AGREEMENT AND PLAN OF MERGERAgreement and Plan of Merger |
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TABLE OF CONTENTS
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EXHIBITS
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GLOSSARY OF DEFINED TERMS
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AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of May 6, 2008, is by and among BE&K, Inc., a Delaware corporation (“ BE&K ”), KBR, Inc., a Delaware corporation (“ KBR ”), and Whitehawk Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of KBR (“ Merger Sub ”, and each of the foregoing a “ Party ” and collectively the “ Parties ”). RECITALS : A. The respective boards of directors of BE&K, KBR and Merger Sub have each approved this Agreement, providing for the acquisition by KBR of BE&K, through the merger of Merger Sub with and into BE&K, with BE&K surviving such merger (the “ Merger ”), as a wholly owned subsidiary of KBR, in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), upon the terms and subject to the conditions set forth herein, and have adopted and declared advisable this Agreement; B. Concurrently with the execution of this Agreement, as a condition and an inducement to KBR’s and Merger Sub’s willingness to enter into this Agreement, certain stockholders of BE&K are entering into support agreements with KBR (each a “ Support Agreement ”), pursuant to which such stockholders have agreed to support the Merger upon the terms and conditions set forth therein. In consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the Parties hereby agree as follows: Section 1.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the applicable provisions of the DGCL, at the Effective Time, Merger Sub shall be merged with and into BE&K. The Merger shall have the effects specified herein and in the DGCL. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and BE&K shall continue as the surviving entity of the Merger (the “ Surviving Company ”), and as an indirect wholly owned Subsidiary of KBR. Section 1.2 Closing; Effective Time . Subject to the satisfaction or, if permissible, waiver of the conditions set forth in Article 6 (other than those conditions that by their terms cannot be satisfied until the Closing, but subject to the satisfaction or waiver of such conditions), the closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place on July 1, 2008. If on July 1, 2008 such conditions have not been so satisfied or waived, then the Closing shall take place as promptly as practicable thereafter (and in any event within two Business Days) after the satisfaction or, if permissible, waiver of the conditions set forth in Article 6 (other than those conditions that by their terms cannot be satisfied until the Closing, but subject to the satisfaction or waiver of such conditions). The Closing of the transactions contemplated by this Agreement shall take place at the offices of Andrews Kurth LLP in Houston, Texas, at 8:00 a.m., Houston time, on the date of the Closing, or at such other place and time as BE&K and KBR shall agree. As part of the Closing, the Parties shall cause the Merger to be consummated by duly filing a certificate of merger
(the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware in such form as is required by, and executed in accordance with the relevant provisions of, the DGCL (the date and time of such filing being the “ Effective Time ”) and as mutually agreed to by BE&K and KBR. The date of the Closing is herein called the “ Closing Date ”. Section 1.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the real estate, property, rights, privileges, powers, franchises and other assets of BE&K and Merger Sub shall vest in the Surviving Company, and all debts, liabilities, obligations and duties of BE&K and Merger Sub shall be the debts, liabilities, obligations and duties of the Surviving Company. Section 1.4 Governing Instruments; Directors and Officers of the Surviving Company . (a) The certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Company until duly amended in accordance with its terms and the DGCL, except that the name of the corporation as specified in such certificate of incorporation shall be amended to read as “BE&K, Inc.”. (b) The bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Company until duly amended in accordance with its terms and the DGCL, except that the name of the corporation as specified in such bylaws shall be amended to read as “BE&K, Inc.”. (c) The directors of Merger Sub and the officers of BE&K (other than those who Merger Sub determines shall not remain as officers of the Surviving Company), in each case, as of the Effective Time, shall be the initial directors and officers, respectively, of the Surviving Company from the Effective Time until their respective successors have been duly elected or appointed in accordance with the certificate of incorporation and bylaws of the Surviving Company and the DGCL. ARTICLE 2 Section 2.1 Conversion of Securities . At the Effective Time, by virtue of the Merger and without any action on the part of KBR, Merger Sub, BE&K or the holders of any of the following securities: (a) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.01, of the Surviving Company. (b) Each share of Class A common stock, par value $1.00 per share, of BE&K (the “ BE&K Class A Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than any shares of BE&K Class A Common Stock to be canceled pursuant to Section 2.1(d) or that constitute Appraisal Shares) shall be converted into the right to receive in cash an amount per share equal to the Class A Per Share 2
Consideration. The actual amount of the applicable Merger Consideration attributable to any particular holder of shares of BE&K Class A Common Stock shall be the number of shares of BE&K Class A Common Stock owned by such holder times the Class A Per Share Consideration, rounded to the nearest $.01. (c) Each share of Class B common stock, par value $1.00 per share, of BE&K (the “ BE&K Class B Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than any shares of BE&K Class B Common Stock to be canceled pursuant to Section 2.1(d) or that constitute Appraisal Shares) shall be converted into the right to receive in cash an amount per share equal to the Class B Per Share Consideration. The actual amount of the applicable Merger Consideration attributable to any particular holder of shares of BE&K Class B Common Stock shall be the number of shares of BE&K Class B Common Stock owned by such holder times the Class B Per Share Consideration, rounded to the nearest $.01. (d) Each share of BE&K Class A Common Stock, BE&K Class B Common Stock and Series A preferred stock, par value $1.00 per share, of BE&K (the “ BE&K Preferred Stock ”) held in the treasury of BE&K, or owned by any direct or indirect Subsidiary of BE&K, in each case immediately prior to the Effective Time, shall be canceled without any conversion thereof and no consideration shall be paid with respect thereto. (e) From and after the Effective Time, the holders of BE&K Class A Common Stock and BE&K Class B Common Stock outstanding immediately prior to the Effective Time (the “ BE&K Stockholders ”) shall cease to have any rights with respect to such capital stock except for the right to receive the Merger Consideration in respect of such capital stock and except as otherwise provided herein or by the DGCL. At the Effective Time, the transfer books of BE&K shall be closed and, thereafter, there shall be no further registration of transfers of BE&K Class A Common Stock or BE&K Class B Common Stock. (f) For purposes of this Agreement, each of the following terms has the meaning set forth below:
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Section 2.2 Purchase Price . The aggregate consideration to be received by the BE&K Stockholders in the Merger is to consist of the sum of $550,000,000, less the Deemed Appraisal Amount (the “ Initial Purchase Price ”). The Initial Purchase Price shall be adjusted pursuant to Section 2.4(b) (as so adjusted, the “ Final Purchase Price ”). The “ Deemed Appraisal Amount ” means the aggregate dollar amount equal to the sum of (as a simultaneous calculation for clauses (i) and (ii)) (i) the product of the number of Appraisal Shares that are comprised of BE&K Class A Common Stock, multiplied by the Class A Per Share Consideration that would have been calculated had there been no Appraisal Shares that are comprised of BE&K Class A Common Stock, and (ii) the product of the number of Appraisal Shares that are comprised of BE&K Class B Common Stock, multiplied by the Class B Per Share Consideration that would have been calculated had there been no Appraisal Shares that are comprised of BE&K Class B Common Stock. Section 2.3 Stockholders’ Representatives . (a) In order to efficiently administer the activities of the parties under this Agreement and the Escrow Agreement from and after the Effective Time, BE&K hereby designates (and such designation shall become effective automatically upon the BE&K Stockholder Approval having been obtained), and the BE&K Stockholders, by virtue of their acceptance of any of their Merger Consideration pursuant to this Agreement, accept, ratify and agree to the designation of, T. Michael Goodrich, Theodore C. Kennedy and Clyde M. Smith as representatives for the BE&K Stockholders (the “ Stockholders’ Representatives ”), and hereby and thereby authorize the Stockholders’ Representatives to act on behalf of the BE&K Stockholders at and after the Closing: (i) to take all actions necessary to determine the Final Purchase Price in accordance with Section 2.4 , including, without limitation, authorizing or consenting to distributions out of the Holdback Amount; (ii) to take all actions necessary in connection with the defense and/or settlement of any claims for which indemnification may be sought by KBR pursuant to Article 8 hereof; (iii) to give and receive all notices required to be given under this Agreement or the Escrow Agreement; (iv) to draw upon the Expense Escrow Fund provided for in Section 2.5 in their discretion for the purposes contemplated by this Agreement without the consent of KBR or the BE&K Stockholders; (v) to authorize disbursements from the Indemnity Escrow Fund and the Excluded Business Escrow Fund in accordance with this Agreement and the Escrow Agreement; (vi) to object to, to litigate, to arbitrate, to negotiate and enter into settlements and compromises of, and to comply with orders of courts or arbitrators with respect to, Claims made by any KBR Indemnified Parties pursuant to Article 8 ; (vii) to provide instructions to the Escrow Agent under the Escrow Agreement; and (viii) to take any and all additional actions as are necessary or appropriate in the judgment of the Stockholders’ Representatives for the accomplishment of the foregoing or as contemplated to be taken by them under by the terms of this Agreement and the Escrow Agreement. In so acting, all decisions of the Stockholders’ Representatives for all purposes of this Agreement and the Escrow Agreement shall be taken by the affirmative vote (or written consent) of a majority of the individuals then holding the title of a Stockholders’ Representative, on a per capita basis. (b) If any Stockholders’ Representative dies, becomes unable to perform his or her responsibilities hereunder or resigns from such position, the remaining Stockholders’ Representatives shall, by majority vote on a per capita basis, appoint a substitute Stockholders’ Representative and shall promptly notify KBR and the Escrow Agent thereof in writing. 4
(c) No bond shall be required of the Stockholders’ Representatives, and the Stockholders’ Representatives shall receive no compensation for their services, but they may be reimbursed from the Escrow Expense Fund for any out-of-pocket expenses actually incurred by them in the performance of their duties as Stockholders’ Representatives. (d) KBR shall be entitled to rely conclusively on the instructions of a majority of the Stockholders’ Representatives for each and every action purported to be taken by the Stockholders’ Representatives hereunder and under the Escrow Agreement, without any duty of inquiry, and none of the Stockholders’ Representatives or any of the BE&K Stockholders shall have any cause of action against KBR or any of its Affiliates for any action taken, or not taken, by KBR in reliance upon the instructions or decisions of a majority of the Stockholders’ Representatives. In all notices and instructions to KBR by the Stockholders’ Representatives, the Stockholders’ Representatives shall certify that a majority of the then existing Stockholders’ Representatives have approved of such notice or instruction. (e) The provisions of this Section 2.3 shall be binding upon the executors, heirs, legal representatives and successors of each BE&K Stockholder, and any references in this Agreement to a BE&K Stockholder shall mean and include the successors to the rights of such BE&K Stockholder hereunder, whether pursuant to testamentary disposition, the laws of descent and distribution or otherwise. (f) Upon request of the Stockholders’ Representatives and/or the Escrow Agent, each BE&K Stockholder shall complete, execute and provide to the Stockholders’ Representatives and/or the Escrow Agent, as applicable, certified tax identification numbers by furnishing IRS Forms W-9 (or Forms W-8, in the case of non-U.S. persons) and other forms, documents and information as the Stockholders’ Representatives and/or the Escrow Agent may reasonably require in order to disburse any amounts from the Indemnity Escrow Fund, the Excluded Business Escrow Fund or the Expense Escrow Fund to such BE&K Stockholder, and each of the BE&K Stockholders agrees that if such documentation is not so certified and provided, the Escrow Agent may be required by the Code to withhold and promptly remit to the Internal Revenue Service a portion of any interest or other income earned on the investment of the Indemnity Escrow Fund, the Excluded Business Escrow Fund or the Expense Escrow Fund. (g) All decisions and actions by the Stockholders’ Representatives, including, without limitation, any agreement between the Stockholders’ Representatives and KBR relating to the defense or settlement of any Claims for which indemnity may be sought by any of the KBR Indemnified Parties pursuant to Article 8 , shall be binding upon all of the BE&K Stockholders, and no BE&K Stockholder shall have (A) the right to object, protest or otherwise contest the same or (B) any cause of action against the Stockholders’ Representatives for any action taken, decision made or instruction given by the Stockholders’ Representatives under this Agreement or the Escrow Agreement while acting in good faith, except for intentional fraud or willful breach of this Agreement or the Escrow Agreement by the Stockholders’ Representatives. (h) Each BE&K Stockholder agrees to indemnify and hold harmless the Stockholders’ Representatives severally, pro rata in accordance with each BE&K Stockholder’s ownership of the capital stock of BE&K immediately prior to the Effective Time, and not jointly, from and against any and all (A) reasonable expenses incurred by the Stockholders’ Representatives in connection with the performance or administration 5
of the Stockholders’ Representatives’ duties hereunder, (B) reasonable legal fees, accounting fees and other fees and expenses incurred by the Stockholders’ Representatives in connection with the performance or administration of the Stockholders’ Representatives’ duties hereunder, which legal fees are hereby authorized by the BE&K Stockholders, and (C) any damages or expenses asserted against, resulting to, or imposed upon, or incurred or suffered by the Stockholders’ Representatives without intentional fraud or willful misconduct on the part of the Stockholders’ Representatives, and arising out of or in connection with the acceptance, performance or administration of the Stockholders’ Representatives’ duties hereunder. If the Stockholders’ Representatives are entitled to indemnification under this Section 2.3 , the Stockholders’ Representatives shall first cause the Escrow Agent to pay such amounts from the Expense Escrow Fund. If, at the time that the BE&K Stockholders are entitled to a distribution from the Indemnity Escrow Fund or the Excluded Business Escrow Fund, any BE&K Stockholder shall not have paid an obligation due to the Stockholders’ Representatives pursuant to this Agreement, and such obligation cannot be satisfied from the Expense Escrow Fund, the Stockholders’ Representatives may direct the Escrow Agent (as part of the distribution instruction given with respect to such distribution) to distribute to the Stockholders’ Representatives the amount of such BE&K Stockholder’s obligation up to the amount distributable to such BE&K Stockholder, and such distribution to the Stockholders’ Representative shall be in full satisfaction of such obligation to the extent of the amount so distributed. (i) The Stockholders’ Representatives shall have no obligation to the BE&K Stockholders to contest any Claim, or take any other action hereunder or under the Escrow Agreement requiring the expenditure of funds by the Stockholders’ Representatives unless the Stockholders’ Representatives determine that the amount of the Expense Escrow Fund is sufficient to pay such expenditures or an indemnity or other security satisfactory to the Stockholder Representatives in their sole discretion is provided by some or all of the BE&K Stockholders. Section 2.4 Closing Purchase Price Adjustments and Procedures. (a) The Parties have agreed that the Adjusted Stockholders’ Equity of BE&K and its Subsidiaries on a consolidated basis, after giving effect on a pro forma basis to (i) the disposition of the Excluded Businesses and (ii) the effectuation of all of the actions contemplated by Sections 5.14 and 5.16 , is expected to be $74,560,431 as of March 30, 2008 (the “ Expected Adjusted Stockholders’ Equity ”). Such dollar amount has been determined based on the pro forma balance sheets comprising Exhibit A hereto and has been calculated in accordance with GAAP, subject to the accounting principles and adjustments set forth in Exhibit A hereto (the “ Adjusted Stockholders’ Equity Adjustment Methodology ”). However, upon completion of the audit of BE&K’s consolidated financial statements for the year ended March 30, 2008, BE&K and KBR shall cooperate and work together to amend and restate the Expected Adjusted Stockholders’ Equity to take into account adjustments made from the preliminary consolidated financial statements of BE&K, utilized for purposes of determining the Expected Adjusted Stockholders’ Equity for purposes of this Agreement, in completing such audited financial statements. In addition, BE&K and KBR shall cooperate and work together to amend and restate the Expected Adjusted Stockholders’ Equity to update and adjust the expected Tax costs and other Tax impacts associated with the distribution to the BE&K Stockholders of the Daugava Hotel Interest as 6
contemplated by Section 5.14 of the BE&K Disclosure Schedule, based on the actual terms of such distribution. For purposes of this Agreement, “ Adjusted Stockholders’ Equity ” means the total assets minus the total liabilities as of a specified date of BE&K and its Subsidiaries on a consolidated basis, as determined in accordance with the Adjusted Stockholders’ Equity Adjustment Methodology and after giving effect to (x) the disposition of the Excluded Businesses and (y) the effectuation of all of the actions contemplated by Sections 5.14 and 5.16 . GAAP, subject to the Adjusted Stockholders’ Equity Adjustment Methodology, shall be used in the determination of the Closing Adjusted Stockholders’ Equity. For purposes of this Agreement, “ GAAP ” means U.S. generally accepted accounting principles, as in effect at the times relevant for the preparation of the particular financial statements in question (which, for purposes of Adjusted Stockholders’ Equity, shall be deemed to mean as of March 30, 2008). All determinations of Adjusted Stockholders’ Equity, Expected Adjusted Stockholders’ Equity, Closing Adjusted Stockholders Equity and Final Adjusted Stockholders’ Equity (and any related determinations of income for periods relevant to such determination) shall be made disregarding the effect of (i) any accounting or tax elections or adjustments made at or subsequent to the Closing, including any such elections or adjustments that are to be retroactive to a date prior to the Closing, and (ii) any restructuring or similar charge resulting from operational or other changes made at or subsequent to the Closing, in each case other than with respect to Taxes associated with the transactions contemplated by Section 5.14 of the BE&K Disclosure Schedule. (b) The Initial Purchase Price shall be adjusted as follows:
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(c) If the Closing has occurred prior to the distribution of all funds under the Escrow Agreement 1, dated February 29, 2008 between BE&K and Neste Jacobs Oy, or any other funds due to BE&K under the Rintekno Purchase Agreement (other than from the Rintekno Escrow, for which provision is made in the next sentence), then promptly after the termination of such escrow agreement or the receipt of such other funds KBR shall deposit, or cause to be deposited, with the Paying Agent a dollar amount equal to the amount of the escrow funds or such other funds, if any, received by BE&K after the Closing in accordance with the terms of such escrow agreement or the Rintekno Purchase Agreement. Promptly after the termination of the Rintekno Escrow, KBR shall deposit, or cause to be deposited, with the Paying Agent a dollar amount equal to the amount of the escrow funds, if any, received by BE&K in accordance with the terms of the escrow agreement governing the Rintekno Escrow. All such amounts so deposited shall be treated as an increase in the Final Purchase Price and distributed to the BE&K Stockholders as Merger Consideration. Promptly after the termination of the North Star Escrow, KBR shall deposit, or cause to be deposited, with the Paying Agent a dollar amount equal to the amount of the escrow funds, if any, received by BE&K or any of its wholly-owned Subsidiaries in accordance with the terms of the escrow agreement governing the North Star Escrow. Such amount so deposited shall be treated as an increase in the Final Purchase Price and distributed to the BE&K Stockholders as Merger Consideration. (d) The Parties acknowledge that there may be accounts receivable associated with North Star that are not purchased or otherwise included in the North Star Sale. In such event, KBR shall, for the 90-day period following Closing, cause the Surviving Company and its Subsidiaries to use reasonable, good faith efforts toward the collection of such receivables, subject to current write-offs and collection practices, provided, however , that none of KBR, the Surviving Company or any of its Subsidiaries shall have any responsibility or liability with regard to such collections nor be expected to incur any cost with respect to collections and none of them shall be required to initiate legal proceedings against any Person in connection with any receivable. Upon collection of any such accounts receivable during the 90 days following Closing, KBR shall cause BE&K and its Subsidiaries to use such collections to pay-off the North Star Payment Obligations. At such time as there are no longer any remaining North Star Payment Obligations, KBR shall cause any further collections of such accounts receivable during the 90 days following Closing to be deposited on a weekly basis with the Paying Agent and disbursed by the Paying Agent to the BE&K Stockholders as Merger Consideration in accordance with Section 2.7(b) . Thereafter, KBR shall cause the Surviving Company and its Subsidiaries to hold any further collections on such accounts receivable and to turn over such collections and to assign any such remaining receivables 10
as the Stockholders’ Representatives may instruct in writing (provided that the Paying Agent has released to KBR or its designee sufficient funds to pay any remaining balance then outstanding of North Star Payment Obligations in accordance with Section 2.7(b) ). After the Closing, KBR shall notify the Stockholders’ Representatives every two weeks of the collection of any such accounts receivable and the use of the funds associated therewith, as contemplated by this Section 2.4(d) . Section 2.5 Escrow Arrangement . At Closing, the sum of (a) 10% of the Initial Purchase Price (such cash, together with any subsequent deposit made by KBR in accordance with Section 2.4(b)(v) , and any earnings or interest thereon, are referred to herein as the “ Indemnity Escrow Fund ”), (b) $5,000,000 of the Initial Purchase Price (such cash, together with any earnings or interest thereon, are referred to herein as the “ Excluded Business Escrow Fund ”) and (c) $3,000,000 of the Initial Purchase Price (such cash, together with any earnings or interest thereon, are referred to herein as the “ Expense Escrow Fund ”), shall be deposited by KBR with JPMorgan Chase Bank, National Association (or such other bank as may be mutually agreeable by KBR and BE&K), as Escrow Agent (the “ Escrow Agent ”), pursuant to an escrow agreement substantially in the form attached hereto as Exhibit B (the “ Escrow Agreement ”). KBR shall be entitled, at any time and from time to time on or prior to the day that is 18 months following the Closing Date, to submit to the Escrow Agent a claim (a “ Claim Notice ”) for Damages claimed pursuant to Section 8.2 (such Damages and such amounts, each a “ Claim ”). KBR shall be entitled, at any time and from time to time on or prior to April 1, 2010, to submit to the Escrow Agent a Claim Notice for Claims pursuant to Section 8.2(a)(iii) . Any such Claim Notice submitted by KBR to the Escrow Agent shall also be simultaneously provided in writing to the Stockholders’ Representatives, and such notice shall state with particularity the nature and amount of the Claim and the basis for which KBR is entitled to compensation for such Claim under this Agreement. A Claim Notice may instruct the Escrow Agent to deliver to KBR, or its designee, in accordance with the terms of the Escrow Agreement such portion of the Indemnity Escrow Fund or the Excluded Business Escrow Fund, as appropriate, as shall satisfy the amount of such Claims by KBR; it being understood that (i) Claim Notices with respect to Claims pursuant to Sections 8.2(a)(i) or 8.2(a)(ii) may only be submitted with respect to, and paid from, the Indemnity Escrow Fund and (ii) no amounts may be paid from either the Excluded Business Escrow Fund or the Indemnity Escrow Fund with respect to Claims arising from claims made under the Rintekno Purchase Agreement or the purchase agreement to be executed in connection with the North Star Sale as described in Section 5.14 of the BE&K Disclosure Letter until all amounts in the Rintekno Escrow or the North Star Escrow, as applicable, have been paid out in accordance with their terms, provided such claims may be paid from the Rintekno Escrow or the North Star Escrow, as applicable, in accordance with their terms. The Stockholders’ Representatives may within 20 Business Days after receiving a Claim Notice give notice to KBR and the Escrow Agent of any good faith objection thereto (an “ Objection Notice ”). If the Stockholders’ Representatives fail to deliver timely an Objection Notice, then the Escrow Agent shall distribute to KBR such portion of the Indemnity Escrow Fund or Excluded Business Escrow Fund, as applicable, as shall satisfy such Claim described in such Claim Notice, all in accordance with the Escrow Agreement. If the Stockholders’ Representatives timely deliver an Objection Notice, then KBR and the Stockholders’ Representatives shall promptly, and in any event within 10 days after delivery of the Objection Notice, meet to attempt to resolve any disputes with respect thereto. Any unresolved disputes shall be resolved in the manner referred to in the Escrow Agreement. The Indemnity Escrow Fund, the Excluded Business Escrow Fund and the Expense Escrow Fund shall terminate, and the final payments of any amounts 11
remaining in such funds at the time of such termination shall be made, as set forth in the Escrow Agreement. KBR shall be responsible for all fees and expenses of the Escrow Agent. Pursuant to the Escrow Agreement, the Escrow Agent shall be authorized and directed to make any payments required to be made by it as contemplated by Section 2.4(e)(iv) . Section 2.6 Appraisal Rights . Notwithstanding anything in this Agreement to the contrary, shares (the “ Appraisal Shares ”) of BE&K Class A Common Stock and BE&K Class B Common Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands appraisal of such Appraisal Shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (“ Section 262 ”) shall not be converted into the right to receive the Merger Consideration as provided in Section 2.1 , but instead such holder shall be entitled to payment of the fair value of such Appraisal Shares in accordance with the provisions of Section 262. At the Effective Time, all Appraisal Shares shall no longer be outstanding, shall automatically be canceled and shall cease to exist, and each holder of Appraisal Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such Appraisal Shares in accordance with the provisions of Section 262. Notwithstanding anything in this Agreement to the contrary, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262, or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262, then the right of such holder to be paid the fair value of such holder’s Appraisal Shares under Section 262 shall cease and such Appraisal Shares shall no longer be considered to be Appraisal Shares, and shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration as provided in Section 2.1 , and KBR shall (i) deposit into the Exchange Fund 90% of the amount of the Deemed Appraisal Amount with respect to such former Appraisal Shares and (ii) deposit into the Indemnity Escrow Fund 10% of the amount of the Deemed Appraisal Amount with respect to such former Appraisal Shares. Promptly after the date of this Agreement, BE&K shall provide the notice contemplated by subsection (d)(2) of Section 262 to the BE&K Stockholders and otherwise comply with Section 262. BE&K shall serve prompt notice to KBR of any demands for appraisal of any shares of BE&K Class A Common Stock and BE&K Class B Common Stock, and KBR shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, BE&K shall not, without the prior written consent of KBR, voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing. Section 2.7 Exchange of Certificates. (a) Prior to the Effective Time, KBR shall appoint JPMorgan Chase Bank, National Association or another comparable bank or trust company reasonably acceptable to BE&K to act as paying agent (the “ Paying Agent ”) for the payment of the Merger Consideration. At the Effective Time, KBR shall deposit with the Paying Agent, for the benefit of the BE&K Stockholders, cash in an amount equal to (i) the Closing Date Purchase Price less (ii) the amount of cash deposited by KBR with the Escrow Agent pursuant to the terms of Section 2.4 (such cash, together with any subsequent deposits made by KBR with the Paying Agent in accordance with Section 2.4(b)(v) and by the Escrow Agent in accordance with the Escrow Agreement, being hereinafter referred to as the “ Exchange Fund ”). 12
(b) As promptly as practicable after the Effective Time (and in any event within five Business Days after the Effective Time), KBR shall cause the Paying Agent to mail to each holder of record of a certificate that immediately prior to the Effective Time represented any shares of BE&K Class A Common Stock or BE&K Class B Common (each, a “ Certificate ”) and that were converted into the right to receive the Merger Consideration (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates held by such person shall pass, only upon proper delivery of the Certificates to the Paying Agent and that shall be in customary form and have such other provisions as KBR may reasonably specify and BE&K may reasonably approve before Closing) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. KBR and BE&K shall cooperate with each other to the extent practicable to facilitate the submission of letters of transmittal prior to the Closing Date such that the payment of Merger Consideration may be made as soon as practicable after the Closing. Each holder of record of a Certificate shall, upon surrender to the Paying Agent of such Certificate, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, be entitled to receive in exchange therefor the amount of cash that the number of shares of BE&K Class A Common Stock or BE&K Class B Common Stock previously represented by such Certificate shall have been converted into the right to receive pursuant to Section 2.1 , and the Certificate so surrendered shall forthwith be canceled. Notwithstanding the foregoing, except as specified in the seventh and eighth sentences of this Section 2.7(b) , until two Business Days after both (x) the Final Purchase Price has been determined in accordance with Section 2.4 and (y) the payment of any funds due KBR in accordance with this Section 2.7(b) because of remaining North Star Payable Obligations, the Paying Agent shall not distribute to the BE&K Stockholders from the initial deposit by KBR to the Exchange Fund a dollar amount equal to the Holdback Amount, in order that sufficient funds may be returned to KBR as contemplated by Section 2.4(b)(v) and this Section 2.7(b) . For purposes of this Agreement, “ Holdback Amount ” means an aggregate dollar amount equal to the sum of (A) 10% of the Expected Adjusted Stockholders’ Equity and (B) the dollar amount, without any discounts, of all North Star Payment Obligations existing as of the Closing Date. If any such North Star Payment Obligations remain outstanding as of the date that is 90 days after the Closing Date, then KBR shall be entitled to instruct, in writing (with a copy thereof to the Stockholders’ Representatives), the Paying Agent to pay to KBR from the Holdback Amount such dollar amount that equals the aggregate dollar amount of all North Star Payment Obligations then remaining outstanding. After the Closing, KBR shall notify the Paying Agent and the Stockholders’ Representatives every two weeks of the collection of any accounts receivable associated with North Star and the pay-off of North Star Payment Obligations, as contemplated by Section 2.4(d) , and the Paying Agent shall, upon receipt of each such notice, release (on such time periods as may be reasonably scheduled by KBR and the Stockholders’ Representatives) from such Holdback Amount an amount equal to the dollar amount of the North Star Payment Obligations so paid-off and set forth in such notices from KBR, and such released amounts shall be disbursed by the Paying Agent to the BE&K Stockholders as Merger Consideration. In addition, the Paying Agent shall disburse, as Merger Consideration, to the BE&K Stockholders, on such time periods as may be reasonably scheduled by KBR and the Stockholders’ Representatives, such dollar amounts as shall be deposited with the Paying Agent pursuant to Section 2.4(d) or Section 5.14 . The Paying Agent shall deduct from the Merger Consideration otherwise then payable to each BE&K Stockholder such BE&K Stockholder’s pro rata share of the Holdback Amount. Once the Final Purchase Price has been determined in 13
accordance with Section 2.4(b) , the Paying Agent shall, upon written notice to such effect from KBR, with a copy thereof to the Stockholders’ Representatives, and after all the payments to or from the Exchange Fund contemplated by Section 2.4(b)(v) have been made in accordance with such provision, distribute the remaining portion of the Merger Consideration in the Exchange Fund (including any remaining portion of the Holdback Amount) on the terms and conditions as contemplated herein, including making a supplemental distribution to those BE&K Stockholders to whom an initial payment of a portion of the Final Purchase Price has already been made. In the event of a transfer of ownership of BE&K Class A Common Stock or BE&K Class B Common Stock that is not registered in the transfer records of BE&K, payment of the Merger Consideration may be made to a person other than the person in whose name the Certificate so surrendered is registered if, upon presentation to the Paying Agent, such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other Taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of such Certificate or establish to the reasonable satisfaction of KBR that such Taxes have been paid or are not applicable. Except as specifically provided herein with respect to the Holdback Amount, any amount paid by KBR pursuant to Section 2.4(b)(v) and to the extent contemplated in Section 2.5 , no interest shall be paid or will accrue on any cash payable to holders of Certificates pursuant to the provisions of this Article 2 . (c) All cash paid upon the surrender of Certificates in accordance with the terms of this Article 2 shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of BE&K Class A Common Stock and BE&K Class B Common Stock formerly represented by such Certificates. If, after the Effective Time, any Certificate is presented to the Surviving Company or the Paying Agent for any reason, it shall be canceled against delivery of cash to the holder thereof as provided in this Article 2 . (d) Any portion of the Exchange Fund that remains undistributed to the holders of the Certificates for 30 months after the Effective Time shall be delivered to KBR, upon demand, and any holders of the Certificates who have not theretofore complied with this Article 2 shall thereafter look only to KBR for, and KBR shall remain liable for, payment of their claim for the Merger Consideration in accordance with this Article 2 . (e) None of KBR, Merger Sub, the Surviving Company or the Paying Agent shall be liable to any person in respect of any cash from the Exchange Fund properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificate shall not have been surrendered immediately prior to the date on which any Merger Consideration would otherwise escheat to or become the property of any Governmental Agency, any such Merger Consideration shall, to the extent permitted by Applicable Laws, become the property of KBR. KBR shall thereafter remain liable for payment of claims for Merger Consideration in accordance with this Article 2 by any holder of Certificates against such cash amount. (f) The Paying Agent shall invest the cash in the Exchange Fund as directed by KBR, so long as the selected investment choice is substantially comparable to an available investment choice set forth in the Escrow Agreement. Except as specifically provided herein with respect to the Holdback Amount and any amount 14
paid by KBR pursuant to Section 2.4(b)(v) , any interest and other income resulting from such investments shall be paid to KBR. KBR shall work with the Paying Agent so that the Paying Agent will make any payments required to be made by it as contemplated by Section 2.4(b)(v) . (g) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by KBR, an agreement to indemnify KBR or the posting by such Person of a bond in such reasonable amount as KBR may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect thereto. KBR, the Surviving Company or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of BE&K Class A Common Stock and BE&K Class B Common Stock such amounts as KBR, the Surviving Company or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by KBR, the Surviving Company or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of BE&K Class A Common Stock and BE&K Class B Common Stock in respect of which such deduction and withholding was made by KBR, the Surviving Company or the Paying Agent. ARTICLE 3 Except as set forth in the disclosure letter delivered to KBR by BE&K at or prior to the execution of this Agreement (the “ BE&K Disclosure Letter ”) and making reference in the BE&K Disclosure Letter to the particular subsection of this Agreement to which exception is being taken ( provided that any information set forth in one section or subsection of the BE&K Disclosure Letter shall be deemed to apply to each other section or subsection thereof to which its relevance is reasonably apparent), BE&K represents and warrants to KBR and Merger Sub as follows: Section 3.1 Existence; Good Standing; Corporate Authority . BE&K is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. BE&K is duly qualified to do business and, to the extent such concept or a similar concept exists in the relevant jurisdiction, is in good standing under the laws of any jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business requires such qualification, except where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and is not reasonably likely to have a BE&K Material Adverse Effect. BE&K has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now conducted. Section 3.2 Authorization, Validity and Effect of Agreements . BE&K has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution of this Agreement and the consummation by BE&K of the transactions contemplated 15
hereby have been duly authorized by all requisite corporate action on behalf of BE&K, subject in the case of consummation of the Merger to the approval of this Agreement by the holders of a majority of the outstanding shares of BE&K Class A Common Stock as contemplated by Section 5.15 . BE&K has duly executed and delivered this Agreement. Assuming this Agreement constitutes the valid and legally binding obligation of KBR and Merger Sub, this Agreement constitutes the valid and legally binding obligation of BE&K, enforceable against BE&K in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’ rights and general principles of equity. Section 3.3 Board Recommendation; Required Vote . The board of directors of BE&K, at a meeting duly called and held, has by the requisite vote under the DGCL and BE&K’s certificate of incorporation and bylaws (a) determined that this Agreement and the transactions contemplated hereby are advisable, fair to and in the best interests of the stockholders of BE&K, (b) approved and adopted this Agreement and (c) resolved to recommend that the holders of the BE&K Class A Common Stock adopt this Agreement (the “ BE&K Board Recommendation ”). The affirmative consent or vote of holders of a majority of the outstanding shares of BE&K Class A Common Stock is the only action of the holders of any class or series of capital stock of BE&K necessary to adopt this Agreement under the DGCL and the certificate of incorporation and bylaws of BE&K (the “ BE&K Stockholder Approval ”). All dividends on the BE&K Preferred Stock are current to the most recent quarterly dividend payment date, and no payment of quarterly dividends with respect to the BE&K Preferred Stock is in arrears. Section 3.4 Capitalization of the Company . (a) The authorized capital stock of BE&K consists of 2,900,000 shares of BE&K Class A Common Stock, 3,100,000 shares of BE&K Class B Common Stock and 25,000 shares of preferred stock, par value $1.00 per share, of BE&K, of which 6,500 shares of BE&K Preferred Stock have been designated and authorized for issuance pursuant to a Certificate of Designations of Series A Preferred Stock of BE&K, Inc. dated June 20, 1995, as amended by an Amended Certificate of Designations dated September 15, 1995. There are (i) 2,680,436 shares of BE&K Class A Common Stock issued and outstanding, (ii) 1,234,248.209 shares of BE&K Class B Common Stock issued and outstanding, (iii) 5,543 shares of BE&K Preferred Stock issued and outstanding, (iv) no shares of BE&K Class A Common Stock or BE&K Preferred Stock held in treasury by BE&K or Subsidiaries of BE&K, (v) no shares of BE&K Class B Common Stock held in treasury by BE&K and (vi) no shares of BE&K Class B Common Stock reserved for issuance under BE&K’s Key Employees Stock Purchase Plan. Except as set forth above in this Section 3.4 , no shares of capital stock or other voting securities of BE&K are issued, reserved for issuance or outstanding. All of the issued and outstanding shares of BE&K Class A Common Stock, BE&K Class B Common Stock Common and BE&K Preferred Stock have been duly authorized and validly issued and are fully paid and nonassessable, and were issued in accordance with any preemptive rights that were in effect at the time of such issuance. BE&K does not have and is not bound by any outstanding subscriptions, options, warrants, calls, preemptive rights, commitments or agreements of any character calling for the purchase or issuance of any shares of BE&K Class A Common Stock, BE&K Class B Common Stock or BE&K Preferred Stock or any other, or exercisable or exchangeable for any, equity securities of BE&K or any securities representing the right to purchase or otherwise receive any shares of capital stock of BE&K. There are no shares 16
of capital stock of BE&K subject to vesting, transfer restrictions (other than as imposed by Applicable Law), stock appreciation rights, “phantom” stock rights, performance units, or other rights that are linked to the value of capital stock of BE&K. Section 3.4(a) of the BE&K Disclosure Schedule sets forth a list of the holders of record as of March 30, 2008 of any BE&K Class A Common Stock, BE&K Class B Common Stock or BE&K Preferred Stock. (b) The issuance and sale of all of the shares of capital stock described in this Section 3.4 have been in compliance in all material respects with United States federal and state securities laws. Neither BE&K nor any of its Subsidiaries has agreed to register any securities under the Securities Act of 1933, as amended, or under any state securities law or granted registration rights to any individual or entity. (a) BE&K does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, limited liability company, joint venture or other entity or enterprise, except as set forth in Section 3.5 to the BE&K Disclosure Letter. Such listing in such Section 3.5 states whether such equity or other ownership interests are in a Subsidiary of BE&K or in another Person that does not constitute a Subsidiary of BE&K (a “ Non-Subsidiary Entity ”), and designates certain Non-Subsidiary Entities as “ Non-Subsidiary Operating Entities ”. BE&K is not subject to any obligation or requirement to provide material funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any of its Subsidiaries or in any Non-Subsidiary Entity. BE&K owns, directly or indirectly, each of the outstanding shares of capital stock (or other ownership interests having by their terms ordinary voting power to elect directors or others performing similar functions with respect to such Subsidiary) of each of its Subsidiaries. Each of the outstanding shares of capital stock, member interests, partnership interests and other equity interests of each of BE&K’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and is owned, directly or indirectly, by BE&K free and clear of all Liens. The following information for each of BE&K’s Subsidiaries is set forth in Section 3.5 to the BE&K Disclosure Letter, as applicable: (i) its name and jurisdiction of incorporation or organization; (ii) its authorized capital stock or share capital; and (iii) the number of issued and outstanding shares of capital stock or share capital and the record owner(s) thereof. There are no outstanding subscriptions, options, warrants, puts, calls, agreements, understandings, claims or other commitments or rights of any type relating to the issuance, sale or transfer of any securities of any of BE&K’s Subsidiaries, nor are there outstanding any securities that are convertible into or exchangeable for any shares of capital stock or other voting securities or ownership interests of any of BE&K’s Subsidiaries. Each Subsidiary of BE&K is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate or other business entity power and authority to carry on its business as now being conducted, except where such failure, individually or in the aggregate, has not had and would not reasonably be expected to have a BE&K Material Adverse Effect. Each of BE&K’s Subsidiaries is duly qualified or licensed or admitted to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, use or leasing of its properties makes such qualification or licensing or admission necessary, other than in such jurisdictions where the failure to be so qualified or licensed or admitted, individually or in the aggregate, has not had and would not reasonably be expected to have a BE&K Material Adverse Effect. 17
BE&K has made available to KBR true and complete copies of the certificate of incorporation and bylaws of BE&K, as amended to the date of this Agreement, and the comparable charter and organizational documents of each Subsidiary of BE&K, in each case as amended through the date of this Agreement. (b) Each of the outstanding shares of capital stock, member interests, partnership interests and other equity interests owned by BE&K and its Subsidiaries in each Non-Subsidiary Entity is duly authorized, validly issued, fully paid and nonassessable, and is owned, directly or indirectly, by BE&K free and clear of all Liens. The following information with respect to each of the Non-Subsidiary Operating Entities is set forth in Section 3.5 to the BE&K Disclosure Letter, as applicable: (i) the name, type of entity and jurisdiction of incorporation or organization and (ii) the number of shares of capital stock or other share capital or equity interests owned by BE&K and its Subsidiaries, and the ownership percentage such shares or share capital or equity interests represent in such Non-Subsidiary Operating Entity. BE&K has made available to KBR, to the knowledge of BE&K, true and complete copies of the certificate of incorporation and bylaws, or comparable charter and organization documents, and any joint venture or operating agreement, of each Non-Subsidiary Operating Entity, in each case as amended through the date of this Agreement. BE&K and its Subsidiaries are in compliance in all material respects with each agreement to which it is a party and that relate to a Non-Subsidiary Operating Entity. Section 3.6 Compliance with Laws; Permits . Except for such matters as, individually or in the aggregate, have not had and are not reasonably likely to have a BE&K Material Adverse Effect: (a) Neither BE&K nor any Subsidiary of BE&K is in violation of any applicable law, rule, regulation, code, ordinance, governmental determination, order, treaty, convention, governmental certification requirement or other public limitation (collectively, “ Applicable Laws ”), and no claim is pending or, to the knowledge of BE&K, threatened against BE&K or any Subsidiary of BE&K with respect to any such matters. No condition exists that does or could reasonably be expected to constitute a violation of or deficiency under any Applicable Law by BE&K or any Subsidiary of BE&K. (b) BE&K and each Subsidiary of BE&K hold all permits, licenses, certifications, variances, exemptions, orders, franchises and approvals of each governmental or regulatory authority, commission, board or other regulatory body, administrative agency or tribunal (“ Governmental Agency ”) necessary for the lawful conduct of their respective businesses (the “ BE&K Permits ”). All BE&K Permits are in full force and effect, there exists no defaults thereunder or breaches thereof by BE&K or any of its Subsidiaries, and BE&K has no notice or actual knowledge that such BE&K Permits will not be renewed in the ordinary course. No Governmental Agency has given, or to the knowledge of BE&K threatened to give, any notice regarding any action to terminate, cancel or reform any BE&K Permit. (c) BE&K and each Subsidiary of BE&K possess all permits, licenses, operating authorities, orders, exemptions, franchises, variances, consents, approvals or other authorizations required for the present ownership and operation of all their real property or leasehold interests in real property (“ BE&K Real Property ”) 18
as of the date of this Agreement. Section 3.6 of the BE&K Disclosure Letter sets forth a listing of all the BE&K Real Property. There exists no default or breach with respect to, and no party or Governmental Agency has taken or, to the knowledge of BE&K, threatened to take, any action to terminate, cancel or reform any such permit, license, operating authority, order, exemption, franchise, variance, consent, approval or other authorization pertaining to the BE&K Real Property. (a) Neither the execution and delivery by BE&K of this Agreement nor the consummation by BE&K of the transactions contemplated by this Agreement in accordance with the terms hereof will (i) conflict with or result in a breach of any provisions of the certificate of incorporation or bylaws of BE&K, as amended and in effect on the date hereof, true, complete and correct copies of which have been provided to KBR, (ii) violate, or conflict with, or result in a breach of any provision of, or constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, or result in the termination or in a right of termination or cancellation of, or give rise to a right of purchase under, or accelerate the performance required by, or result in the creation of any lien, pledge, security interest, claim, charge, mortgage, deed of trust, easement, right of way, reservation, option, right of first refusal or other encumbrance (collectively, “ Liens ”) upon any of the properties of BE&K or its Subsidiaries under, or result in being declared void, voidable, or without further binding effect, or otherwise result in a detriment to BE&K or any of its Subsidiaries under, any of the terms, conditions or provisions of, any note, bond, mortgage, indenture, deed of trust, license, concession, franchise, permit, lease, contract, agreement, joint venture or other instrument or obligation to which BE&K or any of its Subsidiaries is a party, or by which BE&K or any of its Subsidiaries or any of their properties may be bound or affected or (iii) subject to the filings and other matters referred to in Section 3.7(b) , contravene or conflict with or constitute a violation of any provision of any Applicable Law, judgment, order or decree binding upon or applicable to BE&K or any of its Subsidiaries, except as, in the case of matters described in clause (ii) or (iii), individually or in the aggregate, that have not had and are not reasonably likely to have a BE&K Material Adverse Effect. (b) Neither the execution and delivery by BE&K of this Agreement nor the consummation by BE&K of the transactions contemplated hereby in accordance with the terms hereof will require any consent, approval, qualification or authorization of, or filing or registration with, any court or Governmental Agency by BE&K or any of its Subsidiaries, other than (i) filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), and the filings and notifications by BE&K or any of its Subsidiaries required under applicable non-US antitrust laws set forth in Section 3.7(b) of the BE&K Disclosure Letter and (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, except for any consent, approval, qualification or authorization the failure to obtain which, and for any filing or registration the failure to make which, has not had and is not reasonably likely to have a BE&K Material Adverse Effect. (c) This Agreement, the Merger and the transactions contemplated hereby do not, and will not, upon consummation of such transactions in accordance with their terms, result in any “change of control” or similar event or circumstance under (i) the terms of any BE&K P&M Contract or (ii) any contract or plan under 19
which any employees, officers or directors of BE&K or any of its Subsidiaries are entitled to payments or benefits, which, in the case of clause (ii), gives rise to rights or benefits not otherwise available absent such change of control or similar event and requires either a cash payment or an accounting charge in accordance with GAAP, or (iii) any material BE&K Permit. Section 3.8 Financial Statements; Controls and Procedures. (a) Section 3.8 of the BE&K Disclosure Letter contains a copy of the (i) audited consolidated balance sheets and statements of income and cash flows of BE&K and its Subsidiaries as of, and for the years ended, April 1, 2007 and April 2, 2006 and (ii) the unaudited consolidated balance sheet of BE&K and its Subsidiaries as of March 30, 2008 (the “ Most Recent Balance Sheet” ), and the related statement of income for the period then ending (clauses (i) and (ii) collectively, the “ Financial Statements ”). Each of the Financial Statements fairly presents, in all material respects, the financial condition and the results of the operations of BE&K and its Subsidiaries, as of the dates and for the respective periods indicated. The Financial Statements have been prepared in accordance with (x) the books and records of BE&K and its Subsidiaries and (y) GAAP, as in effect at the times relevant for the preparation of such Financial Statements, applied on a consistent basis throughout the periods involved, subject, in the case of the unaudited financial statements, to normal year-end adjustments (which are in the aggregate not expected to be material to BE&K) and to the absence of notes thereto. (b) Section 3.8 of the BE&K Disclosure Letter sets forth, as of the date of this Agreement, an itemized list (including lender and amount outstanding) of all Indebtedness of BE&K and its Subsidiaries. (c) Each of BE&K and its Subsidiaries maintains books and records reflecting in all material respects its assets and liabilities and that in reasonable detail accurately and fairly reflect in all material respects the transactions and dispositions of the assets of BE&K and its Subsidiaries, and each maintains proper and adequate internal accounting controls that provide reasonable assurance that: (i) transactions are executed with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the consolidated financial statements of BE&K and its Subsidiaries and to maintain accountability for the consolidated assets; (iii) access to the assets of BE&K and its Subsidiaries is permitted only in accordance with management’s authorization; (iv) the reporting of the assets of BE&K and its Subsidiaries is compared with existing assets at regular intervals; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. BE&K’s accountants have not advised BE&K of any material deficiencies in BE&K’s internal accounting controls and procedures. (d) BE&K and its Subsidiaries are not and have not been “issuers” as defined in Section 2(a)(7) of the Sarbanes-Oxley Act of 2002, as amended, and, as such, no specific internal or external review of BE&K’s or its Subsidiaries’ internal and disclosure controls has been performed. BE&K has disclosed in writing to KBR in summary form the existence, to BE&K’s knowledge, of each of the following: (i) any material weakness in the internal controls of BE&K and its Subsidiaries that BE&K’s external auditor has advised could adversely affect BE&K and its Subsidiaries’ ability to record, process, summarize and report financial data; (ii) any fraud, whether 20
or not material, that involves management or other employees who have a significant role in BE&K’s and its Subsidiaries’ internal controls occurring since April 4, 2005; and (iii) any material change in the internal controls or disclosure controls and procedures of BE&K and its Subsidiaries effected since January 1, 2007. Section 3.9 Litigation, Decrees, Etc. There are no material actions, suits or proceedings pending against BE&K or any of its Subsidiaries or, to BE&K’s knowledge, threatened against BE&K or any of its Subsidiaries, at law or in equity or in any arbitration or similar proceedings, before or by any court, commission, board, bureau, agency or instrumentality or any arbitral or other dispute resolution body. No order, writ, fine, injunction, decree, judgment, award or determination of any court or Governmental Agency or any arbitral or other dispute resolution body has been issued or entered against BE&K or any Subsidiary of BE&K that continues to be in effect that materially affects the ownership or operation of any of their respective assets, and, since April 4, 2005, no criminal order, writ, fine, injunction, decree, judgment or determination of any court or Governmental Agency has been issued against BE&K or any Subsidiary of BE&K. Section 3.10 Absence of Certain Changes . From and including April 2, 2007 to the date of this Agreement, there has not been: (i) any BE&K Material Adverse Effect or (ii) (A) except as required by Applicable Law or GAAP, any material change by BE&K or any of its Subsidiaries in any of its accounting methods, principles or practices or any of its Tax methods, practices or elections applicable to BE&K’s consolidated financial statements; (B) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of BE&K or any redemption, purchase or other acquisition of any of its capital stock; (C) any split, combination or reclassification of any capital stock or membership interest or equity interest of BE&K or any of its Subsidiaries or any issuance or authorization of any issuance of any other securities in respect of, in lieu of or in substitution for such interests; (D) any material damage to or any destruction or loss of physical properties owned and used by BE&K or any of its Subsidiaries, whether or not covered by insurance; or (E) any reevaluations by BE&K or any of its Subsidiaries of any of their assets that, in accordance with GAAP, BE&K will reflect in its consolidated financial statements, including any impairment of assets, and that in the aggregate are material to them. From and including April 2, 2007, the business of BE&K and its Subsidiaries has been conducted in all material respects in the ordinary course consistent with past practice and, for the period from and including April 2, 2007 until and including the date of this Agreement, none of BE&K or any of its Subsidiaries has taken any of the Enumerated Actions described in clauses (g) (other than dividends to any wholly owned Subsidiary of BE&K), (h) and (p) of Section 5.1 . (a) For purposes of this Agreement, the following definitions shall apply:
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(b) Each of BE&K and its Subsidiaries has (and as of the Closing Date will have) (i) duly and timely filed or caused to be filed all Tax Returns (including any Tax Returns required to be filed by an affiliated, consolidated, combined, unitary or similar group of which BE&K or any of its Subsidiaries is or was a member), or appropriate extensions, required to be filed by or with respect to BE&K and its Subsidiaries or with respect to their assets or operations with the appropriate Taxing Authority, and each such Tax Return is true, complete and correct in all material respects, (ii) paid all Taxes due or claimed due by a Taxing Authority from or with respect to it, except such Taxes, if any, as are listed in Section 3.11 of the BE&K Disclosure Schedule and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been made, and (iii) made all deposits required with respect to Taxes. (c) There is no action, suit, proceeding, investigation, audit, claim or assessment pending or, to the knowledge of BE&K, threatened with respect to BE&K or its Subsidiaries by any Taxing Authority in connection with any liabilities for Taxes or with respect to any Tax Returns relating to the assets or operations of BE&K or any of its Subsidia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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