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Offices of Deutsche Telekom Searched

According to this September 3rd Dow Jones Newswire story “a German public prosecutor’s office based in Bonn [recently] searched German telecommunications company Deutsche Telekom AG offices as part of an initial inquiry into bribery allegations involving eight people, in response to a request from U.S. authorities.”

Deutsche Telekom holds a 59% stake in Magyar Telekom (see here) and the article suggests that the search is in connection with Magyar Telekom’s previously disclosed FCPA inquiry.

As the article notes, Hungary-based Magyar Telekom (see here), a company with ADRs listed on the New York Stock Exchange, disclosed suspicious payments and in December 2009 the company released this detailed press release.

In its Presentation of Second Quarter Results 2010 (see here) Magyar Telekom stated as follows:

“As previously announced, the DOJ, the SEC and the Ministry of Interior of the Republic of Macedonia have commenced investigations into certain of the Company’s activities that were the subject of the internal investigation. Further, in relation to certain activities that were the subject of the internal investigation, the Hungarian Central Investigating Chief Prosecutor’s Office has commenced a criminal investigation into alleged corruption with the intention of violating obligations in international relations and other alleged criminal offenses. Also, as previously announced, the Hungarian National Bureau of Investigation (“NBI”) has begun a criminal investigation into alleged misappropriation of funds relating to payments made in connection with the Company’s ongoing internal investigation and the possible misuse of personal data of employees in the context of the internal investigation. These governmental investigations are continuing, and the Company continues to cooperate with those investigations.

The Company, through its external legal counsel, has recently engaged in discussions with the DOJ and the SEC regarding the possibility of resolving their respective investigations as to the Company through negotiated settlements. The Company has not reached any agreement with either the DOJ or the SEC regarding resolution of their respective investigations, and discussions with both agencies are continuing. We may be unable to reach a negotiated settlement with either agency. Any resolution of the investigations could result in criminal or civil sanctions, including monetary penalties and/or disgorgement, against the Company or its affiliates, which could have a material effect on the Company’s financial position, results of operations or cash flows, as well as require additional changes to its business practices and compliance programs. The Company cannot predict or estimate whether or when a resolution of the DOJ or SEC investigations will occur, or the terms, conditions, or other parameters of any such resolution, including the size of any monetary penalties or disgorgement, the final outcome of these investigations, or any impact such resolution may have on its financial statements or results of operations. Consequently, the Company has not made any provisions in its financial statements as of June 30, 2010 with respect to the investigations.

Magyar Telekom incurred HUF 1.4 bn expenses [approximately $6.3 million] relating to the investigations in the first half of 2010, which are included in other operating expenses of Group Headquarters.”

Friday Roundup

The DOJ appears not interested in Anadarko’s allegations and more disclosure news … its all here in the Friday roundup.

DOJ Appears Not Interested in Anadarko’s Allegations

The Jubilee field is located off the coast of Ghana.

Participants in the West Cape Three Points Block include: Kosmos Energy LLC; Anadarko Petroleum Corporation; Tullow Oil PLC; Ghana National Petroleum Corporation; E.O. Group Ltd.; and Sabre Oil and Gas Limited.

Anadarko (here) apparently reported Kosmos (here) to U.S. authorities for possible violations of the FCPA “in connection with securing licensing and exploration and production agreements.”

Anadarko apparently made similar allegations against EO Group.

Apparently, the DOJ is not interested – according to this Bloomberg article by David Wethe and and Jason McClure.

The article, which cites to a May 12 letter from the DOJ to Kosmos and June 2 letter from the DOJ to EO Group, states that the DOJ does not intend to “take any enforcement action” or pursue charges against either company and that the DOJ closed its inquiry into the matter.

According to the article, “Ghana is pressing ahead with its own criminal inquiry into alleged corruption in the development of the field.”

Disclosure News

From Orthofix International N.V.’s Form 8-K filed August 31 (see here):

“During a recent internal management review of Promeca S.A. DE C.V. (“Promeca”), one of its Mexican subsidiaries, the Company received allegations of improper payments, allegedly made by certain of Promeca’s local employees in Mexico, to employees of a Mexican governmental health care entity. The Company has engaged Hogan Lovells US LLP and Deloitte Financial Advisory Services LLP to conduct an internal investigation focusing on compliance with the Foreign Corrupt Practices Act (“FCPA”) and voluntarily contacted the U.S. Securities and Exchange Commission and the United States Department of Justice to advise both agencies that an internal investigation is underway. During 2009, Promeca accounted for approximately one percent of the Company’s consolidated net sales and consolidated total assets. The internal investigation is in its early stages and no conclusions can be drawn at this time as to its outcome; however, the FCPA and related statutes and regulations provide for potential criminal and civil sanctions in connection with FCPA violations, including criminal fines, civil penalties, and disgorgement of past profits.”

From Diageo PLC’s 2010 Preliminary Results Release, dated August 26th (see here)

“SEC investigation: As previously reported, Diageo Korea and several of its current and former employees have been subject to investigations by Korean authorities regarding various regulatory and control matters. Convictions for improper payments to a Korean customs official have been handed down against two former Diageo Korea employees, and a former and two current Diageo Korea employees have been convicted on various counts of tax evasion. Diageo had previously voluntarily reported the allegations relating to the convictions for improper payments to the US Department of Justice and the US Securities and Exchange Commission (SEC). The SEC has commenced an investigation into these and other matters, and Diageo is in the process of responding to the regulators‟ enquiries regarding activities in Korea, Thailand, India and elsewhere. Diageo‟s own internal investigation in Korea, Thailand, India and elsewhere remains ongoing. The US Foreign Corrupt Practices Act (FCPA) and related statutes and regulations provide for potential monetary penalties, criminal sanctions and may result in some cases in debarment from doing business with governmental entities in connection with FCPA violations. Diageo is unable to quantify meaningfully the possible loss or range of loss to which these matters may give rise.”

*****

A good Labor Day weekend to all.

Friday Roundup

The DOJ appears not interested in Anadarko’s allegations and more disclosure news … its all here in the Friday roundup.

DOJ Appears Not Interested in Anadarko’s Allegations

The Jubilee field is located off the coast of Ghana.

Participants in the West Cape Three Points Block include: Kosmos Energy LLC; Anadarko Petroleum Corporation; Tullow Oil PLC; Ghana National Petroleum Corporation; E.O. Group Ltd.; and Sabre Oil and Gas Limited.

Anadarko (here) apparently reported Kosmos (here) to U.S. authorities for possible violations of the FCPA “in connection with securing licensing and exploration and production agreements.”

Anadarko apparently made similar allegations against EO Group.

Apparently, the DOJ is not interested – according to this Bloomberg article by David Wethe and and Jason McClure.

The article, which cites to a May 12 letter from the DOJ to Kosmos and June 2 letter from the DOJ to EO Group, states that the DOJ does not intend to “take any enforcement action” or pursue charges against either company and that the DOJ closed its inquiry into the matter.

According to the article, “Ghana is pressing ahead with its own criminal inquiry into alleged corruption in the development of the field.”

Disclosure News

From Orthofix International N.V.’s Form 8-K filed August 31 (see here):

“During a recent internal management review of Promeca S.A. DE C.V. (“Promeca”), one of its Mexican subsidiaries, the Company received allegations of improper payments, allegedly made by certain of Promeca’s local employees in Mexico, to employees of a Mexican governmental health care entity. The Company has engaged Hogan Lovells US LLP and Deloitte Financial Advisory Services LLP to conduct an internal investigation focusing on compliance with the Foreign Corrupt Practices Act (“FCPA”) and voluntarily contacted the U.S. Securities and Exchange Commission and the United States Department of Justice to advise both agencies that an internal investigation is underway. During 2009, Promeca accounted for approximately one percent of the Company’s consolidated net sales and consolidated total assets. The internal investigation is in its early stages and no conclusions can be drawn at this time as to its outcome; however, the FCPA and related statutes and regulations provide for potential criminal and civil sanctions in connection with FCPA violations, including criminal fines, civil penalties, and disgorgement of past profits.”

From Diageo PLC’s 2010 Preliminary Results Release, dated August 26th (see here)

“SEC investigation: As previously reported, Diageo Korea and several of its current and former employees have been subject to investigations by Korean authorities regarding various regulatory and control matters. Convictions for improper payments to a Korean customs official have been handed down against two former Diageo Korea employees, and a former and two current Diageo Korea employees have been convicted on various counts of tax evasion. Diageo had previously voluntarily reported the allegations relating to the convictions for improper payments to the US Department of Justice and the US Securities and Exchange Commission (SEC). The SEC has commenced an investigation into these and other matters, and Diageo is in the process of responding to the regulators‟ enquiries regarding activities in Korea, Thailand, India and elsewhere. Diageo‟s own internal investigation in Korea, Thailand, India and elsewhere remains ongoing. The US Foreign Corrupt Practices Act (FCPA) and related statutes and regulations provide for potential monetary penalties, criminal sanctions and may result in some cases in debarment from doing business with governmental entities in connection with FCPA violations. Diageo is unable to quantify meaningfully the possible loss or range of loss to which these matters may give rise.”

*****

A good Labor Day weekend to all.

Is BAE’s Monitor Independent?

As has been widely reported (see here and here among other places) David Gold has been appointed to be BAE’s corporate monitor.

Gold (here) is a partner at Herbert Smith LLP, a leading U.K. based law firm, a firm Gold has been associated with for 37 years and will continue to be associated with until his retirement on April 30, 2011.

BAE is a client of Herbert Smith, as the firm candidly acknowledged in this release announcing Gold’s appointment.

In the release, Herbert Smith states:

“This appointment is a mark of some distinction not only for David, reflecting as it does his international standing as one of the City’s leading lawyers, but also for Herbert Smith.”

Herbert Smith should have plenty of institutional knowledge as to many of the facts prompting the need for BAE’s monitor in the first place.

Why?

Because Herbert Smith previously represented Saudi Prince Bandar – the person at the epicenter of BAE’s alleged Saudi bribery scheme – the same bribery scheme that makes up the bulk of the DOJ’s bribery, yet no bribery allegations against BAE (see here).

A June 8, 2007 article in The Guardian (London) details how “Prince Bandar released a statement through his London solicitors Herbert Smith” the same day an article appeared in the Guardian titled “BAE accused of secretly paying £1 billion to Saudi Prince”.

On June 9, 2007, The Guardian detailed how “lawyers for Prince Bandar, the Saudi royal who received £1bn from BAE, accepted last night that he had spent $17m (£8.6m) on refurbishing one of his palaces, using cash from the US accounts concerned.” The article states, “[b]ut his lawyers, Herbert Smith, said that as the palace in Riyadh was an official residence, there was nothing illegal or untoward spending money out of a Saudi official defence ministry account held at Riggs Banks in Washington DC.”

In a June 13, 2007 article, The Guardian further notes how “the multi-milllionaire prince has hired for his defence the city lawyers Herbert Smith.”

So it turns out that BAE’s monitor is a lawyer who has been with Herbert Smith for 3 years – and will continue to be with Herbert Smith until his retirement – the same firm that represents BAE and the same firm that represented Saudi Prince Bandar the unnamed, yet widely reported, recipient of certain of BAE’s payments as set forth in the DOJ’s bribery, yet no bribery criminal information (see here).

Why does this matter?

Because the DOJ-BAE plea agreement (see here – Appendix C) requires an “independent corporate monitor.” The plea agreement states that this individual shall have “sufficient independence from [BAE] to ensure effective and impartial performance of the Monitor’s duties …”

Not only did the DOJ approve of David Gold as BAE’s monitor, but so too did the U.K. government – at least that is what the plea agreement requires.

So, what do you think? Is BAE’s monitor independent?

Inside A Merger

A post last month on the “FCPA’s long tentacles” (see here) provided background on PBSJ Corp.’s FCPA disclosure and its recent announcement of a definitive merger agreement by which WS Atkins plc will acquire PBSJ in an all-cash transaction for $17.137 per share.

This post goes inside PBSJ and highlights how PBSJ’s FCPA inquiry caused a company with the highest bid to seek closing conditions regarding the FCPA inquiry that PBSJ found unacceptable, thereby prompting it to select a company with a lower bid price.

The glimpse inside PBSJ is courtesy of the company’s preliminary proxy statement filed with the SEC on August 27th (see here).

The proxy statement provides an informative glimpse into how FCPA issues affect real business decisions.

Among other things, interested purchasers of PBSJ: held meetings with PBSJ’s outside counsel (Greenberg Traurig) and its in-house counsel to discuss the FCPA investigation; requested the opportunity to meet with DOJ representatives regarding the FCPA investigation; and requested access to attorney-client privileged documents regarding the FCPA investigation.

As noted in the proxy statement, on July 30th, representatives of Atkins, the lower bidder that PBSJ ultimately chose, its counsel, as well as counsel to PBSJ met with DOJ representatives regarding the FCPA investigation.

[Note – DOJ seldom gives assurances to a company during a Foreign Corrupt Practices Act investigation. Thus, it is difficult to see what comfort or assurances Atkins or its counsel could receive from meeting with the DOJ. If anyone has participated in such a DOJ / company under investigation / potential acquirer company meeting as described above, please consider this an open invitation to share via a guest post your first-hand generic insight into the general issues discussed and resolved during such a meeting]

Here is the PBSJ merger story, in summary fashion, as told in the proxy statement.

“From time to time throughout 2009 […] members of senior management, primarily our then chief executive officer, John B. Zumwalt, III, held informal discussions with other companies concerning possible strategic transactions and with financial sponsors concerning possible investments in PBSJ. Although we held preliminary discussions and entered into confidentiality agreements with certain prospective strategic partners, these discussions did not result in any formal proposals.”

“On December 30, 2009, we announced that we would be unable to timely file our annual report on Form 10-K for fiscal year 2009 due to an internal investigation that was being conducted by the audit committee of our board of directors to determine whether any laws had been violated, including the FCPA, in connection with certain projects undertaken by PBS&J International, Inc., one of our subsidiaries, in certain foreign countries. Our annual report on Form 10-K for fiscal year 2009 was subsequently filed on January 13, 2010, within the extended time period permitted by SEC rules.”

“Barclays Capital, on behalf of PBSJ, contacted 23 potential bidders during the late-March to mid-April period, including Atkins, Company A [a company involved in engineering and construction investments] and Company B [an industry competitor]. These potential bidders were selected by our senior management […] in consultation with Barclays Capital. Of the 23 potential bidders, 13 were strategic buyers and ten were financial sponsors. Sixteen potential bidders, including eight strategic buyers and eight financial sponsors, executed confidentiality agreements with PBSJ between April 1 and April 20, 2010. During the end of March and the first two weeks of April, our senior management, with assistance from Barclays Capital, prepared a confidential information memorandum (“CIM”) describing PBSJ and its business. Copies of the CIM were provided to each of the potential bidders that executed a confidentiality agreement with PBSJ. Potential bidders also received a bid instruction letter from Barclays Capital, on behalf of PBSJ, requesting that initial indications of interest be submitted by April 28, 2010.”

“On April 28, 2010, ten potential bidders, including six strategic buyers and four financial sponsors, submitted initial non-binding indications of interest to acquire PBSJ. The indication of interest from Atkins, which indicated a range of $16.29 to $18.71 per share, represented the highest valuation of the indications of interest, based on the high end of its range. Company A and Company B were among the potential bidders that submitted indications of interest.”

“On April 29, 2010, our senior management […] met with representatives of Barclays Capital to review and discuss the initial indications of interest. The representatives of Barclays Capital presented their analysis of the indicated valuations of PBSJ and the transaction terms proposed by the potential bidders. Barclays Capital recommended that one of the strategic buyers and the four financial sponsors not be invited to proceed to the second phase of the sale process because their valuations of PBSJ were lower than the valuations of the other five strategic buyers.”

“On April 30, 2010, our board of directors met to review and discuss the initial indications of interest.”

“[O]ur board of directors determined to permit five of the ten potential bidders, all of which were strategic buyers, to proceed to the second phase of the sale process. These five potential bidders, which included Atkins and Company B, presented the highest indicated enterprise valuations of PBSJ in their indications of interest.”

“From May 4, 2010 to May 20, 2010, our management made separate presentations to representatives of each of these five potential bidders and conducted additional meetings with some bidders. In addition, our management participated in conference calls and meetings with Barclays Capital and potential bidders responding to questions throughout the time period up to the date refreshed indications of interest were due. On May 14, 2010, the five potential bidders were given access to an electronic “data room” that had been assembled by our management, with the assistance of Barclays Capital, in order to provide the bidders with additional confidential information regarding PBSJ. Bidders were also given an updated bid instruction letter from Barclays Capital, on behalf of PBSJ, requesting that refreshed indications of interest be submitted. On May 24 and 25, 2010, three of the five potential bidders, including Atkins and Company B, had discussions with representatives of GT [Greenberg Traurig – the company’s legal counsel] and our in-house counsel to discuss the FCPA investigation.”

“Between May 27, 2010 and June 3, 2010, four potential bidders submitted refreshed indications of interest to acquire PBSJ, including Atkins and Company B. The fifth potential bidder informed Barclays Capital that it did not wish to continue in the sale process.”

“On June 3, 2010, our senior management and Mr. Klatell [chairman of the strategic finance committee of the PBSJ board] met with representatives of Barclays Capital in order to review and discuss the refreshed indications of interest.”

“The refreshed indication of interest from Atkins, which indicated a price per share of $16.65, continued to represent the highest valuation among the indications of interest. Company B’s refreshed indication of interest indicated a price per share of $15.08 and the refreshed indication of interest from the next highest potential bidder (“Company C”) indicated a price per share of $14.18.”

“[O]ur board of directors determined to permit the three potential bidders with the highest indicated valuations of PBSJ—Atkins, Company B and Company C—to proceed to the third phase of the sale process. Barclays Capital, on behalf of PBSJ, communicated this information to the three potential bidders.”

“On June 14, 2010, Company C informed Barclays Capital that it would not be able to present a more competitive proposal to PBSJ and thus would not continue in the sale process.”

“On June 10 and 11, 2010, Barclays Capital, on behalf of PBSJ, provided Atkins and Company B, respectively, with a form of merger agreement that had been prepared by GT and our in-house counsel and requested that Atkins and Company B submit “final” bids and mark-ups of the merger agreement by July 6, 2010.”

“On July 6, 2010, both Atkins and Company B submitted to Barclays Capital bids to acquire PBSJ, as well as initial mark-ups of the draft merger agreement, which were then provided to our senior management, Mr. Klatell and GT. Atkins initially proposed to acquire PBSJ for a price per share of $15.57 and Company B initially proposed to acquire PBSJ for a price per share of $16.89. However, later that same week, after discussions between Barclays Capital and advisors for Atkins, Atkins and its advisors communicated with Barclays Capital that, subject to the completion of additional financial due diligence, Atkins would be prepared to submit a proposal to acquire PBSJ for a price per share of $17.137. Company B initially proposed that the merger consideration be paid in an unspecified mixture of cash and Company B’s common stock. Company B later proposed that the mixture of cash and Company B common stock be determined at the election of each PBSJ shareholder, provided that not less than 10% of the consideration for each PBSJ shareholder was in the form of Company B common stock. Company B also proposed to make $8.5 million in equity grants to undisclosed members of PBSJ’s management at the closing of the merger.”

“On July 11, 2010, our board of directors met in order to review and discuss the bids to acquire PBSJ. Members of our senior management and representatives of Barclays Capital and GT were also in attendance. […] The representatives of GT summarized the various concerns regarding risk allocation and deal completion certainty raised by the two bids.”

“In particular, the representatives of GT discussed the closing conditions regarding the FCPA investigation that had been included in the mark-ups to the merger agreement received from Atkins and Company B. Atkins included a closing condition in its mark-up to the merger agreement that there must not be any adverse development in the FCPA investigation, including the imposition of any sanction, fine or operating restriction on PBSJ or its subsidiaries. Further, Atkins’ mark-up included a definition of “Company Material Adverse Effect” that allocated significantly more risk to PBSJ.”

“Contrary to indications previously provided by its chairman of the board, Company B included a condition that the FCPA investigation must be resolved to Company B’s satisfaction prior to closing. Both Atkins and Company B also requested the opportunity to meet with representatives of the DOJ regarding the FCPA investigation prior to the execution of the merger agreement; representatives of the DOJ had previously indicated to PBSJ that it would accommodate a meeting with one bidder.”

“In addition, our senior management and representatives of Barclays Capital and GT discussed with our board of directors Atkins’ request that PBSJ allow representatives of Atkins to review attorney-client privileged documents regarding the FCPA investigation prior to execution of the merger agreement. The representatives of GT and our in-house counsel advised our board of directors with respect to possible consequences of complying with Atkins’ request.”

“Our board of directors, after extensive discussion with our senior management, Barclays Capital and GT regarding the bids, instructed our senior management and advisors to continue to negotiate with both Atkins and Company B in order to achieve a definitive proposal that provided the greatest combination of shareholder value and deal completion certainty.”

“On July 12, 2010, GT, through Barclays Capital, circulated revised drafts of the merger agreement to each of Atkins and Company B. The revised drafts of the merger agreement provided that developments in the FCPA investigation could serve as a basis not to close the transaction only if the developments rose to the level of a “Company Material Adverse Effect” and, in the case of Atkins, further revised its definition of “Company Material Adverse Effect” to a market standard.”

“Between July 12, 2010 and July 21, 2010, representatives of PBSJ and its advisors held discussions with each of Atkins and Company B and their advisors regarding the issues in the merger agreement, including the treatment of the FCPA investigation and Atkins’ request that PBSJ allow representatives of Atkins to review attorney-client privileged documents regarding the FCPA investigation prior to the execution of the merger agreement. GT and each of Hunton & Williams LLP (“Hunton”), counsel to Atkins, and in-house counsel to Company B continued to exchange drafts of the merger agreement and negotiate the terms thereof. During this time, both Atkins and Company B agreed to the treatment of the FCPA investigation as proposed by PBSJ and, in the case of Atkins, to a market standard definition of “Company Material Adverse Effect.” In addition, during the week of July 12, 2010, representatives of Atkins conducted additional on-site financial due diligence regarding PBSJ and representatives of Company B conducted additional on-site legal due diligence regarding PBSJ, each at PBSJ’s Tampa headquarters.”

“On the morning of July 21, 2010, Atkins submitted to Barclays Capital a revised bid to acquire PBSJ for a price per share of $17.137, consistent with its prior indication. However, Atkins’ offer continued to be conditioned on PBSJ allowing representatives of Atkins to review attorney-client privileged documents regarding the FCPA investigation prior to execution of the merger agreement. Also on July 21, 2010, Company B increased its bid to acquire PBSJ from a price per share of $16.89 to a price per share of $17.197 and reduced the value of equity grants to be made to undisclosed members of PBSJ’s management at the closing of the merger from $8.5 million to $3.5 million, having been advised that our board of directors did not consider such grants relevant in choosing a successful bidder. Company B also indicated that it would allow PBSJ shareholders to elect to receive merger consideration in any mixture of cash and Company B common stock, including all cash consideration.”

“During the evening of July 21, 2010, our board of directors met in order to review and discuss the revised bids submitted by Atkins and Company B. Members of our senior management and representatives of Barclays Capital and GT were also in attendance.”

“Representatives of Barclays Capital reviewed and discussed with our board of directors their analysis of the financial aspects of both bids, including the implied valuations of PBSJ. Our board of directors also reviewed and discussed a presentation by our chief financial officer regarding the possible alternatives to the sale of PBSJ.”

“Our senior management and representatives of GT also discussed with our board of directors the condition to Atkins’ offer that its representatives be allowed to review attorney-client privileged documents regarding the FCPA investigation prior to execution of the merger agreement and the implications that such review could have.”

“During the course of the meeting and at the instruction of our board of directors, Mr. Klatell contacted the chairman of the board of Company B to discuss Company B’s valuation of PBSJ. After discussions with Mr. Klatell, the chairman of the board of Company B indicated to Mr. Klatell that Company B would increase its bid to acquire PBSJ from a price per share of $17.197 to a price per share of $17.498 and eliminate the equity grants to be made to undisclosed members of PBSJ’s management at the closing of the merger.”

“Our board of directors, after extensive discussion with our senior management, Barclays Capital and GT regarding the proposals, including the value of the proposals to our shareholders, the uncertainty created by the requirement that Atkins’ shareholders approve the transaction, the potential adverse implications to PBSJ from Atkins’ insistence that its representatives be allowed to review attorney-client privileged documents regarding the FCPA investigation prior to execution of the merger agreement, and the business risks facing PBSJ in the execution of its short and long-term business strategies if it remained independent, unanimously authorized our senior management and advisors to finalize the terms of the merger agreement with Company B and to coordinate the requested meeting between Company B and the DOJ regarding the FCPA investigation.”

“On July 22, 2010, after Mr. Klatell notified the chairman of the board of Company B that Company B had been selected as the bidder with which PBSJ would proceed with the sale process, assuming that negotiations could be satisfactorily completed, representatives of Company B began to advise members of our senior management and representatives of Barclays Capital and GT of changes to Company B’s position regarding the FCPA investigation, including a proposal for PBSJ and Company B to enter into an exclusivity agreement until the FCPA investigation was resolved. On July 23, 2010, in-house counsel for Company B provided a revised draft of the merger agreement to GT. The revised draft of the merger agreement included substantial additional closing conditions regarding the FCPA investigation and a definition of “Company Material Adverse Effect” that would have allowed Company B to terminate the merger agreement in the event of developments in the FCPA investigation that did not rise to the level of a material adverse effect. On July 25, 2010, GT provided a revised draft of the merger agreement to in-house counsel for Company B that rejected substantially all of Company B’s additional conditions regarding the FCPA investigation. Our senior management, Mr. Klatell and our advisors continued to negotiate these matters with representatives of Company B and its advisors over the course of July 22-26, 2010; however, despite the indications provided by Company B’s chairman of the board earlier in the sale process, Company B was unwilling to propose terms to address its concerns regarding the FCPA investigation that would provide PBSJ with sufficient certainty regarding the completion of the transaction.”

“Also on July 22, 2010, representatives of Atkins informed our senior management that Atkins was withdrawing the condition that its representatives be allowed to review attorney-client privileged documents regarding the FCPA investigation prior to the execution of the merger agreement, which eliminated the need to provide Atkins with attorney-client privileged materials. Atkins also informed our senior management that, due to an increase in the market value of Atkins’ ordinary shares, Atkins’ shareholders were no longer required to approve the transaction with PBSJ because the size of the transaction with PBSJ did not exceed the threshold requiring a vote, given Atkins’ higher market capitalization. On July 23, 2010, our senior management and representatives of GT held discussions with representatives of Hunton and in-house counsel for Atkins regarding these matters and other issues in the merger agreement. On July 24, 2010, Hunton provided a revised draft of the merger agreement to GT that incorporated the developments from July 22-23, 2010. Over the course of the remainder of July 24, 2010 through July 26, 2010, representatives of Atkins and Hunton and representatives of PBSJ and GT held numerous discussions and negotiated the remaining unresolved issues in the merger agreement.”

“On July 26, 2010, our board of directors met in order to review and discuss the developments in the sale process since their July 21, 2010 meeting. Members of our senior management and representatives of Barclays Capital and GT were also in attendance. Prior to the meeting, the directors were provided with updated summaries of the draft merger agreements for each of Atkins and Company B. Our senior management and Mr. Klatell reviewed for the directors the developments since the July 21, 2010 board meeting and the then-current proposals from Atkins and Company B. The representatives of GT summarized the various changes in the structures of the two bids and the merger agreements, as well as the impact of these changes on the deal completion certainty provided by each of the bids. Representatives of Barclays Capital summarized the impact of these changes on the financial aspects of the bids.”

“Our board of directors held an extensive discussion with our senior management, Barclays Capital and GT regarding the proposals and discussed the value of the proposals to our shareholders, the certainty provided by Atkins’ proposal as a result of the withdrawal of its condition to review attorney-client privileged documents regarding the FCPA investigation and the lack of a requirement that Atkins’ shareholders approve the transaction, the uncertainty regarding Company B’s proposal as a result of its closing conditions regarding the FCPA investigation, and the business risks facing PBSJ in the execution of its short and long-term business strategies if it remained independent. While not dispositive, our board of directors also considered whether, given Atkins’ limited operations in the United States, there might be a lesser likelihood of reductions in force as a result of a transaction with Atkins than with Company B. Our board of directors determined that, in light of the foregoing, the combination of share price and deal certainty provided by Atkins’ proposal provided a superior alternative to Company B’s proposal despite Company B’s slightly higher value. Following this discussion, our board of directors unanimously authorized our senior management and advisors to finalize the terms of the merger agreement with Atkins and to coordinate the requested meeting between Atkins and the DOJ regarding the FCPA investigation.”

“Between July 26, 2010 and July 30, 2010, representatives of our management, GT, Atkins and Hunton held numerous discussions and negotiated the remaining unresolved issues in the merger agreement. On July 30, 2010, representatives of Atkins and its counsel, as well as counsel to PBSJ, met with representatives of the DOJ regarding the FCPA investigation. Over the course of the remainder of July 30, 2010 and the morning of July 31, 2010, representatives of our management, GT, Atkins and Hunton negotiated the final terms of the merger agreement and disclosure letters.”

“In the afternoon of July 31, 2010, our board of directors met to consider Atkins’ definitive proposal. Members of our senior management and representatives of Barclays Capital and GT were also in attendance. The directors had previously been provided with a substantially final draft and a detailed summary of the merger agreement. Representatives of GT briefly reminded the directors of their fiduciary duties under Florida law. The representatives of GT informed the directors that the terms of the merger agreement were substantially as the board of directors had reviewed at their July 26, 2010 meeting.”

“Our board of directors again discussed the value of Atkins’ proposal to our shareholders and the certainty provided by that proposal, as well as the business risks facing PBSJ in the execution of its short and long-term business strategies if it remained independent. Our board of directors determined that, in light of the foregoing, the relative certainty provided by Atkins’ proposal provided a greater value to our shareholders, notwithstanding the higher price per share offered by Company B.

“After extensive discussion among our board of directors, senior management and our advisors, our board of directors unanimously approved and adopted the merger agreement, approved the merger and the other transactions contemplated by the merger agreement, unanimously declared the advisability of the merger agreement, and determined that the merger, the merger agreement and the other transactions contemplated by the merger agreement are fair to and in the best interests of PBSJ and our shareholders. The board of directors further resolved to recommend to our shareholders that they vote to approve the merger agreement and the merger.”

“During the morning of August 1, 2010, the board of directors of Atkins unanimously approved the merger agreement. In the afternoon of August 1, 2010, PBSJ and Atkins executed the merger agreement. Prior to the opening of trading of Atkins’ ordinary shares on the London Stock Exchange on August 2, 2010, Atkins and we issued press releases announcing the transaction. Later on August 2, 2010, we filed a Current Report on Form 8-K with the SEC disclosing the execution of the merger agreement and attaching a copy of the definitive merger agreement as an exhibit.”

“In reaching its decision to approve and adopt the merger agreement with Atkins, approve the merger and the other transactions contemplated by the merger agreement, authorize PBSJ to enter into the merger agreement and recommend that our shareholders vote to approve the merger agreement, our board of directors consulted with its financial and legal advisors and our management. The board of directors considered a number of potentially positive factors and negative factors. The board of directors did not assign relative weights to the factors listed below or the other factors considered by it. In addition, the board of directors did not reach any specific conclusion on each factor considered, but conducted an overall analysis of these factors. Individual members of the board of directors may have given different weights to different factors.”

“Positive factors considered by the board of directors included the following material factors: […] the terms of the merger agreement and the related agreements, including:

the limited number and nature of the conditions to Atkins’ obligation to consummate the merger, including its willingness not to impose special conditions related to our previously disclosed Foreign Corrupt Practices Act (“FCPA”) investigation beyond those developments that would independently constitute a material adverse effect.”

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