a
Form 8-K
that was filed on October 18, 2007.
On the morning of October 15, 2007, Washington Group issued
a press release announcing its preliminary earnings for the
third quarter of 2007.
In mid-October, three prominent independent proxy advisory
firms Glass Lewis, Proxy Governance and
Egan-Jones recommended that Washington Group
stockholders vote in favor of the proposed transaction. In
issuing their recommendations, the firms cited the mergers
strategic logic, the value to be provided to Washington Group
stockholders, and the process that the Washington Group board of
directors conducted before entering into the merger agreement.
One other prominent independent proxy advisory firm
Institutional Shareholder
S-7
Services recommended a vote against the transaction.
Permission to cite the recommendations of Glass Lewis, Proxy
Governance, Egan-Jones, and Institutional Shareholder Services
was neither sought nor obtained.
On the morning of October 25, 2007, URS issued a press
release announcing its preliminary earnings for the third
quarter of 2007.
On October 28, 2007, Washington Groups board of
directors convened by telephone to discuss Washington
Groups proxy solicitation efforts with its financial and
legal advisors and its proxy solicitor, MacKenzie.
On October 28, 2007, URS board of directors also held
a telephonic meeting with representatives of Morgan Stanley,
Latham & Watkins LLP (Latham &
Watkins) and Cooley Godward Kronish LLP (Cooley
Godward). At that meeting, the URS board was informed
about the status of the votes for the special meetings of
stockholders and feedback from stockholders during the proxy
solicitation process. The board also discussed the performance
of the two businesses since the date of the merger agreement.
On the morning of October 29, 2007, Washington Group issued
a press release announcing its earnings for the third quarter of
2007, and updated its outlook for the remainder of the year.
On October 29, 2007, Washington Groups board of
directors convened by telephone to further discuss Washington
Groups proxy solicitation efforts with its financial and
legal advisors and its proxy solicitor, MacKenzie. A
representative from MacKenzie explained that, based on
preliminary vote tallies, it appeared unlikely that, as of such
date, the proposed merger transaction would be approved on
October 30, 2007, the previously scheduled date for
Washington Groups special meeting of stockholders. After
discussion, Mr. William H. Mallender, Washington
Groups lead independent director, and Mr. Stephen G.
Hanks, Washington Groups President and Chief Executive
Officer, to whom the authority to set the meeting date had been
delegated, agreed (with the concurrence of the other directors)
to postpone the special meeting of stockholders until
November 9, 2007 to permit the solicitation of additional
votes. The next morning, Washington Group and URS issued
separate press releases announcing the postponement of their
respective special meetings of stockholders to November 9,
2007.
Between October 29 and November 2, 2007, the financial
advisors, legal advisors and proxy solicitors for URS and
Washington Group had numerous discussions regarding the status
of the vote by the Washington Group stockholders.
On the evening of November 2, 2007, a representative of
Morgan Stanley contacted a representative of Goldman Sachs and
indicated that URS was willing to increase the stock component
of the merger consideration to 0.90 of a share of URS common
stock for each share of Washington Group common stock, subject
to the following three conditions: (i) that the merger
agreement be amended to provide Washington Group stockholders
the opportunity to elect to receive cash, stock or mixed
consideration (subject to proration), (ii) that
Mr. Dennis Washington agree to enter into an option
exercise and transaction support agreement with URS and
Washington Group to exercise all of his options and to vote in
favor of the proposed transaction if necessary to obtain the
required Washington Group stockholder approval and
(iii) that no additional changes to the merger agreement be
made.
On November 3, 2007, Washington Groups board of
directors held a telephonic meeting to discuss URS
proposal. Representatives from Wachtell, Lipton,
Rosen & Katz (Wachtell Lipton), MacKenzie
and Goldman Sachs were also in attendance. At the meeting, a
representative of Wachtell Lipton summarized the terms of the
proposal received by URS and discussed various issues related to
the proposal, including the terms of the option exercise and
transaction support agreement. The board then received a
presentation from Goldman Sachs on the financial aspects of the
proposal. After consideration and deliberation in which Wachtell
Lipton, MacKenzie and Goldman Sachs participated, the board
reached a consensus that Goldman Sachs should contact Morgan
Stanley and request that URS increase its proposed merger
consideration. The board further instructed Wachtell Lipton to
negotiate with Latham & Watkins a proposed amendment
to the merger agreement and, together with
Mr. Washingtons counsel, a proposed option exercise
and transaction support agreement.
Following the Washington Group board meeting, a representative
of Goldman Sachs called a representative of Morgan Stanley to
convey the Washington Group boards request that URS
increase the proposed merger
S-8
consideration. The representative of Morgan Stanley informed the
representative of Goldman Sachs that URS was unwilling to
increase the proposed merger consideration, and that the
proposal previously provided was URS best and final offer.
Following the conversation between Goldman Sachs and Morgan
Stanley, Mr. Hanks called Mr. Koffel to further
discuss the Washington Group boards request that URS
increase URS proposed merger consideration.
Mr. Koffel reiterated that URS was unwilling to increase
the proposed merger consideration and that the proposal was
URS best and final offer.
During November 3 and November 4, 2007, representatives of
Latham & Watkins and Wachtell Lipton negotiated the
terms of the amendment to the merger agreement and, together
with Mr. Washingtons counsel, negotiated the terms of
the option exercise and transaction support agreement.
On the afternoon of November 4, 2007, URS board of
directors convened in person (with six directors participating
by telephone) to consider the proposed amendment to the merger
agreement. Portions of the meeting were also attended by
representatives of Latham & Watkins, Morgan Stanley,
URS management, Cooley Godward and D.F. King.
Latham & Watkins summarized the terms of the proposed
amendment and discussed various issues related to the proposed
transaction. Representatives of Morgan Stanley presented an
updated financial analysis of the proposed transaction and
delivered Morgan Stanleys oral opinion, subsequently
confirmed in writing, to the effect that, as of such date and
based on and subject to the factors and assumptions explained in
their presentation and set forth in their written opinion, the
overall per share mix of $43.80 in cash and 0.90 of a share of
URS common stock to be issued in exchange for each share of
Washington Group common stock pursuant to the amended merger
agreement was fair from a financial point of view to URS. After
consideration and deliberation in which Latham &
Watkins, Cooley Godward, Morgan Stanley and D.F. King
participated, and taking into consideration the factors
described under Recommendation of the URS
Board of Directors and Its Reasons for Adopting the Amendment to
the Merger Agreement on
page S-10,
the URS board of directors voted unanimously to declare it
advisable and in the best interests of URS and its stockholders
for URS to enter into the proposed amendment, approved and
adopted the proposed amendment to the merger agreement and
determined to recommend to URS stockholders that they vote
to approve the issuance of shares of URS common stock in the
proposed merger under the terms of the amended merger agreement.
During the evening of November 4, 2007, Washington
Groups board of directors held another telephonic meeting.
Representatives from Wachtell Lipton, MacKenzie and Goldman
Sachs were also in attendance. Wachtell Lipton summarized the
terms of the proposed amendment and addressed various other
issues related to the proposed transaction. Representatives of
Goldman Sachs then presented an updated financial analysis of
the proposed transaction and delivered Goldman Sachs oral
opinion, subsequently confirmed in writing, to the effect that,
as of the date of their written opinion and based on and subject
to the factors and assumptions explained in their presentation
and set forth in their written opinion, the merger consideration
to be received by holders of the outstanding shares of
Washington Group common stock pursuant to the amended merger
agreement, taken in the aggregate, was fair from a financial
point of view to such holders. The full text of the written
opinion of Goldman Sachs, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with such opinion, is set forth
as Annex D hereto. After consideration and deliberation in which
Wachtell Lipton, MacKenzie and Goldman Sachs participated, and
taking into consideration the factors described under
Recommendation of the Washington Group Board
of Directors and Its Reasons for the Merger on
page S-11,
the Washington Group board of directors voted unanimously to
declare it advisable and in the best interests of Washington
Group and its stockholders for Washington Group to enter into
the proposed amendment, to approve and adopt the proposed
amendment to the merger agreement, to recommend to Washington
Groups stockholders that they vote FOR the
proposal to adopt the merger agreement, as amended, and approve
the merger and FOR the proposal to authorize the
adjournment of the Washington Group special meeting.
Following the conclusion of the Washington Group board meeting,
URS and Washington Group each executed the definitive amendment
to the merger agreement and Mr. Washington, URS and
Washington Group each executed the definitive option exercise
and transaction support agreement.
S-9
On November 5, 2007, URS and Washington Group issued a
joint press release announcing the terms of the amended merger
agreement and the option exercise and transaction support
agreement and the further postponement of the stockholder
meetings to November 15, 2007. On November 5, Dennis
Washington and Washington Group filed notifications under the
HSR Act in connection with the exercise of his options.
Recommendation
of the URS Board of Directors and Its Reasons for Adopting the
Amendment to the Merger Agreement
The URS board of directors, at a special meeting, considered
whether to approve the amendment to the merger agreement and to
recommend that the URS stockholders vote to approve the issuance
of shares of URS common stock in the proposed merger under the
terms of the amended merger agreement. The URS board of
directors unanimously:
|
|
|
|
|
determined that the modified terms of the merger are advisable
for, fair to and in the best interests of URS and its
stockholders;
|
|
|
|
approved the amendment to the merger agreement and the
transactions contemplated by the amended merger agreement,
including the merger;
|
|
|
|
directed that approval of the issuance of URS common stock
pursuant to the amended merger agreement be submitted for
consideration by URS stockholders at a URS special
meeting; and
|
|
|
|
resolved to recommend that the URS stockholders vote
FOR the proposal to approve the issuance of shares
of URS common stock pursuant to the amended merger agreement.
|
In reaching its decision to reaffirm its approval of the merger
under the modified terms of the amended merger agreement, the
URS board of directors re-examined and reconsidered the matters
described in The Merger Recommendation of the
URS Board of Directors and Its Reasons for the Merger
beginning on page 65 of the September 28 joint proxy
statement/prospectus. In addition, the URS board of directors
consulted with senior members of URS management team,
representatives of Morgan Stanley and URS other advisors
regarding the current business operations, financial condition
and future prospects of Washington Group. The URS board of
directors also consulted with Morgan Stanley as to the fairness,
from a financial point of view, to URS of the merger
consideration to be paid to by URS under the amended merger
agreement. The URS board of directors also consulted with
representatives of Latham & Watkins and Cooley Godward
regarding the terms of the amended merger agreement and the
option exercise and transaction support agreement. In reaching
its decision to reaffirm its approval of the merger under the
amended merger agreement, the URS board of directors considered
a variety of factors, a number of which are summarized below:
|
|
|
|
|
Financial Performance:
The URS board of
directors considered Washington Groups financial
performance since the original merger agreement was signed,
taking into account that Washington Groups revenue and
profit growth were on track for meeting or exceeding the
financial forecasts for 2007 provided in the September 28 joint
proxy statement/prospectus.
|
|
|
|
Opinion of Financial Advisor:
The URS board of
directors considered the opinion of Morgan Stanley that, as of
the date of the opinion, and based upon and subject to the
considerations described in the opinion and based on such other
matters as Morgan Stanley considered relevant, the merger
consideration to be paid by URS pursuant to the amended merger
agreement was fair from a financial point of view to URS. See
Opinion of URS Financial Advisor
on
page S-13.
|
|
|
|
Stockholder Vote:
The URS board of directors
considered the fact that the merger was not likely to be
approved by the Washington Group stockholders absent an increase
in merger consideration, in light of the potential benefits of
the merger to URS, including the strengthened strategic
position, operating efficiencies and synergies and long-term
growth potential that the board believed would be provided by
the combined company.
|
S-10
|
|
|
|
|
Terms of the Amended Merger Agreement:
The URS
board of directors, with the assistance of counsel, considered
the general terms of the amended merger agreement, including:
|
|
|
|
|
|
Merger Consideration Election and
Proration:
The URS board of directors considered
the fact that the merger consideration election mechanism gives
Washington Group stockholders the flexibility to choose
consideration in a form best suited to their personal
circumstances while the proration mechanism also provides
certainty as to the amount of cash and number of shares of URS
common stock to be delivered to Washington Group stockholders as
a whole.
|
|
|
|
Stock Option Election:
The URS board of
directors considered Washington Group employees interest
in electing to have their options converted entirely into shares
of URS common stock to retain an investment in the post-merger
combined company.
|
In addition, the URS board of directors identified and
considered a variety of potentially negative factors in its
deliberations concerning the merger, including:
|
|
|
|
|
the possibility that the financial performance of the Washington
Group could be affected by a slowdown in the overall economy;
|
|
|
|
the projected dilution of URS earnings per share as a
result of issuing a greater number of shares in the amended
merger, and the estimated time period before the merger was
expected to be accretive to URS earnings per share; and
|
|
|
|
the risks and costs that the merger might not be completed,
notwithstanding the increase in merger consideration, in light
of the fact that a majority of Washington Groups
stockholders were not supportive of the original proposal and
may not support the revised transaction; and
|
|
|
|
the lower relative percentage ownership of the combined company
to be retained by URS stockholders under the amended merger
agreement relative to the original merger agreement.
|
The URS board of directors concluded that these factors could be
managed or mitigated by URS or were unlikely to have a material
impact on the merger or URS, and that, overall, the potentially
negative factors associated with the merger were outweighed by
the potential benefits of the merger.
It was not practical to, and thus the URS board of directors did
not, quantify, rank or otherwise assign relative weights to the
wide variety of factors it considered in evaluating the merger
and the amended merger agreement, nor did the board determine
that any one factor was of particular importance in deciding
that the amended merger agreement and associated transactions
were in the best interests of URS and its stockholders. This
discussion of information and material factors considered by the
URS board of directors is intended to be a summary rather than
an exhaustive list. In considering these factors, individual
members of the board may have given different weight to
different factors. The board conducted an overall analysis of
the factors described above, and considered as a whole the
factors to support its decision in favor of the merger and the
merger agreement. The decision of each member of the URS board
of directors was based upon his or her own judgment, in light of
all of the information presented, regarding the overall effect
of the amended merger agreement and associated transactions on
URS stockholders as compared to any potential alternative
courses of action. After considering this information, all
members of the URS board of directors unanimously approved the
amendment to the merger agreement and the transactions
contemplated by the amended merger agreement, including the
merger, and recommended that URS stockholders approve the
issuance of shares of URS common stock pursuant to the amended
merger agreement.
Recommendation
of the Washington Group Board of Directors and Its Reasons for
Adopting the Amendment to the Merger Agreement
The Washington Group board of directors, at a special meeting,
approved the amendment to the merger agreement. The Washington
Group board of directors unanimously:
|
|
|
|
|
determined that the merger, as amended, is advisable for, fair
to and in the best interests of Washington Group and its
stockholders;
|
S-11
|
|
|
|
|
approved the amendment to the merger agreement and the
transactions contemplated by the amended merger agreement,
including the merger; and
|
|
|
|
resolved to recommend that the Washington Group stockholders
vote FOR the proposal to adopt the merger agreement,
as amended, and approve the merger and FOR the
proposal to authorize the adjournment of the Washington Group
special meeting.
|
In reaching its decision to reaffirm its approval of the merger
under the modified terms of the amended merger agreement, the
Washington Group board of directors re-examined and reconsidered
the matters described in The Merger
Recommendation of the Washington Group board of directors and
Its Reasons for the Merger beginning on page 68 of
the September 28 joint proxy statement/prospectus. In
addition, the Washington Group board of directors consulted with
senior members of Washington Groups management team,
representatives of Goldman Sachs and Washington Groups
other advisors regarding the current business operations,
financial condition and future prospects of Washington Group.
The Washington Group board of directors also consulted with
Goldman Sachs as to the fairness, from a financial point of
view, of the merger consideration, taken in the aggregate, to
Washington Groups stockholders pursuant to the amended
merger agreement. The Washington Group board of directors also
consulted with representatives of Wachtell Lipton regarding the
terms of the amended merger agreement. In reaching its decision
to reaffirm its approval of the merger under the amended merger
agreement, the Washington Group board of directors considered a
variety of factors, a number of which are summarized below:
|
|
|
|
|
Additional Consideration:
The amended per
share consideration provides $43.80 in cash and 0.90 of a share
of URS common stock for each share of Washington Group common
stock (other than shares held by URS, any subsidiary of URS, Elk
Merger Corporation or Bear Merger Sub and other than treasury
shares and shares as to which a Washington Group stockholder has
validly demanded and perfected appraisal rights under Delaware
law). This increased consideration represented:
|
|
|
|
|
|
an implied value of $97.89 per share based on the closing price
of URS common stock on November 2, 2007, which represented
a premium of approximately 2% over the closing price of
Washington Group on such date;
|
|
|
|
a 9% premium over the initial merger consideration;
|
|
|
|
a 40% premium to the undisturbed preannouncement trading
price; and
|
|
|
|
a premium of approximately 49% over the volume-weighted average
closing price of shares of Washington Group common stock over
the 3-month period prior to announcement of the merger.
|
|
|
|
|
|
Greater Ownership of Combined Company:
Under
the modified terms of the merger agreement, Washington Group
stockholders are expected to own approximately 35% of the shares
of URS common stock outstanding after the merger. Under the
original terms of the merger, Washington Group stockholders were
expected to own approximately 32% of the shares of URS common
stock outstanding after the merger.
|
|
|
|
Unique strategic fit:
A combination of
Washington Group and URS represents a unique opportunity to
create a single-source provider that can offer a full life cycle
of planning, engineering, construction, environmental
management, and operations and maintenance services. The
combined company will have leadership positions in key growth
markets, global scale, a broad set of service capabilities, a
diverse business portfolio and a strong financial position. This
combination would also provide Washington Group stockholders
with a more diversified company that would be better positioned
to insulate stockholders from industry downturns.
|
|
|
|
No Other Transaction Proposals:
Since the date
of the announcement of the original merger agreement, and as of
the date of this supplement, no other party has approached
Washington Group expressing an interest in pursuing a
transaction to acquire Washington Group.
|
|
|
|
Strong Financial Performance:
The Washington
Group board of directors considered URS financial
performance since the original merger agreement was signed.
URS revenue and profit growth are on track for meeting or
exceeding the financial forecasts for 2007 provided in the
September 28 joint proxy statement/prospectus and as updated.
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S-12
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|
Opinion of Financial Advisor:
The Washington
Group board of directors considered the opinion of Goldman Sachs
that, as of the date of the opinion, and based upon and subject
to the considerations described in the opinion and based on such
other matters as Goldman Sachs considered relevant, the merger
consideration to be received by Washington Groups
stockholders pursuant to the amended merger agreement, taken in
the aggregate, was fair from a financial point of view to such
stockholders. See Opinion of Washington
Groups Financial Advisor on
page S-21.
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Terms of the Amended Merger Agreement:
The
Washington Group board of directors, with the assistance of
counsel, considered the modified terms of the merger agreement,
including:
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Merger Consideration Election and
Proration:
The Washington Group board of
directors considered the fact that the merger consideration
election mechanism gives Washington Group stockholders the
flexibility to choose consideration in a form best suited to
their personal circumstances, while the proration mechanism also
provides certainty as to the amount of cash and number of shares
of URS common stock to be delivered to Washington Group
stockholders.
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Stock Option Election:
The Washington Group
board of directors considered the fact that the merger
consideration election mechanism would also be made available to
Washington Group employees who hold options for Washington Group
common stock.
|
In addition, the Washington Group board of directors identified
and considered a variety of potentially negative factors in its
deliberations concerning the amendment to the merger agreement,
including:
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|
|
that a majority of Washington Groups stockholders were not
supportive of the merger as initially proposed, and that
Washington Groups stockholders may not support the revised
transaction; and
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the risk and costs that the merger might not be completed, the
potential for diversion of management and employee attention and
for increased employee attrition and the potential effect of
these factors on Washington Groups business and relations
with customers and service providers.
|
The Washington Group board of directors concluded that these
factors could be managed or mitigated or were unlikely to have a
material impact on the merger or the combined company, and that,
overall, the potentially negative factors associated with the
merger were outweighed by the potential benefits of the merger.
It was not practical to, and thus the Washington Group board of
directors did not, quantify, rank or otherwise assign relative
weights to the wide variety of factors it considered in
evaluating the merger and the amended merger agreement, nor did
the board determine that any one factor was of particular
importance in deciding that the amended merger agreement and
associated transactions were in the best interests of Washington
Group and its stockholders. This discussion of information and
material factors considered by the Washington Group board of
directors is intended to be a summary rather than an exhaustive
list. In considering these factors, individual members of the
board may have given different weight to different factors. The
board conducted an overall analysis of the factors described
above, and considered as a whole the factors to support its
decision in favor of the merger and the amended merger
agreement. The decision of each member of the Washington Group
board of directors was based upon his or her own judgment, in
light of all of the information presented, regarding the overall
effect of the amended merger agreement and associated
transactions on Washington Groups stockholders as compared
to any potential alternative courses of action. After
considering this information, all members of the Washington
Group board of directors unanimously approved the amendment to
the merger agreement and the transactions contemplated by the
amended merger agreement, including the merger, and recommended
that Washington Groups stockholders vote FOR
the proposal to adopt the merger agreement, as amended, and
approve the merger and FOR the proposal to authorize
the adjournment of the Washington Group special meeting.
Opinion
of URS Financial Advisor
Morgan
Stanley & Co. Incorporated
On March 23, 2007, the URS board of directors retained
Morgan Stanley to act as its exclusive financial advisor and
provide a financial opinion letter in connection with a possible
acquisition of or business combination with Washington Group.
The URS board of directors selected Morgan Stanley to provide
financial advice and
S-13
assistance in connection with the merger based on Morgan
Stanleys qualifications, expertise, reputation, and
experience in transactions similar to the merger. At a URS board
of directors meeting held on November 4, 2007, Morgan
Stanley delivered its oral opinion, subsequently confirmed in
writing that, as of that date and based upon and subject to the
various assumptions, qualifications and limitations set forth in
the opinion, the merger consideration to be paid by URS pursuant
to the merger agreement, as amended, was fair from a financial
point of view to URS.
The full text of Morgan Stanleys opinion, dated
November 4, 2007, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and
qualifications and limitations on the scope of the review
undertaken by Morgan Stanley in rendering its opinion, is
included as Annex C to this supplement. The summary of
Morgan Stanleys fairness opinion set forth in this
supplement is qualified in its entirety by reference to the full
text of the opinion. URS stockholders should read this opinion
carefully and in its entirety. Morgan Stanleys opinion is
directed to the board and only addresses the fairness from a
financial point of view of the merger consideration to URS.
Morgan Stanleys opinion did not address any other aspect
of the merger. Morgan Stanley expressed no opinion or
recommendation as to how the URS stockholders or Washington
Group stockholders should vote at the stockholder meetings to be
held in connection with the merger.
In connection with rendering its opinion, Morgan Stanley, among
other things:
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|
reviewed certain publicly available financial statements and
other business and financial information of Washington Group and
URS, respectively;
|
|
|
|
reviewed certain internal financial statements and other
financial and operating data, concerning Washington Group
prepared by the management of Washington Group;
|
|
|
|
reviewed certain financial forecasts concerning Washington Group
prepared by the management of Washington Group and reviewed
and/or
adjusted by the management of URS;
|
|
|
|
reviewed certain internal financial statements and other
financial and operating data, concerning URS prepared by the
management of URS;
|
|
|
|
reviewed information relating to certain strategic, financial
and operational benefits anticipated from the merger, prepared
by the management of URS;
|
|
|
|
discussed the past and current operations and financial
condition and prospects of Washington Group with senior
executives from Washington Group;
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|
|
|
discussed the past and current operations and financial
condition and the prospects of URS and Washington Group,
including information relating to certain strategic, financial
and operational benefits anticipated from the merger, with
senior executives of URS;
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|
|
|
reviewed the pro forma impact of the merger on URS
earnings per share, cash flow, capitalization and financial
ratios;
|
|
|
|
reviewed the reported prices and trading activity for the
Washington Group common stock and the URS common stock,
respectively;
|
|
|
|
compared the financial performance of Washington Group and URS
and the prices and trading activity of Washington Group common
stock and URS common stock with that of other publicly-traded
companies that are comparable with Washington Group and URS,
respectively, and their respective securities;
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|
participated in discussions and negotiations among
representatives of Washington Group and URS and their financial
and legal advisors;
|
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|
reviewed the Merger Agreement, the Amendment to the Merger
Agreement, the Senior Credit Facilities Commitment Letter, dated
May 27, 2007, and the draft Amendment to Commitment Letter
of the Buyer dated November 3, 2007 (together with the
Senior Credit Facilities Commitment Letter, the Commitment
Letters), and certain related documents; and
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S-14
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|
performed such other analyses and considered such other factors
as Morgan Stanley deemed appropriate.
|
In arriving at its opinion, Morgan Stanley assumed and relied
upon, without independent verification, the accuracy and
completeness of the information supplied or otherwise made
available to it by Washington Group and URS for the purposes of
its opinion. With respect to the financial forecasts prepared by
the management of URS, including information relating to certain
strategic, financial and operational benefits anticipated from
the merger, Morgan Stanley assumed that they had been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of
Washington Group and URS.
In addition, Morgan Stanley assumed that the merger will be
consummated in accordance with the terms set forth in the merger
agreement, as amended, without any material waiver, amendment or
delay of any terms or conditions, including, among other things,
that the second merger will be consummated promptly following
the merger, that the merger and the second merger will be
treated as a single integrated transaction and that the merger
will be treated as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code.
Morgan Stanley did not make any independent valuation or
appraisal of the assets or liabilities of URS or Washington
Group nor was it furnished with any such appraisals. In
addition, Morgan Stanley assumed that URS will obtain financing
in connection with the merger on terms consistent with the
Commitment Letters and as discussed with the senior management
of URS. Morgan Stanley assumed that, in connection with the
receipt of all the necessary governmental, regulatory or other
approvals and consents required for the merger, no delays,
limitations, conditions or restrictions will be imposed that
would have a material adverse effect on the contemplated
benefits expected to be derived in the merger. Morgan Stanley
relied upon, without independent verification, the assessment by
the management of URS of: (i) the strategic, financial and
other benefits expected to result from the merger; (ii) the
timing and risks associated with the integration of Washington
Group and URS; (iii) the strategic rationale for the merger
and (iv) the validity of, and risks associated with,
Washington Groups and URS existing and future
services, technologies, intellectual property, products and
business models. Morgan Stanley is not a legal, tax or
regulatory advisor and has relied upon, without independent
verification, the assessment of URS and its legal, tax or
regulatory advisors with respect to legal, tax and regulatory
matters. Morgan Stanleys opinion was necessarily based on
financial, economic, market and other conditions as in effect
on, and the information made available to it as of,
November 4, 2007. Events occurring after the date of the
opinion may affect the opinion and the assumptions used in
preparing it, and Morgan Stanley did not assume any obligations
to update, revise, or reaffirm this opinion.
The opinion was for the information of the URS board of
directors in connection with the merger. In addition, Morgan
Stanleys opinion did not in any manner address the prices
at which the URS common stock will trade following consummation
of the merger and expressed no opinion or recommendation as to
how the URS stockholders and the Washington Group stockholders
should vote at the stockholder meetings to be held in connection
with the merger.
Valuation
Methods and Analyses
The following is a summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion
and the preparation of its written opinion letter dated
November 4, 2007. The various analyses summarized below
were based on closing prices for the common stock of URS and
Washington Group as of November 2, 2007, the last full
trading day preceding the day of the special meeting of the URS
board of directors to consider and approve, adopt and authorize
the amendment to the merger agreement. As of that date, the
value of the merger consideration was $97.89 per share of
Washington Group common stock. Although each analysis was
provided to the URS board of directors, in connection with
arriving at its opinion, Morgan Stanley considered all of its
analyses as a whole and did not attribute any particular weight
to any analysis described below. Some of these summaries of
financial analyses include information presented in tabular
format. In order to fully understand the financial analyses used
by Morgan Stanley, the tables must be read together with the
text of each summary. The tables alone do not constitute a
complete description of the financial analyses used by Morgan
Stanley.
S-15
Merger
Consideration
Morgan Stanley reviewed the merger consideration and calculated
its value based on URS common stock prices of: $46.89, the URS
closing price on May 25, 2007, which was the last trading
day prior to the initial announcement of the transaction, and
$60.10, the URS closing price on November 2, 2007, which
was the last trading day prior to the special meeting of the URS
board of directors on November 4 to consider and approve, adopt
and authorize the merger agreement amendment. Based on a URS
common stock price of $46.89, the value of the merger
consideration is $86.00, which represents a 23%, 23%, and 26%
premium to the Washington Group closing prices one day, one week
and four weeks prior to the initial announcement of the
transaction. Based on a URS common stock price of $60.10, the
value of the merger consideration is $97.89, which represents a
40%, 40%, and 43% premium to the Washington Group closing prices
one day, one week and four weeks prior to the initial
announcement of the transaction
Washington
Group
Trading
History
Morgan Stanley reviewed the historical trading prices for
Washington Group common stock for the four-month period from
January 26, 2007 (the last trading day prior to the
delivery of the initial offer) to May 25, 2007 (one trading
day prior to the announcement of the merger agreement) and for
the twelve-month period prior to the announcement of the merger
agreement. Morgan Stanley observed that the twelve-month range
of trading prices was $47-$74 and the range of trading prices
from January 26, 2007 to May 25, 2007 was $56-$74.
Morgan Stanley noted that as of May 25, 2007, the closing
price of Washington Group common stock was $69.97 per
share, and that, as of November 2, 2007, the closing price
of Washington Group common stock was $96.15 per share.
Morgan Stanley also noted that, based on closing prices for the
common stock of URS and Washington Group as of November 2,
2007, the implied transaction value per share of Washington
Group common stock was $97.89.
Comparable
Company Analysis
Using publicly available information, Morgan Stanley reviewed
the market values and trading multiples of Washington Group and
the following seven publicly held companies in the engineering
and construction industry that Morgan Stanley deemed comparable
to Washington Group:
Engineering and Construction Comparables
Fluor Corporation
McDermott International, Inc.
Foster Wheeler Ltd.
Jacobs Engineering Group Inc.
The Shaw Group Inc.
Chicago Bridge & Iron Company N.V.
AECOM Technology Corporation
EMCOR Group, Inc.
Granite Construction Incorporated
Tetra Tech, Inc.
All multiples were based on closing stock prices on
November 2, 2007. Estimated financial data for the selected
companies were based on public filings and publicly available
equity research analysts estimates, as aggregated by the
Institutional Brokers Estimate System, which is referred
to as the IBES. Estimated financial data for Washington Group
were based on public filings, publicly announced earnings
guidance, URS managements estimates, D.A. Davidson
research estimates
(10/30/07)
and publicly available equity research analysts estimates
as aggregated by IBES.
For each of the comparable companies, Morgan Stanley calculated
the following:
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Aggregate Value, which is defined as market value of common
equity plus debt and preferred stock, less cash.
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S-16
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Aggregate Value/2008E EBITDA, which is defined as Aggregate
Value as a multiple of calendar year 2008 EBITDA, based upon
publicly available information, including reports of equity
research analysts and using the mean of the analysts
calendar year 2008 estimates.
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Price/2008E Earnings, which is defined as stock price as a
multiple of estimated earnings per share, based upon publicly
available information, including reports of equity research
analysts and using the mean of the analysts calendar year
2008 estimates.
|
A summary of the reference range of market trading multiples is
set forth below:
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Engineering and Construction Comparables
|
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Mean
|
|
Median
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|
High
|
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Low
|
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Aggregate Value/2008E EBITDA
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12.5
|
x
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13.3
|
x
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17.2
|
x
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5.6
|
x
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Price/2008E Earnings
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22.6
|
x
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23.8
|
x
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28.3
|
x
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|
12.4
|
x
|
Morgan Stanley calculated an implied valuation range by applying
multiple ranges to the applicable operating statistics based on
publicly available equity research analyst estimates, and other
publicly available data. Based upon and subject to the
foregoing, Morgan Stanley calculated implied valuation ranges
for the Washington Group common stock of $95 to $110
per share based on Aggregate Value/2008E EBITDA and $84 to
$102 based on Price/2008E Earnings. Morgan Stanley noted that,
based on closing prices for the common stock of URS and
Washington Group as of November 2, 2007, the implied
transaction value per share of Washington Group common stock
was $97.89.
Although the foregoing companies were compared to Washington
Group for purposes of this analysis, Morgan Stanley noted that
no company used in the comparable company analysis is identical
to Washington Group because of differences between the business
mix, markets served, operations, and other characteristics of
Washington Group and the comparable companies. In evaluating the
comparable companies, Morgan Stanley relied on publicly
available equity research analyst estimates, which estimates are
based in part on judgments and assumptions with regard to
industry performance, general business, economic, market and
financial conditions, and other matters, many of which are
beyond the control of Washington Group, such as the impact of
competition on the business of Washington Group, as well as on
the industry generally, industry growth, and the absence of any
adverse material change in the financial condition and prospects
of Washington Group or the industry or in the markets generally.
Mathematical analysis, such as determining the mean or median,
is not in itself a meaningful method of using comparable company
data.
Discounted
Equity Value Analysis
Morgan Stanley performed an analysis of the implied present
value per share of the Washington Group common stock on a
standalone basis based on Washington Groups projected
future equity value using calendar year 2009 estimates based on
D.A. Davidson research estimates
(10/30/07).
To calculate the discounted equity value, Morgan Stanley
multiplied the applicable earnings estimate by the current
calendar year multiple range used in the comparable company
analysis described above, and discounted the implied nominal
equity values of Washington Group to a present value at an
illustrative discount rate of 10.3%, which reflected Washington
Groups estimated average cost of equity capital. Based on
these forecasts and assumptions, Morgan Stanley derived an
implied valuation range for the Washington Group common stock of
$87 to $105. Morgan Stanley noted that based on closing prices
for the common stock of URS and Washington Group as of
November 2, 2007, the implied transaction value per share
of Washington Group common stock was $97.89.
Discounted
Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis of the
projected unlevered free cash flows of Washington Group for
calendar years 2008 through 2011, based on forecasts prepared by
the management of URS. Morgan Stanley calculated implied equity
values per share of Washington Group common stock by using
estimated discount rates ranging from 9.0% to 10.0% and
multiples of estimated 2012 EBITDA ranging from 10.0x to 13.0x.
Based on selected ranges of multiples and discount rates, this
analysis indicated a range of equity values per share of $84 to
$104. Morgan Stanley noted that, based on closing prices for the
common stock of URS and Washington
S-17
Group as of November 2, 2007, the implied transaction value
per share of Washington Group common stock was $97.89.
Morgan Stanley performed a discounted cash flow analysis of the
projected unlevered free cash flows for calendar years 2008
through 2011, based on an extrapolation from the operating
forecasts for 2007 through 2009 in D.A. Davidsons
research (10/30/07). Morgan Stanley calculated implied equity
values per share of Washington Group common stock by using
estimated discount rates ranging from 9.0% to 10.0% and
multiples of estimated 2012 EBITDA ranging from 10.0x to 13.0x.
Based on selected ranges of multiples and discount rates, this
analysis indicated a range of equity values per share of $91 to
$113. Morgan Stanley noted that, based on closing prices for the
common stock of URS and Washington Group as of November 2,
2007, the implied transaction value per share of Washington
Group common stock was $97.89.
The valuation stated above is not necessarily indicative of
Washington Groups respective actual, present or future
value or results, which may be more or less favorable than
suggested by this type of analysis.
URS
Trading
History
Morgan Stanley reviewed the historical trading prices for URS
common stock for the twelve-month period prior to the
announcement of the merger agreement. Morgan Stanley observed
that the twelve-month range of trading prices was
$36 $49. Morgan Stanley noted that, as of
May 25, 2007, the closing price of URS common stock was
$46.89 per share and that as of November 2, 2007, the
closing price of URS common stock was $60.10 per share.
Comparable
Company Analysis
Using publicly available information, Morgan Stanley reviewed
the market values and trading multiples of URS and the following
twelve publicly held companies in the engineering and
construction and government services industries that Morgan
Stanley deemed comparable to URS:
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Engineering and Construction Comparables
|
|
Government Services
|
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Fluor Corporation
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SAIC, Inc.
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McDermott International, Inc.
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CACI International Inc
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Foster Wheeler Ltd.
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SRA International, Inc.
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Jacobs Engineering Group Inc.
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ManTech International Corporation
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The Shaw Group Inc.
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DynCorp International Inc.
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Chicago Bridge & Iron Company N.V.
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AECOM Technology Corporation
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EMCOR Group, Inc.
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Granite Construction Incorporated
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Tetra Tech, Inc.
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All multiples were based on closing stock prices on
November 2, 2007. Estimated financial data for the selected
companies were based on public filings and publicly available
equity research analysts estimates as aggregated by IBES.
Estimated financial data for URS were based on public filings,
publicly announced earnings guidance, URS managements
estimates, and publicly available equity research analysts
estimates as aggregated by IBES.
For each of the comparable companies, Morgan Stanley calculated
the following, each as previously defined:
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Aggregate Value
|
|
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Aggregate Value/2008E EBITDA
|
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Price/2008E Earnings
|
S-18
A summary of the reference range of market trading multiples is
set forth below:
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|
|
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|
|
|
|
|
|
|
|
|
Engineering and Construction Comparables
|
|
Mean
|
|
Median
|
|
High
|
|
Low
|
|
Aggregate Value/2008E EBITDA
|
|
|
12.5
|
x
|
|
|
13.3
|
x
|
|
|
17.2
|
x
|
|
|
5.6
|
x
|
Price/2008E Earnings
|
|
|
22.6
|
x
|
|
|
23.8
|
x
|
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|
28.3
|
x
|
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|
12.4
|
x
|
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|
|
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Government Services Comparables
|
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Mean
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Median
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High
|
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Low
|
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|
Aggregate Value/2008E EBITDA
|
|
|
9.4
|
x
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|
9.0
|
x
|
|
|
11.0
|
x
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|
8.2
|
x
|
Price/2008E Earnings
|
|
|
19.4
|
x
|
|
|
20.0
|
x
|
|
|
20.8
|
x
|
|
|
17.4
|
x
|
Morgan Stanley calculated an implied valuation range by applying
multiple ranges to the applicable operating statistics based on
publicly available equity research analyst estimates, and other
publicly available data. Based upon and subject to the
foregoing, Morgan Stanley calculated implied valuation ranges
for the URS common stock of $56 to $74 per share based on
Aggregate Value/2008E EBITDA and $55 to $67 based on Price/2008E
Earnings.
Although the foregoing companies were compared to URS for
purposes of this analysis, Morgan Stanley noted that no company
used in the comparable company analysis is identical to URS
because of differences between the business mix, markets served,
operations, and other characteristics of URS and the comparable
companies. In evaluating the comparable companies, Morgan
Stanley relied on publicly available equity research analyst
estimates, which estimates are based in part on judgments and
assumptions with regard to industry performance, general
business, economic, market and financial conditions, and other
matters, many of which are beyond the control of URS, such as
the impact of competition on the business of URS, as well as on
the industry generally, industry growth, and the absence of any
adverse material change in the financial condition and prospects
of URS or the industry or in the markets generally. Mathematical
analysis, such as determining the mean or median, is not in
itself a meaningful method of using comparable company data.
Securities
Research Analysts Price Targets
Morgan Stanley reviewed and analyzed future public market
trading price targets for URS common stock prepared and
published by equity research analysts. These targets reflect
each analysts estimate of the future public market trading
price of URS common stock. Morgan Stanley discounted the price
targets at URS estimated average cost of equity capital of
10.6%. The range of discounted analyst price targets for URS was
$51 to $68.
The public market trading price targets published by the
securities research analysts do not necessarily reflect current
market trading prices for URS common stock and these estimates
are subject to uncertainties, including the future financial
performance of URS and future financial market conditions.
Discounted
Equity Value Analysis
Morgan Stanley performed an analysis of the implied present
value per share of the URS common stock on a standalone basis
based on URS projected future equity value using calendar
year 2009 estimates based on URS management forecasts.
To calculate the discounted equity value, Morgan Stanley
multiplied the applicable earnings estimate by the current
calendar year multiple range used in the comparable company
analysis described above, and discounted the implied nominal
equity values of URS to a present value at an illustrative
discount rate of 10.6%, which reflected URS estimated
average cost of equity capital. Based on the aforementioned
forecasts and assumptions, Morgan Stanley derived an implied
valuation range for the URS common stock of $56 to $68.
Discounted
Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis of the
projected unlevered free cash flows of URS for calendar years
2008 through 2011, based on the forecasts prepared by the
management of URS. Morgan Stanley calculated implied equity
values per share of URS common stock by using estimated discount
rates ranging from 9.0% to 10.0% and multiples of estimated 2012
EBITDA ranging from 8.0x to 10.0x. Based on selected ranges of
multiples and discount rates, this analysis indicated a range of
equity values per share of $55 to $68.
The valuation stated above is not necessarily indicative of
URS respective actual, present or future value or results,
which may be more or less favorable than suggested by this type
of analysis.
S-19
Pro Forma
Merger Analysis
Morgan Stanley analyzed the potential pro forma impact of the
transaction on URS earnings per share and cash earnings
per share for calendar years 2008 through and 2011. Morgan
Stanley calculated such pro forma earnings per share and cash
earnings per share on the basis of the transaction exchange
ratio provided for by the merger agreement, as amended,
URS estimates of earnings per share for URS and synergies
resulting from the merger estimated by URS management. Morgan
Stanley calculated that estimated pro forma GAAP earnings per
share would be below estimated GAAP earnings per share by 4% in
2008 and exceed estimated GAAP earnings per share by 3%, 8%, and
9% in 2009, 2010, and 2011, respectively, and exceed estimated
cash earnings per share by 4%, 10%, 14%, and 15% in 2008, 2009,
2010 and 2011, respectively, not including the impact of revenue
synergies expected to be achieved through the combination.
General
The summary set forth above does not purport to be a complete
description of all the analyses performed by Morgan Stanley. The
preparation of a fairness opinion is a complex process that
involves various determinations as to the most appropriate and
relevant methods of financial analyses and the application of
these methods to the particular circumstances and is not
necessarily susceptible to a partial analysis or summary
description. In arriving at its opinion, Morgan Stanley
considered the results of all of the analyses as a whole and did
not attribute any particular weight to any particular analysis
or factor considered by it. The summary provided and the
analyses described above must be considered as a whole, and
selecting any portion of Morgan Stanleys analyses, without
considering all analyses, would create an incomplete view of the
process underlying Morgan Stanleys opinion. In addition,
Morgan Stanley may have given various factors more or less
weight than other factors and may have deemed various
assumptions more or less probable than other assumptions, so
that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan
Stanleys view of the actual value of Washington Group
or URS.
In performing its analysis, Morgan Stanley made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Washington Group or URS. Any
estimates contained in the analyses performed by Morgan Stanley
are not necessarily indicative of actual values, which may be
significantly more or less favorable than suggested by such
estimates. The analyses performed were prepared solely as part
of Morgan Stanleys analysis of the fairness from a
financial point of view to URS of the merger consideration to be
paid by URS pursuant to the merger agreement, as amended, and
were conducted in connection with the delivery by Morgan Stanley
of its opinion, dated November 4, 2007, to the URS board of
directors. These analyses do not purport to be appraisals or to
reflect the prices at which shares of common shares of URS or
Washington Group might naturally trade.
The merger consideration pursuant to the merger agreement, as
amended, was determined through arms-length negotiations
between URS and Washington Group and was approved by the URS
board of directors. Morgan Stanley provided advice to URS during
these negotiations. Morgan Stanley did not, however, recommend
any specific merger consideration to URS or the URS board of
directors or that any specific merger consideration constituted
the only appropriate consideration for the transaction. Morgan
Stanleys opinion to the URS board of directors was one of
many factors taken into consideration by the URS board of
directors in deciding to approve the transaction. Morgan Stanley
did not advise the URS board of directors that any specific
consideration constituted the only appropriate consideration for
the transaction.
Consequently, the analyses as described above should not be
viewed as determinative of the opinion of the URS board of
directors with respect to the merger consideration or of whether
the URS board of directors would have been willing to agree to
different consideration. The foregoing summary describes the
material analyses performed by Morgan Stanley but does not
purport to be a complete description of the analyses performed
by Morgan Stanley.
Morgan Stanley is an internationally recognized investment
banking and advisory firm. Morgan Stanley, as part of its
investment banking business, is continuously engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate,
estate and other purposes. In the ordinary course of its
business, Morgan Stanley and its affiliates may from time to
time trade in the securities or the indebtedness of URS and its
affiliates for its own account, the accounts of investment funds
and other clients under
S-20
the management of Morgan Stanley and for the accounts of its
customers and accordingly, may at any time hold a long or short
position in such securities or indebtedness for any such account.
Under the terms of its engagement letter, Morgan Stanley
provided URS financial advisory services and a financial opinion
in connection with the merger. Pursuant to the terms of this
engagement letter, URS has agreed to pay Morgan Stanley and its
affiliates advisory and financing fees currently estimated at
$30 million, of which $2 million was paid upon the
announcement of the transaction, and the remainder of which is
contingent upon closing of the transaction. URS has also entered
into a financing commitment letter with an affiliate of Morgan
Stanley to provide 50% of a senior secured debt financing in
connection with the transaction, for which the affiliate will
receive the financing portion of the aforementioned fees upon
the closing of the transaction. URS has also agreed to reimburse
Morgan Stanley for its fees and expenses incurred in performing
its services. In addition, URS has agreed to indemnify Morgan
Stanley and any of its affiliates, their respective directors,
officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities
under the federal securities laws relating to or arising out of
its engagement and any related transactions. In the past, Morgan
Stanley and its affiliates have provided financial advisory and
financing services for URS and have received fees for the
rendering of these services. Other than the fees disclosed
above, since August 15, 2005, Morgan Stanley has not
received any investment banking fees from URS or its affiliates.
Opinion
of Washington Groups Financial Advisor
Goldman,
Sachs & Co.
At the meeting of Washington Groups board of directors on
November 4, 2007, Goldman Sachs delivered its oral opinion,
which opinion was later confirmed in writing, that, as of
November 4, 2007 and based upon and subject to the factors
and assumptions set forth in such opinion, the mixed merger
consideration, all-cash consideration and all-stock
consideration to be received by holders of Washington Group
common stock, taken in the aggregate, pursuant to the merger
agreement, as amended, is fair from a financial point of view to
such holders.
The full text of the written opinion of Goldman Sachs, dated
November 4, 2007, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex D. Goldman Sachs provided its opinion for the
information and assistance of Washington Groups board of
directors in connection with its consideration of the
transaction. The Goldman Sachs opinion is not a recommendation
as to how any holder of Washington Group common stock should
vote with respect to the transaction.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
|
|
|
|
|
the merger agreement, as amended;
|
|
|
|
the annual reports to stockholders and Annual Reports on
Form 10-K
of Washington Group and URS for the five fiscal years ended
December 29, 2006;
|
|
|
|
certain interim reports to stockholders and Quarterly Reports on
Form
10-Q
of
Washington Group and URS;
|
|
|
|
certain other communications from Washington Group and URS to
their respective stockholders;
|
|
|
|
certain internal financial analyses and forecasts for Washington
Group and URS prepared by their respective managements,
including certain cost savings and operating synergies projected
by the managements of Washington Group and URS; and
|
|
|
|
certain research analyst reports with respect to Washington
Group and URS, including reports issued subsequent to
May 27, 2007, the date on which the transaction was
announced.
|
Goldman Sachs also held discussions with members of the senior
managements of Washington Group and URS regarding their
assessment of the strategic rationale for, and the potential
benefits of, the transaction and the past and current business
operations, financial condition, and future prospects of their
respective companies. In
S-21
addition, Goldman Sachs reviewed the reported price and trading
activity for shares of Washington Group common stock and URS
common stock, compared certain financial and stock market
information for Washington Group and URS with similar financial
and stock market information for certain other companies the
securities of which are publicly traded, and reviewed the
financial terms of certain recent business combinations in the
engineering and construction industry specifically and in other
industries generally and performed such other studies and
analyses, and considered such other factors, as it considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all
of the financial, legal, accounting, tax and other information
discussed with or reviewed by it and assumed such accuracy and
completeness for purposes of rendering the opinion described
above. In that regard, Goldman Sachs assumed that the internal
financial analyses and forecasts, including certain cost savings
and operating synergies, were reasonably prepared on a basis
reflecting the best then available estimates and judgments of
the managements of Washington Group and URS, as the case may be.
In addition, Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities (including
any contingent, derivative or off-balance-sheet assets and
liabilities) of Washington Group and URS or any of their
respective subsidiaries, nor was any evaluation or appraisal of
the assets or liabilities of Washington Group and URS or any of
their respective subsidiaries furnished to Goldman Sachs.
Goldman Sachs opinion does not address any legal,
regulatory, tax or accounting matters, and did not address the
underlying business decision of Washington Group to engage in
the transaction or the relative merits of the transaction as
compared to any alternative business strategies or transactions
that might be available to Washington Group. In addition,
Goldman Sachs opinion does not express any opinion as to
the prices at which the common stock of URS will trade at any
time. The Goldman Sachs opinion was approved by a fairness
committee of Goldman Sachs.
The following is a summary of the material financial analyses
delivered by Goldman Sachs to the board of directors of
Washington Group in connection with rendering the opinion
described above. The following summary, however, does not
purport to be a complete description of the financial analyses
performed by Goldman Sachs, nor does the order of analyses
described represent relative importance or weight given to those
analyses by Goldman Sachs. Some of the summaries of the
financial analyses include information presented in tabular
format. The tables must be read together with the full text of
each summary and are alone not a complete description of Goldman
Sachs financial analyses. Except as otherwise noted, the
following quantitative information, to the extent that it is
based on market data, is based on market data as it existed on
or before November 4, 2007, and is not necessarily
indicative of current market conditions.
Implied Premiums and Multiples.
Goldman Sachs
performed certain analyses, based on historical information, SEC
filings, estimates supplied by Institutional Brokers
Estimate System or IBES, a data service that compiles estimates
issued by securities analysts, and forecasts provided by
management of Washington Group, (i) at the undisturbed
closing market price as of May 25, 2007 of $69.97 per
share of Washington Group common stock, (ii) at the implied
transaction price under the unamended merger agreement, as of
May 25, 2007, of $80.00 per share, consisting of $43.80 in
cash and 0.772 shares of URS common stock for each share of
Washington Group common stock, (iii) at the implied
transaction price under the unamended merger agreement, as of
November 2, 2007, of $90.20 per share, consisting of
$43.80 in cash and 0.772 shares of URS common stock for
each share of Washington Group common stock, and (iv) at
the implied transaction price of the amended merger agreement,
as of November 2, 2007, of $97.89 per share,
consisting of $43.80 in cash and 0.900 shares of URS common
stock for each share of Washington Group common stock. Using
these share prices, Goldman Sachs calculated an implied equity
value for Washington Group. Goldman Sachs added to this implied
equity value the net debt to be incurred as part of the
transaction to derive an implied enterprise value of Washington
Group. Based on these calculations, Goldman Sachs calculated the
multiples described below:
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|
|
|
Washington Groups implied enterprise value as a multiple
of Washington Groups managements estimates of its
earnings before interest, taxes, depreciation and amortization,
or EBITDA, for the 2007 and 2008 fiscal years and as a multiple
of the estimates of Washington Groups EBITDA for the 2007
and 2008 fiscal years based on estimates supplied by
IBES; and
|
|
|
|
Washington Groups implied price as a multiple of
Washington Groups managements estimates of its
earnings per share, which is referred to as EPS, for the 2007
and 2008 fiscal years and as a multiple of the
|
S-22
|
|
|
|
|
estimates of Washington Groups EPS for the 2007 and 2008
fiscal years based on estimates supplied by IBES.
|
The following table presents the results of Goldman Sachs
analysis (dollar amounts in millions, except for purchase price
per share):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Based on an
|
|
|
Based on an
|
|
|
Based on an
|
|
|
|
|
|
|
Implied Total
|
|
|
Implied Total
|
|
|
Implied Total
|
|
|
|
|
|
|
per Share
|
|
|
per Share
|
|
|
per Share
|
|
|
|
|
|
|
Consideration
|
|
|
Consideration of
|
|
|
Consideration
|
|
|
|
Based on
|
|
|
of $80.00
|
|
|
of $90.20
|
|
|
of $97.89
|
|
|
|
Washington
|
|
|
(Unamended
|
|
|
(Unamended
|
|
|
(Amended
|
|
|
|
Group Closing
|
|
|
Merger
|
|
|
Merger
|
|
|
Merger
|
|
|
|
Stock Price of
|
|
|
Proposal as of
|
|
|
Proposal as
|
|
|
Proposal as of
|
|
|
|
$69.97 on May 25,
|
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|
May 27,
|
|
|
of November 4,
|
|
|
November 4,
|
|
|
|
2007
|
|
|
2007)
|
|
|
2007)
|
|
|
2007)
|
|
|
Premium as a % of Washington Group Closing Stock Price as of:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 25, 2007
|
|
|
N/A
|
|
|
|
14
|
%
|
|
|
29
|
%
|
|
|
40
|
%
|
November 2, 2007
|
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|
N/A
|
|
|
|
N/A
|
|
|
|
(6
|
)%
|
|
|
2
|
%
|
Implied Equity Value
|
|
$
|
2,232
|
|
|
$
|
2,577
|
|
|
$
|
2,931
|
|
|
$
|
3,195
|
|
Implied Enterprise Value
|
|
$
|
2,058
|
|
|
$
|
2,403
|
|
|
$
|
2,734
|
|
|
$
|
2,999
|
|
Implied Enterprise Value/EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2007E IBES
|
|
|
11.9
|
x
|
|
|
13.9
|
x
|
|
|
14.7
|
x
|
|
|
16.1
|
x
|
FY 2008E IBES
|
|
|
10.4
|
x
|
|
|
12.1
|
x
|
|
|
13.0
|
x
|
|
|
14.2
|
x
|
FY 2007E Management
|
|
|
10.8
|
x
|
|
|
12.6
|
x
|
|
|
12.9
|
x
|
|
|
14.1
|
x
|
FY 2008E Management
|
|
|
9.1
|
x
|
|
|
10.6
|
x
|
|
|
12.1
|
x
|
|
|
13.3
|
x
|
Price/EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2007E IBES
|
|
|
24.4
|
x
|
|
|
27.9
|
x
|
|
|
27.1
|
x
|
|
|
29.4
|
x
|
FY 2008E IBES
|
|
|
20.2
|
x
|
|
|
23.1
|
x
|
|
|
24.1
|
x
|
|
|
26.2
|
x
|
FY 2007E Management
|
|
|
23.8
|
x
|
|
|
27.2
|
x
|
|
|
28.1
|
x
|
|
|
30.4
|
x
|
FY 2008E Management
|
|
|
19.4
|
x
|
|
|
22.1
|
x
|
|
|
25.0
|
x
|
|
|
27.1
|
x
|
Comparison of Selected Companies.
Goldman
Sachs reviewed and compared certain financial information for
Washington Group and URS to corresponding financial information,
ratios and public market multiples for the following publicly
traded corporations in the engineering and construction industry:
|
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|
|
Fluor Corporation;
|
|
|
|
Jacobs Engineering Group Inc.;
|
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|
|
The Shaw Group Inc.;
|
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|
|
Chicago Bridge & Iron Company, N.V.;
|
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|
EMCOR Group, Inc.;
|
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|
|
Granite Construction Inc.;
|
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|
|
McDermott International, Inc.; and
|
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|
Foster Wheeler Ltd.
|
Although none of the selected companies is directly comparable
to Washington Group or URS, the companies included were chosen
because they are publicly traded companies with operations that
for purposes of analysis may be considered similar to certain
operations of Washington Group and URS.
Goldman Sachs also calculated and compared various financial
multiples and ratios based on financial data as of
November 2, 2007, information it obtained from SEC filings
and IBES estimates. The multiples and ratios of Washington Group
were calculated using Washington Groups closing price on
November 2, 2007 and the multiples
S-23
and ratios of URS were calculated using the URS closing price on
November 2, 2007. The multiples and ratios of Washington
Group, URS and each of the selected companies were based on
company reports, SEC filings and IBES estimates as of
November 2, 2007. With respect to the selected companies,
Goldman Sachs calculated, on a fully diluted basis:
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|
|
|
Enterprise value as a multiple of estimated calendar year 2008
EBITDA; and
|
|
|
|
Price per share of Washington Group common stock as a multiple
of estimated 2008 EPS.
|
The results of these analyses are summarized as follows:
|
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|
|
|
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|
|
|
|
|
|
|
|
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|
|
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|
|
Selected Companies
|
|
|
Washington Group
|
|
|
URS
|
|
|
|
|
|
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|
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|
as of
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|
|
|
|
as of
|
|
|
|
|
|
|
|
|
|
November 2,
|
|
|
at $97.89
|
|
|
November 2,
|
|
Trading Multiple
|
|
Range
|
|
|
Median
|
|
|
2007
|
|
|
per share
|
|
|
2007
|
|
|
Enterprise Value/2008E EBITDA
|
|
|
5.5x 18.1
|
x
|
|
|
13.6
|
x
|
|
|
14.1
|
x
|
|
|
14.2
|
x
|
|
|
10.0
|
x
|
Price/2008E EPS
|
|
|
12.4x 28.5
|
x
|
|
|
22.9
|
x
|
|
|
25.7
|
x
|
|
|
26.2
|
x
|
|
|
20.6
|
x
|
Illustrative Analysis of Potential Future Stock
Price.
Goldman Sachs performed an illustrative
analysis of the standalone present value of potential future
trading prices of Washington Group common stock by applying
selected ranges of multiples to estimates of EPS of Washington
Group based on management forecasts of Washington Group provided
by the management of Washington Group and estimates provided by
IBES. In performing this analysis, Goldman Sachs applied
multiples ranging from 18x to 25x, based upon a review of
current and historical multiples of price to EPS estimates
provided by IBES of certain publicly traded corporations in the
engineering and construction industry, including those with and
without significant oil and gas exposure, to Washington
Groups estimated EPS for fiscal years 2008 and 2009. Based
on the implied future share prices derived from the range of
multiples noted above as well as the EPS estimates for
Washington Group, Goldman Sachs calculated the present values of
the resulting implied per share equity values using a discount
rate of 9.5%. The results of this analysis are summarized below:
|
|
|
|
|
|
|
Implied Present
|
|
|
|
Value to Washington
|
|
|
|
Group Stockholders
|
|
|
Implied Present Value to Washington Group Stockholders
|
|
|
|
|
Based on 2008E EPS
|
|
$
|
65.02 - $93.38
|
|
Based on 2009E EPS at a 9.5% Discount Rate
|
|
$
|
65.75 - $96.52
|
|
Discounted Cash Flow Analysis.
Goldman Sachs
performed an illustrative discounted cash flow analysis on
Washington Group using Washington Groups management
forecasts to determine indications of implied total equity
values per share of Washington Group common stock based on the
present value as of December 31, 2007 of the standalone,
unlevered, after-tax estimated future free cash flows of
Washington Group and net operating losses for United States
federal income tax purposes, which are referred to as NOLs,
available to Washington Group (including indications of value
ranging from $4.61 to $4.75 per share for tax savings from
goodwill deductibility and NOL carryforwards that were
incorporated into the range of implied present values of the
total equity value per share of Washington Group common stock).
In performing the discounted cash flow analysis, Goldman Sachs
calculated illustrative terminal values based upon free cash
flow perpetuity growth rates ranging from 2.5% to 4.0%, and
discounted all free cash flows to December 31, 2007 using
discount rates ranging from 9.0% to 10.0%, reflecting estimates
of the weighted average cost of capital for Washington Group.
This analysis resulted in a range of implied present values of
the total equity value per share of Washington Group common
stock of $69.59 to $92.61. The illustrative terminal value
calculations indicated a range of implied last twelve months
EBITDA multiples of 6.9x to 10.4x and a range of implied forward
price/earnings multiples of 14.8x to 21.7x. The calculations of
implied multiples did not include the value related to tax
savings from goodwill deductibility and NOL carryforwards. The
mean of Washington Groups last twelve months EBITDA
multiples from July 2002 through May 2007 was 6.0x and the mean
of industry composite last twelve months EBITDA multiples over a
10-year
period ending May 2007 was 8.7x. Using the same range of
perpetuity growth rate assumptions, assuming a discount rate of
9.5%, and applying annual percentage increases and decreases to
Washington Groups managements estimates of earnings
before interest and taxes (EBIT) from (5.0)% to 15.0%, Goldman
Sachs also
S-24
performed an illustrative sensitivity analysis and calculated
the implied present values of the total equity value of
Washington Group common stock of $70.49 to $96.46. Goldman Sachs
noted that the 2008 IBES earnings per share estimate for
Washington Group as of November 2, 2007 was approximately
8% above the 2008 IBES earnings per share estimate for Washinton
Group as of May 25, 2007.
Premium Analysis at Implied Offer
Price.
Goldman Sachs calculated the implied
premium for Washington Group common stock represented by the
implied consideration of $97.89 per share, as of
November 2, 2007, of Washington Group common stock,
consisting of $43.80 cash and 0.900 shares of URS common
stock for each share of Washington Group common stock, and based
on the volume-weighted average closing prices of Washington
Group common stock on May 25, 2007 and the closing price of
URS common stock on November 2, 2007 and during the
one-month, three-month, six-month, twelve-month and three-year
periods ended May 25, 2007.
The results of Goldman Sachs calculations are reflected
below:
|
|
|
|
|
|
|
|
|
|
|
Volume-
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Implied
|
|
Day/Period:
|
|
Price
|
|
|
Premium
|
|
|
May 25, 2007
|
|
$
|
69.97
|
|
|
|
39.9
|
%
|
Three-Month Average
|
|
$
|
65.57
|
|
|
|
49.3
|
%
|
Six-Month Average
|
|
$
|
62.80
|
|
|
|
55.9
|
%
|
Twelve-Month Average
|
|
$
|
59.64
|
|
|
|
64.1
|
%
|
Three-Year Average
|
|
$
|
51.50
|
|
|
|
90.1
|
%
|
Precedent Premiums Analysis.
Goldman Sachs
also analyzed the premiums for selected precedent transactions
involving U.S. targets acquired for between $1 billion
and $5 billion in transaction value since May 2005 in which
the consideration included a cash component. Goldman Sachs
analyzed such premiums as of one day, one week and four weeks
prior to the announcement of the transaction. The results of
Goldman Sachs analysis are reflected below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of U.S. Targets from $1 Billion to $5 billion in
Transaction Value Since May 2005, based on Premium to Price
Prior to announcement:
|
|
% Premium
|
|
One Day
|
|
|
One Week
|
|
|
Four Weeks
|
|
|
<
0%
|
|
|
2
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
0-10%
|
|
|
23
|
%
|
|
|
19
|
%
|
|
|
12
|
%
|
10-25%
|
|
|
37
|
%
|
|
|
36
|
%
|
|
|
37
|
%
|
25-50%
|
|
|
31
|
%
|
|
|
36
|
%
|
|
|
39
|
%
|
> 50%
|
|
|
7
|
%
|
|
|
7
|
%
|
|
|
9
|
%
|
Selected Precedent Transactions
Analysis.
Goldman Sachs analyzed certain
information relating to the following selected transactions in
the engineering and construction industry since May 1999:
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Acquisition of ABB Lummus Global Inc. by Chicago
Bridge & Iron Company NV, announced on August 24,
2007;
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Acquisition of VECO by CH2M HILL, announced June 15, 2007
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Acquisition of Infrasource Services, Inc. by Quanta Services,
Inc., announced on March 19, 2007;
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Acquisition of Colt Engineering Corporation by WorleyParsons
Limited, announced on February 8, 2007;
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Acquisition of AMEC SPIE, SA by PAI Partners, announced on
May 22, 2006;
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Acquisition of DynCorp by The Veritas Capital Fund II,
L.P., announced on December 12, 2004;
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Acquisition of Parsons E&C Corporation by Worley Group
Limited, announced on October 7, 2004;
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Acquisition of Corsan-Corviam, SA by Isolux-Wat, SA, announced
on May 1, 2004;
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S-25
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Acquisition of Consolidated Engineering Services, Inc. by EMCOR
Group, Inc., announced on December 19, 2002;
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Acquisition of SPIE, SA (Remaining 54%) by AMEC, plc, announced
on December 5, 2002;
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Acquisition of Carlyle-EG&G Services, Inc. by URS Corp.,
announced on July 17, 2002;
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Acquisition of Bouygues Offshore, SA by Saipem S.p.A, announced
on May 8, 2002;
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Acquisition of Coflexip, SA by Technip, SA, announced on
July 3, 2001;
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Acquisition of Howe-Baker International, Inc. by Chicago
Bridge & Iron NV, announced on July 31, 2000;
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Acquisition of Stone & Webster, Inc. by Shaw Group,
Inc., announced on July 14, 2000;
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Acquisition of GTM Group, SA by Vinci, SA, announced on
July 13, 2000;
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Acquisition of Raytheon Engineers & Constructors
International, Inc. by Morrison Knudsen Corp., announced on
April 17, 2000;
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Acquisition of AGRA, Inc. by AMEC, plc, announced on
February 16, 2000;
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Acquisition of MYR Group, Inc. by GPU, Inc., announced on
December 22, 1999;
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Acquisition of Nichols Research Corp. by Computer Sciences
Corp., announced on September 20, 1999; and
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Acquisition of Dames & Moore Group by URS Corp.,
announced on May 5, 1999.
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For each of the selected transactions, Goldman Sachs calculated
and compared, based on company reports, public filings, press
releases, Wall Street research estimates and other public
sources, the transaction value as a multiple of EBITDA for the
latest twelve months and compared it against the multiples
implied for the proposed transaction.
The following table presents the results of this analysis:
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Proposed
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Selected Transactions
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Transaction
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Mean
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Median
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High
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Low
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Implied Transaction Value as a Multiple of LTM EBITDA
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16.7
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x
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8.5
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x
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8.7
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x
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17.1
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x
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4.0x
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Illustrative Pro Forma Merger
Analysis.
Goldman Sachs analyzed the potential
pro forma impact of the transaction on URS GAAP earnings
per share and cash earnings per share for the calendar years
2008 through 2009 based on (i) URS management forecasts
provided by the management of URS, Washington Group management
forecasts provided by the management of Washington Group and
(ii) IBES estimates for Washington Group and URS financial
forecasts, and in each case, using estimates of synergies
resulting from the merger provided by the managements of URS and
Washington Group and based on the closing prices per share of
URS and Washington Group common stock as of November 2,
2007, the 0.900 of a share of URS common stock and $43.80 in
cash to be received for each share of Washington Group common
stock pursuant to the merger agreement, as amended, the number
of shares and options to purchase shares of URS common stock
outstanding as of November 2, 2007 and the number of shares
and options to purchase shares of Washington Group common stock
outstanding as of November 2, 2007.
Based on the projections and estimates provided by the
management of URS and Washington Group, this analysis indicated
that the transaction would be 10% dilutive to URS
GAAP EPS and 2% accretive to URS cash EPS in 2008 and
3% dilutive to URS GAAP EPS and 8% accretive to
URS cash EPS in 2009. Based on the IBES estimates for
Washington Group and URS financial forecasts, this analysis
indicated that the transaction would be 4% dilutive to URS
GAAP EPS and 8.0% accretive to URS cash EPS in 2008
and 4% accretive to URS GAAP EPS and 14% accretive to
URS cash EPS in 2009.
Illustrative Pro Forma Future Stock
Price.
Goldman Sachs compared the illustrative
potential standalone stock price analysis to the present value
of the implied consideration to Washington Group stockholders
based on potential future trading prices of URS common stock,
incorporating the potential pro forma impact of the
S-26
transaction, by applying selected ranges of multiples to pro
forma estimates of EPS of URS based on (i) management
forecasts of Washington Group provided by the management of
Washington Group and management forecasts of URS provided by the
management of URS and (ii) IBES estimates for Washington
Group and URS financial forecasts. Goldman Sachs applied
multiples ranging from 18x to 23x to the pro forma estimates of
URS EPS for fiscal years 2008 and 2009. Based on the implied
future share prices derived from the range of multiples noted
above as well as the pro forma EPS estimates for URS, Goldman
Sachs calculated the present values of the resulting implied per
share consideration to Washington Group stockholders using
discount rates of 9.0% and 9.5%. The results of this analysis
are summarized below:
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Implied Present
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Value to Washington
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Group Stockholder
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Implied Present Value to Washington Group Stockholders
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Based on 2008E EPS
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$
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87.17-$102.00
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Based on 2009E EPS at a 9.0% 9.5% Discount Rate
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$
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92.01-$105.72
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The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Goldman Sachs opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of
all of its analyses and did not attribute any particular weight
to any factor or analysis considered by it. Rather, Goldman
Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the
results of all of its analyses. No company or transaction used
in the above analyses as a comparison is directly comparable to
Washington Group or URS or the contemplated transaction.
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs providing its opinion to Washington Groups
board of directors as to the fairness from a financial point of
view of the mixed merger consideration, all-cash consideration
and all-stock consideration to be received by holders of shares
of Washington Group common stock, taken in the aggregate,
pursuant to the merger agreement, as amended. These analyses do
not purport to be appraisals nor do they necessarily reflect the
prices at which businesses or securities actually may be sold.
Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by these
analyses. Because these analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond
the control of the parties or their respective advisors, none of
Washington Group, URS, Goldman Sachs or any other person assumes
responsibility if future results are materially different from
those forecast.
The consideration to be received by holders of shares of
Washington Group common stock pursuant to the merger agreement,
as amended, was determined through arms-length
negotiations between Washington Group and URS and was approved
by Washington Groups board of directors. Goldman Sachs
provided advice to Washington Group during these negotiations.
Goldman Sachs did not, however, recommend any specific exchange
ratio or amount of consideration to Washington Group or its
board of directors or that any specific exchange ratio or amount
of consideration constituted the only appropriate exchange ratio
or consideration for the transaction.
As described above, Goldman Sachs opinion to Washington
Groups board of directors was one of many factors taken
into consideration by Washington Groups board of directors
in making its determination to approve the merger agreement, as
amended. The foregoing summary describes the material analyses
underlying Goldman Sachs fairness opinion, but does not
purport to be a complete description of the analyses performed
by Goldman Sachs in connection with the fairness opinion and is
qualified in its entirety by reference to the written opinion of
Goldman Sachs attached as Annex D.
Goldman Sachs and its affiliates, as part of their investment
banking business, are continually engaged in performing
financial analyses with respect to businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and other transactions as well as for estate,
corporate and other purposes. Goldman Sachs has acted as
financial advisor to Washington Group in connection with, and
has participated in certain of the negotiations leading to, the
transaction contemplated by the merger agreement, as amended. In
addition, Goldman
S-27
Sachs has provided certain investment banking and other
financial services to Washington Group from time to time.
Goldman Sachs also may provide investment banking and other
financial services to Washington Group and URS in the future. In
connection with the above-described services, Goldman Sachs has
received, and may receive in the future, compensation. Except
for this transaction, the investment banking business of Goldman
Sachs has not had any material engagements with Washington Group
or any of its affiliates within the past two years for which it
has received or will receive fees for its services. Goldman
Sachs is not part of the syndicate providing financing to URS
for the proposed Merger.
Goldman Sachs is a full service securities firm engaged, either
directly or through its affiliates, in securities trading,
investment management, financial planning and benefits
counseling, risk management, hedging, financing and brokerage
activities for both companies and individuals. In the ordinary
course of these activities, Goldman Sachs and its affiliates may
provide such service to Washington Group, URS and their
respective affiliates, may actively trade the debt and equity
securities of Washington Group and URS (or related derivative
securities) for their own account and for the accounts of their
customers and may at any time hold long and short positions of
such securities.
The board of directors of Washington Group selected Goldman
Sachs as its financial advisor because it is an internationally
recognized investment banking firm that has substantial
experience in transactions similar to the transaction. Pursuant
to a letter agreement dated May 18, 2006, Washington Group
engaged Goldman Sachs to act as its financial advisor in
connection with the evaluation of potential strategic
transactions. Pursuant to the terms of this engagement letter,
Washington Group has agreed to pay Goldman Sachs a financial
advisory fee of $1.0 million that has become due and
payable (but will be credited against the payment of any
transaction fee), and a transaction fee, calculated based on the
aggregate consideration for the transaction, of approximately
$22.4 million, $5.4 million of which became payable
upon the public announcement of the transaction and the balance
of which is contingent upon consummation of the transaction. If
Goldman Sachs failed to deliver to Washington Groups board
of directors an opinion stating that the mixed merger
consideration, all-cash consideration and all-stock
consideration to be received by Washington Groups
stockholders in the merger was fair from a financial point of
view to such stockholders, it is unlikely that the board would
have approved the merger, preventing Goldman Sachss
transaction fee from becoming payable. In addition, Washington
Group has agreed to reimburse Goldman Sachs for its expenses,
including attorneys fees and disbursements, and to
indemnify Goldman Sachs and related persons against various
liabilities, including certain liabilities under the federal
securities laws.
Supplemental
Material United States Federal Income Tax Consequences
This discussion of supplemental United States federal income
tax consequences is a supplement to, and is intended to be read
together with, the discussion of Material United States
Federal Income Tax Consequences set forth in the
September 28 joint proxy statement/prospectus. The
qualifications and limitations set forth in such discussion are
applicable to this discussion.
In the September 28 joint proxy statement/prospectus, the
bullet-point list immediately following the sentence that reads,
Based on and subject to the foregoing, the material United
States federal income tax consequences of the merger transaction
to holders of Washington Group common stock will be as
follows is amended and restated as follows:
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a Washington Group stockholder who receives solely URS common
stock in the merger will not recognize gain or loss (except to
the extent the stockholder receives cash instead of a fractional
share of URS common stock, as discussed below);
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a Washington Group stockholder who receives solely cash in the
merger will recognize capital gain or loss in an amount equal to
the difference between such stockholders tax basis in the
Washington Group common stock exchanged in the merger and the
amount of cash received in the merger;
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a Washington Group stockholder who receives both URS common
stock and cash in the merger will recognize gain (but not loss)
with respect to its shares of Washington Group common stock in
an amount equal to the lesser of (i) any gain realized with
respect to such stock or (ii) the amount of cash received
with
|
S-28
respect to such stock (other than any cash received instead of a
fractional share of URS common stock). A holders gain
realized will equal the difference between the fair market value
of the URS common stock and cash received and such holders
tax basis in the Washington Group common stock surrendered. Any
such gain recognized will be a capital gain;
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a Washington Group stockholders aggregate tax basis for
the shares of URS common stock received in the merger (including
any fractional share interest for which cash is received) will
equal the stockholders aggregate tax basis in the shares
of Washington Group common stock surrendered upon completion of
the merger, increased by any gain recognized by such holder in
the merger (other than gain resulting from the receipt of cash
instead of a fractional share of URS common stock) and reduced
by the amount of any cash received in the merger (other than any
cash received instead of a fractional share of URS common stock);
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a Washington Group stockholders holding period for the
shares of URS common stock received in the merger (including any
fractional share interest for which cash is received) will
include the period during which the shares of Washington Group
common stock surrendered in the merger were held; and
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a Washington Group stockholder who receives cash instead of a
fractional share of URS common stock in the merger will
recognize capital gain or loss in an amount equal to the
difference between the amount of cash received instead of a
fractional share and the stockholders adjusted tax basis
allocable to such fractional share.
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Any stockholder who wishes to assert appraisal rights should not
submit an election form, as doing so will be considered a
withdrawal of any previously filed written demand for appraisal.
For additional information regarding appraisal rights, see
The Merger Appraisal Rights, beginning
on page 91 of the September 28 joint proxy
statement/prospectus.
Interests
of Washington Groups Directors and Executive Officers in
the Merger
In considering the recommendation of the Washington Group board
of directors with respect to the merger agreement, Washington
Group stockholders should be aware that some of the Washington
Group directors and executive officers have interests in the
merger and have arrangements that are different from, or in
addition to, those of Washington Group stockholders generally.
These interests and arrangements may create potential conflicts
of interest. The Washington Group board of directors was aware
of these potential conflicts of interest and considered them,
among other matters, in reaching its decisions to approve and
adopt the merger agreement and to recommend that Washington
Group stockholders vote in favor of adopting the merger
agreement and approving the merger.
Stock
Options, Restricted Stock, Deferred Shares and Performance
Units
Stock
Options
Immediately following the completion of the merger, each
outstanding option to acquire shares of Washington Group common
stock, whether or not vested, that remains outstanding as of the
closing of the merger will be cancelled and converted into the
right to receive either cash or URS common stock or a
combination of cash and URS common stock as described in
The Amendment to the Merger Agreement Increase
in Option Consideration on
page S-33
and The Amendment to the Merger Agreement
Proration of the Stock and Cash Elections beginning on
page S-33.
The cash and shares payable pursuant to the preceding sentence
will be subject to any applicable withholding taxes. Immediately
after the merger is completed, any cancelled option will no
longer be exercisable by its former holder, but will only
entitle the holder to the payment of the option consideration.
Deferred
Shares
Upon the completion of the merger, each deferred share of
Washington Group will be converted into the right to receive
$97.89 in cash, payable on a deferred basis at the time that the
underlying deferred shares would have
S-29
been settled under their terms as in effect immediately prior to
the effective time of the merger, plus earnings thereon as
described in the merger agreement.
Consideration
to be Received by Directors and Executive Officers
The following table reflects the amounts described above and
under The Merger Interests of Washington
Groups Directors and Executive Officers in the
Merger beginning on page 95 of the September 28 joint
proxy statement/prospectus, with respect to each of Washington
Groups directors and executive officers as a result of the
merger.
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Value of
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WGI Restricted
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Consideration in
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Stock that Will Vest
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Cash Proceeds in
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Cash Proceeds in
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Respect of WGI
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and Receive Merger
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Respect of WGI
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Respect of WGI
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Cost of Cash
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Unvested Options
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Consideration
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Deferred Shares
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Performance Units
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Severance Benefits
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$(1)
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#
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$
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$
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$(2)
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Stephen G. Hanks
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4,362,208
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52,400
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5,305,000
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7,150,110
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(3)
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George H. Juetten
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1,124,508
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14,100
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759,626
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2,378,630
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2,731,315
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Stephen M. Johnson
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1,480,968
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18,350
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3,036,375
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2,999,384
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Thomas H. Zarges
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1,293,572
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16,100
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619,056
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2,675,655
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2,999,384
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Louis E. Pardi
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717,334
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9,275
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1,567,813
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2,073,329
|
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Larry L. Myers
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382,350
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4,763
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277,910
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800,670
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1,732,151
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Richard D. Parry
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337,230
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4,100
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212,519
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683,170
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1,659,041
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Frank S. Finlayson
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331,668
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4,250
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711,183
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640,600
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Cynthia Stinger
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229,054
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2,850
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456,628
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525,402
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Jerry K. Lemon
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223,042
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2,763
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453,128
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472,090
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Craig G. Taylor
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117,416
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1,450
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247,860
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422,737
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John R. Alm
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268,316
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David H. Batchelder
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563,455
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Michael L. DAppolonia
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563,455
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Scott Greer
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563,455
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Gail E. Hamilton
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380,401
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William H. Mallender
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563,455
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Michael P. Monaco
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563,455
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Cordell Reed
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563,455
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Dennis R. Washington
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Dennis K. Williams
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563,455
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(1)
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Based on the number of unvested options to acquire Washington
Group common stock that will vest in the merger and the weighted
average exercise price of each option.
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(2)
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Assumes the merger is completed on November 15, 2007 and
that thereafter each executive officers employment is
terminated on that date by Washington Group without cause or
voluntarily terminated on that date by the executive officer for
good reason.
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(3)
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Includes a payment of $2,035,000 in respect of
Mr. Hanks covenant not to compete with Washington
Group for a period of at least twelve months following a
qualifying termination of employment.
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S-30
THE
AMENDMENT TO THE MERGER AGREEMENT
The following summary describes the amendment to the merger
agreement and the material effect of the amendment on the
original terms of the merger. The amendment to the merger
agreement is included as Annex A and is incorporated by
reference into this supplement. This summary may not contain all
of the information about the amendment to the merger agreement
that is important to you. You are encouraged to read the
amendment to the merger agreement carefully in its entirety.
The September 28 joint proxy statement/prospectus includes the
original merger agreement as an annex and also includes a
summary of the merger agreement, beginning on page 100 of
the September 28 joint proxy statement/prospectus.
Increase
in Merger Consideration; Stock and Cash Elections
The amendment to the merger agreement provides for an increase
in the merger consideration to be received by Washington Group
stockholders in the merger. In addition, under the merger
agreement, as amended, each Washington Group stockholder will
have the right to elect to receive, for each Washington Group
share owned:
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a combination of 0.90 of a share of URS common stock and $43.80
in cash, which is referred to as the mixed merger consideration;
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an amount in cash, without interest, equal to the sum of
(i) $43.80 and (ii) 0.90 multiplied by the Volume
Weighted Average Price, which sum we refer to as the maximum per
share cash amount; or
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a number of shares equal to the sum of (i) 0.90 and
(ii) $43.80 divided by the Volume Weighted Average Price,
which sum we refer to as the maximum per share stock amount.
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Washington Group stockholders may elect to receive one of these
three categories of merger consideration. Washington Group
stockholders that do not make either an all-cash or an all-stock
election will automatically receive the mixed merger
consideration, except with respect to shares as to which they
have validly demanded and perfected appraisal rights under
Delaware law. Election materials are included in this package.
Proration
of the Stock and Cash Elections By Stockholders
URS will pay Washington Group stockholders an overall per-share
mix of 0.90 of a share of URS common stock and $43.80 in cash
for each outstanding share of Washington Group common stock
taken together, providing for a blended merger consideration
value of approximately $98.98 per share of Washington Group
common stock based on the volume weighted average trading prices
of URS common stock on November 2, 2007. The aggregate
amount of URS common stock that will be issued in the merger to
holders of Washington Group common stock will be equal to 0.90
multiplied by the total number of shares of Washington common
stock outstanding immediately prior to completion of the merger,
other than those shares held by URS or any subsidiary of URS,
treasury shares and shares as to which a Washington Group
stockholder has validly demanded and perfected appraisal rights
under Delaware law. The aggregate amount of cash that will be
paid to holders of Washington Group common stock in the merger
will be equal to $43.80 multiplied by the total number of shares
of Washington Group common stock outstanding immediately prior
to completion of the merger, other than those shares held by URS
or any subsidiary of URS, treasury shares and shares as to which
a Washington Group stockholder has validly demanded and
perfected appraisal rights under Delaware law, which we refer to
as the aggregate cash amount. Based on the outstanding shares
and equity awards of Washington Group as of November 2,
2007, in the aggregate, Washington Group shares and equity
awards will be converted into approximately $1.4 billion in
cash and approximately 29.4 million shares of URS common
stock.
Although Washington Group stockholders who elect the mixed
merger consideration will not be subject to proration, all-stock
and all-cash elections are subject to proration to preserve an
overall per share mix of 0.90 of a share of URS common stock and
$43.80 in cash for all of the outstanding shares of Washington
Group common stock taken together. Assuming, for this purpose
only, a Volume Weighted Average Price of $61.3165, proration
will occur for Washington Group stockholders making all-cash
elections if the number of all-cash elections make up more than
approximately 45% of the total number of all-cash and all-stock
elections. However, in all cases,
S-31
Washington Group stockholders who make the all-cash election
will receive at least as much cash as is received by
stockholders electing the mixed merger consideration. Similarly,
assuming, for this purpose only, a Volume Weighted Average Price
of $61.3165, proration will occur for Washington Group
stockholders making all-stock elections if the number of
all-stock elections make up more than approximately 55% of the
total number of all-cash and all-stock elections. However, in
all cases, Washington Group stockholders who make the all-stock
election will receive at least as much stock as is received by
stockholders electing the mixed merger consideration.
We illustrate below how the proration mechanism will be used and
calculated.
Proration
If Too Much Cash Is Elected By Stockholders
Assuming a Volume Weighted Average Price of $61.3165, if the
number of all-cash elections make up more than approximately 45%
of the total number of all-cash and all-stock elections,
Washington Group stockholders making an all-cash election will
not receive the maximum per share cash amount for each share of
Washington Group common stock, but instead will receive a mix of
stock and cash calculated in the following manner:
Step 1:
Derive the available cash election
amount
: The available cash election amount is equal to the
aggregate cash amount minus the amount of cash to be paid in
respect of shares of Washington Group common stock as to which a
valid election for the mixed merger consideration was made or is
deemed to have been made.
Step 2:
Derive the all-cash elected
amount
: The all-cash elected amount is an amount equal to
$98.98 multiplied by the number of shares of Washington Group
common stock as to which a valid all-cash election was made. If
the all-cash elected amount exceeds the available cash election
amount, then steps 3 through 6 below will be completed. However,
if the available cash election amount exceeds the all-cash
elected amount, then steps 3 through 6 below will not be
completed because Washington Group stockholders making an
all-cash election
will
receive the maximum per share cash
amount.
Step 3:
Derive the cash proration
factor
: The cash proration factor equals the available
all-cash election amount divided by the all-cash elected amount.
Step 4:
Derive the prorated cash merger
consideration
: The prorated cash merger consideration is an
amount in cash equal to $98.98 multiplied by the cash proration
factor.
Step 5:
Derive the prorated stock merger
consideration
: The prorated stock merger consideration is an
amount of shares of URS common stock equal to product of
(i) the maximum per share stock amount multiplied by
(ii) one (1) minus the cash proration factor.
Step 6:
Determine the stock and cash
mix
: Each share of Washington Group common stock as to which
a valid all-cash election was made will be converted into the
right to receive the prorated cash merger consideration and the
prorated stock merger consideration.
Proration
If Too Many Shares of URS Common Stock Are Elected By
Stockholders
Assuming a Volume Weighted Average Price of $61.3165, if the
number of all-stock elections make up more than approximately
55% of the total number of all-cash and all-stock elections,
Washington Group stockholders making an all-stock election will
not receive the maximum per share stock amount for each share of
Washington Group common stock, but instead will receive a mix of
stock and cash calculated in the following manner:
Step 1:
Derive the available cash election
amount
: The available cash election amount is equal to the
aggregate cash amount minus the amount of cash to be paid in
respect of shares of Washington Group common stock as to which a
valid election for the mixed merger consideration was made or is
deemed to have been made.
Step 2:
Derive the all-cash elected
amount
: The all-cash elected amount is an amount equal to
$98.98 multiplied by the number of shares of Washington Group
common stock as to which a valid all-cash election was made. If
the available cash election amount exceeds the all-cash elected
amount, then steps 3 through 6 below will be completed. However,
if the all-cash elected amount exceeds the available cash
election amount,
S-32
then steps 3 through 6 below will not be completed because
Washington Group stockholders making an all-stock election
will
receive the maximum per share stock amount.
Step 3:
Derive the excess cash amount
:
The excess cash amount is the difference between the available
cash election amount and the all-cash elected amount.
Step 4:
Derive the prorated cash merger
consideration
: The prorated cash merger consideration is an
amount in cash equal to the excess cash amount divided by the
number of shares of Washington Group common stock as to which a
valid all-stock election was made.
Step 5:
Derive the stock proration
factor
: The stock proration factor is a fraction the
numerator of which is equal to $98.98 minus the per share
prorated cash consideration calculated in Step 4 and the
denominator of which is $98.98.
Step 6:
Derive the prorated stock merger
consideration
: The prorated stock merger consideration is a
number of shares of URS common stock equal to the product of the
maximum per share stock amount multiplied by the stock proration
factor.
Step 7:
Determine the stock and cash
mix
: Each share of Washington Group common stock as to which
a valid all-stock election was made will be converted into the
right to receive the prorated cash merger consideration and the
prorated stock merger consideration.
Increase
in Option Consideration; Stock and Cash Elections
The amendment to the merger agreement provides for an increase
in the consideration to be received by Washington Group
optionholders in the merger. Under the amended merger agreement,
immediately following the completion of the merger, each
outstanding option to acquire shares of Washington Group common
stock, whether or not vested, that remains outstanding as of the
effective time of the merger will be cancelled and converted
into the right to receive the option consideration,
which equals the product of (1) the number of shares of
Washington Group common stock subject to such option and
(2) the excess, if any, of $97.89 over the exercise price
per share of Washington Group common stock subject to the
option. Under the amended merger agreement, each Washington
Group optionholder, other than Dennis Washington, will have the
right to elect to receive the option consideration, for each
cancelled Washington Group option owned, in:
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a combination of (i) an amount in cash, without interest,
equal to the option consideration multiplied by 0.4474, which
amount in cash is referred to as the per option mixed cash
consideration, and (ii) a number of shares of URS
common stock equal to the option consideration less the cash
payable pursuant to the preceding clause (i), divided by $60.10,
which combination is referred to as the per option mixed
consideration;
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an amount in cash, without interest, equal to the option
consideration; or
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a number of shares equal to the option consideration divided by
$60.10.
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Washington Group optionholders, other than Mr. Washington,
may elect to receive one of these three categories of option
consideration. Mr. Washington will not be entitled to make
an election with respect to any cancelled options held by him
after the effective time of the merger. Instead, under the
merger agreement, as amended, any cancelled option held by
Mr. Washington will be exchanged only for the combination
of cash and stock, as if Mr. Washington had elected the per
option mixed consideration. Washington Group optionholders that
do not make either an all-cash or an all-stock election will
automatically receive the mixed option consideration. Election
materials are included in this package.
Proration
of the Stock and Cash Elections By Optionholders
Of the aggregate option consideration that URS will pay to
Washington Group optionholders, 44.74% will be paid in cash and
the remaining 55.26% will be paid in shares of URS stock. In the
aggregate, URS will issue approximately 3.0 million shares
of URS common stock and pay approximately $144.5 million in
cash to Washington Group optionholders in the merger.
S-33
Although Washington Group optionholders who elect the mixed
option consideration will not be subject to proration, all-stock
and all-cash elections are subject to proration to preserve an
overall allocation of 44.74% of the aggregate option
consideration being paid in cash and the remaining 55.26% of the
aggregate option consideration being paid in shares of URS
common stock. Assuming, for this purpose only, that shares of
URS common stock are valued at $60.10 per share, proration will
occur for Washington Group optionholders making all-cash
elections if the aggregate option consideration represented by
the number of all-cash elections makes up more than
approximately 44.74% of the total number of all-cash and
all-stock elections. However, in all cases, Washington Group
optionholders who make the all-cash election will receive at
least as much cash as is received by optionholders electing the
mixed merger consideration. Similarly, assuming, for this
purpose only, that shares of URS common stock are valued at
$60.10 per share, proration will occur for Washington Group
optionholders making all-stock elections if the aggregate option
consideration represented by the number of all-stock elections
makes up more than approximately 55.26% of the aggregate option
consideration represented by the total number of all-cash and
all-stock elections. However, in all cases, Washington Group
optionholders who make the all-stock election will receive at
least as much stock as is received by optionholders electing the
mixed merger consideration.
We illustrate below how the option consideration proration
mechanism will be used and calculated.
Proration
If Too Much Cash Is Elected By Optionholders
Assuming that shares of URS common stock are valued at $60.10
per share, if the aggregate option consideration represented by
the number of all-cash elections make up more than approximately
44.74% of the aggregate option consideration represented by the
total number of all-cash and all-stock elections, Washington
Group optionholders making an all-cash election will not receive
an amount in cash, without interest, equal to the option
consideration for each cancelled Washington Group option, but
instead will receive a mix of stock and cash calculated in the
following manner:
Step 1: Derive the available cash option election
amount
: The available cash option election amount is equal
to the aggregate amount of per option mixed cash consideration
that would be payable to holders of mixed election options if
all cancelled Washington Group options were converted into mixed
election options, minus the aggregate amount of per option mixed
cash consideration payable to all holders of mixed election
options.
Step 2: Derive the all-cash option elected
amount
: The all-cash option elected amount is equal to the
aggregate amount of option consideration payable to all holders
that made an all-cash election. If the all-cash option elected
amount exceeds the available cash option election amount, then
steps 3 through 6 below will be completed. However, if the
available cash option election amount exceeds the all-cash
option elected amount, then steps 3 through 6 below will not be
completed because Washington Group optionholders making an
all-cash election
will
receive an amount in cash, without
interest, equal to the option consideration for each cancelled
Washington Group option.
Step 3: Derive the option cash proration
factor
: The option cash proration factor equals the
available all-cash option election amount divided by the
all-cash option elected amount.
Step 4: Derive the prorated cash option
consideration
: The prorated cash option consideration is an
amount in cash equal to the option consideration multiplied by
the option cash proration factor.
Step 5: Derive the prorated stock option
consideration
: The prorated stock option consideration is an
amount of shares of URS common stock equal to product of
(i) the option consideration divided by $60.10, multiplied
by (ii) one (1) minus the option cash proration factor.
Step 6: Determine the stock and cash mix
: Each
cancelled Washington Group option as to which a valid all-cash
election was made will be converted into the right to receive
the prorated cash option consideration and the prorated stock
option consideration.
S-34
Proration
If Too Many Shares of URS Common Stock Are Elected By
Optionholders
Assuming that shares of URS common stock are valued at $60.10
per share, if the aggregate option consideration represented by
the number of all-stock elections makes up more than
approximately 55.26% of the aggregate option consideration
represented by the total number of all-cash and all-stock
elections, Washington Group optionholders making an all-stock
election will not receive an amount of shares of URS common
stock equal to the option consideration divided by $60.10 for
each cancelled Washington Group option, but instead will receive
a mix of stock and cash calculated in the following manner:
Step 1: Derive the available cash option election
amount
: The available cash option election amount is equal
to the aggregate amount of per option mixed cash consideration
that would be payable to holders of mixed election options if
all cancelled Washington Group options were converted into mixed
election options, minus the aggregate amount of per option mixed
cash consideration payable to all holders of mixed election
options.
Step 2: Derive the all-cash option elected
amount
: The all-cash option elected amount is equal to the
aggregate amount of option consideration payable to all holders
that made an all-cash election. If the available cash option
election amount exceeds the all-cash option elected amount, then
steps 3 through 6 below will be completed. However, if the
all-cash option elected amount exceeds the available cash option
election amount, then steps 3 through 6 below will not be
completed because Washington Group optionholders making an
all-stock election
will
receive a number of shares equal
to the option consideration divided by $60.10 for each cancelled
Washington Group option.
Step 3: Derive the excess cash option amount
:
The excess cash option amount is the difference between the
available cash option election amount and the all-cash option
elected amount.
Step 4: Derive the prorated cash option
consideration
: The prorated cash option consideration is an
amount in cash equal to the product of the excess cash option
amount multiplied by a fraction, the numerator of which shall be
the option consideration and the denominator of which shall be
the aggregate amount of option consideration payable to all
holders of stock election options.
Step 5: Derive the option proration factor
:
The option proration factor is a fraction, the numerator of
which is the option consideration minus the prorated cash option
consideration and the denominator of which is the option
consideration.
Step 6: Derive the prorated stock option
consideration
: The prorated stock option consideration is a
number of shares of URS common stock equal to the product of
(i) the option consideration divided by $60.10, multiplied
by (ii) the option proration factor.
Step 7: Determine the stock and cash mix
: Each
cancelled Washington Group option as to which a valid all-stock
election was made will be converted into the right to receive
the prorated cash option consideration and the prorated stock
option consideration.
S-35
THE
OPTION EXERCISE AND TRANSACTION SUPPORT AGREEMENT
The following summary describes the material provisions of the
option exercise and transaction support agreement, which is
referred to as the support agreement, entered into by URS,
Washington Group and Dennis Washington on November 4, 2007, and
which is included in this supplement as Annex B and is
incorporated by reference into this supplement. The summary may
not contain all of the information about the support agreement
that is important to you. You are encouraged to read the support
agreement in its entirety.
Pursuant to the support agreement, Mr. Washington agreed to
exercise his options and vote in favor of the merger if
necessary to achieve the required Washington Group stockholder
approval. The exercise price will be paid entirely in cash, with
the result that, following the exercise, he will have record and
beneficial ownership of 3,224,100 shares of Washington
Group common stock. Under the support agreement, he has also
agreed not to, directly or indirectly, sell, transfer, exchange
or otherwise dispose of any of his options or shares until the
earlier of the consummation of the proposed transaction and the
termination of the amended merger agreement. From and after the
exercise of his options, he has agreed to vote, his shares in
favor of the amended merger agreement and the approval of the
transactions contemplated thereby and against any proposal for
any recapitalization, merger, sale of assets or other business
combination between Washington Group and any person or entity
other than URS. He will be eligible to vote those shares on any
proposals at the special meeting if the special meeting is
adjourned or postponed again and a new record date is set for
the meeting. Under certain circumstances, at the request of URS,
Mr. Washington must irrevocably constitute and appoint URS as
his attorney and proxy with full power to vote his shares of
Washington Group common stock in favor of the merger. The
Support Agreement will terminate on the earlier to occur of (a)
the termination of the merger agreement in accordance with the
terms thereof, (b) the date following the date of the Washington
Group Stockholder meeting, including any adjournment or
postponement thereof and (c) the effective time of the merger.
Nothing in the Support Agreement may be construed to limit or
affect any action or inaction by Mr. Washington in his capacity
as a director or fiduciary of Washington Group. The independent
directors of Washington Group authorized Washington Group to pay
Mr. Washingtons filing fee under the HSR Act, and the
legal fees of his counsel in preparing such filing without any
gross-up for imputed income.
On November 5, 2007, Mr. Washington and Washington Group
filed notifications under the HSR Act in connection with the
exercise of his options.
S-36
UPDATE
TO FINANCIAL FORECASTS
On November 2, 2007, representatives of URS management and
representatives of Washington Group management, together with
their respective financial and legal advisors, met to discuss
the financial performance and outlook of URS and Washington
Group. In the course of these discussions, the representatives
of URS and Washington Group management provided the financial
forecasts set forth below. These financial forecasts update or
confirm the information contained under Financial
Forecasts beginning on page 133 of the September 28,
joint proxy statement/prospectus.
These financial forecasts were developed from historical
financial statements and do not give effect to any changes or
expenses as a result of the merger or any other effects of the
merger. Furthermore, the financial forecasts were not prepared
with a view toward public disclosure or compliance with
published guidelines of the SEC or the American Institute of
Certified Public Accountants for preparation and presentation of
prospective financial information or GAAP.
The financial forecasts of URS and Washington Group included
below were prepared by, and are the responsibility of, URS
management and Washington Group management, respectively.
Neither URS nor Washington Groups independent
auditors, nor any other independent auditors, have compiled,
examined or performed any procedures with respect to the
prospective financial information contained in the financial
forecasts, nor have they expressed any opinion or given any form
of assurance on the financial forecasts or their achievability.
The auditors reports included in the September 28 joint
proxy statement/prospectus relate, to URS and Washington
Groups historical financial information. The
auditors reports do not extend to prospective financial
information and should not be read to do so. In addition, Morgan
Stanley and Goldman Sachs did not assist in the preparation of
the financial forecasts, have no responsibility for the
financial forecasts, and may have varied some of the assumptions
underlying the financial forecasts for purposes of their
respective analyses. Furthermore, the financial forecasts:
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necessarily make numerous assumptions, many of which are beyond
the control of URS and Washington Group and may not prove to
have been, or may no longer be, accurate;
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do not necessarily reflect revised prospects for URS and
Washington Groups businesses, changes in general business
or economic conditions, or any other transaction or event that
has occurred or that may occur and that was not anticipated at
the time the forecasts were prepared;
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are not necessarily indicative of current values or future
performance, which may be significantly more favorable or less
favorable than as set forth below; and
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should not be regarded as a representation that the financial
forecasts will be achieved.
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URS and Washington Group believe that the assumptions that their
respective managements used as a basis for the financial
forecasts were reasonable at the time the financial forecasts
were prepared, given the information their respective
managements had at the time.
These financial forecasts are not a guarantee of performance.
Financial forecasts involve risks, uncertainties and
assumptions. The future financial results of URS, Washington
Group and, if the merger is completed, the combined company, may
materially differ from those expressed in the financial
forecasts due to factors that are beyond URS
and/or
Washington Groups ability to control or predict. Neither
URS nor Washington Group can assure you that their respective
financial forecasts will be realized or that their respective
future financial results will not materially vary from the
financial forecasts. Since the financial forecasts cover
multiple years, such information by its nature becomes less
reliable with each successive year. The financial forecasts do
not take into account any circumstances or events occurring
after the date they were prepared. URS and Washington Group do
not intend to update or revise the financial forecasts.
The financial forecasts are forward-looking statements. For more
information on factors which may cause URS and Washington
Groups future financial results to materially vary, see
Cautionary Statement Concerning Forward-Looking
Statements on page 41 and Risk Factors on
page 19 of the September 28 joint proxy
statement/prospectus. URS and Washington Groups
management have prepared their respective financial forecasts
using accounting policies consistent with their respective
annual and interim financial statements, as well as any changes
S-37
to those policies known to be effective in future periods. The
financial forecasts do not reflect the effect of any proposed or
other changes in GAAP that may be made in the future. Any such
changes could have a material impact to the information shown
below.
Updated
URS Financial Forecasts
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Projected Fiscal Year Ending
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December 28,
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2007 Guidance
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2007
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(In millions, except per share data)
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Revenue
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$
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4,850
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Net Income
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$
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134
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Diluted Earnings Per Share
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$
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2.50-$2.55
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2008
and 2009 Guidance
URS management confirmed the forecasts for the projected fiscal
years 2008 and 2009 set forth under Financial
Forecasts URS Financial Forecasts beginning on
page 133 of the September 28 joint proxy
statement/prospectus.
Updated
Washington Group Financial Forecasts
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Projected Fiscal Year Ending
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December 28,
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2007 Guidance
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2007
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(In millions, except per share data)
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Revenue
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$
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4,039
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Net Income
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$
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99
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Diluted Earnings Per Share
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$
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3.06-3.39
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The above financial forecast assumes that Washington Group
continues to operate as a stand-alone company through fiscal
2007, and excludes merger-related costs and future change orders
and claim recoveries.
2008
Guidance
Washington Group management confirmed the forecast for the
projected fiscal year 2008 set forth under Financial
Forecasts Washington Group Financial Forecasts
beginning on page 133 of the September 28 joint proxy
statement/prospectus.
S-38
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined balance sheet as of
June 29, 2007 and the unaudited pro forma condensed
combined statements of operations for the year ended
December 29, 2006 and the six months ended June 29,
2007 are based on the separate historical consolidated financial
statements of URS and Washington Group. These unaudited pro
forma condensed combined financial statements reflect the merger
and related events using the purchase method of accounting and
apply the assumptions and adjustments described in the
accompanying notes to the unaudited pro forma condensed combined
financial statements. The unaudited pro forma condensed combined
balance sheet as of June 29, 2007 reflects the merger and
related events as if they had been consummated on June 29,
2007. The unaudited pro forma condensed combined statements of
operations for the year ended December 29, 2006 and the six
months ended June 29, 2007 reflect the merger and related
events as if they had been consummated on December 31,
2005, the beginning of URS 2006 fiscal year.
The pro forma adjustments are based upon available information
and assumptions that the managements of URS and Washington Group
believe reasonably reflect the merger. We present the unaudited
pro forma condensed combined financial statements for
informational purposes only. The pro forma condensed combined
financial statements are not necessarily indicative of what our
financial position or results of operations actually would have
been had we completed the merger as of the dates indicated. In
addition, the unaudited pro forma condensed combined financial
statements do not purport to project the future financial
position or operating results of the combined company. You
should read this information together with the following:
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the accompanying notes to the unaudited pro forma condensed
combined financial statements;
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the separate historical unaudited financial statements of URS as
of and for the six months ended June 29, 2007 included in
URS Quarterly Report on
Form 10-Q
for the quarterly period ended June 29, 2007, which is
incorporated by reference into the September 28 joint proxy
statement/prospectus;
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the separate historical audited financial statements of URS as
of and for the fiscal year ended December 29, 2006 included
in URS Annual Report on
Form 10-K
for the fiscal year ended December 29, 2006, which is
incorporated by reference into the September 28 joint proxy
statement/prospectus;
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the separate historical unaudited financial statements of
Washington Group as of and for the six months ended
June 29, 2007 included in Washington Groups Quarterly
Report on
Form 10-Q
for the quarterly period ended June 29, 2007, which is
incorporated by reference into the September 28 joint proxy
statement/prospectus; and
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the separate historical audited financial statements of
Washington Group as of and for the fiscal year ended
December 29, 2006 included in Washington Groups
Annual Report on
Form 10-K
for the fiscal year ended December 29, 2006, as amended,
which is incorporated by reference into the September 28
joint proxy statement/prospectus.
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The financial statements identified above are also incorporated
by reference into this supplement to the September 28 joint
proxy statement/prospectus. For a more detailed description of
the information incorporated by reference into this supplement
to the September 28 joint proxy statement/prospectus, and
how you may obtain it, see Additional
Information Where You Can Find More
Information on page 146 of the September 28
joint proxy statement/prospectus.
We prepared the unaudited pro forma condensed combined financial
statements using the purchase method of accounting, with URS as
the acquirer. Accordingly, the total estimated purchase price,
calculated as described in Note 1 to the unaudited pro
forma condensed combined financial statements, is allocated to
the net tangible and identifiable intangible assets of
Washington Group acquired in connection with the merger, based
on their respective fair values. The allocation is dependent
upon valuations and other studies that have not progressed to a
stage where there is sufficient information to make a definitive
allocation. Accordingly, the purchase price allocation pro forma
adjustments are preliminary and have been made solely for the
purpose of providing unaudited pro forma condensed combined
financial statements. The final purchase price allocation, which
will be determined subsequent to the closing of the merger, and
its effect on results of operations may differ significantly
from the pro
S-39
forma amounts included in the unaudited pro forma condensed
combined financial statements. These amounts represent the
managements best estimate as of the date of this joint
proxy statement/prospectus.
In connection with the plan to integrate the operations of URS
and Washington Group, we anticipate that non-recurring charges,
such as costs associated with systems implementation, relocation
expenses, severance and other costs associated with exit or
disposal activities, will be incurred. We are not able to
determine the timing, nature and amount of these charges as of
the date of this joint proxy statement/prospectus. However,
these charges could affect the combined results of operations of
URS and Washington Group, as well as those of the combined
company following the merger, in the period in which they are
recorded. The unaudited pro forma condensed combined financial
statements do not include the effects of the costs associated
with any restructuring or integration activities resulting from
the transaction, as they are non-recurring in nature and not
factually supportable at the time that the unaudited pro forma
condensed combined financial statements were prepared. In
addition, the unaudited pro forma condensed combined financial
statements do not include the realization of any cost savings
from operating efficiencies or synergies resulting from the
transaction, nor do they include any potential incremental
revenues and earnings that may be achieved with the combined
capabilities of the companies.
S-40
Unaudited
Pro Forma Condensed Combined Balance Sheet
As of June 29, 2007
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Historical
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|
|
|
|
|
|
|
|
|
URS
|
|
|
Washington Group
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Corporation
|
|
|
International, Inc.
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
63,511
|
|
|
$
|
136,490
|
|
|
$
|
(136,490
|
)(a)
|
|
$
|
63,511
|
|
Accounts receivable, net
|
|
|
665,913
|
|
|
|
287,436
|
|
|
|
|
|
|
|
953,349
|
|
Costs and accrued earnings in excess of billings on contracts in
process, net
|
|
|
565,493
|
|
|
|
345,244
|
|
|
|
|
|
|
|
910,737
|
|
Deferred tax assets
|
|
|
40,725
|
|
|
|
93,189
|
|
|
|
1,443
|
(f)
|
|
|
135,357
|
|
Prepaid expenses and other current assets
|
|
|
86,243
|
|
|
|
170,609
|
|
|
|
5,342
|
(b)
|
|
|
270,375
|
|
|
|
|
|
|
|
|
|
|
|
|
8,181
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,421,885
|
|
|
|
1,032,968
|
|
|
|
(121,524
|
)
|
|
|
2,333,329
|
|
Property and equipment at cost, net
|
|
|
170,011
|
|
|
|
203,629
|
|
|
|
|
|
|
|
373,640
|
|
Goodwill
|
|
|
1,006,832
|
|
|
|
97,076
|
|
|
|
2,070,172
|
(d)
|
|
|
3,077,004
|
|
|
|
|
|
|
|
|
|
|
|
|
(97,076
|
)(d)
|
|
|
|
|
Purchased intangible assets, net
|
|
|
3,339
|
|
|
|
21,353
|
|
|
|
628,726
|
(e)
|
|
|
632,065
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,353
|
)(e)
|
|
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
237,328
|
|
|
|
(175,575
|
)(f)
|
|
|
61,753
|
|
Other assets
|
|
|
32,862
|
|
|
|
132,824
|
|
|
|
20,475
|
(b)
|
|
|
236,161
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(g)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,634,929
|
|
|
$
|
1,725,178
|
|
|
$
|
2,353,845
|
|
|
$
|
6,713,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft.
|
|
$
|
819
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
819
|
|
Current portion of long-term debt
|
|
|
16,487
|
|
|
|
|
|
|
|
58,100
|
(h)
|
|
|
74,587
|
|
Accounts payable
|
|
|
307,463
|
|
|
|
299,778
|
|
|
|
|
|
|
|
607,241
|
|
Accrued salaries and wages
|
|
|
234,371
|
|
|
|
183,922
|
|
|
|
42,026
|
(j)
|
|
|
460,319
|
|
Accrued expenses and other current liabilities
|
|
|
79,157
|
|
|
|
38,068
|
|
|
|
56,350
|
(i)
|
|
|
194,170
|
|
|
|
|
|
|
|
|
|
|
|
|
924
|
(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,671
|
(m)
|
|
|
|
|
Billings in excess of costs and accrued earnings on contracts in
process
|
|
|
128,956
|
|
|
|
132,520
|
|
|
|
|
|
|
|
261,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
767,253
|
|
|
|
654,288
|
|
|
|
177,071
|
|
|
|
1,598,612
|
|
Long-term debt
|
|
|
116,004
|
|
|
|
|
|
|
|
1,272,912
|
(h)
|
|
|
1,388,916
|
|
Deferred tax liabilities
|
|
|
17,453
|
|
|
|
|
|
|
|
(17,453
|
)(f)
|
|
|
|
|
Other long-term liabilities
|
|
|
128,887
|
|
|
|
212,333
|
|
|
|
11,619
|
(m)
|
|
|
347,644
|
|
|
|
|
|
|
|
|
|
|
|
|
4,620
|
(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,815
|
)(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,029,597
|
|
|
|
866,621
|
|
|
|
1,438,954
|
|
|
|
3,335,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
6,768
|
|
|
|
11,629
|
|
|
|
|
|
|
|
18,397
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
531
|
|
|
|
304
|
|
|
|
(304
|
)(l)
|
|
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
294
|
(l)
|
|
|
|
|
Treasury stock
|
|
|
(287
|
)
|
|
|
(67,474
|
)
|
|
|
67,474
|
(l)
|
|
|
(287
|
)
|
Additional paid-in capital
|
|
|
999,711
|
|
|
|
685,024
|
|
|
|
(685,024
|
)(l)
|
|
|
2,764,254
|
|
|
|
|
|
|
|
|
|
|
|
|
1,764,543
|
(l)
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
(462
|
)
|
|
|
21,851
|
|
|
|
(21,851
|
)(l)
|
|
|
(462
|
)
|
Retained earnings
|
|
|
599,071
|
|
|
|
207,223
|
|
|
|
(207,223
|
)(l)
|
|
|
596,053
|
|
|
|
|
|
|
|
|
|
|
|
|
(876
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,142
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,598,564
|
|
|
|
846,928
|
|
|
|
914,891
|
|
|
|
3,360,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,634,929
|
|
|
$
|
1,725,178
|
|
|
$
|
2,353,845
|
|
|
$
|
6,713,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
S-41
Unaudited
Pro Forma Condensed Combined Statement of Operations
Six Months Ended June 29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical (Note 3)
|
|
|
Pro Forma
|
|
|
|
|
|
|
URS
|
|
|
Washington Group
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
Corporation
|
|
|
International, Inc.
|
|
|
(Note 4)
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
2,375,636
|
|
|
$
|
1,789,253
|
|
|
$
|
18,265
|
(n)
|
|
$
|
4,183,154
|
|
Direct operating expenses
|
|
|
(1,576,831
|
)
|
|
|
(1,333,545
|
)
|
|
|
2,186
|
(o)
|
|
|
(2,923,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(15,429
|
)(p)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess of revenues over direct operating expenses
|
|
|
798,805
|
|
|
|
455,708
|
|
|
|
5,022
|
|
|
|
1,259,535
|
|
Equity in income of unconsolidated subsidiaries
|
|
|
6,757
|
|
|
|
12,934
|
|
|
|
|
|
|
|
19,691
|
|
Indirect, general and administrative expenses
|
|
|
(679,414
|
)
|
|
|
(417,666
|
)
|
|
|
(5,894
|
)(p)
|
|
|
(1,096,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
6,650
|
(q)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
126,148
|
|
|
|
50,976
|
|
|
|
5,778
|
|
|
|
182,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(7,991
|
)
|
|
|
(2,981
|
)
|
|
|
(49,403
|
)(r)
|
|
|
(60,375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes and minority interests
|
|
|
118,157
|
|
|
|
47,995
|
|
|
|
(43,625
|
)
|
|
|
122,527
|
|
Income tax expense
|
|
|
(49,032
|
)
|
|
|
(21,462
|
)
|
|
|
17,668
|
(s)
|
|
|
(52,826
|
)
|
Minority interests, net of tax
|
|
|
(1,962
|
)
|
|
|
(2,802
|
)
|
|
|
|
|
|
|
(4,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
67,163
|
|
|
$
|
23,731
|
|
|
$
|
(25,957
|
)
|
|
$
|
64,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.31
|
|
|
$
|
0.83
|
|
|
|
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.28
|
|
|
$
|
0.77
|
|
|
|
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
51,367
|
|
|
|
28,742
|
|
|
|
|
|
|
|
80,732
|
(t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
52,444
|
|
|
|
30,740
|
|
|
|
|
|
|
|
81,809
|
(t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
S-42
Unaudited
Pro Forma Condensed Combined Statement of Operations
Fiscal Year Ended December 29, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical (Note 3)
|
|
|
Pro Forma
|
|
|
|
|
|
|
URS
|
|
|
Washington Group
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
Corporation
|
|
|
International, Inc.
|
|
|
(Note 4)
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
4,222,836
|
|
|
$
|
3,398,082
|
|
|
$
|
8,805
|
(n)
|
|
$
|
7,629,723
|
|
Direct operating expenses
|
|
|
(2,737,828
|
)
|
|
|
(2,560,888
|
)
|
|
|
(19,700
|
)(n)
|
|
|
(5,335,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
13,862
|
(o)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,858
|
)(p)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess of revenues over direct operating expenses
|
|
|
1,485,008
|
|
|
|
837,194
|
|
|
|
(27,891
|
)
|
|
|
2,294,311
|
|
Equity in income of unconsolidated subsidiaries
|
|
|
17,314
|
|
|
|
35,816
|
|
|
|
|
|
|
|
53,130
|
|
Indirect, general and administrative expenses
|
|
|
(1,283,533
|
)
|
|
|
(747,103
|
)
|
|
|
(11,801
|
)(p)
|
|
|
(2,042,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
218,789
|
|
|
|
125,907
|
|
|
|
(39,692
|
)
|
|
|
305,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(19,740
|
)
|
|
|
(11,279
|
)
|
|
|
(87,975
|
)(r)
|
|
|
(118,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes and minority interests
|
|
|
199,049
|
|
|
|
114,628
|
|
|
|
(127,667
|
)
|
|
|
186,010
|
|
Income tax expense
|
|
|
(84,793
|
)
|
|
|
(30,590
|
)
|
|
|
51,705
|
(s)
|
|
|
(63,678
|
)
|
Minority interests, net of tax
|
|
|
(1,244
|
)
|
|
|
(3,192
|
)
|
|
|
|
|
|
|
(4,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
113,012
|
|
|
$
|
80,846
|
|
|
$
|
(75,962
|
)
|
|
$
|
117,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.23
|
|
|
$
|
2.83
|
|
|
|
|
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
2.19
|
|
|
$
|
2.64
|
|
|
|
|
|
|
$
|
1.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
50,705
|
|
|
|
28,605
|
|
|
|
|
|
|
|
80,070
|
(t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
51,652
|
|
|
|
30,608
|
|
|
|
|
|
|
|
81,017
|
(t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
S-43
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
|
|
1.
|
Basis of
Pro Forma Presentation
|
On May 27, 2007, URS and Washington Group entered into a
merger agreement, pursuant to which a wholly owned subsidiary
of URS will merge with and into Washington Group, with
Washington Group continuing as the surviving corporation and a
wholly owned subsidiary of URS. Immediately following this
merger, URS will cause Washington Group to merge with and into
another wholly owned subsidiary of URS with this subsidiary
continuing as the surviving corporation and a wholly owned
subsidiary of URS. On November 4, 2007, URS and Washington
Group amended the terms of the merger agreement. The amendment
has the effect of increasing the merger consideration to be paid
to Washington Group stockholders for their shares and of
providing Washington Group stockholders the additional
flexibility to elect to receive merger consideration either all
in shares of URS common stock or all in cash (subject to
proration as described below). The transaction is to be
accounted for using the purchase method of accounting. For
purposes of these unaudited pro forma condensed combined
financial statements, URS has assumed the total preliminary
purchase consideration in the merger to be approximately
$3.2 billion, consisting of $1.4 billion in cash,
shares of URS common stock valued at $1.8 billion, and
approximately $30.0 million in transaction costs, excluding
financing costs, to be paid by URS.
Under the terms of the amended merger agreement, each Washington
Group stockholder will have the right to elect to receive, for
each outstanding share of Washington Group common stock, other
than those shares held by URS, any subsidiary of URS, Elk Merger
Corporation or Bear Merger Sub and other than treasury shares
and shares as to which a Washington Group stockholder has
validly demanded and perfected appraisal rights under Delaware
law, (a) 0.90 of a share of URS common stock and $43.80 in
cash, without interest, (b) an amount in cash, without
interest, equal to the sum of (i) $43.80 and (ii) 0.90
multiplied by the volume weighted average of the trading prices
of URS common stock during the five trading days ending on the
trading day that is one day prior to the date of the Washington
Group special meeting at which stockholder approval is received,
as defined as VWAP in the Bloomberg function VAP
(the Volume Weighted Average Price) or (c) a
number of shares equal to the sum of (i) 0.90 and
(ii) $43.80 divided by the Volume Weighted Average Price;
provided, however, that all-cash and all-stock elections are
subject to proration in order to preserve an overall per share
mix of 0.90 of a share of URS common stock and $43.80 in cash
for all of the outstanding shares of Washington Group common
stock taken together. Accordingly, the total purchase price for
financial reporting purposes will not vary as a result of
individual stockholder elections. URS will not issue fractional
shares of URS common stock in the merger. Instead, each
Washington Group common stockholder will receive cash in lieu of
fractional shares of URS common stock to which any Washington
Group common stockholder is entitled. In addition, immediately
following the completion of the merger, each outstanding option
to acquire shares of Washington Group common stock, whether or
not vested, that remains outstanding as of the effective time of
the merger will be cancelled and converted into the right to
receive the option consideration, which equals the
product of (1) the number of shares of Washington Group
common stock subject to such option and (2) the excess, if
any, of $97.89 over the exercise price per share of Washington
Group common stock subject to the option. Each Washington Group
optionholder, other than Dennis Washington, will have the right
to elect to receive the option consideration, for each cancelled
Washington Group option owned, in (a) a combination of
(i) an amount in cash, without interest, equal to the
option consideration multiplied by 0.4474 and (ii) a number
of shares of URS common stock equal to the option consideration
less the cash payable pursuant to the preceding clause (i),
divided by $60.10, which is referred to as a mixed option
election; (b) an amount in cash, without interest, equal to
the option consideration; or (c) a number of shares of URS
common stock equal to the option consideration divided by
$60.10; provided, however, that all-cash and all-stock elections
are subject to proration in order to preserve an overall option
consideration value mix of 44.74% cash and 55.26% URS common
stock. Any cancelled option held by Mr. Washington will be
exchanged only for the combination of cash and stock, as if
Mr. Washington had made a mixed option election. In the
merger, URS expects to issue approximately 29.4 million
shares of URS common stock, based on Washington Groups
shares of common stock and equity awards outstanding as of
November 2, 2007 and assuming that all of the equity awards
outstanding as of November 2, 2007 remain outstanding as of
the effective time of the merger. For more information on the
merger consideration, please see The Amendment to the
Merger Agreement Increase in Merger Consideration;
Stock and Cash Elections beginning on
page S-31
and The Amendment to the Merger Agreement
Increase in Option Consideration; Stock and Cash Elections
beginning on page S-33.
S-44
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
The unaudited pro forma condensed combined balance sheet
contains a preliminary estimate of the purchase price
allocation, assuming a per share value of URS common stock of
$60.10, the closing market price of URS common stock on
November 2, 2007. The final purchase price will be based on
the average of the closing market prices of URS common stock for
the period beginning two trading days before and ending two
trading days after November 5, 2007, the day the amendment
to the merger was announced.
The preliminary unaudited pro forma condensed combined financial
statements have been prepared assuming that the merger is
accounted for using the purchase method of accounting, which is
referred to as purchase accounting, with URS as the acquiring
entity. Accordingly, under purchase accounting, the assets,
liabilities and commitments of Washington Group are adjusted to
their fair values. For purposes of these preliminary unaudited
pro forma condensed combined financial statements, consideration
has also been given to the impact of conforming Washington
Groups accounting policies to those of URS. Additionally,
amounts in the historical consolidated financial statements of
Washington Group have been reclassified, where necessary, to
conform to the URS financial statement presentation. The
preliminary unaudited pro forma condensed combined financial
statements do not reflect the impact of possible revenue
enhancements, cost and expense efficiencies, synergies or asset
dispositions. The preliminary unaudited pro forma condensed
combined financial statements do not reflect possible
adjustments related to restructuring charges that have yet to be
determined or charges or credits that are not expected to have a
continuing impact after twelve months succeeding the merger.
The preliminary unaudited pro forma adjustments represent each
managements estimates based on information available as of
the time this joint proxy statement/prospectus was prepared and
are subject to revision as additional information becomes
available and as additional analyses are performed.
The final allocation of the purchase price will be determined
after the merger is consummated and after completion of a
thorough analysis to determine the fair values of Washington
Groups tangible and identifiable intangible assets and
liabilities. Accordingly, the final purchase accounting
adjustments, including conforming Washington Groups
accounting policies to those of URS, could be materially
different from the preliminary unaudited pro forma adjustments
presented herein. Any increase or decrease in the fair values of
Washington Groups assets, liabilities, contracts and other
items, as compared to the information shown herein, will change
the portion of the purchase price allocable to goodwill and will
impact the combined income statement due to adjustments in
amortization or accretion related to the adjusted assets or
liabilities.
S-45
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
Based on Washington Groups shares of common stock and
equity awards outstanding as of November 2, 2007 and
assuming that all of the equity awards outstanding as of
November 2, 2007 remain outstanding as of the effective
time of the merger, the total preliminary estimated purchase
price is as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amounts
|
|
|
|
(In thousands)
|
|
|
Cash consideration
|
|
|
|
|
|
|
|
|
Cash consideration for Washington Group common stock outstanding
at $43.80 per share
|
|
|
29,331
|
|
|
$
|
1,284,698
|
|
Cash consideration for Washington Group deferred stock
outstanding at $97.89 per share
|
|
|
70
|
|
|
|
6,852
|
|
Cash consideration for Washington Group stock options
outstanding based on 44.74 percent of the excess of
$97.89 over the respective exercise prices per share
|
|
|
|
|
|
|
144,452
|
|
|
|
|
|
|
|
|
|
|
Total cash consideration
|
|
|
|
|
|
|
1,436,002
|
|
|
|
|
|
|
|
|
|
|
Stock consideration
|
|
|
|
|
|
|
|
|
Shares of URS common stock to be issued for Washington Group
common stock outstanding at the 0.90 exchange ratio based on the
closing market price of URS common stock on November 2,
2007 of $60.10
|
|
|
26,397
|
|
|
|
1,586,460
|
|
Shares of URS common stock to be issued for Washington Group
stock options outstanding based on 55.26 percent of the
excess of $97.89 over the respective exercise prices per share
with shares of URS common stock being valued at $60.10 per share
|
|
|
2,968
|
|
|
|
178,377
|
|
|
|
|
|
|
|
|
|
|
Total URS shares to be issued and value of equity consideration
|
|
|
29,365
|
|
|
|
1,764,837
|
|
|
|
|
|
|
|
|
|
|
Total gross consideration
|
|
|
|
|
|
|
3,200,839
|
|
Estimated transaction costs, excluding financing costs, to be
paid by URS
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Total preliminary estimated purchase price
|
|
|
|
|
|
$
|
3,230,839
|
|
|
|
|
|
|
|
|
|
|
Under the purchase method of accounting, the total preliminary
estimated purchase price as shown in the table above is
allocated to Washington Groups tangible and intangible
assets and liabilities based on their estimated fair values as
of the date of completion of the merger. The total preliminary
estimated purchase price is allocated herein as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
(In thousands)
|
|
|
Net tangible assets as of June 29, 2007 at estimated fair
value
|
|
|
|
|
|
$
|
358,103
|
|
Identifiable intangible assets:
|
|
|
|
|
|
|
|
|
Favorable leases
|
|
$
|
15,856
|
|
|
|
|
|
Trade name
|
|
|
150,000
|
|
|
|
|
|
Customer relationships and other
|
|
|
462,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount allocated to identifiable intangible assets
|
|
|
|
|
|
|
628,726
|
|
Net deferred tax assets
|
|
|
|
|
|
|
173,838
|
|
Amount allocated to goodwill
|
|
|
|
|
|
|
2,070,172
|
|
|
|
|
|
|
|
|
|
|
Total preliminary estimated purchase price
|
|
|
|
|
|
$
|
3,230,839
|
|
|
|
|
|
|
|
|
|
|
A preliminary estimate of $358.1 million has been allocated
to net tangible assets acquired, excluding deferred tax assets,
and $628.7 million has been allocated to amortizable
intangible assets acquired. The depreciation and amortization
related to the fair value adjustment to net tangible assets and
the amortization related to the
S-46
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
amortizable intangible assets are reflected as pro forma
adjustments to the unaudited pro forma condensed combined
statements of operations.
Identifiable intangible assets.
Of the total
estimated purchase price, $628.7 million has been allocated
to favorable leases, trade name, customer relationships, and
other. This adjustment is preliminary and based on
managements estimate. The amount that will ultimately be
allocated to identifiable intangible assets may differ
materially from this preliminary allocation. Favorable leases
are amortized over the terms of the leases. Trade name is
amortized using the straight-line method over an estimated
useful life of fifteen years and customer relationships and
other are amortized over a weighted average useful life of
fifteen years.
Net deferred tax assets.
The net deferred tax
assets reflect the excess of pre-existing deferred tax assets
over the estimated net deferred tax liabilities associated with
purchase accounting. Such deferred tax liabilities are primarily
associated with the
step-up
to
fair value of identifiable intangible assets. This determination
is preliminary and subject to change based upon the final
determination of the fair values of identifiable intangible
assets acquired.
Goodwill.
Goodwill represents the excess of
the purchase price over the fair value of the underlying net
tangible and intangible assets. In accordance with Statement of
Financial Accounting Standards No. 142,
Goodwill
and Other Intangible Assets,
goodwill will not be
amortized, but instead will be tested for impairment at least
annually and whenever events or circumstances have occurred that
may indicate a possible impairment. In the event the combined
management determines that the value of goodwill has become
impaired, the combined company will incur an accounting charge
for the amount of the impairment during the period in which the
determination is made.
|
|
2.
|
Financing
Considerations
|
The unaudited pro forma condensed combined financial statements
reflect the managements current estimate of the amount of
financing required to complete the merger. The actual amount of
financing will not be determined until shortly before the
closing date of the merger. The unaudited pro forma condensed
combined financial statements included in this supplement to the
September 28 joint proxy statement/prospectus assume that
URS will issue approximately 29.4 million shares of URS
common stock, based on Washington Groups shares of common
stock and equity awards outstanding as of November 2, 2007
and assuming that all of the equity awards outstanding as of
November 2, 2007 remain outstanding as of the effective
time of the merger, and pay approximately $1.4 billion in
cash to holders of Washington Groups common stock,
deferred and restricted stock, and stock options in this merger.
In addition, we will pay approximately $58.9 million in
cash to the holders of Washington Groups performance units.
The pro forma condensed combined financial statements reflect
the managements current estimate that the cash portion of
the purchase price will be funded by a combination of cash, the
issuance of a $1.1 billion Tranche A term loan at an
interest rate of 6.87% (LIBOR rate plus an additional margin of
2.00%), the issuance of a $0.3 billion Tranche B term loan
at an interest rate of 7.62% (LIBOR rate plus an additional
margin of 2.75%) and the remainder in a revolving line of credit
at an interest rate of 6.87% (LIBOR rate plus an additional
margin of 2.00%). Our pro forma interest expense also reflects a
commitment fee payable on the unused portion of the revolving
line of credit of 0.375%.
The initial actual interest rates charged on the new senior
secured credit facility, the initial level of our commitment fee
applicable to the unused portion of the revolving line of credit
and the level of our up-front financing fee will ultimately all
be based on our credit ratings as of the closing date. The
foregoing pro forma amounts assume credit ratings based on
initial indications of our possible ratings from
Standard & Poors and from Moodys. Our actual
credit ratings at either one or both of the credit rating
agencies as of the closing date may be higher or lower. In
addition, the allocation of debt between the Tranche A term
loan and the Tranche B term loan reflect the
managements current expectations, but the actual
allocation of debt between the Tranche A term loan and the
Tranche B term loan will depend on the results of the term
loan syndication process. Finally, in connection with the
syndication process and in order to achieve a successful
syndication of the new senior secured credit
S-47
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
facility, MSSF and Wells Fargo are permitted to make certain
limited changes to the terms of the new senior secured credit
facility.
The following reclassifications have been made to conform
URS and Washington Groups historical reported
financial statements to the basis of presentation in the
unaudited pro forma condensed combined balance sheet as of
June 29, 2007, and the unaudited pro forma condensed
combined statements of operations for the six months ended
June 29, 2007 and the year ended December 29, 2006.
These reclassifications have no effect on previously reported
total assets, total liabilities, stockholders equity, and
net income.
URS
reclassifications
|
|
|
|
|
Condense $18.7 million and $19.6 million of receivable
allowances as of June 29, 2007 to accounts receivable, net
and accrued earnings in excess of billings on contracts in
process, net, respectively; and
|
|
|
|
Reclassify $6.8 million and $17.3 million of equity in
income of unconsolidated subsidiaries for the six months ended
June 29, 2007 and the year ended December 29, 2006,
respectively, from revenues to equity in income of
unconsolidated subsidiaries.
|
Washington
Group reclassifications
|
|
|
|
|
Reclassify $63.8 million of restricted cash and
$59.9 million of investments in and advances to
construction joint ventures as of June 29, 2007 to prepaid
expenses and other current assets;
|
|
|
|
Reclassify $21.4 million of intangible assets as of
June 29, 2007 from other assets to purchased intangible
assets;
|
|
|
|
Condense $117.9 million of investments in unconsolidated
affiliates as of June 29, 2007 to other assets;
|
|
|
|
Condense $74.2 million of self-insurance reserves and
$86.3 million of pension and post-retirement benefit
obligations as of June 29, 2007 to other long-term
liabilities;
|
|
|
|
Reclassify $377.7 million and $681.4 million of
Washington Groups employee benefits, insurance and other
overhead expenses for the six months ended June 29, 2007
and the year ended December 29, 2006, respectively, from
direct operating expenses to indirect, general and
administrative expenses. Washington Group has historically
classified direct expenses, an allocation of indirect expenses,
and overhead expenses associated with its business units as cost
of revenue in the determination of gross profit. URS
historical classification of expenses includes the deduction of
direct expenses to determine excess of revenues over direct
operating expenses and indirect expenses are combined with
general and administrative expenses to determine operating
income. Accordingly, Washington Groups expenses have been
reclassified to be consistent with URS presentation;
|
|
|
|
Reclassify $4.8 million of interest income and
$0.4 million of other non-operating expense for the six
months ended June 29, 2007 to indirect, general and
administrative expenses. For the year ended December 29,
2006, $16,000 of other operating income, $10.5 million of
interest income, and $0.5 million of other non-operating
expense were reclassified to indirect, general and
administrative expenses;
|
|
|
|
Reclassify $6.7 million of merger-related costs for the six
months ended June 29, 2007 to indirect, general and
administrative expenses; and
|
|
|
|
Reclassify $5.1 million write-off of deferred financing
fees for the year ended December 29, 2006 to interest
expense.
|
S-48
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
Adjustments included in the column under the heading Pro
Forma Adjustments in the unaudited pro forma condensed
combined financial statements correspond to the following
descriptions:
Pro
Forma Adjustments to Condensed Combined Balance
Sheet
(a) Reflect the utilization of Washington Groups cash
to fund a portion of the total purchase price.
(b) Write off current and long-term capitalized debt
issuance costs related to URS term loans and Washington
Groups existing capitalized credit facility fees and
record the new current and long-term capitalized debt issuance
costs required under the new credit facility, resulting in a net
short-term increase of $5.3 million and a net long-term
increase of $20.5 million in debt issuance costs.
(c) Adjust Washington Groups property held for sale
to fair value.
(d) Eliminate Washington Groups historical goodwill
and record preliminary goodwill resulting from the merger. See
Note 1 for a more detailed discussion.
(e) Eliminate Washington Groups historical intangible
assets and record the preliminary estimated identifiable
intangible assets, which include favorable operating leases,
trade name, customer relationships and other. See Note 1
for a more detailed discussion.
(f) Adjust deferred income taxes, which are primarily
associated with the estimated identifiable intangible assets and
pro forma adjustments attributable to the merger.
(g) Record Washington Groups investment in an
incorporated mining venture, MIBRAG mbH, a company that operates
lignite coal mines and power plants in Germany, to fair value.
Washington Group has been accounting for this investment using
the equity method and therefore the recorded value of the
investment has been adjusted to the estimated fair value based
on discounted future cash flows.
(h) Record borrowings under the new credit facility used to
finance the merger and record payment of amounts currently
outstanding under URS existing credit facility. The actual
debt borrowings under the new credit facility will be determined
at the time of closing, and it will differ from this pro forma
adjustment as the adjustment is determined as if the merger and
related events had been consummated on June 29, 2007.
|
|
|
|
|
|
|
|
|
|
|
Short Term
|
|
|
Long Term
|
|
|
|
(In thousands)
|
|
|
New credit facility
|
|
$
|
58,100
|
|
|
$
|
1,351,912
|
|
Payoff of URS existing credit facility
|
|
|
|
|
|
|
(79,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
58,100
|
|
|
$
|
1,272,912
|
|
|
|
|
|
|
|
|
|
|
(i) Accrue estimated incremental direct and external
transaction costs of $56.4 million, comprised of investment
banking fees, legal fees, accounting fees, due diligence
expenses, and filing and printing costs related to the merger.
The estimated transaction costs, excluding financing costs, are
expected to be paid from the combined companys cash after
the closing of the merger. URS portion of the estimated
transaction cost in the merger is approximately
$30.0 million. Of the total estimated transaction costs
related to the merger, excluding financing costs, approximately
$30.0 million is expected to be paid or accrued by URS
prior to the effective time of the merger and an additional
$26.4 million is expected to be accrued by Washington Group
prior to the effective time of the merger.
Washington Groups total estimated merger related costs
will be approximately $34.0 million, $7.6 million of
which was accrued in the unaudited historical balance sheet as
of June 29, 2007.
(j) Accrue estimated incremental amount of
$32.2 million in payments that will vest under long-term
incentive compensation arrangements upon the change in control
of Washington Group and reclassify the non-
S-49
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
current portion of $9.8 million to current. As of
June 29, 2007, Washington Group had accrued
$26.7 million of long-term incentive compensation
associated with performance units which, together with the
$32.2 million additional accrual, will result in
$58.9 million as
change-in-control
payments shortly after closing. These unpaid amounts are
expected to be paid from the combined companys cash after
the closing of the merger.
(k) Accrue estimated incremental amount of
$5.5 million for Washington Group directors and
officers insurance liability that URS is expected to
maintain for six years from the effective date pursuant to the
merger agreement.
(l) Eliminate Washington Groups historical equity
balances and record shares of URS common stock issued as a
result of the merger.
(m) Record a net normal profit fair value adjustment as of
June 29, 2007 related to Washington Group in-process
customer contracts that have terms that are either more or less
favorable than the terms that could be realized in a current
market transaction. A normal profit liability or asset is
recognized in connection with purchase accounting such that the
rate of return reflected in the post-acquisition financial
statements of the acquirer is equal to a market return for the
acquirers remaining performance effort under the contract.
Above- or below-market rates of return can occur for a variety
of reasons, including: proposing and securing a contract at
above or below market profitability levels; cost over- or
under-runs on fixed price, lump-sum contracts, fixed unit price
contracts, target price contracts or cost over-runs on cost
reimbursable contracts that contain cost ceilings; changed
conditions that cannot be resolved through change orders or
claims; and shifts in market prices resulting in higher or lower
margins occurring after a particular contract was established.
The net normal profit fair value adjustment was determined by
reviewing significant customer contracts to be acquired and
comparing the estimated profit margin to be realized under the
contract to the current market rate of return at June 29,
2007 for similar contracts negotiated in a competitive bidding
environment. The net normal profit fair value adjustment
primarily relates to fixed-price construction projects and fixed
unit price mining contracts that have experienced cost over-runs
due to higher material, labor and equipment operating costs than
anticipated during the period between contract consummation and
the date of the acquisition.
The following table summarizes the net normal profit fair value
adjustment as of June 29, 2007.
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
19,671
|
|
Other long-term liabilities
|
|
|
11,619
|
|
|
|
|
|
|
|
|
$
|
31,290
|
|
|
|
|
|
|
Assuming the merger and related transactions were consummated on
June 29, 2007, the net normal profit fair value adjustment
of $31.3 million would be amortized as an increase to
revenue as summarized in the table below. The amortization is
based on the expected progress towards completion to be made on
each contract over the remaining contract term.
|
|
|
|
|
Year
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Remainder of fiscal 2007
|
|
$
|
12,301
|
|
2008
|
|
|
11,982
|
|
2009
|
|
|
2,735
|
|
2010
|
|
|
2,513
|
|
2011
|
|
|
1,067
|
|
Thereafter
|
|
|
692
|
|
|
|
|
|
|
Total
|
|
$
|
31,290
|
|
|
|
|
|
|
S-50
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
Pro Forma Adjustments to Condensed Combined Statements
of Operations
(n) Record amortization of the acquired Washington Group
normal profit asset and liability that would have been recorded
as of December 31, 2005 under the assumption that the
merger and related transactions would have been consummated as
of that date, the beginning of URS 2006 fiscal year.
Acquired contracts were reviewed as described in note
(m) above to determine the amount of the normal profit
asset and liability required for the return reflected in the
post-acquisition financial statements to be equal to the then
current market returns. The normal profit asset relates to a
management services contract with the Department of Energy that
included performance incentive fees based on the achievement of
specific milestones. Significant progress was made towards the
achievement of the milestones prior to December 31, 2005;
however, the related performance incentive fees were not
recognized in the historical financial statements until fiscal
year 2006. Accordingly, the normal profit asset represents the
estimated performance incentive fees recognized in fiscal year
2006 related to work performed prior to December 31, 2005.
The contract terminated at the end of fiscal year 2006;
therefore, there is no amortization for the six months ended
June 29, 2007.
The following table summarizes the amortization of the
December 31, 2005 normal profit fair value adjustment,
based on the expected progress towards completion to be made on
each contract over the remaining contract term.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Amortization of normal profit liability (increase to revenues)
related to contracts yielding below market profit margins
|
|
$
|
18,265
|
|
|
$
|
8,805
|
|
Amortization of normal profit asset (increase to direct
operating expenses) related to contract yielding an above market
profit margin
|
|
|
|
|
|
|
19,700
|
|
(o) Reverse the amortization of Washington Groups
historical intangible assets.
(p) Record the amortization of the purchased intangible
assets resulting from the merger. The purchased intangible
assets consist of the estimated fair market value of the
acquired trade name, favorable leases and customer
relationships. (See Note 1)
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Amortization of purchased intangible assets:
|
|
|
|
|
|
|
|
|
Trade name
|
|
$
|
5,000
|
|
|
$
|
10,000
|
|
Favorable leases
|
|
|
894
|
|
|
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,894
|
|
|
$
|
11,801
|
|
|
|
|
|
|
|
|
|
|
Customer relationships and other intangible assets
|
|
$
|
15,429
|
|
|
$
|
30,858
|
|
|
|
|
|
|
|
|
|
|
(q) Reverse the reclassified merger-related costs recorded
by Washington Group during the six months ended June 29,
2007.
(r) Record estimated incremental interest expense and
incremental amortization of financing fees associated with debt
expected to be incurred in connection with the merger. (See
Note 2)
S-51
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Interest expense calculated based on current rate as of
November 2, 2007
|
|
$
|
54,516
|
|
|
$
|
113,379
|
|
Less: Reversal of URS historical interest expense
|
|
|
(3,657
|
)
|
|
|
(16,049
|
)
|
Less: Reversal of URS historical debt issuance cost
amortization related to the existing credit facility
|
|
|
(383
|
)
|
|
|
(767
|
)
|
Less: Reversal of Washington Groups historical credit
facility interest, and write off and amortization of deferred
finance fees
|
|
|
(1,073
|
)
|
|
|
(8,588
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
49,403
|
|
|
$
|
87,975
|
|
|
|
|
|
|
|
|
|
|
A
1
/
8
%
increase in the estimated LIBOR rate would increase interest
expense to $55,414 for the six months ended June 29, 2007
and to $115,254 for the fiscal year ended December 29,
2006. A
1
/
8
%
decrease in the estimated LIBOR rate would decrease interest
expense to $53,618 for the six months ended June 29, 2007
and to $111,504 for the fiscal year ended December 29, 2006.
The Tranche A term loans will have a final maturity date of
five years after the closing date. Quarterly principal payments,
commencing with the first full fiscal quarter following the
closing date, will be required in aggregate annual amounts
expressed as a percentage of the original principal amount of
the Tranche A term loans as follows: (i) 5% in years
one and two, (ii) 10% in years three and four and
(iii) 70% in year five. It is anticipated that the
Tranche B term loans will have a final maturity date of
five and one-half years after the closing date. Commencing with
the first full quarter following the closing date, quarterly
payments will be required of .25%, or 1% in aggregate on an
annual basis, of the original aggregate principal amount of the
Tranche B term loans. Over the four quarters prior to maturity,
the remaining principal balance of the Tranche B term loans will
be payable in equal quarterly amounts.
For the fiscal year ended
December 29, 2006, estimated pro forma interest expense
under the new credit facility is calculated based on the
estimated average outstanding borrowings of $1.5 billion,
after giving effect to the merger and related events, as if the
merger had been consummated on December 31, 2005. For the
six months ended June 29, 2007, estimated pro forma
interest expense under the new credit facility is calculated
based on the estimated average outstanding borrowings of
$1.4 billion assuming that estimated annual debt payments
were made at the end of fiscal year 2006.
(s) Record the tax effect of pro forma adjustments at an
assumed blended statutory tax rate of 40.5%.
(t) The pro forma basic and diluted net income per share is
based on the historical weighted-average number of shares of URS
common stock used in computing basic and diluted net income per
share, plus 29.4 million shares of URS common stock assumed
to be issued in connection with the merger based on the
Washington Groups shares of common stock and stock options
outstanding as of November 2, 2007 and assuming that all of
the stock options outstanding as of November 2, 2007 remain
outstanding as of the effective time of the merger.
S-52
ANNEX A
AMENDMENT
NO. 1
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 to Agreement and Plan of Merger (this
Amendment
) is made and entered into as of
November 4, 2007, by and among URS Corporation, a
Delaware corporation (the
Parent
), Elk Merger
Corporation, a Delaware corporation and wholly owned subsidiary
of Parent (
Merger Sub
), Bear Merger Sub,
Inc., a Delaware corporation and wholly owned subsidiary of
Parent (
Second Merger Sub
), and Washington
Group International, Inc., a Delaware corporation (the
Company
).
RECITALS
WHEREAS
, Parent, Merger Sub, Second Merger Sub and the
Company are parties to an Agreement and Plan of Merger, dated as
of May 27, 2007 (the
Merger Agreement
);
WHEREAS
, pursuant to Section 8.11 of the Merger
Agreement, Parent, Merger Sub, Second Merger Sub and the Company
desire to amend the Merger Agreement as provided in this
Amendment;
WHEREAS
, the board of directors of each of Parent, Merger
Sub, Second Merger Sub and the Company has determined that this
Amendment is advisable, fair to and in the best interests of
their respective stockholders; and
WHEREAS
, simultaneous with the execution of this
Amendment, Parent, the Company and Dennis R. Washington, a
holder of options to purchase shares of Common Stock of the
Company (
DRW
), have entered into an Option
Exercise and Transaction Support Agreement (the
Option/Support Agreement
) and Parent has
required that the Option/Support Agreement be entered into as a
condition to entering into this Amendment.
NOW, THEREFORE
, in consideration of the premises, and of
the representations, warranties, covenants and agreements
contained in this Amendment and the Agreement, Parent, Merger
Sub, Second Merger Sub and the Company agree as follows:
Section 1.
Amendments to Merger Consideration Provisions.
(a) Section 2.1(a) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
(a) Subject to this
Article II
, each share of
common stock, par value $0.01 per share, of the Company
(
Company Common Stock
) issued and outstanding
immediately prior to the Effective Time (other than the
Cancelled Shares and except for any Dissenting Shares) shall, by
virtue of this Agreement and without any action on the part of
the holder thereof, be converted into and shall thereafter
represent the right to receive the following consideration
(collectively, the
Merger Consideration
):
(i) Each (A) share of Company Common Stock with
respect to which an election to receive a combination of stock
and cash has been effectively made and not revoked pursuant to
Section 2.9(a)
and (B) No Election Share (as that
term is defined in
Section 2.9(a)
hereof) (each such
share described in the preceding clauses (A) and (B), a
Mixed Election Share
) shall be converted into
the right to receive the combination (which combination shall
hereinafter be referred to as the
Per Share Mixed
Consideration
) of (x) $43.80 in cash (the
Per Share Cash Amount
) and (y) 0.90 of a
share of validly issued, fully paid and non-assessable shares of
common stock, par value $0.01 per share, of Parent (the
Parent Common Stock
), subject to adjustment
in accordance with
Section 2.1(c)
(the
Mixed Election Stock Exchange Ratio
).
(ii) Each share of Company Common Stock with respect to
which an election to receive cash has been effectively made and
not revoked pursuant to
Section 2.9(a)
(each, a
Cash Election Share
) shall be converted
(provided that the Available Cash Election Amount (as defined
below) equals or exceeds the Cash Election Amount (as defined
below)) into the right to receive an amount in cash, without
interest (such amount in cash being the
Per Share Cash
Election Consideration
), equal to the sum of
(A) the Per
A-1
Share Cash Amount and (B) an amount in cash equal to the
product of (1) the Mixed Election Stock Exchange Ratio and
(2) the volume weighted average trading price of Parent
Common Stock during the five (5) consecutive trading days
ending on the trading day that is one day prior to the date of
the Company Stockholder Meeting at which Company Stockholder
Approval is received, calculated utilizing VWAP in
the Bloomberg function VAP (the
Average Parent Stock
Price
);
provided
,
however
, if
(X) the product of the number of Cash Election Shares and
the Per Share Cash Election Consideration (such product being
the
Cash Election Amount
) exceeds (Y)
(1) the product of the Per Share Cash Amount and the total
number of shares of Company Common Stock (other than the
Cancelled Shares and any shares that are Dissenting Shares as of
the Election Deadline) issued and outstanding immediately prior
to the Effective Time minus (2) the product of the number
of Mixed Election Shares and the Per Share Cash Amount (such
difference being the
Available Cash Election
Amount
), then each Cash Election Share shall be
converted into a right to receive (A) an amount in cash,
without interest, equal to the product of (1) the Per Share
Cash Election Consideration and (2) a fraction, the
numerator of which shall be the Available Cash Election Amount
and the denominator of which shall be the Cash Election Amount
(such fraction being the
Cash Fraction
) and
(B) a number of validly issued, fully paid and
non-assessable shares of Parent Common Stock equal to the
product of (1) the Exchange Ratio (as defined below) and
(2) one minus the Cash Fraction.
(iii) Each share of Company Common Stock with respect to
which an election to receive stock consideration has been
effectively made and not revoked pursuant to
Section 2.9(a)
(each, a
Stock Election
Share
) shall be converted (provided that the Cash
Election Amount equals or exceeds the Available Cash Election
Amount) into the right to receive a number of shares (such
number of shares being the
Exchange Ratio
) of
validly issued, fully paid and non-assessable shares of Parent
Common Stock, subject to adjustment in accordance with
Section 2.1(c)
(such Exchange Ratio, together with
any cash in lieu of fractional shares of Parent Common Stock to
be paid pursuant to
Section 2.3
, the
Per
Share Stock Consideration
), equal to the sum of
(A) the Mixed Election Stock Exchange Ratio and (B)
(1) the Per Share Cash Amount divided by (2) the
Average Parent Stock Price;
provided
,
however
, if
the Available Cash Election Amount exceeds the Cash Election
Amount (such excess being the
Available Cash
Excess
), then each Stock Election Share shall be
converted into the right to receive (X) an amount in cash,
without interest, equal to the Available Cash Excess divided by
the number of Stock Election Shares and (Y) a number of
validly issued, fully paid and non-assessable shares of Parent
Common Stock equal to the product of (1) the Exchange Ratio
and (2) a fraction, the numerator of which shall be the Per
Share Cash Election Consideration minus the amount calculated in
clause (X) of this proviso and the denominator of which
shall be the Per Share Cash Election Consideration.
(b) Section 2.1(c) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
(c) If at any time during the period between the date of
this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Parent or the Company
shall occur by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares,
or any stock dividend thereon with a record date during such
period, the Merger Consideration, the Per Share Cash Amount, the
Mixed Election Stock Exchange Ratio, the Exchange Ratio and any
number or amount contained in this Agreement which is based on
the price of Parent Common Stock or Company Common Stock or the
number of shares of Parent Common Stock or Company Common Stock,
as the case may be, shall be equitably adjusted to reflect such
reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, or stock dividend thereon.
(c) Section 2.2(a) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
(a) Prior to the Effective Time, Parent shall appoint a
bank or trust company designated by Parent and reasonably
acceptable to the Company (the
Exchange
Agent
) and shall cause to be deposited with the
Exchange Agent, in trust for the benefit of the holders of
Company Common Stock and Company Options, certificates
representing the shares of Parent Common Stock and an amount of
cash in U.S. dollars sufficient to be issued and paid
pursuant to
Sections 2.1
,
2.3 and
2.6(a),
payable, in the case of Company Common Stock, upon due surrender
of the Certificates (or effective affidavits of loss in lieu
thereof) or non-certificated
A-2
Company Common Stock represented by book-entry
(
Book-Entry Shares
) and payable, in the case
of Company Options, in accordance with
Section 2.6(a)
, and in each case pursuant to the
provisions of this
Article II.
Following the
Effective Time, Parent agrees to make available to the Exchange
Agent, from time to time as needed, cash in U.S. dollars
sufficient to pay any dividends and other distributions pursuant
to
Section 2.2(f).
Any cash and certificates
representing Parent Common Stock deposited with the Exchange
Agent (including the amount of any dividends or other
distributions payable with respect thereto and such cash in lieu
of fractional shares to be paid pursuant to
Section 2.3
) shall be referred to in this Agreement
as the
Exchange Fund.
The Exchange Agent
shall, pursuant to irrevocable instructions, deliver the Merger
Consideration contemplated to be issued pursuant to
Section
2.1
and the Option Consideration contemplated to be issued
pursuant to
Section 2.6(a)
out of the Exchange Fund.
Except as contemplated by
Section 2.3
, the Exchange
Fund shall not be used for any other purpose. As soon as
reasonably practicable after the Effective Time and in any event
not later than the second business day following the Effective
Time, Parent will cause the Exchange Agent to send to each
holder of record of shares of Company Common Stock whose Company
Common Stock was converted into the Merger Consideration
pursuant to
Section 2.1
(other than any holder which has
previously and properly surrendered all of its Certificates to
the Exchange Agent in accordance with
Section 2.9(a)
(each, an
Electing Stockholder
)), (i) a
letter of transmittal for use in such exchange (which shall
specify that the delivery shall be effected, and risk of loss
and title shall pass, only upon proper delivery of the
Certificates (or effective affidavits of loss in lieu thereof)
or Book-Entry Shares to the Exchange Agent) in such form as
Parent and the Company may reasonably agree, for use in
effecting delivery of shares of Company Common Stock to the
Exchange Agent, and (ii) instructions for use in effecting
the surrender of Certificates (or effective affidavits of loss
in lieu thereof) or Book-Entry Shares in exchange for the Merger
Consideration. Exchange of any Book-Entry Shares shall be
effected in accordance with Parents customary procedures
with respect to securities represented by book entry.
(d) Section 2.2(b) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
(b) Each holder of shares of Company Common Stock that have
been converted into a right to receive the Merger Consideration,
upon (A) with respect to any Electing Stockholder,
completion of the calculations required by
Section 2.1(a)
and (B) with respect to any
holder of shares of Company Common Stock, surrender to the
Exchange Agent of a Certificate (or effective affidavits of loss
in lieu thereof) or Book-Entry Shares to the Exchange Agent,
together with a properly completed letter of transmittal, duly
executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required
by the Exchange Agent, will be entitled to receive in exchange
therefor (x) one or more shares of Parent Common Stock
(which shall be in non-certificated book-entry form unless a
physical certificate is requested) representing, in the
aggregate, the whole number of shares of Parent Common Stock, if
any, that such holder has the right to receive pursuant to
Section 2.1
(after taking into account all shares of
Company Common Stock then held by such holder)
and/or
(y) a check in the amount equal to the cash portion of the
Merger Consideration that such holder has the right to receive
pursuant to
Section 2.1
and this
Article II
, including cash payable in lieu of
fractional shares pursuant to
Section 2.3
and
dividends and other distributions pursuant to
Section 2.2(f)
(less any required Tax withholding).
Each holder of cancelled Company Options that have been
converted into a right to receive the Option Consideration will
be entitled to receive in exchange therefor (x) one or more
shares of Parent Common Stock (which shall be in
non-certificated book-entry form unless a physical certificate
is requested) representing, in the aggregate, the whole number
of shares of Parent Common Stock, if any, that such holder has
the right to receive pursuant to
Section 2.6(a)
and/or
(y) a check in the amount equal to the cash portion of the
Option Consideration that such holder has the right to receive
pursuant to
Section 2.6(a)
and this
Article II
, including cash payable in lieu of
fractional shares pursuant to
Section 2.3
and
dividends and other distributions pursuant to
Section 2.2(f)
(less any required Tax withholding).
No interest shall be paid or accrued on any Merger Consideration
or Option Consideration, cash in lieu of fractional shares or on
any unpaid dividends and distributions payable to holders of
Certificates or Company Options. Until so surrendered, each such
Certificate shall, after the Effective Time, represent for all
purposes only the right to receive such Merger Consideration.
A-3
(e) Section 2.2(e) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
(e) Any portion of the Exchange Fund that remains unclaimed
by the holders of shares of Company Common Stock or holders of
cancelled Company Options eighteen (18) months after the
Effective Time shall be returned to Parent, upon demand. Any
holder of shares of Company Common Stock who has not exchanged
his shares of Company Common Stock for the Merger Consideration
in accordance with this
Section 2.2
and any holder
of cancelled Company Options who has not received the Option
Consideration in accordance with
Section 2.6(a)
prior to that time shall thereafter look only to Parent for
delivery of the Merger Consideration or Option Consideration in
respect of such holders shares or options. Notwithstanding
the foregoing, neither Parent, Merger Sub, the Company nor the
First Surviving Corporation shall be liable to any holder of
shares for any Merger Consideration or Option Consideration
delivered to a public official pursuant to applicable abandoned
property laws. Any Merger Consideration or Option Consideration
remaining unclaimed by holders of shares of Company Common Stock
or holders of cancelled Company Options immediately prior to
such time as such amounts would otherwise escheat to or become
property of any Governmental Authority shall, to the extent
permitted by Applicable Law, become property of Parent free and
clear of any claims or interest of any Person previously
entitled thereto.
(f) The ultimate sentence in Section 2.2(f) of the
Merger Agreement is hereby amended and restated in its entirety
as follows:
For purposes of dividends or other distributions in respect of
shares of Parent Common Stock, all shares of Parent Common Stock
to be issued pursuant to the First Merger (the
Stock
Issuance
) shall be entitled to dividends pursuant to
the immediately preceding sentence as if issued and outstanding
as of the Effective Time and all shares of Parent Common Stock
to be issued pursuant to
Section 2.6(a)
shall be
entitled to dividends as if issued and outstanding as of the
Effective Time.
(g) Section 2.2(h) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
(h) All Merger Consideration or Option Consideration issued
and paid upon conversion of the Company Common Stock or the
Company Options, respectively, in accordance with the terms of
this Agreement (including any cash paid pursuant to
Section 2.3
), shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such
Company Common Stock or Company Options, respectively.
(h) Section 2.3 of the Merger Agreement is hereby
amended and restated in its entirety as follows:
2.3
Fractional Shares.
(a) No fractional shares of Parent Common Stock shall be
issued in the First Merger or pursuant to
Section 2.6(a)
, but in lieu thereof each holder of
shares of Company Common Stock and each holder of Company
Options otherwise entitled to a fractional share of Parent
Common Stock will be entitled to receive, from the Exchange
Agent in accordance with the provisions of this
Section 2.3
, a cash payment in lieu of such
fractional shares of Parent Common Stock representing such
holders proportionate interest, if any, in the proceeds
from the sale by the Exchange Agent (reduced by any fees of the
Exchange Agent attributable to such sale) in one or more
transactions of shares of Parent Common Stock equal to the
excess of (i) the aggregate number of shares of Parent
Common Stock to be delivered to the Exchange Agent by Parent
pursuant to
Section 2.2(a)
over (ii) the
aggregate number of whole shares of Parent Common Stock to be
distributed to the holders of Company Common Stock and Company
Options pursuant to
Section 2.2(b)
and
Section 2.6(a)
(such excess being, the
Excess Shares
). The parties acknowledge that
payment of the cash consideration in lieu of issuing fractional
shares was not separately bargained-for consideration but merely
represents a mechanical rounding off for purposes of avoiding
the expense and inconvenience to Parent that would otherwise be
caused by the issuance of fractional shares. As soon as
practicable after the Effective Time, the Exchange Agent, as
agent for the holders that would otherwise receive fractional
shares, shall sell the Excess Shares at then prevailing prices
on the New York Stock Exchange (
NYSE
) in the
manner provided in the following paragraph.
(b) The sale of the Excess Shares by the Exchange Agent, as
agent for the holders that would otherwise receive fractional
shares, shall be executed on the NYSE at then-prevailing market
prices and shall be executed
A-4
in round lots to the extent practicable. Until the proceeds of
such sale or sales have been distributed to the holders of
shares of Company Common Stock or the holders of Company
Options, the Exchange Agent shall hold such proceeds in trust
for the holders of shares of Company Common Stock and the
holders of Company Options (the
Common Stock
Trust
). The Exchange Agent shall determine the portion
of the Common Stock Trust to which each holder of shares of
Company Common Stock and each holder of Company Options shall be
entitled, if any, by multiplying the amount of the aggregate
proceeds comprising the Common Stock Trust by a fraction, the
numerator of which is the amount of the fractional share
interest to which such holder of shares of Company Common Stock
or such holder of Company Options would otherwise be entitled
and the denominator of which is the aggregate amount of
fractional share interests to which all holders of shares of
Company Common Stock and all holders of Company Options would
otherwise be entitled.
(c) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of shares of
Company Common Stock or holders of Company Options in lieu of
any fractional shares of Parent Common Stock, the Exchange Agent
shall make available such amounts to such holders of shares of
Company Common Stock or such holders of Company Options, without
interest, subject to and in accordance with
Section 2.2
and
Section 2.6(a).
(i) The ultimate sentence in Section 2.5 of the Merger
Agreement is hereby amended and restated in its entirety as
follows:
To the extent that amounts are so deducted or withheld by
Parent, Merger Sub, the Surviving Corporation, or the Exchange
Agent, as the case may be, and paid over to the applicable
Governmental Authority, such deducted or withheld amounts shall
be treated for all purposes of this Agreement as having been
paid to the holder of the shares of Company Common Stock or the
holder of Company Options in respect of which such deduction and
withholding was made by Parent, Merger Sub, the Surviving
Corporation or the Exchange Agent, as the case may be.
(j) Section 2.6(a) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
(a) Immediately prior to the Effective Time, each option to
purchase shares of Company Common Stock (a
Company
Option
) granted under the employee and director equity
and performance incentive plans of the Company (
Company
Incentive Plans
) or under any individual consultant,
employee or director agreement or otherwise issued by the
Company, whether vested or unvested, that is outstanding
immediately prior to the Effective Time shall become fully
exercisable and vested. Immediately following the Effective
Time, each such Company Option shall be cancelled and, in
exchange therefor, each former holder of any such cancelled
Company Option shall be entitled to receive, in consideration of
the cancellation of such Company Option and in settlement
therefor, a payment equal to the product of (i) the number
of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time and (ii) the
excess, if any, of the Merger Consideration Value over the
exercise price per share of Company Common Stock previously
subject to such Company Option (such product of clauses (i)
and (ii) payable for each option hereunder being referred
to as the
Per Option Total Consideration
).
Merger Consideration Value
shall mean the sum
of (x) the Per Share Cash Amount and (y) the product
of the Mixed Election Stock Exchange Ratio and $60.10.
Immediately after the Effective Time, any such cancelled Company
Option shall no longer be exercisable by the former holder
thereof, but shall only entitle such holder to the payment of
the Per Option Total Consideration as described below. After the
Election Deadline and as soon as reasonably practicable after
the completion of the calculations required by this
Section 2.6(a)
, but in any event within four
(4) business days following the Election Deadline, Parent
shall or shall cause the Surviving Corporation to deliver in
exchange for each Company Option which is cancelled pursuant to
this
Section 2.6(a)
, the following (collectively,
the
Option Consideration
):
(i) Each (A) cancelled Company Option with respect to
which an election to receive a combination of stock and cash has
been effectively made and not revoked pursuant to
Section 2.9(b)
, (B) cancelled Company Option
held by DRW (each, a
DRW Option
), and
(C) No Election Option (as that term is defined in
Section 2.9(b)
hereof) (each such Company Option
described in the preceding clauses (A), (B) and (C), a
Mixed Election Option
) shall be converted
into the right to receive the combination (which combination
shall hereinafter be referred to as the
Per Option
Mixed Consideration
) of (A) an
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amount in cash, without interest (such amount in cash being the
Per Option Mixed Cash Consideration
), equal
to the product of (1) the Per Option Total Consideration
with respect to such Company Option and (2) a fraction the
numerator of which is the Per Share Cash Amount and the
denominator of which is the Merger Consideration Value, plus
(B) a number of validly issued, fully paid and
non-assessable shares of Parent Common Stock equal to
(1) the Per Option Total Consideration with respect to such
Company Option less the cash payable pursuant to the immediately
preceding clause (A), divided by (2) $60.10. In furtherance
of the foregoing, any cancelled Company Option held by DRW shall
be exchanged only for the Per Option Mixed Consideration and
shall not be entitled to make any election.
(ii) Each cancelled Company Option with respect to which an
election to receive cash has been effectively made and not
revoked pursuant to
Section 2.9(b)
(each, a
Cash Election Option
) shall be converted
(provided that the Available Option Cash Election Amount (as
defined below) equals or exceeds the Option Cash Election Amount
(as defined below)) into the right to receive an amount of cash,
without interest (such amount in cash being the
Per
Option Cash Consideration
), equal to the Per Option
Total Consideration with respect to such Company Option;
provided
,
however
, if (X) the aggregate
amount of Per Option Cash Consideration payable to all holders
of Cash Election Options (the
Option Cash Election
Amount
) exceeds (Y) (1) the aggregate amount of
Per Option Mixed Cash Consideration that would be payable to
holders of Mixed Election Options if all cancelled Company
Options were converted into Mixed Election Options, minus
(2) the aggregate amount of Per Option Mixed Cash
Consideration actually payable to all holders of Mixed Election
Options (such difference being the
Available Option
Cash Election Amount
), then each Cash Election Option
shall be converted into a right to receive (A) an amount in
cash, without interest, equal to the product of (1) the Per
Option Total Consideration with respect to such Company Option
and (2) a fraction, the numerator of which shall be the
Available Option Cash Election Amount and the denominator of
which shall be the Option Cash Election Amount (such fraction
being the
Option Cash Fraction
) and
(B) a number of validly issued, fully paid and
non-assessable shares of Parent Common Stock equal to the
product of (1) the Option Exchange Ratio (as defined below)
and (2) one minus the Option Cash Fraction.
(iii) Each cancelled Company Option with respect to which
an election to receive stock consideration has been effectively
made and not revoked pursuant to
Section 2.9(b)
(each, a
Stock Election Option
) shall be
converted (provided that the Option Cash Election Amount equals
or exceeds the Available Option Cash Election Amount) into the
right to receive a number of validly issued, fully paid and
non-assessable shares of Parent Common Stock (such number of
shares being the
Per Option Stock
Consideration
) equal to the Option Exchange Ratio;
provided
,
however
, if the Available Option Cash
Election Amount exceeds the Option Cash Election Amount (such
excess being the
Available Option Cash
Excess
), then each Stock Election Option shall be
converted into the right to receive (X) an amount in cash,
without interest, equal to the product of (1) the Available
Option Cash Excess and (2) a fraction, the numerator of
which shall be the Per Option Total Consideration with respect
to such Company Option and the denominator of which shall be the
aggregate amount of Per Option Total Consideration payable to
all holders of Stock Election Options, and (Y) a number of
validly issued, fully paid and non-assessable shares of Parent
Common Stock equal to the product of (1) the Option
Exchange Ratio and (2) a fraction, the numerator of which
shall be the Per Option Total Consideration with respect to such
Company Option minus the amount calculated in clause (X) of
this proviso and the denominator of which shall be the Per
Option Total Consideration with respect to such Company Option.
For purposes of this
Section 2.6(a)
, with respect to
any Company Option,
Option Exchange Ratio
shall mean (A) the Per Option Total Consideration with
respect to such Company Option divided by (B) $60.10. The
cash and shares payable pursuant to this
Section 2.6(a)
shall be subject to any applicable withholding or other Taxes
required by Applicable Law to be withheld, provided that Parent
shall at its expense assist each former holder of a cancelled
Company Option who received such Company Option in his or her
capacity as a Company Employee in selling shares of Parent
Common Stock delivered in payment of the cancelled Company
Option in order to satisfy such Taxes with respect to the Option
Consideration (whether such assistance applies with respect to
this
Section 2.6(a)
or with respect to
Section 2.6(b)
, the
Assisted Sales
Process
) and Parent agrees that any applicable
withholding or other Taxes required by Applicable Law to be
withheld in respect of the
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Option Consideration shall first be satisfied from the sale of
shares of Parent Common Stock pursuant to the Assisted Sales
Process and Parent shall only withhold or cause the withholding
of cash from the cash portion of an individuals Option
Consideration if and to the extent that the sale of shares of
Parent Common Stock pursuant to the Assisted Sales Process does
not yield cash adequate to satisfy such tax obligation with
respect to such individual.
(k) Section 2.7 of the Merger Agreement is hereby
amended and restated in its entirety as follows:
2.7.
Dissenting Shares.
Notwithstanding
anything in this Agreement to the contrary, with respect to each
share of Company Common Stock as to which the holder thereof
shall have (i) not voted in favor of the First Merger nor
consented thereto in writing, (ii) properly complied with
the provisions of Section 262 of the DGCL as to appraisal
rights, or (iii) not effectively withdrawn or lost its
rights to appraisal (each, a
Dissenting
Share
), if any, such holder shall be entitled to
payment, solely from the Surviving Corporation, of the appraisal
value of the Dissenting Shares to the extent permitted by and in
accordance with the provisions of section 262 of the DGCL;
provided
,
however
, that (x) if any holder of
Dissenting Shares, under the circumstances permitted by and in
accordance with the DGCL, affirmatively withdraws or loses
(through failure to perfect or otherwise) the right to dissent
or its right for appraisal of such Dissenting Shares,
(y) if any holder of Dissenting Shares fails to establish
his entitlement to appraisal rights as provided in the DGCL or
(z) if any holder of Dissenting Shares takes or fails to
take any action the consequence of which is that such holder is
not entitled to payment for his shares under the DGCL, such
holder or holders (as the case may be) shall forfeit the right
to appraisal of such shares of Company Common Stock and such
shares of Company Common Stock shall thereupon cease to
constitute Dissenting Shares, and if such forfeiture shall occur
following the Election Deadline, each such share of Company
Common Stock shall, to the fullest extent permitted by the law,
thereafter be deemed to have been converted into and to have
become, as of the Effective Time, the right to receive, without
interest thereon, the Per Share Mixed Consideration;
provided
that each such share shall instead be converted into the
right to receive the Per Share Stock Consideration as provided
in this
Article II
if Parent shall have received an
opinion from Latham & Watkins LLP to the effect that
the Merger would otherwise fail to satisfy the continuity of
interest requirement under Section 368 of the Code. The
Company shall give Parent prompt notice of any demands received
by the Company for appraisal of shares of Company Common Stock,
and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The
Company shall not, except with the prior written consent of
Parent (which shall not be unreasonably withheld or delayed),
(A) voluntarily make any payment with respect to any
demands for appraisal for Dissenting Shares, (B) offer to
settle any such demands, (C) waive any failure to timely
deliver a written demand for appraisal in accordance with the
DGCL, or (D) agree to do any of the foregoing.
(l) New Section 2.9 of the Merger Agreement is hereby
added as follows:
Section 2.9
Election Procedures
.
(a) Notwithstanding anything in this Agreement to the
contrary, with respect to each holder of Company Common Stock:
(i) An election form in such form as Parent shall specify
and as shall be reasonably acceptable to the Company (the
Merger Consideration Election Form
) shall be
mailed together with the supplement to the Proxy Statement
describing this Amendment (the
Mailing Date
)
to each holder of record of Company Common Stock as of the close
of business on the record date for notice of the Company
Stockholder Meeting (the
Election Form Record
Date
).
(ii) Each Merger Consideration Election Form shall permit
the holder (or the beneficial owner through appropriate and
customary documentation and instructions), other than any holder
of Dissenting Shares, to specify (A) the number of shares
of such holders Company Common Stock with respect to which
such holder elects to receive the Per Share Mixed Consideration,
(B) the number of shares of such holders Company
Common Stock with respect to which such holder elects to receive
the Per Share Cash Election Consideration, (C) the number
of shares of such holders Company Common Stock with
respect to which such holder elects to receive the Per Share
Stock Consideration, or (D) that such holder makes no
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election with respect to such holders Company Common Stock
(
No Election Shares
). Any Company Common
Stock with respect to which the Exchange Agent has not received
an effective, properly completed Merger Consideration Election
Form on or before 5:00 p.m., New York time, on the date
that is three Business Days following the Closing Date (or such
other time and date as the Company and Parent shall agree prior
to the Closing) (the
Election Deadline
)
(other than any shares of Company Common Stock that constitute
Dissenting Shares as of such time) shall be deemed to be No
Election Shares.
(iii) Parent shall make available one or more Merger
Consideration Election Forms as may reasonably be requested from
time to time by all Persons who become holders (or beneficial
owners) of Company Common Stock between the Election
Form Record Date and the close of business on the business
day prior to the Election Deadline, and the Company shall
provide to the Exchange Agent all information reasonably
necessary for it to perform as specified herein.
(iv) Any such election shall have been properly made only
if the Exchange Agent shall have actually received a properly
completed Merger Consideration Election Form by the Election
Deadline. Any Merger Consideration Election Form may be revoked
or changed by the Person submitting such Merger Consideration
Election Form, by written notice received by the Exchange Agent
prior to the Election Deadline. In the event a Merger
Consideration Election Form is revoked prior to the Election
Deadline, the shares of Company Common Stock represented by such
Merger Consideration Election Form shall become No Election
Shares, except to the extent (if any) a subsequent election is
properly made with respect to any or all of such shares of
Company Common Stock. Subject to the terms of this Agreement and
of the Merger Consideration Election Form, the Exchange Agent
shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made
and to disregard immaterial defects in the Merger Consideration
Election Forms, and any good faith decisions of the Exchange
Agent regarding such matters shall be binding and conclusive.
None of Parent, Company or the Exchange Agent shall be under any
obligation to notify any Person of any defect in a Merger
Consideration Election Form.
(b) Notwithstanding anything in this Agreement to the
contrary, with respect to each holder of Company Options:
(i) An election form in such form as Parent shall specify
and as shall be reasonably acceptable to the Company (the
Option Consideration Election Form
) shall be
mailed together with the supplement to the Proxy Statement
describing this Amendment or at the Mailing Date to each holder
of record of any Company Option as of immediately prior to the
Effective Time (the
Option Consideration Election
Form Date
).
(ii) Each Option Consideration Election Form shall permit
the holder to specify with respect to each Company Option
(A) whether such holder elects to receive the Per Option
Mixed Consideration, (B) whether such holder elects to
receive the Per Option Cash Consideration, (C) whether such
holder elects to receive the Per Option Stock Consideration, or
(D) that such holder makes no election with respect to such
Company Option (
No Election Options
). Any
Company Options with respect to which the Exchange Agent has not
received an effective, properly completed Option Consideration
Election Form on or before the Election Deadline shall also be
deemed to be No Election Options.
(iii) Parent shall make available one or more Option
Consideration Election Forms as may reasonably be requested from
time to time by all Persons who become holders (or beneficial
owners) of Company Options between the Option Consideration
Election Form Date and the close of business on the
business day prior to the Election Deadline, and the Company
shall provide to the Exchange Agent all information reasonably
necessary for it to perform as specified herein.
(iv) Any such election shall have been properly made only
if the Exchange Agent shall have actually received a properly
completed Option Consideration Election Form by the Election
Deadline. Any Option Consideration Election Form may be revoked
or changed by the Person submitting such Option Consideration
Election Form, by written notice received by the Exchange Agent
prior to the Election Deadline. In the event an Option
Consideration Election Form is revoked prior to the Election
Deadline,
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the Company Options represented by such Election Form shall
become No Election Options, except to the extent (if any) a
subsequent election is properly made with respect to any or all
such Company Options. Subject to the terms of this Agreement and
of the Option Consideration Election Form, the Exchange Agent
shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made
and to disregard immaterial defects in the Option Consideration
Election Forms, and any good faith decisions of the Exchange
Agent regarding such matters shall be binding and conclusive.
None of Parent, Company or the Exchange Agent shall be under any
obligation to notify any Person of any defect in an Option
Consideration Election Form.
(m) Section 8.2 (a) of the Merger Agreement is
hereby amended and restated in its entirety as follows:
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(a)
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if to Parent, Merger Sub or Second Merger Sub:
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URS CORPORATION
600 Montgomery Street, 26th Floor San Francisco, CA
94111
Attention: General Counsel
Telecopy No.:
(415) 398-4525
with a copy to:
Paul D. Tosetti, Esq.
Steven B. Stokdyk, Esq.
Latham & Watkins LLP
Suite 4000
633 West Fifth Street
Los Angeles, CA 90071
Telecopy No.:
(212) 751-4864
Section 2.
Representations and Warranties.
(a) Parent, Merger Sub and Second Merger Sub represent and
warrant to the Company as follows:
Each of Parent, Merger Sub and Second Merger Sub has all
requisite corporate power and authority to enter into and
deliver this Amendment, to perform its obligations under this
Amendment, and, subject to (i) the Parent Stockholder
Approval and (ii) the approval of Parent in its capacity as
the sole stockholder of each of Merger Sub, the First Surviving
Corporation and Second Merger Sub (which, in the case of this
clause (ii), Parent shall obtain reasonably promptly), to
consummate the transactions contemplated by this Amendment. The
execution, performance and delivery of this Amendment by Parent,
Merger Sub and Second Merger Sub have been duly authorized by
all necessary corporate action on the part of each of Parent,
Merger Sub and Second Merger Sub, subject to (1) the Parent
Stockholder Approval, (2) the filing of the Certificate of
Merger with the Delaware Secretary of State and (3) the
filing of the Second Certificate of Merger with the Delaware
Secretary of State, and no other corporate proceedings on the
part of Parent, Merger Sub or Second Merger Sub are necessary to
authorize or approve this Amendment or to consummate the
transactions contemplated hereby. This Amendment has been duly
and validly executed and delivered by each of Parent, Merger Sub
and Second Merger Sub, and, assuming the due authorization,
execution and delivery of this Amendment by the Company,
constitutes a legal, valid and binding obligation of each of
Parent, Merger Sub and Second Merger Sub enforceable against
each of them in accordance with its terms, except that such
enforceability (x) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors rights generally
and (y) is subject to general principles of equity.
(b) The Company represents and warrants to the Company and
Merger Sub as follows:
The Company has all requisite corporate power and authority to
enter into and deliver this Amendment, to perform its
obligations under this Amendment, and, subject to Company
Stockholder Approval, to consummate the transactions
contemplated by this Amendment. The execution, performance and
delivery of this Amendment by the Company have been duly
authorized by all necessary corporate action on the part of the
Company, subject to (1) the Company Stockholders Approval,
(2) the filing of the Certificate of Merger with
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the Delaware Secretary of State, and no other corporate
proceedings on the part of the Company are necessary to
authorize or approve this Amendment or to consummate the
transactions contemplated hereby. This Amendment has been duly
and validly executed and delivered by the Company, and, assuming
the due authorization, execution and delivery of this Amendment
by Parent, Merger Sub and Second Merger Sub, constitutes the
legal, valid and binding obligation of the Company enforceable
against it in accordance with its terms except that such
enforceability (x) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors rights generally
and (y) is subject to general principals of equity.
Section 3.
Stockholders Meetings.
Parent and the Company shall duly call and give notice of, and
convene and hold on November 15, 2007, the Parent
Stockholder Meeting and the Company Stockholder Meeting;
provided
,
however
, that if, at any time on or
prior to November 14, 2007, Parents Board or the
Companys Board reasonably determines after consulting with
their respective advisors that the Company Stockholder Approval,
in the case of the Companys Board, or the Parent
Stockholder Approval, in the case of Parents Board, is
reasonably likely not to be obtained on November 15, 2007,
then Parent and the Company shall, as promptly as practicable,
(i) establish a new record date for the Parent Stockholder
Meeting and the Company Stockholder Meeting sufficiently in
advance to permit the exercise of options pursuant to the Option
Exercise/Support Agreement by DRW, and (ii) duly call, give
notice of, convene and hold such meetings. Parent and the
Company shall solicit new proxies referring to this Amendment.
Notwithstanding anything to the contrary contained in this
Section 3, nothing shall prohibit Parent or the Company
from (A) establishing a new record date to facilitate the
convening of the Parent Stockholder Meeting or the Company
Stockholder Meeting, as applicable, prior to the End Date or
(B) postponing or adjourning the Parent Stockholder Meeting
or the Company Stockholder Meeting scheduled for
November 15, 2007 or thereafter, as applicable, to any
subsequent date.
Section 4.
Ratification of Merger Agreement.
Except as otherwise provided herein, all of the terms, covenants
and other provisions of the Merger Agreement are hereby ratified
and confirmed and shall continue to be in full force and effect
in accordance with their respective terms. After the date
hereof, all references to the Merger Agreement (whether in the
Merger Agreement or this Amendment) shall refer to the Merger
Agreement as amended by this Amendment. Capitalized terms used
but not defined in this Amendment shall have the meanings
assigned to them in the Merger Agreement.
Section 5.
Counterparts.
This Amendment may be executed in counterparts, which together
shall constitute one and the same agreement. The parties hereto
may execute more than one copy of this Amendment, each of which
shall constitute an original. Signatures to this Amendment
transmitted by facsimile transmission, by electronic mail in
portable document format (.pdf) form, or
by any other electronic means intended to preserve the original
graphic and pictorial appearance of a document, will have the
same effect as physical delivery of the paper document bearing
the original signature.
Section 6.
Entire Agreement.
This Amendment, the Merger Agreement (including the exhibits and
schedules thereto), the Option/Support Agreement, the
Confidentiality Agreement and the Joint Defense Agreement
constitute the entire agreement among the parties hereto and
thereto and supersede all prior agreements and understandings,
agreements or representations by or among the parties hereto and
thereto, written and oral, with respect to the subject matter
hereof and thereof. No representation, warranty, inducement,
promise, understanding or condition not set forth in this
Amendment has been made or relied upon by any of the parties
hereto.
(Signature
page follows.)
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IN WITNESS WHEREOF
, Parent, Merger Sub, Second Merger Sub
and the Company have signed this Amendment as of the date first
written above.
URS CORPORATION
Name: H. Thomas Hicks
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Title:
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Vice President and Chief Financial Officer
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ELK MERGER CORPORATION
Name: H. Thomas Hicks
BEAR MERGER SUB, INC.
Name: H. Thomas Hicks
WASHINGTON GROUP INTERNATIONAL, INC.
Name: Stephen G. Hanks
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Title:
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President and Chief Executive Officer
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A-11
Exhibit B
OPTION
EXERCISE AND TRANSACTION SUPPORT AGREEMENT
This Option Exercise and Transaction Support Agreement (this
Agreement
) is made and entered into as of
November 4, 2007, by and among URS Corporation, a
Delaware corporation (
Parent
), Washington
Group International, Inc., a Delaware corporation (the
Company
), and the undersigned holder of
options to purchase shares of common stock of the Company (the
Holder
). Capitalized terms used herein but
not defined shall have the meanings ascribed to them in the
Merger Agreement (as defined below).
RECITALS
A. Pursuant to an Agreement and Plan of Merger, dated as of
May 27, 2007 (the
Original Merger
Agreement
), as amended as of November 4, 2007
(the
Amendment
and, together with the
Original Merger Agreement, the
Merger
Agreement
), by and among Parent, Elk Merger
Corporation, a Delaware corporation and wholly owned subsidiary
of Parent (
Merger Sub
), Bear Merger Sub,
Inc., a Delaware corporation and wholly owned subsidiary of
Parent (
Second Merger Sub
) and the Company,
Merger Sub agreed to merge with and into the Company (the
First Merger
), with the Company surviving
such First Merger, to be immediately followed by the merger of
the Company with and into Second Merger Sub (the
Second
Merger
and, together with the First Merger, the
Transaction
), with Second Merger Sub
surviving such subsequent Second Merger as a wholly owned
subsidiary of Parent.
B. Concurrently with the execution and delivery of the
Amendment and as a condition and inducement to Parent, Merger
Sub and Second Merger Sub to enter into the Amendment, Parent
has required that the Holder enter into this Agreement. The
Holder is the record and beneficial owner (within the meaning of
Rule 13d-3
of the Exchange Act) of options (the
Options
)
to purchase 3,224,100 shares of Company Common Stock.
AGREEMENT
The parties hereby agree as follows:
1.
Agreement to Make Necessary Regulatory
Filings.
As promptly as practicable following the
execution of this Agreement, the Holder and the Company shall
make the filings required under the HSR Act in order to allow
the Holder to exercise the Options and acquire shares of Company
Common Stock pursuant to the terms of this Agreement. In its
filing under the HSR Act, the Holder will request early
termination of the waiting period. Parent acknowledges that the
Company will pay the Holders filing fee under the HSR Act
and the legal fees of outside counsel in preparing such HSR Act
filings and Parent agrees that the payment of such fees by the
Company shall be deemed to not violate any of the provisions of
the Merger Agreement. The parties to this agreement acknowledge
that the Holders obligations under Sections 2, 3 and
4 of this Agreement are subject to expiration or termination of
the applicable waiting period under the HSR Act.
2.
Agreement to Exercise the Options.
If
a new record date for the Company Stockholder Meeting is
established pursuant to Section 3 of the Amendment, the
Holder agrees to exercise all of the Options no later than the
date that is one business day prior to such new record date (the
Record Date
) established with respect to the
Company Stockholder Meeting. Such exercise shall be made in cash
(and not on a net exercise or comparable basis),
such that following such exercise the Holder shall have, as of
the Record Date, record and beneficial ownership of
3,224,100 shares of Company Common Stock (the
Shares
). The Holder shall effect such
exercise in such fashion (and the Company shall facilitate such
exercise as reasonably required) so as to ensure that the Holder
is vested with full voting rights with respect to the Shares at
and for the Company Stockholder Meeting.
3.
Agreement to Retain the Options and the Shares and
Any New Shares.
(a)
Transfer.
During the period beginning
on the date hereof and ending on the earliest to occur of
(A) the Effective Time, (B) the Expiration Date (as
defined below) and (C) the day after the Record Date, the
Holder agrees not to, directly or indirectly, sell, transfer,
exchange or otherwise dispose of (including by
B-1
merger, consolidation or otherwise by operation of law) any of
the Options (except upon the exercise of the Options in
accordance with this Agreement) or the Shares or any New Shares
(as defined below). During the period beginning on the date
hereof and ending on the earlier to occur of (A) the
Effective Time and (B) the Expiration Date (as defined
below), (i) the Holder agrees not to, directly or
indirectly, grant any proxies or powers of attorney, deposit any
of the Holders Shares or any New Shares into a voting
trust or enter into a voting agreement with respect to any of
the Shares or New Shares, or enter into any agreement or
arrangement providing for any of the actions described in this
clause (i), and (ii) the Holder agrees not to, directly or
indirectly, take any action that could reasonably be expected to
have the effect of preventing or disabling the Holder from
performing the Holders obligations under this Agreement.
As used herein, the term
Expiration Date
shall mean the date of termination of the Merger Agreement in
accordance with the terms and provisions thereof.
(b)
New Shares.
The Holder agrees that
any shares of Company Common Stock that the Holder purchases or
with respect to which the Holder otherwise acquires record or
beneficial ownership after the date of this Agreement and prior
to the earlier to occur of (i) the Effective Time and
(ii) the Expiration Date (the
New
Shares
) shall be subject to the terms and conditions
of this Agreement to the same extent as if they constituted the
Shares.
(c)
Stop Transfer.
During the period
described in the first sentence of Section 3(a), the
Company will not register or otherwise recognize the transfer
(book entry or otherwise) of any of the Options or the Shares or
any New Shares or any certificate or uncertificated interest
representing any of such securities that would violate the
provisions of this Agreement (including any written waiver by
Parent of any of the terms of this Agreement).
(d)
Cash Election.
Parent and the Company
agree to facilitate the Holder making an election to receive
cash to the extent permitted by the Merger Agreement.
4.
Agreement to Vote the Shares.
(a) From and after the exercise of the Options in
accordance with this Agreement and until the earlier to occur of
(A) the Effective Time, (B) the Expiration Date and
(C) the termination of the Merger Agreement in accordance
with the terms thereof , at every meeting of the stockholders of
the Company called with respect to any of the following, and at
every adjournment thereof, and on every action or approval by
written consent of the stockholders of the Company with respect
to any of the following, the Holder shall (unless the Holder
grants a proxy pursuant to Section 4(c) below) appear at
such meeting (in person or by proxy) and shall vote or consent
the Shares and any New Shares (i) in favor of adoption of
the Merger Agreement and the approval of the transactions
contemplated thereby (as the Merger Agreement may be modified or
amended so long as the Merger Consideration is not reduced), and
(ii) against any proposal for any recapitalization, merger,
sale of assets or other business combination (other than the
Transaction) between the Company and any person or entity other
than Parent or any other action or agreement that would
reasonably be expected to result in a breach of any covenant,
representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement or the Holder under
this Agreement or which would reasonably be expected to result
in any of the conditions to the Companys obligations under
the Merger Agreement not being fulfilled. This Agreement is
intended to bind the Holder as a holder of securities of the
Company only with respect to the specific matters set forth
herein. Except as set forth in clauses (i) and (ii) of
this Section 4(a), the Holder shall not be restricted from
voting in favor of, against or abstaining with respect to any
other matter presented to the stockholders of the Company. Prior
to the termination of this Agreement, the Holder covenants and
agrees not to enter into any agreement or understanding with any
person to vote or give instructions in any manner inconsistent
with the terms of this Agreement.
(b) The Holder further agrees that, until the termination
of this Agreement, the Holder will not, and will not permit any
entity under the Holders control to, (i) solicit
proxies or become a participant in a
solicitation (as such terms are defined in
Rule 14A under the Exchange Act) with respect to an
Opposing Proposal (as defined below), (ii) initiate a
stockholders vote with respect to an Opposing Proposal or
(iii) become a member of a group (as such term
is used in Section 13(d) of the Exchange Act) with respect
to any voting securities of the Company with respect to an
Opposing Proposal. For the purposes of this
B-2
Agreement, an
Opposing Proposal
means any
action or proposal described in clause (ii) of
Section 4(a) above.
(c) If requested by Parent, subject to the provisions set
forth in Section 7 hereof and as security for the
Holders obligations under Section 4(a), the Holder
shall, at any time after (i) the exercise of the Options
pursuant to Section 2 and (ii) any purchase or other
acquisition of record or beneficial ownership of any New Shares
after the date of this Agreement and prior to the earlier to
occur of (A) the Effective Time and (B) the Expiration
Date, irrevocably constitute and appoint Parent and its
designees as his attorney and proxy in accordance with the DGCL
with respect to the Shares, in each case, with full power of
substitution and resubstitution, to cause the Shares and any New
Shares to be counted as present at the Company Stockholder
Meeting, to vote the Shares and any New Shares at the Company
Stockholder Meeting, however called, and to execute consents in
respect of the Shares and any New Shares as and to the extent
provided in Section 4(a). SUBJECT TO THE PROVISIONS SET
FORTH IN SECTION 7 HEREOF, ANY PROXY AND POWER OF ATTORNEY
GRANTED PURSUANT TO THIS SECTION 4(C) WILL BE IRREVOCABLE
(IN ACCORDANCE WITH THE PROVISIONS OF SECTION 212 OF THE
DGCL) AND COUPLED WITH AN INTEREST AND WILL UNDER NO
CIRCUMSTANCES BE REVOKED PRIOR TO THE TERMINATION OF THIS
AGREEMENT. Upon the execution of this Agreement, the Holder
agrees not to grant any subsequent proxies or powers of attorney
with respect to the voting of the Shares or the New Shares on
the matters referred to in Section 4(a) until the earlier
to occur of (A) the Effective Time and (B) the
Expiration Date. The Holder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon
the Holders execution and delivery of this Agreement and
the Holders agreement to grant a proxy as provided for in
this Section 4(c). The Holder hereby affirms that any proxy
granted pursuant to this Section 4(c) will be given in
connection with the execution of the Merger Agreement, and that
such proxy would be given to secure the performance of the
duties of the Holder under this Agreement. If for any reason any
proxy granted hereby is not irrevocable, the Holder agrees to
vote the Shares and any New Shares in accordance with
Section 4(a). Parent agrees that to the extent it utilizes
a proxy granted under this Section 4(c), that it will use
such proxy to vote the Shares and any New Shares in accordance
with Section 4(a).
5.
Representations, Warranties and Covenants of the
Holder.
The Holder hereby represents, warrants
and covenants to Parent that the Holder (a) is the record
and beneficial owner of the Options, which, at the date of this
Agreement and at all times up until the exercise of such Options
in accordance with the terms of this Agreement, will be free and
clear of any liens, claims, options, charges or other
encumbrances (collectively, the
Encumbrances
), (b) upon the exercise of
the Options, will be the record and beneficial owner of the
Shares (constituting 3,224,100 shares of Company Common
Stock), which, at all times from and after such exercise up
until the earlier to occur of (i) the Effective Time and
(ii) the Expiration Date, will be free and clear of any
such Encumbrances and (c) does not own of record or
beneficially any shares of, or any securities or other rights
convertible or exercisable into shares of, any capital stock of
the Company other than the Options. Upon the exercise of the
Options in accordance with this Agreement, the Holder will have
the sole right to vote, the sole power of disposition, the sole
power to issue instructions with respect to the matters set
forth in Section 4, the sole power to demand appraisal
rights and the sole power to agree to all of the matters set
forth in this Agreement, in each case, with respect to all of
the Shares, with no material limitations, qualifications or
restrictions on such rights, subject to applicable federal
securities laws and the terms of this Agreement. The Holder has
the legal capacity, power and authority to enter into and
perform all of the Holders obligations under this
Agreement (including under any proxy granted pursuant to
Section 4(c)). This Agreement (including any proxy granted
pursuant to Section 4(c)) has been duly and validly
executed and delivered by the Holder and constitutes a valid and
binding agreement of the Holder, enforceable against the Holder
in accordance with its terms, subject to (A) laws of
general application relating to bankruptcy, insolvency and the
relief of debtors and (B) rules of law governing specific
performance, injunctive relief and other equitable remedies.
6.
Additional Documents.
The Holder
hereby covenants and agrees to execute and deliver any
additional documents reasonably necessary to carry out the
purpose and intent of this Agreement.
7.
Termination.
This Agreement and any
proxy delivered in connection herewith shall terminate and shall
have no further force and effect as of the earlier to occur of
(a) the Expiration Date, (b) the termination of the
Merger
B-3
Agreement in accordance with the terms thereof, (c) the
date following the date of the Company Stockholder Meeting,
including any adjournment or postponement thereof and
(d) the Effective Time.
8.
Fiduciary Duties.
Notwithstanding
anything in this Agreement to the contrary: (a) the Holder
makes no agreement or understanding herein in any capacity other
than in the Holders capacity as a record holder and
beneficial owner of the Options, the Shares (upon exercise of
the Options) and, if acquired, any New Shares, (b) nothing
in this Agreement shall be construed to limit or affect any
action or inaction by the Holder acting in his capacity as a
director or fiduciary of the Company, and (c) the Holder
shall have no liability to Parent, Merger Sub, Second Merger Sub
or any of their respective affiliates under this Agreement as a
result of any action or inaction by the Holder acting in his
capacity as a director or fiduciary of the Company.
9.
Miscellaneous.
(a)
Amendments and Waivers.
Any term of
this Agreement may be amended or waived with the written consent
of the parties or their respective successors and assigns. Any
amendment or waiver effected in accordance with this
Section 9(a) shall be binding upon the parties and their
respective successors and assigns.
(b)
Governing Law; Venue.
This Agreement
shall be governed by and construed in accordance with the laws
of the State of Delaware, without giving effect to principles of
conflicts of law thereof. Each of the parties hereto
(a) consents to submit to the personal jurisdiction of any
federal court located in the State of Delaware or any Delaware
state court in the event any dispute arises out of this
Agreement, (b) agrees that it shall not attempt to deny or
defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it shall not
bring any action relating to this Agreement in any court other
than a federal or state court sitting in the State of Delaware.
(c)
Counterparts.
This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute
one instrument.
(d)
Titles and Subtitles.
The titles and
subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this
Agreement.
(e)
Notices.
Any notice required or
permitted by this Agreement shall be in writing and shall be
deemed sufficient upon receipt, when delivered personally or by
courier, overnight delivery service or confirmed facsimile, or
72 hours after being deposited in the regular mail as
certified or registered mail with postage prepaid, if such
notice is addressed to the party to be notified at such
partys address or facsimile number as set forth below, or
as subsequently modified by written notice.
(f)
Severability.
If one or more
provisions of this Agreement are held to be unenforceable under
applicable law, the parties agree to renegotiate such provision
in good faith, in order to maintain the economic position
enjoyed by each party as close as possible to that under the
provision rendered unenforceable. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement
for such provision, then (a) such provision shall be
excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so
excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms.
(g)
Specific Performance.
Each of the
parties hereto recognizes and acknowledges that a breach of any
covenants or agreements contained in this Agreement will cause
Parent, Merger Sub and Second Merger Sub to sustain damages for
which they would not have an adequate remedy at law for money
damages, and therefore each of the parties hereto agrees that in
the event of any such breach Parent shall be entitled to the
remedy of specific performance of such covenants and agreements
and injunctive and other equitable relief in addition to any
other remedy to which they may be entitled, at law or in equity.
(h)
WAIVER OF JURY TRIAL.
EACH PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT
B-4
OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS,
(B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY AND
(D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 8(H).
(i)
Waiver of Appraisal Rights.
The
Holder hereby waives and agrees not to exercise any rights of
appraisal or rights to dissent from the Merger that the Holder
may at any time have.
(Signature
Page Follows)
B-5
The parties have caused this Agreement to be duly executed on
the date first above written.
URS CORPORATION
Name: H. Thomas Hicks
|
|
|
|
Title:
|
Vice President and Chief Financial Officer
|
WASHINGTON GROUP INTERNATIONAL, INC.
Name: Stephen G. Hanks
|
|
|
|
Title:
|
President and Chief Executive Officer
|
HOLDER
Dennis R. Washington
B-6
Annex C
1999 Avenue
of the Stars
Suite 2400
Los Angeles, CA 90067
November 4, 2007
Board of Directors
URS Corporation
600 Montgomery Street, 26th Floor
San Francisco, California 94111
Members of the Board,
We understand that URS Corporation (the Buyer),
Elk Merger Corporation, a wholly owned subsidiary of the Buyer
(Merger Sub), Bear Merger Sub, Inc., a wholly owned
subsidiary of the Buyer (Second Merger Sub), and
Washington Group International, Inc. (Elk or the
Company) propose to enter into an amendment,
substantially in the form of the draft dated November 4,
2007 (the Amendment) to the Agreement and Plan of
Merger, dated as of May 27, 2007 (as amended, the
Merger Agreement), which together provide, among
other things, for (i) the merger of Merger Sub with and
into the Company (the First Merger) and
(ii) promptly following the First Merger, the subsequent
merger of the Company with and into Second Merger Sub (the
Second Merger, and together with the First Merger,
the Merger). Pursuant to the Merger, a wholly owned
subsidiary of the Buyer will continue as the surviving entity
and each outstanding share of common stock, par value $0.01 per
share (the Company Common Stock) of the Company,
other than shares held in treasury or held by the Buyer or
Merger Sub, or as to which dissenters rights have been
perfected, will be converted into the right to receive, at the
election of each holder thereof, any of (a) $43.80 per
share in cash without interest and 0.9 of a share of common
stock, par value $0.01 per share, (the Buyer Common
Stock) of the Buyer,(b) the equivalent value per share in
shares of Buyer Common Stock, or (c) the equivalent value
per share in cash (collectively, the Consideration),
in each case as determined pursuant to a formula set forth in
the Merger Agreement and subject to an aggregate maximum amount
of cash and an aggregate maximum number of shares of Buyer
Common Stock. The terms and conditions of the Merger are more
fully set forth in the Merger Agreement. You have asked for our
opinion as to whether the Consideration to be paid by the Buyer
pursuant to the Merger Agreement is fair from a financial point
of view to the Buyer.
For purposes of the opinion set forth herein, we have:
i) reviewed certain publicly available financial statements
and other business and financial information of the Company and
the Buyer, respectively;
ii) reviewed certain internal financial statements and
other financial and operating data, including certain financial
projections, concerning the Company prepared by the management
of the Company;
iii) reviewed certain financial projections concerning the
Company prepared by the management of the Company and reviewed
and/or
adjusted by the management of Buyer;
iv) reviewed certain internal financial statements and
other financial and operating data, including certain financial
projections, concerning the Buyer prepared by the management of
the Buyer;
v) reviewed information relating to certain strategic,
financial and operational benefits anticipated from the Merger,
prepared by the management of the Buyer;
vi) discussed the past and current operations and financial
condition and the prospects of the Buyer and the Company,
including information relating to certain strategic, financial
and operational benefits anticipated from the Merger, with
senior executives of the Buyer;
C-1
Board of Directors
URS Corporation
Page 2
vii) reviewed the pro forma impact of the Merger on the
Buyers earnings per share, cash flow, capitalization and
financial ratios;
viii) reviewed the reported prices and trading activity for
the Company Common Stock and the Buyer Common Stock,
respectively;
ix) compared the financial performance of the Company and
the Buyer and the prices and trading activity of the Company
Common Stock and the Buyer Common Stock with that of certain
other publicly-traded companies comparable with the Company and
the Buyer, respectively, and their respective securities;
x) participated in discussions and negotiations among
representatives of the Company and the Buyer and their financial
and legal advisors;
xi) reviewed the Merger Agreement, the Amendment, the
Senior Credit Facilities Commitment Letter, dated May 27,
2007, and the draft Amendment to Commitment Letter of the Buyer
dated November 3, 2007 (together with the Senior Credit
Facilities Commitment Letter, the Commitment
Letters), and certain related documents; and
xii) performed such other analyses and considered such
other factors as we have deemed appropriate.
We have assumed and relied upon without independent verification
the accuracy and completeness of the information supplied or
otherwise made available to us by the Company and the Buyer for
the purposes of this opinion. With respect to the financial
projections prepared by the management of the Buyer, including
information relating to certain strategic, financial and
operational benefits anticipated from the Merger, we have
assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the future financial performance of the Company and the
Buyer. In addition, we have assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger
Agreement without any material waiver, amendment or delay of any
terms or conditions, including, among other things, that the
Second Merger will be consummated promptly following the First
Merger, that the First Merger and the Second Merger will be
treated as a single integrated transaction and that the Merger
will be treated as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended. We have not made any independent valuation
or appraisal of the assets or liabilities of the Company and
Buyer, nor have we been furnished with any such appraisals. In
addition, we have assumed that the Buyer will obtain financing
in connection with the Merger on terms consistent with the
Commitment Letters and as discussed with the senior management
of the Buyer. Morgan Stanley has assumed that, in connection
with the receipt of all the necessary governmental, regulatory
or other approvals and consents required for the Merger, no
delays, limitations, conditions or restrictions will be imposed
that would have a material adverse effect on the contemplated
benefits expected to be derived in the Merger. We have relied
upon, without independent verification, the assessment by the
management of the Buyer of: (i) the strategic, financial
and other benefits expected to result from the Merger;
(ii) the timing and risks associated with the integration
of the Company and the Buyer; (iii) the strategic rationale
for the Merger and (iv) the validity of, and risks
associated with, the Companys and the Buyers
existing and future services, technologies, intellectual
property, products and business models. We are not legal, tax or
regulatory advisors and have relied upon, without independent
verification, the assessment of the Buyer and its legal, tax or
regulatory advisors with respect to legal, tax or regulatory
matters. Our opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Events
occurring after the date hereof may affect this opinion and the
assumptions used in preparing it, and we do not assume any
obligation to update, revise or reaffirm this opinion.
We have acted as financial advisor to the Board of Directors of
the Buyer in connection with this transaction and will receive a
fee for our services, a significant portion of which is
contingent upon the closing of the transaction. In addition, the
Buyer has agreed to offer us the opportunity to provide
financing services in connection with the transaction and we may
receive a fee for such services. In the past, we and our
affiliates have provided
C-2
Board of Directors
URS Corporation
Page 3
financial advisory and financing services for the Buyer and have
received fees for the rendering of these services. In the
ordinary course of our trading, brokerage, investment management
and financing activities, we and our affiliates may at any time
hold long or short positions, and may trade or otherwise effect
transactions, for our own account or the accounts of customers,
in debt or equity securities or senior loans of the Buyer, the
Company or any other company or any currency or commodity that
may be involved in this transaction.
It is understood that this letter is for the information of the
Board of Directors of the Buyer and may not be used for any
other purpose without our prior written consent, except that a
copy of this opinion may be included in its entirety in any
filing the Buyer is required to make with the Securities and
Exchange Commission in connection with this transaction if such
inclusion is required by applicable law. In addition, this
opinion does not in any manner address the prices at which the
Buyer Common Stock will trade following consummation of the
Merger and we express no opinion or recommendation as to how the
shareholders of the Buyer and the Company should vote at the
shareholders meetings to be held in connection with the
Merger.
Based upon and subject to the foregoing, we are of the opinion
on the date hereof that the Consideration to be paid by the
Buyer pursuant to the Merger Agreement is fair from a financial
point of view to the Buyer.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Jeffrey N. Hogan
Jeffrey N. Hogan
Managing Director
C-3
Annex D
Goldman, Sachs & Co. | 85 Broad Street | New York, New
York 10004
Tel:
212-902-1000
PERSONAL
AND CONFIDENTIAL
November 4, 2007
Board of Directors
Washington Group International, Inc.
720 Park Boulevard
Boise, Idaho 83712
Madam and Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the holders of the outstanding shares
of common stock, par value $0.01 per share (the
Shares), of Washington Group International, Inc.
(the Company) of the Mixed Consideration, the Stock
Election Consideration and the Cash Election Consideration (each
as defined below) to be received by such holders, taken in the
aggregate, pursuant to the Agreement and Plan of Merger, dated
as of May 27, 2007, as amended by Amendment No. 1
thereto, dated as of November 4, 2007 (the
Agreement), by and among the Company,
URS Corporation (Parent), Elk Merger
Corporation (Merger Sub), a wholly owned subsidiary
of Parent, and Bear Merger Sub, Inc. (Second Merger
Sub), a wholly owned subsidiary of Parent. The Agreement
provides that Merger Sub will be merged with and into the
Company and immediately thereafter the Company will be merged
with and into Second Merger Sub and each outstanding Share will
be converted into the right to receive, at the election of the
holder of such Share: (i) $43.80 in cash (the Cash
Consideration) and 0.90 shares of common stock, par
value $0.01 per share, of Parent (Parent Common
Stock) (the Stock Consideration; together with
the Cash Consideration, the Mixed Consideration);
(ii) an amount in cash, without interest, equal to the sum
of (a) the Cash Consideration plus (b) an amount in
cash equal to the product of (1) the Average Parent Stock
Price (as defined in the Agreement) and (2) the Stock
Consideration (the Cash Election Consideration),
subject to certain procedures and limitations contained in the
Agreement, as to which procedures and limitations we are
expressing no opinion; or (iii) a number of shares of
Parent Common Stock equal to the sum of (a) the Stock
Consideration and (b) the number of shares of Parent Common
Stock equal to (1) the Cash Consideration divided by
(2) the Average Parent Stock Price (the Stock
Election Consideration), subject to certain procedures and
limitations contained in the Agreement
,
as to which
procedures and limitations we are expressing no opinion.
Goldman, Sachs & Co. and its affiliates, as part of
their investment banking business, are continually engaged in
performing financial analyses with respect to businesses and
their
D-1
Board of Directors
Washington Group International, Inc.
November 4, 2007
Page Two
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and other transactions as well as for estate,
corporate and other purposes. We have acted as financial advisor
to the Company in connection with, and have participated in
certain of the negotiations leading to, the transaction
contemplated by the Agreement (the Transaction). We
expect to receive fees for our services in connection with the
Transaction, a substantial portion of which is contingent upon
consummation of the Transaction, and the Company has agreed to
reimburse our expenses and indemnify us against certain
liabilities arising out of our engagement. In addition, we have
provided certain investment banking and other financial services
to the Company from time to time. We also may provide investment
banking and other financial services to the Company and Parent
in the future. In connection with the above-described services
we have received, and may receive, compensation.
Goldman, Sachs & Co. is a full service securities firm
engaged, either directly or through its affiliates, in
securities trading, investment management, financial planning
and benefits counseling, risk management, hedging, financing and
brokerage activities for both companies and individuals. In the
ordinary course of these activities, Goldman, Sachs &
Co. and its affiliates may provide such services to the Company,
Parent and their respective affiliates, may actively trade the
debt and equity securities (or related derivative securities) of
the Company and Parent for their own account and for the
accounts of their customers and may at any time hold long and
short positions of such securities.
In connection with this opinion, we have reviewed, among other
things, the Agreement; annual reports to stockholders and Annual
Reports on
Form 10-K
of the Company and Parent for the five fiscal years ended
December 29, 2006; certain interim reports to stockholders
and Quarterly Reports on
Form 10-Q
of the Company and Parent; certain other communications from the
Company and Parent to their respective stockholders; certain
internal financial analyses and forecasts for the Company and
Parent prepared by their respective managements (the
Forecasts), including certain cost savings and
operating synergies projected by the managements of the Company
and Parent to result from the Transaction (the
Synergies); and certain research analyst reports
with respect to the Company and Parent, including reports issued
subsequent to the date on which the Transaction was announced.
We also have held discussions with members of the senior
managements of the Company and Parent regarding their assessment
of the strategic rationale for, and the potential benefits of,
the Transaction and the past and current business operations,
financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and
trading activity for the Shares and Parent Common Stock,
compared certain financial and stock market information for the
Company and Parent with similar information for certain other
companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in
the engineering and construction industry specifically and in
other industries generally and performed such other studies and
analyses, and considered such other factors, as we considered
appropriate.
For purposes of rendering this opinion, we have relied upon and
assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
D-2
Board of Directors
Washington Group International, Inc.
November 4, 2007
Page Three
financial, accounting, legal, tax and other information provided
to, discussed with or reviewed by us. In that regard, we have
assumed with your consent that the Forecasts, including the
Synergies, have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the
managements of the Company and Parent, as the case may be. In
addition, we have not made an independent evaluation or
appraisal of the assets and liabilities (including any
contingent, derivative or off-balance-sheet assets and
liabilities) of the Company or Parent or any of their respective
subsidiaries and we have not been furnished with any such
evaluation or appraisal.
Our opinion does not address the underlying business decision of
the Company to engage in the Transaction or the relative merits
of the Transaction as compared to any alternative business
strategies or transactions that might be available to the
Company nor are we expressing any opinion as to the prices at
which shares of Parent Common Stock will trade at any time. We
have assumed, with your consent, that all governmental,
regulatory or other consents and approvals necessary for the
consummation of the Transaction will be obtained without the
imposition of any delay, limitation, restriction or condition
that would have an adverse effect on the Company or Parent or on
the expected benefits of the Transaction in any way meaningful
to our analysis. Our opinion does not address any legal,
regulatory, tax or accounting matters.
Our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof. We were not authorized
to solicit, and did not solicit, interest from any party with
respect to a merger or other business combination transaction
involving the Company or any of its assets. Our advisory
services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the
Company in connection with its consideration of the Transaction
and such opinion does not constitute a recommendation as to how
any holder of Shares should vote or make any election with
respect to the Transaction or any other matter. This opinion has
been approved by a fairness committee of Goldman,
Sachs & Co.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Mixed Consideration, the Stock
Election Consideration and the Cash Election Consideration to be
received by holders of Shares, taken in the aggregate, pursuant
to the Agreement are fair from a financial point of view to such
holders.
Very truly yours,
(GOLDMAN, SACHS & CO.)
D-3
There are three ways to vote
your Proxy
Your telephone or Internet vote authorizes
the Named Proxies to vote your shares in the
same manner as if you marked, signed and
returned your proxy card.
INTERNET TELEPHONE MAIL https://www.proxypush.com/wgn 1-866-822-4616
· Use the Internet to vote your proxy
OR
Use any touch-tone telephone to
OR
Mark, sign and date your proxy 24 hours a day, 7 days a week, until vote your proxy 24
hours a day, 7 card.
12:00 a.m. on November 14, 2007. days a week, until 12:00 a.m. on
Detach your proxy
card.
· Please have your proxy card ready. November 14, 2007.
Return your proxy card in the
· Follow the simple instructions to
Please have your proxy card ready. postage-paid
envelope provided. obtain your records and create an
Follow the simple instructions the
electronic ballot. voice provides you.
HTTPS://WWW.PROXYPUSH.COM/WGN
VOTE VIA THE INTERNET
1-866-822-4616
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
PLEASE DETACH HERE
Please Sign, Date and Return the
Proxy Card Promptly x
Using the Enclosed Envelope. Votes must
be indicated (x) in Black or Blue ink.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Adoption of the Agreement and Plan of Merger, dated as of May 2. Adjournment of the
Washington Group International 27, 2007, as amended on November 4, 2007, by and among special
meeting, if necessary, to permit further URS Corporation, Elk Merger Corporation, a wholly
owned solicitation of proxies if there are not sufficient subsidiary of URS, Bear Merger Sub,
Inc., a wholly owned votes at the time of the Washington Group subsidiary of URS, and
Washington Group International, Inc., International special meeting in favor of pursuant to
which Elk Merger Corporation will merge with and into Washington Group the foregoing.
International, and each outstanding share of Washington Group International common stock,
other than those shares
held by URS, any subsidiary of URS, Elk Merger Corporation or Bear Merger Sub and other than
treasury shares and shares as to which a Washington Group
International stockholder has validly demanded and perfected appraisal rights under Delaware
Address Change? Mark Box a l w, will be converted into the right to receive (a) 0.909 of a
share of URS common stock and Indicate changes below: $43.60 in cash, without interest, (b) an
amount in cash, without interest, equal to the sum of (i) $43.60 and (ii) 0.90 multiplied by
thee volume weighted average of the trading prices of URS common stock during the five trading
days ending on the trading day that is one day prior to
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR,
the date of the URS special
meeting, or (c) a number of shares equal to the sum of (i) 0.90 and (ii) $43.80 divided the
volume weighted average of the trading prices of URS common stock
IF NO DIRECTION IS GIVEN, WILL
BE VOTED FOR ITEMS 1 and 2.
during the five trading days ending on the trading day that is one
day prior to the date of the URS special meeting.
S C A N L I N E
Please sign exactly as
your name(s) appears on
the Proxy. If held in
joint tenancy, all persons
should sign. Trustees,
administrators, guardians,
executors and
attorneys-in-fact, should
include title and
authority. Corporations
should provide full name
of corporation and title
of authorized officer
signing the proxy.
Date Share Owner sign here
Co-Owner sign here
|
1
WASHINGTON GROUP INTERNATIONAL, INC.
SPECIAL MEETING OF STOCKHOLDERS
November 15, 2007, 7:00
a.m. MST
This proxy is solicited by the Board of Directors of Washington Group International for use at
the Special Meeting of Stockholders of Washington Group International on November 15, 2007.
This proxy when properly executed will be voted as you specify on the reverse side.
If no choice is specified, the proxy will be voted FOR Items 1 and 2.
By signing the proxy, you revoke all prior proxies and appoint George H. Juetten, Stephen G. Hanks
and Craig G.Taylor and each of them with full power of substitution, to vote your shares on the
matters shown on the reverse side and any other matters which may come before the Special Meeting
and all adjournments.
See reverse for voting instructions.
WASHINGTON GROUP
INTERNATIONAL P.O. BOX 11444
NEW YORK, NY 10203-0444
Washington Group International,
Inc. 720 Park Boulevard, P.O. Box
73 Boise, Idaho 83729
|
2
VOTE BY INTERNET
WWW.CESVOTE.COM
Use the Internet to transmit your voting instructions up until 3:00 a.m. PST on
the morning of the Special Meeting. Have your proxy card in hand when you access
URS
Corporation
the website listed above and follow the instructions to create an electronic
voting
c/o Corporate Election Services
instruction form.
PO Box 3230 Pittsburgh, PA
15230 VOTE BY TELEPHONE 1-888-693-8683
Use any touch-tone telephone to
transmit your voting instructions up until
3:00 a.m. PST on the morning of the
Special Meeting. Have your proxy card in
hand when you call and then follow the
instructions.
VOTE BY MAIL
Please mark, sign and date your proxy
card and return it in the
postage-paid
envelope
we have provided or return it to:
URS Corporation, c/o Corporate Election
Services, P.O. Box 3230, Pittsburgh PA
15230-3230 to ensure that your vote is
received prior to the Special Meeting on
November 15, 2007.
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Mark, sign, date and return
touch-tone telephone: cast your vote: your proxy in the postage-paid
1-888-693-8683 www.cesvote.com
envelope provided.
Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card. If you vote your proxy by Internet
or by telephone, you do NOT need to mail back your proxy card.
I
THIS PROXY CARD IS VALID ONLY WHEN SIGNED.
D
Please fold and detach card at perforation before
mailing.
D
URS CORPORATION SPECIAL MEETING OF STOCKHOLDERS
THURSDAY, NOVEMBER 15, 2007 AT 9:00
A. M. EST The Board of Directors recommends a vote FOR proposals 1 and 2
below. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BELOW. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
FOR AGAINST ABSTAIN
1. Approval of the issuance of shares of URS common stock pursuant to the Agreement and Plan of Merger,
dated as of May 27, 2007, by and among URS Corporation, Elk Merger Corporation, a wholly
owned subsidiary of URS, Bear Merger Sub, Inc., a wholly owned subsidiary of URS, and
Washington Group International, Inc., as amended or restated.
2. Adjournment of the URS Special Meeting, if necessary, to permit further solicitation of proxies if there are not
sufficient votes at the time of the URS Special Meeting in favor of the foregoing.
, 2007
Signature Date
, 2007
Signature (Joint Owner) Date
Please vote, date and sign
and mail this proxy
promptly in the enclosed
envelope. When there is
more than one owner, each
should sign. When signing
as an attorney,
administrator, executor,
g
uardian or trustee, please
add your title as such. If
executed by a corporation,
the full corporation name
should be given, and this
proxy should be signed by a
duly authorized officer,
showing his or her title.
|
URS CORPORATION
VOTE YOUR SHARES VIA THE INTERNET OR BY TELEPHONE
Dear Stockholder:
Your vote is important. URS Corporation encourages you to submit your proxy electronically
via the Internet or by telephone, both of which are available 24 hours a day, seven days a
week. If you vote your proxy by Internet or by telephone, you do NOT need to mail back your
proxy card.
·
To submit your proxy electronically via the Internet, go to the Website:
http://www.cesvote.com and follow the prompts. You must use the control number
printed in the box by the arrow on the reverse side of this card.
·
To submit your proxy by telephone, use a touch-tone telephone and call
1-888-693-8683. You must use the control number printed in the box by the arrow on
the reverse side of this card.
If you have any questions or need assistance in voting, please call D. F. King & Co., Inc.
toll-free at 1-800-829-6551. Stockholders calling from outside the U.S. and Canada may call
+44 20 7920 9700.
Your vote is important. Thank you for voting.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED.
D
Please fold and detach card at perforation before
mailing.
D
URS CORPORATION SPECIAL MEETING OF STOCKHOLDERS
THURSDAY, NOVEMBER 15, 2007 AT 9:00
A. M. EST
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF URS CORPORATION for use at the
Special Meeting of Stockholders of URS on November 15, 2007.
This proxy when properly executed will be voted as you specify on the reverse side.
If no choice is specified, the proxy will be voted FOR Items 1 and 2.
By signing the proxy, you revoke all prior proxies and appoint Joseph Masters and H. Thomas Hicks
and each of them with full power of substitution, to vote your shares on the matters shown on the
reverse side and in their discretion on any other matters which may come before the Special Meeting
and all adjournments or postponements thereof.
Please indicate any change of address below:
IMPORTANT This Proxy must be signed and dated on the reverse
side.
|
VOTE BY INTERNET
WWW.CESVOTE.COM
Use the Internet to transmit your voting instructions up until 5:00 p.m. EST on
November 12, 2007. Have your voting instruction card in hand when you access
URS
Corporation
the website listed above and follow the instructions to create an electronic
voting
c/o Corporate Election Services
instruction form.
PO Box 3230 Pittsburgh, PA
15230 VOTE BY TELEPHONE 1-888-693-8683
Use any touch-tone telephone to
transmit your voting instructions up until
5:00 p.m. EST on November 12, 2007. Have
your voting instruction card in hand when
you call and then follow the instructions.
VOTE BY MAIL
Please mark, sign and date your voting
instruction card and return it in the
postage-paid envelope
we have provided or
return it to: URS Corporation, c/o
Corporate Election Services, P.O. Box
3230, Pittsburgh PA 15230-3230 to ensure
that your vote is received prior to 5:00
p.m. EST on November 12, 2007.
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Mark, sign, date and return
touch-tone telephone: cast your vote: your voting instruction card in the
1-888-693-8683 www.cesvote.com
postage-paid envelope provided.
Your telephone or Internet vote authorizes the Trustee to vote your shares in the same manner
as if you marked, signed and returned your voting instruction card. If you vote your voting
instruction card by Internet or by telephone, you do NOT need to mail back your voting instruction
card.
I
THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED.
D
Please fold and detach card at perforation before
mailing.
D
URS CORPORATION CONFIDENTIAL VOTING INSTRUCTION
CARD
The Board of Directors recommends a vote FOR proposals 1 and 2 below. THIS VOTING INSTRUCTION
CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BELOW. IF NO DIRECTION IS MADE,
THIS VOTING INSTRUCTION CARD WILL BE VOTED FOR PROPOSALS 1 AND 2.
FOR AGAINST ABSTAIN
1. Approval of the issuance of shares of URS common stock pursuant to the Agreement and Plan of Merger,
dated as of May 27, 2007, by and among URS Corporation, Elk Merger Corporation, a wholly
owned subsidiary of URS, Bear Merger Sub, Inc., a wholly owned subsidiary of URS, and
Washington Group International, Inc., as amended or restated.
2. Adjournment of the URS Special Meeting, if necessary, to permit further solicitation of proxies if there are not
sufficient votes at the time of the URS Special Meeting in favor of the foregoing.
Signature Date
Please vote, date and
sign
and mail this voting
instruction card promptly
in the enclosed envelope.
|
Your vote is important.
Please provide your voting instructions today.
THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED.
D
Please fold and detach card at perforation before
mailing.
D
URS CORPORATION CONFIDENTIAL VOTING INSTRUCTION
CARD
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF URS CORPORATION for
use at the Special Meeting of Stockholders of URS on November 15, 2007.
Pursuant to the Trust Agreement for the URS Corporation 401(k) Retirement Plan (the Plan),
the undersigned, as a participant or beneficiary in the Plan, hereby directs Fidelity Management
Trust Company, as Trustee under the Plan, to vote as indicated on the reverse at the Special
Meeting of Stockholders of URS Corporation to be held on November 15, 2007, and at any
adjournment(s) thereof, all URS Corporation Common Stock allocated to the undersigneds Company
stock accounts under the Plan as of the September 21, 2007 record date for such meeting. Fidelity
Management Trust Company will vote the shares represented by this voting instruction form if it is
properly completed, signed and received by the independent tabulator before 5:00 p.m. EST on
November 12, 2007. Fidelity Management Trust Company shall not vote shares allocated to a
participants account for which it has not received instructions from the participant.
IMPORTANT This voting instruction card must be signed and dated on the
reverse side.
|
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