SCHEDULE 13D
(Rule 13d-101)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Under the Securities Exchange Act of 1934
Amendment No. __
QUANTA SERVICES, INC.
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(Name of Issuer)
Common Stock, par value $0.00001
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(Title of Class of Securities)
74762E102
--------------------------------------------------------------------------------
(CUSIP Number)
Thomas R. Denison - First Reserve Corporation, 1801 California St., Suite #4110,
Denver, CO 80202, (303) 382-1270
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
OCTOBER 15, 2002
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
following box. [ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
SEC 1746 (12-91)
------------------- ------------------
CUSIP No. 74762E102 SCHEDULE 13D Page 2 of 11 Pages
------------------- ------------------
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1 NAME OF REPORTING PERSONS S.S.
OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
First Reserve GP IX, Inc.
I.R.S. No.: 91-209254 2
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
0
NUMBER OF -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 16,666,666 (1)
OWNED BY
EACH -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH
-----------------------------------------------------
10 SHARED DISPOSITIVE POWER
16,666,666 (1)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON
16,666,666 (1)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.6%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
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(1) Consists of 11,969,766 shares of Common Stock and 4,696,900 shares of
Common Stock into which 939,380 shares of Series A Convertible
Preferred Stock beneficially owned by First Reserve GP IX, Inc. are
convertible.
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CUSIP No. 74762E102 SCHEDULE 13D Page 3 of 11 Pages
------------------- ------------------
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1 NAME OF REPORTING PERSONS S.S.
OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
First Reserve GP IX, L.P.
I.R.S. No.: 91-208465 3
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 16,666,666 (1)
OWNED BY
EACH -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH
-----------------------------------------------------
10 SHARED DISPOSITIVE POWER
16,666,666 (1)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON
16,666,666 (1)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.6%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
(1) Consists of 11,969,766 shares of Common Stock and 4,696,900 shares of
Common Stock into which 939,380 shares of Series A Convertible
Preferred Stock beneficially owned by First Reserve GP IX, L.P. are
convertible.
------------------- ------------------
CUSIP No. 74762E102 SCHEDULE 13D Page 4 of 11 Pages
------------------- ------------------
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1 NAME OF REPORTING PERSONS S.S.
OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
First Reserve Fund IX, L.P.
I.R.S. No.: 91-208465 2
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 16,666,666 (1)
OWNED BY
EACH -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH
-----------------------------------------------------
10 SHARED DISPOSITIVE POWER
16,666,666 (1)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON
16,666,666 (1)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.6%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
(1) Consists of 11,969,766 shares of Common Stock and 4,696,900 shares of
Common Stock into which 939,380 shares of Series A Convertible
Preferred Stock directly owned by First Reserve Fund IX, L.P. are
convertible.
Page 5 of 11
ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D (the "Schedule 13D") relates to the
Common Stock, $.00001 par value per share (the "Common Stock"), and shares of
Common Stock issuable upon conversion of the Series A Convertible Preferred
Stock, par value $0.00001 per share (the "Series A Preferred Stock") of Quanta
Services, Inc., a Delaware corporation (the "Issuer"). The principal executive
offices of the Issuer are located at 1360 Post Oak Blvd., Suite 2100, Houston,
Texas 77056.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is being filed jointly by First Reserve Fund IX, L.P.
("Fund IX"), First Reserve GP IX, L.P. ("GP IX"), and First Reserve GP IX, Inc.
("First Reserve" and collectively, the "Reporting Persons") to report the
acquisition by Fund IX of Common Stock and Series A Preferred Stock. GP IX is
the general partner of Fund IX, and First Reserve is the general partner of GP
IX. The Reporting Persons, by and through the holdings of Fund IX, directly own
more than 5% of the issued and outstanding shares of Common Stock.
Fund IX is a Delaware limited partnership with a limited term of
existence, the principal purpose of which is to make equity, equity-linked and
debt investments in companies engaged in various energy and energy related
activities. GP IX is a Delaware limited partnership, the sole purpose of which
is to act as the general partner of Fund IX. First Reserve is a Delaware
corporation and is the general partner of GP IX. The principal business of First
Reserve is to be the indirect general partner of Fund IX.
The principal business and office address of the Reporting Persons is
411 West Putnam Ave., Suite 109, Greenwich, CT 06830.
Information with respect to the executive officers and directors of
First Reserve, including name, business address, present principal occupation or
employment and the organization in which such employment is conducted, and their
citizenship is listed on the attached Schedule I, which is incorporated in this
Schedule 13D by reference.
During the last five years, none of the Reporting Persons nor any
executive officer or director of First Reserve has (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding or a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the Securities Purchase Agreement, dated October 15, 2002,
between Fund IX and the Issuer, Fund IX purchased 8,666,666 shares of Common
Stock at a per
Page 6 of 11
share price of $3.00 for a total consideration of $25,999,998. Pursuant to the
Letter Agreement, dated October 15, 2002, between Fund IX and Aquila, Inc.
("Aquila") (the "Aquila Purchase Agreement") Fund IX also purchased from Aquila
3,303,100 shares of Common Stock at a per share price of $3.00 and 939,380
shares of Series A Preferred Stock at a per share price of $15.00, for a total
consideration of $24,000,000. The source of funds for the acquisition of
beneficial ownership of Common Stock and Series A Preferred Stock by Fund IX is
money contributed by limited and general partners for the investment by Fund IX.
Except in relation to its partnership interest in Fund IX, no funds were
acquired directly by GP IX, or First Reserve, for their indirect acquisition of
beneficial ownership of the Common Stock and Series A Preferred Stock.
ITEM 4. PURPOSE OF TRANSACTION.
The purchase of shares of Common Stock and Series A Preferred Stock by
Fund IX was undertaken for investment purposes. Fund IX also intends to
participate in and influence the affairs of the Issuer through the exercise of
its voting rights, with respect to the shares of Common Stock and Series A
Preferred Stock owned by Fund IX, as limited by the Investor's Rights Agreement,
dated October 15, 2002, between Fund IX and the Issuer (the "Investor's Rights
Agreement") and the certificate of designation with respect to the Series A
Preferred Stock. In addition, upon the receipt of approvals required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") with
respect to the transaction, Fund IX will have the right to appoint one director
to the Issuer's Board of Directors.
In addition to the shares of Common Stock Fund IX purchased pursuant to
the terms of the Issuer Purchase Agreement, Fund IX has agreed, subject to the
satisfaction of certain conditions set forth therein, to purchase 2,430,741
shares of newly issued Series E Convertible Preferred Stock (each share of
which, subject to the satisfaction of certain conditions (including approval by
the Issuer's Stockholders), will be convertible into 10 shares of Common Stock)
of the Issuer (the "Series E Preferred Stock"). If the purchase of Series E
Preferred Stock is consummated then, in connection therewith and subject to the
satisfaction of certain conditions, Fund IX will have the right to appoint two
additional directors, for a total of three, to the Issuer's Board of Directors.
Fund IX intends to review its investment in the Issuer on a continuing
basis and, depending upon the price of and other market conditions relating to
the Common Stock and the Series A Preferred Stock, subsequent developments
affecting the Issuer, the Issuer's business and prospects, other investment and
business opportunities available to Fund IX, general stock market and economic
conditions, tax considerations and other factors deemed relevant, may decide to
increase or decrease the size of their investment in the Issuer, subject to the
limitations set forth in the Investor's Rights Agreement.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As of August 14, 2002, the Reporting Persons beneficially owned no
shares of any class of securities of the Issuer.
Page 7 of 11
(a) As of the date hereof, the Reporting Persons are the
beneficial owners of Common Stock in the numbers and percentages set forth in
the table below.
Number of Shares Percentage
Reporting Party Beneficially Owned of Class
--------------- ------------------ ----------
Fund IX 11,969,766 15.5%(3)
4,696,900(2) 6.1%(3)
GP IX (1) 11,969,766 15.5%(3)
4,696,900(2) 6.1%(3)
First Reserve (1) 11,969,766 15.5%(3)
4,696,900(2) 6.1%(3)
(1) Consists of shares of Common Stock owned directly by Fund IX. GP IX is
the general partner of Fund IX and may be deemed to beneficially own
all of the shares of Common Stock owned by Fund IX. First Reserve, as
the general partner of GP IX, may be deemed to beneficially own all of
the shares of Common Stock owned by Fund IX.
(2) Consists of 4,696,900 shares of Common Stock into which the 939,380
shares of Series A Preferred Stock owned directly by Fund IX are
convertible.
(3) The percentage above is obtained by using as the denominator 77,024,653
shares of outstanding Common Stock, which includes 59,799,848 shares of
Common Stock currently outstanding (as indicated as outstanding as of
August 9, 2002 in the Issuer's Form 10-Q filed on August 14, 2002) and
17,224,805 shares of Common Stock into which the Issuer's Series A
Preferred Stock is convertible (in accordance with Rule
13d-3(d)(1)(i)(D)). This denominator excludes (a) 1,083,750 shares of
Limited Vote Common Stock (as indicated as outstanding as of August 9,
2002 in the Issuer's Form 10-Q filed on August 14, 2002), (b) 3,163,396
shares of Common Stock into which the Issuer's Convertible Subordinated
Notes can be converted (as indicated in the Issuer's Form 10-Q filed on
August 14, 2002), and (c) 9,720,762 shares of Common Stock into which
the options issued pursuant to the 2001 Stock Incentive Plan can be
exercised (as indicated as outstanding as of May 24, 2002 in the
Issuer's Form 14(A) filed on June 4, 2002).
As of the date hereof, the Reporting Persons are the
beneficial owners of Series A Preferred Stock in the numbers and percentages set
forth in the table below.
Number of Shares Percentage
Reporting Party Beneficially Owned of Class
--------------- ------------------ ----------
Fund IX 939,380 27.3%
GP IX (1) 939,380 27.3%
First Reserve (1) 939,380 27.3%
(1) Consists of 939,380 shares of Series A Preferred Stock owned directly
by Fund IX. GP IX is the general partner of Fund IX and may be deemed
to beneficially own the shares of Common Stock owned by Fund IX. First
Reserve, as the general partner of GP IX, may be deemed to beneficially
own all of the shares of Common Stock owned by Fund IX.
Page 8 of 11
(b) Fund IX shares with its general partner the power to vote
or to direct the vote of the shares directly held by it. GP IX, as the general
partner of Fund IX, and First Reserve, in its role as general partner of GP IX,
shares with Fund IX the power to cause Fund IX to dispose of or vote the shares
of Common Stock directly held by Fund IX.
(c) During the past 60 days, the following transactions were
effected:
REPORTING NUMBER OF
PARTY DATE SHARES PRICE TRANSACTION
--------- -------- --------- ---------------- ------------------
Fund IX 10/15/02 8,666,666 $3.00 per share Common Purchased
Fund IX 10/15/02 3,303,100 $3.00 per share Common Purchased
Fund IX 10/15/02 939,380 $15.00 per share Series A Preferred
Purchased
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
JOINT FILING AGREEMENT
A Joint Filing Agreement dated October 23, 2002, by and among Fund IX,
GP IX, and First Reserve has been executed by the Reporting Persons, a copy of
which is attached hereto as Exhibit A and incorporated herein by reference.
ISSUER PURCHASE AGREEMENT
On October 15, 2002, Fund IX and the Issuer entered into the Issuer
Purchase Agreement, which provided for the purchase of 8,666,666 shares of
Common Stock from the Issuer at a purchase price per share of $3.00. The Issuer
Purchase Agreement also provides that, subject to certain conditions, Fund IX
will purchase shares of Series E Convertible Preferred Stock, which Fund IX will
be able to convert into shares of Common Stock, subject to the receipt of HSR
Act approval and approval by the Issuer's stockholders. The Issuer Purchase
Agreement includes provisions customary in investments of this type. The Issuer
Purchase Agreement is filed as an exhibit to this Schedule 13D and is
incorporated by reference herein and the description set forth above is
qualified in its entirety by reference thereto.
INVESTOR'S RIGHTS AGREEMENT
On October 15, 2002, Fund IX and the Issuer entered into the Investor's
Rights Agreement.
Page 9 of 11
The Investor's Rights Agreement provides that Fund IX may transfer its
shares of Common Stock to one or more transferees subject to certain
restrictions, including a prohibition on transfers to competitors of the Issuer.
The Investor's Rights Agreement also provides that Fund IX is entitled
to (i) three demand registration rights with respect to the Common Stock, (ii)
unlimited "piggyback" registrations and (iii) a pre-emptive right to purchase
shares of common stock of the Issuer upon the Issuer's issuance of shares to
third parties.
The Investor's Rights Agreement contains so-called "standstill"
provisions, which, among other things, (i) prohibit Fund IX from increasing its
beneficial ownership of the Issuer's voting securities beyond a specified
amount, and (ii) prohibit acquisition proposals, proxy solicitations, group
formation or encouragement of third parties for takeover purposes by Fund IX.
Subject to receipt of approvals under the HSR Act, Fund IX will have
the right to appoint one director to the Issuer's Board of Directors. If the
purchase of Series E Preferred Stock is consummated then, in connection
therewith and subject to the satisfaction of certain conditions, Fund IX will
have the right to appoint two additional directors to the Issuer's Board of
Directors, subject to reduction in certain circumstances based on the level of
Fund IX's ownership of capital stock of the Issuer.
The Investor's Rights Agreement is filed as an exhibit to this Schedule
13D and is incorporated by reference herein and the description set forth above
is qualified in its entirety by reference thereto.
AQUILA PURCHASE AGREEMENT
On October 15, 2002, Fund IX and Aquila entered into the Aquila
Purchase Agreement, pursuant to which Fund IX purchased from Aquila 3,303,100
shares of Common Stock at a purchase price per share of $3.00 and 939,380 shares
of Series A Preferred Stock at a purchase price per share of $15.00. The Aquila
Purchase Agreement is filed as an exhibit to this Schedule 13D and is
incorporated by reference herein and the description set forth above is
qualified in its entirety by reference thereto.
FORM OF CERTIFICATE OF DESIGNATION, RIGHTS, AND LIMITATIONS OF SERIES E
CONVERTIBLE PREFERRED STOCK
If the purchase of Series E Preferred Stock is consummated, the
Certificate of Designation will designate shares of Issuer's preferred stock as
Series E Convertible Preferred Stock and will set forth the terms of the Series
E Preferred Stock. The Form of Certificate of Designation is filed as an exhibit
to this Schedule 13D and is incorporated by reference herein and the description
set forth above is qualified in its entirety by reference thereto.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Joint Filing Agreement of Schedule 13D.
Page 10 of 11
2. Securities Purchase Agreement, dated as of October 15, 2002, between
Quanta Services, Inc. and First Reserve Fund IX, L.P.
3. Letter Purchase Agreement, dated as of October 15, 2002, between
Aquila, Inc. and First Reserve Fund IX, L.P.
4. Investor's Rights Agreement between Quanta Services, Inc. and First
Reserve Fund IX, L.P., dated October 15, 2002.
5. Form of Certificate of Designation, Rights, and Limitations of Series E
Convertible Preferred Stock.
Page 11 of 11
SIGNATURE
After reasonable inquiry, and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
October 23, 2002
FIRST RESERVE FUND IX, L.P.
By: First Reserve GP IX, L.P.,
General Partner
By: First Reserve GP IX, Inc.,
General Partner
By: /s/ Thomas R. Denison
--------------------------------
Name: Thomas R. Denison
Title: Managing Director
FIRST RESERVE GP IX, L.P.
By: First Reserve GP IX, Inc.,
General Partner
By: /s/ Thomas R. Denison
--------------------------------
Name: Thomas R. Denison
Title: Managing Director
FIRST RESERVE GP IX, INC.
By: /s/ Thomas R. Denison
--------------------------------
Name: Thomas R. Denison
Title: Managing Director
SCHEDULE I
The name, business address and present principal occupation or employment of
each of the executive officers and directors of the First Reserve GP IX, Inc.
are set forth below. Each such person is a citizen of the United States and does
not have any other principal occupation:
Business
Name Position with First Reserve GP IX, Inc. Address
---- ---------------------------------------- --------
William E. Macaulay Chairman, CEO, Managing Director and Director (1)
John A. Hill Vice Chairman and Managing Director (1)
Ben A. Guill President, Managing Director and Director (2)
Thomas J. Sikorski Managing Director (1)
Will Honeybourne Managing Director (2)
Thomas R. Denison Managing Director, General Counsel and Secretary (3)
Jennifer G. Zarrilli Vice President, Treasurer and Chief Financial Officer (1)
and Director
(1) 411 W. Putnam Avenue, Suite 109, Greenwich, CT 06830
(2) 600 Travis Street, Suite 6000, Houston, TX 77002
(3) 1801 California Street, Suite 4110, Denver, CO 80202
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
A. Joint Filing Agreement of Schedule 13D.
B. Securities Purchase Agreement, dated as of October 15, 2002,
between Quanta Services, Inc. and First Reserve Fund IX, L.P.
C. Letter Purchase Agreement, dated as of October 15, 2002,
between Aquila, Inc. and First Reserve Fund IX, L.P.
D. Investor's Rights Agreement between Quanta Services, Inc. and
First Reserve Fund IX, L.P., dated October 15, 2002.
E. Form of Certificate of Designation, Rights, and Limitations of
Series E Convertible Preferred Stock.
EXHIBIT A
JOINT FILING AGREEMENT
We, the signatories of the statement on Schedule 13D filed with respect
to the Common Stock of Quanta Services, Inc., to which this Agreement is
attached, hereby agree this 23rd day of October, 2002, that such statement is,
and any amendments thereto filed by any of us will be, filed on behalf of each
of us pursuant to and in accordance with the provisions of Rule 13d-1(k) of the
Securities Exchange Act of 1934.
FIRST RESERVE FUND IX, L.P.
By: First Reserve GP IX, L.P.,
General Partner
By: First Reserve GP IX, Inc.,
General Partner
By: /s/ Thomas R. Denison
--------------------------------
Name: Thomas R. Denison
Title: Managing Director
FIRST RESERVE GP IX, L.P.
By: First Reserve GP IX, Inc.,
General Partner
By: /s/ Thomas R. Denison
--------------------------------
Name: Thomas R. Denison
Title: Managing Director
FIRST RESERVE GP IX, INC.
By: /s/ Thomas R. Denison
--------------------------------
Name: Thomas R. Denison
Title: Managing Director
EXHIBIT B
================================================================================
SECURITIES PURCHASE AGREEMENT
BETWEEN
QUANTA SERVICES, INC.
AND
FIRST RESERVE FUND IX, L.P.
DATED AS OF OCTOBER 15, 2002
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS..................................................................................1
Section 1.01 Definitions..................................................................................1
Section 1.02 Accounting Procedures and Interpretation.....................................................9
ARTICLE II. AGREEMENT TO SELL AND PURCHASE...............................................................9
Section 2.01 Authorization of Shares......................................................................9
Section 2.02 Sale and Purchase............................................................................9
Section 2.03 Closing.....................................................................................10
Section 2.04 Delivery....................................................................................10
Section 2.05 Conversion..................................................................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................10
Section 3.01 Corporate Existence.........................................................................10
Section 3.02 Company SEC Documents.......................................................................11
Section 3.03 No Material Adverse Change..................................................................11
Section 3.04 Litigation..................................................................................12
Section 3.05 No Breach...................................................................................12
Section 3.06 Authority...................................................................................13
Section 3.07 Approvals...................................................................................13
Section 3.08 Employee Benefit Matters....................................................................13
Section 3.09 Taxes.......................................................................................13
Section 3.10 Assets......................................................................................14
Section 3.11 No Material Misstatements...................................................................14
Section 3.12 Investment Company Act......................................................................14
Section 3.13 Public Utility Holding Company Act..........................................................14
Section 3.14 No Violation................................................................................14
Section 3.15 Environmental Matters.......................................................................14
Section 3.16 Insurance...................................................................................15
Section 3.17 Capitalization..............................................................................15
Section 3.18 Conversion Shares...........................................................................16
Section 3.19 Certain Fees................................................................................16
Section 3.20 Licenses....................................................................................17
Section 3.21 Undisclosed Liabilities.....................................................................17
Section 3.22 Labor Relations.............................................................................17
Section 3.23 State Takeover Statutes.....................................................................17
Section 3.24 Stockholders' Rights Plan...................................................................17
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................................18
Section 4.01 Organization................................................................................18
Section 4.02 Authorization of Transaction................................................................18
Section 4.03 Noncontravention............................................................................18
Section 4.04 Litigation..................................................................................18
Section 4.05 Investment..................................................................................19
-i-
Section 4.06 Nature of Purchaser.........................................................................19
Section 4.07 Receipt of Information; Authorization.......................................................19
Section 4.08 Anti-Hedging................................................................................19
Section 4.09 Restricted Securities.......................................................................19
Section 4.10 Certain Fee.................................................................................20
Section 4.11 No Implied Representations..................................................................20
ARTICLE V. CONDITIONS TO CLOSINGS......................................................................20
Section 5.01 Conditions to the Purchaser's Obligation to Purchase the Shares at the Tranche I Closing....20
Section 5.02 Conditions to the Purchaser's Obligation to Purchase Shares at the Tranche II Closing.......21
Section 5.03 Conditions to Obligations of the Company....................................................23
ARTICLE VI. COVENANTS...................................................................................24
Section 6.01 Financial Statements and Reports............................................................24
Section 6.02 Maintenance, Etc............................................................................25
Section 6.03 Further Assurances..........................................................................25
Section 6.04 Efforts; Performance of Obligations.........................................................25
Section 6.05 Shares......................................................................................26
Section 6.06 Insurance...................................................................................26
Section 6.07 Use of Proceeds.............................................................................26
Section 6.08 Notification of Certain Matters.............................................................26
Section 6.09 Nomination of First Reserve Director Designee(s)............................................26
Section 6.10 Venture Capital Operating Companies.........................................................26
Section 6.11 Covenant Amendments.........................................................................26
Section 6.12 Calling of Stockholders' Meeting............................................................26
Section 6.13 Fees and Expenses...........................................................................27
Section 6.14 Termination of Certain Covenants............................................................27
Section 6.15 Grounds for Termination.....................................................................27
Section 6.16 Effect of Termination.......................................................................27
ARTICLE VII. MISCELLANEOUS...............................................................................28
Section 7.01 Interpretation and Survival of Provisions...................................................28
Section 7.02 Indemnification, Costs and Expenses.........................................................28
Section 7.03 No Waiver; Modifications in Writing.........................................................31
Section 7.04 Binding Effect; Assignment..................................................................31
Section 7.05 Replacement Securities......................................................................32
Section 7.06 Communications..............................................................................32
Section 7.07 Governing Law; Consent to Jurisdiction......................................................33
Section 7.08 Expenses....................................................................................34
Section 7.09 Execution in Counterparts...................................................................34
Section 7.10 No Third Party Beneficiaries................................................................34
-ii-
Exhibits:
Exhibit A-1 - Form of Opinion of Company Counsel
Exhibit A-2 - Form of Opinion of Winston & Strawn
Exhibit B - Certificate of Designation
Exhibit C - Investor's Rights Agreement
Exhibit D - Aquila Consent
Schedules:
Schedule 3.01 - Subsidiaries
Schedule 3.03 - Material Adverse Change
Schedule 3.04 - Litigation
Schedule 3.05 - No Breach
Schedule 3.07 - Approvals
Schedule 3.09 - Taxes
Schedule 3.15 - Environmental Matters
Schedule 3.16 - Insurance
Schedule 3.17 - Capitalization
Schedule 3.19 - Fees
Schedule 3.20 - Licenses
Schedule 3.21 - Undisclosed Liabilities
Schedule 3.22 - Labor Relations
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of October 15, 2002
(this "Agreement"), by and between QUANTA SERVICES, INC., a Delaware corporation
(the "Company"), and FIRST RESERVE FUND IX, L.P., a Delaware limited partnership
("Purchaser").
In consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 Definitions. As used in this Agreement, and
unless the context requires a different meaning, the following terms have the
meanings indicated:
"Action" against a Person means any lawsuit, action,
proceeding, investigation or complaint before any Governmental Authority,
mediator or arbitrator.
"Affiliate" of any Person means (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person that owns directly or indirectly 20% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 20% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to "control" (including, with its correlative meanings, "controlled by"
and "under common control with") such corporation or other Person.
"Aquila Consent" means the consent and waiver letter
agreement, dated as of the date hereof, by Aquila, Inc. with respect to the
transactions contemplated hereby, a copy of which is attached as Exhibit D
hereto.
"Aquila Documents" means (i) the Securities Purchase Agreement
dated as of September 29, 1999, between the Company and UtiliCorp United Inc.,
(ii) the Settlement and Governance Agreement, dated as of May 20, 2002, between
the Company and Aquila, Inc., (iii) the Amended and Restated Investor's Rights
Agreement, dated as of May 20, 2002, between the Company and Aquila, Inc., (iv)
the Certificate of Designation, Rights and Limitations of Series A Convertible
Preferred Stock of the Company and (v) the Stockholder's Voting Agreement, dated
as of September 21, 1999, between the Company and UtiliCorp United Inc.
"Aquila Sale" means the sale by Aquila, Inc., a Delaware
corporation, and the purchase by Purchaser at the Tranche I Closing of 3,303,100
shares of Common Stock and 939,380 shares of the Company's Series A Preferred
Stock.
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"Average Trading Price" has the meaning specified in Section
2.02(b).
"Basic Documents" means, collectively, this Agreement, the
Investor's Rights Agreement, the Certificate of Designation and any and all
other agreements or instruments executed and delivered to Purchaser by the
Company or any Subsidiary or Affiliate of the Company on even date herewith or
at or prior to the Tranche II Closing, or any amendments, supplements,
continuations or modifications thereto.
"Beneficial Ownership," "Beneficial Owner" and "Beneficially
Own" have the meanings ascribed to them in Rule 13d-3 under the Exchange Act in
effect on the date hereof.
"Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day other than a Saturday, Sunday, or
a legal holiday for commercial banks in Houston, Texas, or New York, New York.
"Capital Stock" of any Person means any and all shares,
interests, participations, or other equivalents (however designated) of, or
rights, warrants, or options to purchase, corporate stock or any other equity
interest (however designated) of or in such Person.
"CERCLA" has the meaning specified in the definition of
Environmental Laws in this Section 1.01.
"Certificate of Designation" has the meaning specified in
Section 2.01.
"Claims" has the meaning specified in the definition of
Environmental Claims in this Section 1.01.
"Closing" has the meaning specified in Section 2.04.
"Closing Date" means, as applicable, the date upon which the
Tranche I Closing or Tranche II Closing occurs as provided in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" has the meaning specified in Section 2.01.
"Common Stock" means the common stock, par value $0.00001 per
share, of the Company or such other class of securities as shall, after the date
of this Agreement, constitute the common equity of the Company.
"Company" has the meaning specified in the introductory
paragraph.
"Company SEC Documents" has the meaning specified in Section
3.02.
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"Consolidated Subsidiaries" means each Subsidiary of the
Company (whether now existing or hereafter created or acquired), the financial
statements of which shall be (or should have been) consolidated with the
financial statements of the Company in accordance with GAAP.
"Conversion Shares" has the meaning specified in Section 2.01.
"Convertible Loan Documents" means the Subordinated Indenture,
dated as of July 25, 2000 between the Company and Chase Bank of Texas, National
Association as Trustee, and the First Supplemental Indenture, dated as of July
25, 2000, between the Company and Chase Bank of Texas, National Association as
Trustee, and all other documents and instruments executed or delivered in
connection therewith, as the same may be amended or supplemented from time to
time.
"Delist" or "Delisted" means the delisting of the shares of
stock of a corporation from the exchange such shares are traded on.
"DGCL" means the Delaware General Corporation Law.
"Employee Plan" means any employee benefit plan, program or
policy including thrift plans, stock purchase plans, stock bonus plans, stock
option plans, employee stock ownership plans or other incentive or profit
sharing arrangements for the benefit of employees, officers or directors of the
Company or its Affiliates, with respect to which the Company or any ERISA
Affiliate may have any liability or any obligation to contribute, including a
Plan or a Multiemployer Plan.
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non- compliance or violations, formal investigations or proceedings
relating to any Environmental Law ("Claims") or any permit issued under any
Environmental Law, including, without limitation, (i) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law and (ii) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from a release or threatened release of Hazardous
Materials.
"Environmental Laws" means any and all Government Requirements
pertaining to the environment in effect in any and all jurisdictions in which
the Company or any Subsidiary is conducting or at any time has conducted
business, or where any Property of the Company or any Subsidiary is located,
including, without limitation, the Oil Pollution Act of 1990 ("OPA"), as
amended, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. As
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used in the provisions hereof relating to Environmental Laws, the term "oil" has
the meaning specified in OPA; the terms "hazardous substance" and "release" (or
"threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment, and (ii)
to the extent the laws of the state in which any Property of the Company or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" that is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) that together with the Company or any Subsidiary of the Company
would be deemed to be a "single employer" within the meaning of Section
4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the
Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the Commission
promulgated thereunder.
"Financial Statements" means the financial statement or
statements described or referred to in Section 3.02.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"Government Requirement" means any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (in the case of banking regulatory authorities whether or not having
the force of law), including without limitation, Environmental Laws, energy
regulations and occupational, safety and health standards or controls of any
Governmental Authority.
"Governmental Authority" includes the country, the state,
county, city and political subdivisions in which any Person or such Person's
Property is located or that exercises valid jurisdiction over any Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them, including monetary authorities, that
exercises valid jurisdiction over any Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Company, the Subsidiaries or any of their Property or Purchaser, any Affiliate
of Purchaser or any of their respective Property.
"Hazardous Material" shall have the meaning assigned to the
term Hazardous Substance by CERCLA, and shall include any substance defined as
"hazardous" or "toxic" or words used in place thereof under any Environmental
Law applicable to the Company or any of its Subsidiaries.
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"HSR Act" has the meaning specified in Section 3.07.
"Indemnified Party" has the meaning specified in Section
7.02(d).
"Indemnity Matters" has the meaning specified in Section
7.02(a).
"Investor's Rights Agreement" means the First Reserve
Investor's Rights Agreement, to be entered into on the Tranche I Closing Date,
between the Company and Purchaser relating to, among other things, the
registration of the Common Shares and Conversion Shares for public distribution.
"Licenses" has the meaning specified in Section 3.20.
"Lien" means any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to the
lien or security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" includes reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property. For the
purpose of this Agreement, a Person shall be deemed to be the owner of any
Property that it has acquired or holds subject to a conditional sale agreement,
or leases under a financing lease or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person in a
transaction intended to create a financing.
"Material Adverse Effect" means any material and adverse
effect on (i) the assets, liabilities, financial condition, business, operations
or affairs of the Company and its Subsidiaries taken as a whole, (ii) the
ability of the Company and its Subsidiaries taken as a whole to carry out their
business as of the Tranche I Closing Date or as proposed as of the Tranche I
Closing Date to be conducted to meet their obligations under the Basic Documents
on a timely basis or (iii) the ability of the Company to consummate the
transactions under this Agreement and the other Basic Documents.
"Material Employment Agreement" means any employment agreement
filed as an Exhibit to any of the Company SEC Documents.
"Multiemployer Plan" means a Plan defined as such in Section
3(37) or 4001(a)(3) of ERISA.
"Note Holders" means each of the holders from time to time of
the senior secured notes issued by the Company under the Note Purchase
Agreement.
"Note Purchase Agreement" means that certain Note Purchase
Agreement dated as of March 1, 2000, among the Company, as issuer, and the
purchasers listed on "Schedule A" attached thereto, as lenders, and all other
documents and instruments executed or delivered in connection therewith, as the
same may be amended, restated or supplemented from time to time.
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"NYSE" has the meaning specified in Section 3.06.
"Obligations" means any and all amounts, liabilities and
obligations owing from time to time by the Company to Purchaser, pursuant to any
of the Basic Documents and all renewals, extensions and/or rearrangements
thereof, whether such amounts, liabilities or obligations be liquidated or
unliquidated, now existing or hereafter arising, absolute or contingent.
"OPA" has the meaning specified in the definition of
Environmental Laws in this Section 1.01.
"Per Preferred Share Purchase Price" has the meaning specified
in Section 2.02.
"Person" means any individual, corporation, company, voluntary
association, partnership, joint venture, trust, limited liability company,
unincorporated organization or government or any agency, instrumentality or
political subdivision thereof, or any other form of entity.
"Plan" means any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by the Company, any Subsidiary or an ERISA Affiliate or (ii)
was at any time during the preceding three calendar years sponsored, maintained
or contributed to, by the Company, any Subsidiary or an ERISA Affiliate.
"Preferred Shares" has the meaning specified in Section 2.01.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Purchaser" has the meaning set forth in the introductory
paragraph.
"RCRA" has the meaning specified in the definition of
Environmental Laws in this Section 1.01.
"Related Parties" has the meaning specified in Section
7.02(a).
"Responsible Officer" means, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and the
Chief Financial Officer of such Person.
Unless otherwise specified, all references to a Responsible
Officer herein shall mean a Responsible Officer of the Company.
"Securities" means the Common Shares, the Preferred Shares
and, when issued, the Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations of the Commission promulgated
thereunder.
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"Senior Credit Agreement" means the Third Amended and Restated
Credit Agreement dated as of June 14, 1999, among the Company, the Senior Loan
Agent, and the Senior Lenders, as it may from time to time be amended, modified,
supplemented or increased from time to time, and any Credit Agreement or similar
agreement executed in connection with any refinancing of the Senior Loan.
"Senior Indebtedness" means all obligations, including the
obligation to pay principal and accrued interest, arising under the Senior Loan
Documents.
"Senior Lenders" means each of the lenders from time to time
under the Senior Credit Agreement.
"Senior Loan" means, collectively, any advance or advances of
principal made by the Senior Lenders to the Company under the Senior Credit
Agreement and the other Senior Loan Documents and all accrued but unpaid
interest thereon.
"Senior Loan Agent" means NationsBank, N.A. doing business as
Bank of America, N.A., and any substitute agent, as agent under the Senior
Credit Agreement, and any agent, if any, under any refinancing arrangement of
the Senior Loan.
"Senior Loan Documents" means the Senior Credit Agreement and
all promissory notes, collateral documents and other agreements, documents and
instruments executed or delivered in connection therewith, as such agreements
may be amended, modified or supplemented from time to time.
"Series A Preferred Stock" has the meaning specified in
Section 3.17.
"Series E Preferred Stock" means the Series E convertible
preferred stock, par value $0.00001 per share, of the Company to be issued to
Purchaser pursuant to Article II of this Agreement, each share of which is
convertible into ten (10) shares of Common Stock (subject to adjustment pursuant
to the Certificate of Designation).
"Share Calculation Date" has the meaning specified in Section
3.17.
"Share Issuance Obligations" has the meaning specified in
Section 3.17.
"Shares" has the meaning specified in Section 2.01.
"Special Entity" means any joint venture, limited liability
company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation, in which a Person or one or
more of its Subsidiaries is a member, owner, partner or joint venturer and owns,
directly or indirectly, at least a majority of the equity of such entity or
controls such entity, but excluding any tax partnerships that are not classified
as partnerships under state law. For purposes of this definition, any Person
that owns directly or indirectly an equity investment in another Person which
allows the first Person to manage or elect managers who manage the normal
activities of the second Person will be deemed to "control" such second Person
(e.g., a sole general partner controls a limited partnership).
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"Standstill Amount", at any time, shall mean the number of
shares of Voting Securities representing 37% of the Voting Securities of the
Company, as such amount may be increased from time to time with the consent of a
majority of the directors of the Company that were not appointed (pursuant to
Article VII of the Investor's Rights Agreement) by, or affiliated with,
Investor.
"Stockholders' Rights Plan" means the Rights Agreement dated
March 8, 2000 between the Company and American Stock Transfer and Trust Company,
as amended.
"Subsidiary" means (i) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by a
Person or one or more of its Subsidiaries or by a Person and one or more of its
Subsidiaries and (ii) any Special Entity. Unless otherwise indicated herein,
each reference to the term "Subsidiary" shall mean a Subsidiary of the Company.
"Ten Trading Day Period" means (i) if the Tranche II Closing
Date occurs prior to the Company's public announcement (the "Announcement") of
its quarterly earnings for the quarter ended September 30, 2002, the ten (10)
consecutive Trading Days ending on the fifth Trading Day immediately preceding
the Tranche II Closing Date or (ii) if the Tranche II Closing Date occurs after
the Announcement, the ten (10) consecutive trading Days ending on the Trading
Day immediately preceding the Announcement.
"Trading Day" means any day on which the Company's Common
Stock is traded on the NYSE.
"Tranche I Closing" has the meaning specified in Section 2.03.
"Tranche II Closing" has the meaning specified in Section
2.03.
"Tranche I Closing Date" has the meaning specified in Section
2.03.
"Tranche II Closing Date" has the meaning specified in Section
2.03.
"Voting Percentage" means the ratio that the total number of
shares of Voting Securities owned by Purchaser bears to the total number of
shares of Voting Securities outstanding, in each case assuming full conversion
of all outstanding equity securities convertible into Voting Securities
(including, without limitation, the Preferred Shares, whether or not they are
then convertible), calculated at the time of any determination hereunder.
"Voting Securities" means Common Stock or other capital stock
of the Company entitled generally to vote in the election of directors, the
Series A Preferred Stock and the Preferred Shares (or any equity securities (not
including options, warrants or other similar rights) convertible into securities
so entitled generally to vote in the election of directors (whether or not then
convertible)).
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Section 1.02 Accounting Procedures and Interpretation. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all Financial Statements and certificates and reports as to
financial matters required to be furnished to Purchaser hereunder shall be
prepared, in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the Certificate of Designation
or, in the case of unaudited statements, as permitted by Form 10-Q promulgated
by the Commission) and in compliance as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto.
ARTICLE II.
AGREEMENT TO SELL AND PURCHASE
Section 2.01 Authorization of Shares. On or prior to the
Tranche I Closing, the Company shall have authorized (a) the sale and issuance
to Purchaser of the number of shares of Common Stock set forth in Section 2.02
below (the "Common Shares"), (b) the initial sale and issuance to Purchaser of
the number of shares of Series E Preferred Stock set forth in Section 2.02 below
(the "Preferred Shares", and together with the Common Shares, the "Shares") and
(c) the issuance of shares of Common Stock upon conversion of the Preferred
Shares (the "Conversion Shares"). The Preferred Shares shall have the rights,
preferences, privileges and restrictions set forth in the Certificate of
Designation, Rights, and Limitations of the Series E Preferred Stock of the
Company in the form attached hereto as Exhibit B (the "Certificate of
Designation"). The Common Shares and the Conversion Shares shall have the
rights, preferences, privileges and restrictions set forth in the Company's
Certificate of Incorporation.
Section 2.02 Sale and Purchase.
(a) Subject to the terms and conditions hereof, at
the Tranche I Closing (as defined in Section 2.03 below) the Company
shall issue and sell to Purchaser, and Purchaser shall purchase from
the Company, 8,666,666 Common Shares at a price of $3.00 per share.
(b) Subject to the terms and conditions hereof, at
the Tranche II Closing (as defined in Section 2.03 below) the Company
shall issue and sell to Purchaser, and Purchaser shall purchase from
the Company, 2,430,741 Preferred Shares at a price per share of $30.00
per share, but subject to adjustment as hereinafter provided in this
Section 2.02(b) (the "Per Preferred Share Purchase Price"). In the
event that the average of the closing prices of the Common Stock as
reported on the NYSE on each of the ten (10) consecutive Trading Days
during the Ten Trading Day Period (the "Average Trading Price") shall
be greater than $4.00 per share, then the Per Preferred Share Purchase
Price shall be increased by an amount equal to ten times one-half of
the amount by which such Average Trading Price is greater than $4.00,
provided, that such increase shall not exceed $5.00 per Preferred
Share.
(c) Notwithstanding anything in this Section 2.02 to
the contrary, in no event shall the number of Common Shares or
Preferred Shares purchased or purchasable pursuant to this Agreement
exceed the lesser of the Standstill Amount or the amount of
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shares the acquisition of which would constitute a change of control
(or similar concept) under any of the Company's debt instruments.
Section 2.03 Closing. The delivery of the certificate(s)
representing the Common Shares, payment by Purchaser of the required
consideration and all other instruments required by this Agreement (the "Tranche
I Closing") shall take place at 10:00 a.m. on the date of execution of the
Agreement at the offices of the Company, 1360 Post Oak Boulevard, Suite 2100,
Houston, Texas 77056, or at such other time or place as the Company and
Purchaser may mutually agree. The delivery of the certificate(s) representing
the Preferred Shares, payment by Purchaser of the required consideration and all
other instruments required by this Agreement (the "Tranche II Closing") will
occur on the second Trading Day following the satisfaction of the conditions set
forth in Sections 5.02 and 5.03 hereof or such other date as is mutually agreed
upon by the parties, but in no event shall such date be later than December 7,
2002. Notwithstanding the foregoing, Purchaser may postpone the Tranche II
Closing for up to 11 Business Days following any such scheduled Tranche II
Closing to the extent the aggregate consideration to fund the purchase price in
respect thereof exceeds the amount of funds then on hand at Purchaser. The date
of the Tranche I Closing is hereinafter referred to as the "Tranche I Closing
Date" and the date of the Tranche II Closing is hereinafter referred to as the
"Tranche II Closing Date"). Further, it is the intention of the parties hereto
that the Tranche I Closing shall be deemed to have occurred immediately prior to
the Aquila Sale.
Section 2.04 Delivery. At each of the Tranche I Closing and
the Tranche II Closing (as applicable, the "Closing"), subject to the terms and
conditions hereof, the Company will deliver to Purchaser all of the Common
Shares or Preferred Shares, as applicable, by delivery of a certificate or
certificates evidencing the Shares to be purchased at the Closing, free and
clear of any Liens or interests of any other party other than those incurred by
action or inaction of the Purchaser or its Affiliates, and Purchaser will make
payment to the Company of the purchase price therefor by wire transfer of
immediately available funds to an account designated by the Company.
Section 2.05 Conversion. Purchaser shall have the right, at
its option, to convert shares of Series E Preferred Stock into shares of Common
Stock upon the terms and conditions (including antidilution adjustments) as more
fully specified in the Certificate of Designation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser, which
representations and warranties shall survive the Tranche II Closing for a period
of two years, as follows:
Section 3.01 Corporate Existence. The Company: (i) is a
corporation duly incorporated, legally existing and in good standing under the
laws of the State of Delaware; (ii) has all requisite power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as its business is now being or as
its business is proposed to be conducted, except where the failure to have all
such material governmental licenses, authorizations, consents and approvals
would not have a Material Adverse Effect; and (iii) is qualified to do business
in all jurisdictions in which the nature of the
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business conducted by it makes such qualifications necessary and where failure
so to qualify would have a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is in default in the performance, observance or fulfillment
of any provision of, in the case of the Company, its Certificate of
Incorporation, as amended and restated, or Bylaws, or, in the case of any
Subsidiary, its Certificate of Incorporation, Bylaws or other organizational
documents. Schedule 3.01 identifies each Subsidiary of the Company and the
ownership of all outstanding Capital Stock of each such Subsidiary. Each of the
Company's Subsidiaries that is a corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State or other
jurisdiction of its incorporation and has all requisite power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted, except where the failure to have all such material governmental
licenses, authorizations, consents and approvals would not have a Material
Adverse Effect. Each of the Company and each of its Subsidiaries that is a
corporation is duly qualified or licensed and in good standing as a foreign
corporation, and is authorized to do business, in each jurisdiction in which the
ownership or leasing of its respective properties or the character of its
respective operations makes such qualification necessary, except where the
failure to obtain such qualification, license, authorization or good standing
would not have a Material Adverse Effect. Each Subsidiary of the Company that is
not a corporation has been duly formed and is duly qualified or licensed and
authorized to do business in each jurisdiction in which the ownership or leasing
of its respective properties or the character of its respective operations makes
such qualification necessary, except where the failure to obtain such
qualification, license or authorization would not have a Material Adverse
Effect.
Section 3.02 Company SEC Documents. The Company has timely
filed with the Commission all forms, registrations and proxy statements,
reports, schedules and statements required to be filed by it since December 31,
2000, under the Exchange Act or the Securities Act (all documents filed since
such date, collectively "Company SEC Documents"). The Company SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed (in the case of registration statements and proxy
statements, solely on the dates of effectiveness and the dates of mailing,
respectively) (except to the extent corrected by a subsequently filed Company
SEC Document filed prior to the Tranche I Closing Date) (i) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be, (iii) complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the Commission), and (iv) fairly
present (subject in the case of unaudited statements to normal, recurring and
year-end audit adjustments) in all material respects the consolidated financial
position of the Company as at the dates thereof and the consolidated results of
its operations and cash flows for the periods then ended.
Section 3.03 No Material Adverse Change. Except as set forth
in or contemplated by the Company SEC Documents filed with the Commission as of
the date hereof or in Schedule 3.03, since June 30, 2002, each of the Company
and its Subsidiaries has
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conducted its business in the ordinary course, consistent with past practice,
and there has been no (i) change that could reasonably be expected to have a
Material Adverse Effect, other than those occurring as a result of general
economic or financial conditions or other developments which are not unique to
the Company and its Subsidiaries but also affect similarly other Persons who
participate or are engaged in the lines of business of which the Company and its
Subsidiaries participate or are engaged, (ii) Material Adverse Effect, (iii)
declaration, setting aside or payment of any dividend or other distribution with
respect to the Company's Capital Stock, (iv) acquisition or disposition of any
material asset by the Company or any of its Subsidiaries or any contract or
arrangement therefore, otherwise than for fair value in the ordinary course of
business or as disclosed in the Company SEC Documents, or (v) material change in
the Company's accounting principles, practices or methods.
Section 3.04 Litigation. Except as set forth in the Company
SEC Documents or as disclosed to Purchaser in Schedule 3.04, there is no Action
pending or, to the knowledge of the Company, contemplated or threatened against
or affecting the Company, any of its Subsidiaries or any of their respective
officers, directors, properties or assets, which relates to or challenges the
legality, validity or enforceability of this Agreement, any of the Basic
Documents or any other documents or agreements executed or to be executed by the
Company pursuant hereto or thereto or in connection herewith or therewith, or
which (individually or in the aggregate) reasonably could be expected to have a
Material Adverse Effect.
Section 3.05 No Breach. The execution, delivery and
performance by the Company of this Agreement, the Basic Documents and all other
agreements and instruments to be executed and delivered by the Company pursuant
hereto or thereto or in connection herewith or therewith, compliance by the
Company with the terms and provisions hereof and thereof, the issuance of the
Shares and (when issued) the Conversion Shares by the Company, the consummation
by the Company of the transaction contemplated hereby or thereby and the
application of the proceeds thereof in compliance herewith do not and will not
(a) violate any provision of any law, statute, rule or regulation, order, writ,
judgment, injunction, decree, governmental permit, determination or award or
other Government Requirement having applicability to the Company or any of its
Subsidiaries or any of their respective properties or assets, (b) conflict with
or result in a violation of any provision of the charter or bylaws of the
Company or its Subsidiaries, (c) require any consent (other than consents set
forth on Schedule 3.05), approval or notice under or result in a violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration
or constitute a change of control (or similar concept)) under (i) any note,
bond, mortgage, license, or loan or credit agreement to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties may be bound or (ii) any
other contract, agreement, instrument or obligation, (d) result in or require
the creation or imposition of any Lien upon or with respect to any of the
properties now owned or hereafter acquired by the Company or any of its
Subsidiaries or (e) give rise to any anti-dilution or similar adjustment, or any
preemptive rights, in respect of any Capital Stock of the Company; with the
exception of the conflicts stated (x) in clause (b) of this Section 3.05, (y) in
clause (c) of this Section 3.05 (but, in the case of such clause (c), only in
respect of the Senior Loan Documents, the Note Purchase Agreement, the
Convertible Loan Documents, the Aquila Documents and any Material Employment
Agreement) and (z) in clause (e) of this Section 3.05, except where such
conflict, violation, default, breach, termination,
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cancellation, failure to receive consent or approval, or acceleration with
respect to the foregoing provisions of this Section 3.05 would not, individually
or in the aggregate, reasonably be likely to have a Material Adverse Effect.
Section 3.06 Authority. The Company has all necessary power
and authority to execute, deliver and perform its obligations under the Basic
Documents to which it is a party; and the execution, delivery and performance by
the Company of the Basic Documents to which it is a party, have been duly
authorized by all necessary action on its part; and the Basic Documents
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer and similar laws affecting
creditors' rights generally or by general principles of equity. No approval from
the stockholders of the Company is required as a result of the Company's
issuance of the Shares or the Conversion Shares or the listing of the Common
Shares or the Conversion Shares with the New York Stock Exchange (the "NYSE"),
except that the affirmative vote of at least a majority of the votes cast by the
holders of Common Stock (with the Series A Preferred Stock being voted on an as
converted basis), provided that the total votes cast represent a majority of
shares entitled to vote (the "Required Stockholder Vote"), is required under the
NYSE rules to approve the issuance of the Conversion Shares.
Section 3.07 Approvals. Except as set forth in Schedule 3.07,
no authorization, consent, approval, waiver, license, qualification or written
exemption from, nor any filing, declaration, qualification or registration with,
any Governmental Authority or any other Person that has not been made or
obtained and is required in connection with the execution, delivery or
performance by the Company of this Agreement or any of the Basic Documents or
the issuance by the Company of the Shares or the Conversion Shares, except (i)
with respect to the Tranche II Closing, consents and approvals under the
applicable requirements of the Hart-Scott Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) with respect to the Conversion Shares,
the receipt of the Required Stockholder Vote and (iii) where the failure to
receive such authorization, consent, approval, waiver, license, qualification or
written exemption from, or to make such filing, declaration, qualification or
registration would not, individually or in the aggregate, reasonably be likely
to have a Material Adverse Effect.
Section 3.08 Employee Benefit Matters. The Company and its
Subsidiaries and each ERISA Affiliate are in compliance in all material respects
with all applicable provisions of ERISA or the Code and published
interpretations thereunder with respect to all Employee Plans which are subject
to ERISA or the Code, except where the failure to be in compliance would not
reasonably be likely to have a Material Adverse Effect. No breach or violation
of or default by the Company or any ERISA Affiliate under any Employee Plan has
occurred which is reasonably likely to have a Material Adverse Effect.
Section 3.09 Taxes. Except as set forth in Schedule 3.09, the
Company and each of its Subsidiaries have timely and properly prepared and filed
all necessary federal, state, local and foreign tax returns with respect to the
Company and its Subsidiaries that are required to be filed (taking into
consideration any extension periods) and have paid when due all taxes shown to
be due thereon and have paid, or made adequate provision (in accordance with
GAAP) for the payment of, all other taxes and assessments with respect to the
Company and its Subsidiaries to the extent that the same shall have become due
(taking into consideration any
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extension periods), except where the failure to file such returns or to pay, or
make provision for the payment of, such taxes and assessments would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
Except as set forth in Schedule 3.09, the Company has no knowledge of any tax
deficiency that has been asserted against the Company or any Subsidiary which
the Company reasonably expects to have a Material Adverse Effect.
Section 3.10 Assets. Neither the Company nor any of its
Affiliates is a party to any contract, agreement, arrangement or understanding
(other than this Agreement and the agreements entered into hereunder) that by
its terms purports to obligate, restrict or otherwise bind Purchaser (as
Affiliates of the Company or otherwise) including any area of mutual interest,
exclusivity, non- competition or other similar agreement.
Section 3.11 No Material Misstatements. None of the
representations or warranties made by the Company herein or in any Schedule
hereto, or certificate furnished by the Company pursuant to this Agreement, when
all such documents are read together in their entirety, contains any untrue
statement of a material fact, or omits to state any material fact necessary to
make the statements contained herein or therein, in light of the circumstances
under which made, not misleading.
Section 3.12 Investment Company Act. Neither the Company nor
any Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 3.13 Public Utility Holding Company Act. Neither the
Company nor any Subsidiary is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 3.14 No Violation. Neither the Company nor any of its
Subsidiaries is (a) in default (nor has an event occurred which, with notice or
passage of time or both, would constitute such a default) under or in violation
of any provision of (i) any loan or credit agreement (including the Senior Loan
Documents, the Note Purchase Agreement and the Convertible Loan Documents), (ii)
any Aquila Documents or (iii) any other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, (b) a party to any
order of any Governmental Authority arising out of any Action, which such
violation, default or action in clauses (a)(iii) or (b) could reasonably be
expected to have a Material Adverse Effect, (c) in violation of any statute,
rule or regulation of any Governmental Authority or any governmental permit,
which violation could reasonably be expected to (individually or in the
aggregate) (x) affect the legality, validity or enforceability by Purchaser of
this Agreement or any of the Basic Documents or (y) have a Material Adverse
Effect.
Section 3.15 Environmental Matters.
(a) Environmental Laws. The Company and its
Subsidiaries have complied with, and will be in compliance with, all
applicable Environmental Laws and the requirements of any permits
issued under such Environmental Laws except where
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failure to so comply could not reasonably be expected to have a
Material Adverse Effect. Except as set forth in Schedule 3.15, to the
knowledge of the Company, there are no pending, past or threatened
Environmental Claims against the Company or any of its Subsidiaries or
any Property owned or operated by the Company or any of its
Subsidiaries which could reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 3.15, to the knowledge
of the Company, there are no conditions or occurrences on or emanating
from any Property owned or operated by the Company or any of its
Subsidiaries or on any property adjoining or in the vicinity of any
such Property that could reasonably be expected (i) to form the basis
of an Environmental Claim against the Company or any of its
Subsidiaries or any Property owned or operated by the Company or any of
its Subsidiaries or (ii) to cause any Property owned or operated by the
Company or any of its Subsidiaries to be subject to any material
restrictions on the ownership, occupancy, the current or intended use
or transferability of such Property by the Company or any of its
Subsidiaries under any applicable Environmental Law, except for any
such condition or occurrence described in clauses (i) or (ii) which
could not reasonably be expected to have a Material Adverse Effect.
(b) Hazardous Materials. Except as set forth on
Schedule 3.15, to the knowledge of the Company (i) Hazardous Materials
have not at any time been generated, used, treated or stored on, or
transported to or from, any property owned or operated by the Company
or any of its Subsidiaries in a manner that has violated or could
reasonably be expected to violate any Environmental Law, except for
such violation which could not reasonably be expected to have a
Material Adverse Effect, and (ii) Hazardous Materials have not at any
time been released on or from any property owned or operated by the
Company or any of its Subsidiaries in a manner that has violated or
could reasonably be expected to violate any Environmental Law, except
for such violation which could not reasonably be expected to have a
Material Adverse Effect.
Section 3.16 Insurance. Except as set forth in Schedule 3.16,
the Company and its Subsidiaries (for such time period after an entity became a
Subsidiary of the Company) have policies of property and casualty insurance and
bonds of the type and in amounts customarily carried by persons conducting
business or owning assets similar to those of the Company and its Subsidiaries.
There is no material claim pending under any of such policies or bonds as to
which coverage has been, nor any basis for the Company to reasonably believe
that a material claim will be, questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and the Company and its Subsidiaries are
otherwise in compliance with the terms of such policies and bonds. Except as set
forth in Schedule 3.16, the Company has no knowledge of, since December 31,
2001, any threatened termination of, or material premium increase with respect
to, any of such policies. Schedule 3.16 identifies all risks, if any, of the
Company or any of its Subsidiaries that are self-insured and might have a
Material Adverse Effect.
Section 3.17 Capitalization. The authorized Capital Stock of
the Company consists of (a) 300,000,000 shares of Common Stock, par value
$0.00001 per share, 59,799,848 shares are issued and outstanding as of the end
of the day immediately preceding the Tranche I Closing Date (the "Share
Calculation Date") and 926,371 shares of Common Stock are held in treasury; (b)
3,345,333 shares of Limited Vote Common Stock, par value $0.00001 per share, of
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which 1,083,750 shares are issued and outstanding as of the Share Calculation
Date; and (c) 10,000,000 shares of preferred stock, par value $0.00001 per
share, of which (x) 3,444,961 shares have been designated Series A convertible
preferred stock, par value $0.0001 per share (the "Series A Preferred Stock"),
of which all 3,444,961 shares are issued and outstanding as of the Share
Calculation Date, which shares are convertible into 17,224,805 shares of Common
Stock (which number of shares (assuming delivery of the Aquila Consent) will not
be subject to adjustment as a result of the transactions contemplated by this
Agreement), (y) 1,000,000 shares have been designated Series B junior
participating preferred stock, par value $0.00001 per share (the "Series B
Preferred Stock"), of which no shares are issued and outstanding as of the Share
Calculation Date, and (z) 1,000,000 shares have been designated Series C junior
convertible preferred stock, par value $0.00001 per share (the "Series C
Preferred Stock"), of which no shares are issued and outstanding as of the Share
Calculation Date; provided, that as of the Tranche II Closing Date, no shares of
the Series B Preferred Stock or Series C Preferred Stock will be designated,
issued or outstanding, 1,000,000 shares will be designated Series D junior
participating preferred stock, par value $0.00001 per share, of which no shares
will be issued and outstanding, and 3,918,209 shares will be designated Series E
Preferred Stock of which, immediately prior to the Tranche II Closing, no shares
will be issued and outstanding. All outstanding shares of Common Stock, Limited
Vote Common Stock and Series A Preferred Stock are validly issued, fully paid
and nonassessable and were issued free of preemptive rights. Except as set forth
on Schedule 3.17, the Company is not a party to any voting trust or other
agreement with respect to the voting of its Capital Stock. Except as set forth
in Schedule 3.17, there are as of the Share Calculation Date no (i) outstanding
securities convertible into or exchangeable for Capital Stock of the Company or
(ii) contracts, commitments, agreements, understandings or arrangements of any
kind to which the Company is a party obligating the Company under any
circumstance to issue any Capital Stock (including by virtue of anti-dilution
provisions of any Capital Stock), or any securities convertible into or
exchangeable for or rights to purchase or subscribe for Capital Stock of the
Company, other than this Agreement (the "Share Issuance Obligations"). Schedule
3.17 reasonably sets forth information regarding the Share Issuance Obligations.
Except as set forth on Schedule 3.17 neither the Company nor any of its
Subsidiaries is a party to or bound by any agreement with respect to any of its
securities that grants registration rights to any Person.
Section 3.18 Conversion Shares. The Conversion Shares, when
issued and delivered in accordance with the terms of the Certificate of
Designation, will be duly and validly issued, fully paid, non-assessable, free
of preemptive rights of other stockholders and free from all Liens (except any
Liens created or suffered to be created by Purchaser or its Affiliates) and will
not be subject to any restriction on the voting or transfer thereof created by
the Company, other than the restrictions set forth in Section 4.05 of this
Agreement and pursuant to the Investor's Rights Agreement. The Company has duly
and validly reserved the Conversion Shares for issuance upon conversion of the
Shares.
Section 3.19 Certain Fees. Except for the fees payable to
Goldman, Sachs & Co. described on Schedule 3.19 attached hereto, no fees or
commissions will be payable by the Company to brokers, finders, investment
bankers, or Purchaser with respect to the issuance and sale of any of the Shares
or the consummation of the transactions contemplated by this Agreement. The
Company agrees that it will indemnify and hold harmless Purchaser from and
against any and all claims, demands, or liabilities for broker's, finders,
placement, or other
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similar fees or commissions incurred by the Company or alleged to have been
incurred by the Company in connection with the issuance or sale of the Shares or
the consummation of the transaction contemplated by this Agreement.
Section 3.20 Licenses. Except as set forth in Schedule 3.20,
each of the Company and its Subsidiaries holds all licenses, franchises,
permits, consents, registrations, certificates and other approvals (including,
without limitation, those relating to environmental matters and worker health
and safety) (individually, a "License" and, collectively, "Licenses") required
for the conduct of its business as now being conducted, except where the failure
to hold any such License would not have a Material Adverse Effect.
Section 3.21 Undisclosed Liabilities. Except (a) as and to the
extent disclosed or reserved against on the consolidated balance sheet of the
Company as of June 30, 2002 or the notes thereto included in the Company SEC
Documents or otherwise disclosed in the Company SEC Documents filed with the
Commission as of the date hereof (b) those incurred in connection with the
execution of the Basic Documents (c) obligations incurred in the ordinary course
of business subsequent to June 30, 2002 or (d) as set forth in Schedule 3.21,
neither the Company nor any of its subsidiaries have any liabilities or
obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, and that would be
required by GAAP to be disclosed and that, individually or in the aggregate,
have or would reasonably be expected to have a Material Adverse Effect.
Section 3.22 Labor Relations. Except as disclosed on Schedule
3.22, there is no unfair labor practice litigation involving the Company or any
of its subsidiaries either pending before the National Labor Relations Board or
a court or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries. Except as disclosed on Schedule 3.22, there is no labor
strike, dispute, slowdown or stoppage, either pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries, nor has
the Company experienced any such labor interruptions over the past two years.
The Company considers its relationship with its employees to be good.
Section 3.23 State Takeover Statutes. The Board of Directors
of the Company has taken all action necessary to render inapplicable to the
issuance of Shares and Conversion Shares to Purchaser and the transactions
contemplated hereby (including the Aquila Sale) the provisions of Section 203 of
the DGCL. No other state takeover statute or similar statute or regulation
applies or purports to apply to the issuance of Shares and Conversion Shares to
Purchaser and the transactions contemplated hereby (including the Aquila Sale).
Section 3.24 Stockholders' Rights Plan. The Company and the
Board of Directors have taken all necessary action to render the Stockholders'
Rights Plan inapplicable to the issuance of Common Shares, Preferred Shares
(including shares issuable as pay-in-kind dividends) and Conversion Shares, the
sale of shares pursuant to the Aquila Sale and any other sales or issuances in
accordance with the Basic Documents and neither the execution of this Agreement
nor the consummation of any of the transactions contemplated hereby will result
in the Purchaser becoming an "Acquiring Person" or will result in a "Triggering
Event," "Distribution Date," "Flip-In Event," or "Share Acquisition Date" (as
such terms are defined in the Stockholders' Rights Plan).
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser represents and warrants to the Company, which
representations and warranties shall survive the execution of any Basic
Document, that as of the date of this Agreement:
Section 4.01 Organization. The Purchaser is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.
Section 4.02 Authorization of Transaction. The Purchaser has
all requisite partnership power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
by the Purchaser of this Agreement and the consummation by the Purchaser of the
transactions contemplated hereby have been validly authorized by all necessary
partnership action on the part of the Purchaser. This Agreement has been validly
executed and delivered by the Purchaser and, assuming this Agreement constitutes
the valid and binding obligation of the Company, constitutes valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or other similar
laws relating to or affecting the rights of creditors generally and by equitable
principles, including those limiting the availability of specific performance,
injunctive relief and other equitable remedies and those providing for equitable
defenses.
Section 4.03 Noncontravention. Neither the execution and
delivery by the Purchaser of this Agreement, nor the consummation by the
Purchaser of the transactions contemplated hereby, will: (a) conflict with or
violate any provision of the partnership agreement of the Purchaser; (b) require
on the part of the Purchaser any filing with, or permit, authorization, consent
or approval of, any Governmental Entity, except (i) with respect to the Tranche
II Closing, consents and approvals under the HSR Act, and (ii) for any filing,
permit, authorization, consent or approval which if not obtained or made would
not reasonably be expected to result in a material adverse effect on the ability
of the Purchaser to consummate the transactions contemplated by this Agreement
(a "Purchaser Material Adverse Effect"); (c) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to terminate
or modify, or require any notice, consent or waiver under, any contract or
agreement to which the Purchaser is a party or by which the Purchaser is bound,
except for (i) any conflict, breach, default, acceleration or right to terminate
or modify that would not reasonably be expected to result in a Purchaser
Material Adverse Effect or (ii) any notice, consent or waiver the absence of
which would not reasonably be expected to result in a Material Adverse Effect;
or (d) violate any order, writ, injunction or decree specifically naming, or
statute, rule or regulation applicable to, the Purchaser or any of its
properties or assets, except for any violation that would not reasonably be
expected to result in a Purchaser Material Adverse Effect.
Section 4.04 Litigation. There are no actions, suits, claims
or legal, administrative or arbitratorial proceedings pending against, or, to
the Purchaser's knowledge, threatened against the Purchaser which would
adversely affect the Purchaser's performance under this Agreement or the
consummation of the transactions contemplated by this Agreement.
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Section 4.05 Investment. Purchaser represents and warrants to,
and covenants and agrees with, the Company that the Shares are being acquired
for its own account, not as a nominee or agent, and with no intention of
distributing or reselling the Shares or the Conversion Shares or any part
thereof and that Purchaser has no present intention of selling or granting any
participation in or otherwise distributing the same in any transaction that
would be in violation of the securities laws of the United States of America or
any State, without prejudice, however, to Purchaser's right at all times to sell
or otherwise dispose of all or any part of the Shares or the Conversion Shares
under a registration statement under the Securities Act and applicable state
securities laws or under an exemption from such registration available
thereunder (including, without limitation, if available, Rule 144 promulgated
thereunder). If Purchaser should in the future decide to dispose of any of the
Shares or the Conversion Shares, Purchaser understands and agrees (a) that it
may do so only (i) in compliance with the Securities Act and applicable state
securities law, as then in effect, and (ii) in the manner contemplated by any
registration statement pursuant to which such securities are being offered, and
(b) that stop-transfer instructions to that effect will be in effect with
respect to such securities. Purchaser agrees to the imprinting, so long as
appropriate, of a legend on each certificate representing the Securities to the
effect as set forth above.
Section 4.06 Nature of Purchaser. Purchaser represents and
warrants to, and covenants and agrees with, the Company that, (a) it is an
"accredited investor" within the meaning of Rule 501 of Regulation D promulgated
by the Securities and Exchange Commission pursuant to the Securities Act and (b)
by reason of its business and financial experience it has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, is able to bear the economic risk of such investment and, at the
present time, would be able to afford a complete loss of such investment.
Section 4.07 Receipt of Information; Authorization. Purchaser
acknowledges that it has had access to information regarding the business,
assets, operations, financial condition and results of operations of the Company
and has been provided a reasonable opportunity to ask questions of and receive
answers from representatives of the Company regarding such matters. Purchaser
acknowledges that it has signed a Confidentiality Agreement with the Company,
and it hereby re-affirms its obligation under such agreement. Purchaser further
acknowledges that it is experienced in investing in corporations and businesses.
Purchaser represents and warrants that the purchase of the Shares by it has been
duly and properly authorized and this Agreement and each other Basic Document to
which Purchaser is (or will at the Tranche II Closing be) a signatory have been
(or, with respect to the other Basic Documents, at the Tranche II Closing will
be) duly executed and delivered by it or on its behalf.
Section 4.08 Anti-Hedging. Purchaser represents and warrants
to, and covenants and agrees with, the Company that it will not at any time
prior to the tenth anniversary of the Tranche II Closing Date engage in any put,
call, option, short-sale, hedge, straddle or similar transactions in the
Company's Capital Stock intended to reduce Purchaser's risk of owning the
Company's Capital Stock.
Section 4.09 Restricted Securities. Purchaser understands that
the Securities it is purchasing are characterized as "restricted securities"
under the federal securities laws
-19-
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act,
only in certain limited circumstances. In this connection, such Purchaser
represents that it is familiar with Rule 144 of the Commission promulgated under
the Securities Act.
Section 4.10 Certain Fee. No fees or commissions will be
payable by Purchaser to brokers, finders, or investment bankers with respect to
the purchase of any of the Securities or the consummation of the transaction
contemplated by this Agreement. Purchaser agrees that it will, jointly and
severally, indemnify and hold harmless the Company from and against any and all
claims, demands, or liabilities for broker's, finders, placement, or other
similar fees or commissions incurred by Purchaser or alleged to have been
incurred by Purchaser in connection with the purchase of the Securities or the
consummation of the transaction contemplated by this Agreement.
Section 4.11 No Implied Representations. Notwithstanding
anything to the contrary contained in this Agreement, it is the express
understanding of Purchaser that the Company is not making any representation or
warranty whatsoever, express or implied, other than those representations and
warranties of the Company expressly set forth in this Agreement.
Section 4.12 Available Funds. Purchaser has the funds on hand
necessary to satisfy its obligation to pay for the Common Shares on the Tranche
I Closing Date pursuant to Section 2.02(a). Purchaser has, or will have on the
Tranche II Closing Date, the funds on hand necessary to satisfy its obligation
to pay for the Preferred Shares on the Tranche II Closing Date pursuant to
Section 2.02(b).
ARTICLE V.
CONDITIONS TO CLOSINGS
Section 5.01 Conditions to the Purchaser's Obligation to
Purchase the Shares at the Tranche I Closing. In addition to any other
applicable conditions set forth herein, Purchaser's obligation to purchase the
Shares at the Tranche I Closing, is subject to the satisfaction of the following
conditions, each of which may be waived in the sole discretion of Purchaser:
(a) Representations and Warranties True; Performance
of Obligations. The representations and warranties made by the Company
in Article III hereof that are qualified as to materiality or Material
Adverse Effect shall be true and correct in all respects and the
representations and warranties made by the Company in Article III
hereof that are not so qualified shall be true and correct in all
material respects (other than the representations and warranties set
forth in Sections 3.17, 3.23 and 3.24 hereof, which shall be true and
correct in all respects) as of the Tranche I Closing Date, except (A)
for changes contemplated by this Agreement and (B) for those
representations and warranties that address matters only as of a
particular date (which representations and warranties which address
matters only as of a particular date shall be true and correct in all
respects or in all material respects, as the case may be, as of such
particular date). The Company shall have performed all obligations and
satisfied all conditions herein required to be performed or observed or
satisfied by it on or prior to the Tranche I Closing Date;
-20-
(b) Legal Investment. On the Tranche I Closing Date,
the sale and issuance of the Shares shall be legally permitted by all
laws, regulations and NYSE listing rules to which Purchaser and the
Company are subject;
(c) Consents, Permits, and Waivers. The Company shall
have obtained all consents, permits and waivers necessary for
consummation of the Tranche I Closing Date transactions contemplated by
this Agreement and the other Basic Documents;
(d) Corporate Documents. The Company shall have
delivered to Purchaser or its counsel, copies of all corporate
documents of the Company as Purchaser shall reasonably request;
(e) Secretary's Certificate; Good Standing
Certificate. The Company shall have delivered to Purchaser a
certificate executed by the Secretary of the Company, dated the Tranche
I Closing Date, certifying as to (A) the resolutions of the Board of
Directors evidencing approval of the transactions contemplated by and
from this Agreement and the Basic Documents and the authorization of
the named officer or officers to execute and deliver this Agreement and
the Basic Documents, (B) the Certificate of Incorporation and the
Bylaws of the Company, in each case, as amended, and (C) certain of the
officers of the Company, their titles and examples of their signatures.
The Company shall have delivered to Purchaser a certificate, dated as
of the Tranche I Closing Date, certifying as to the fulfillment of the
condition set forth in Section 5.01(a) hereof. The Company shall have
delivered to Purchaser a certificate of the Secretary of State of the
State of Delaware, dated a recent date in relation to the Tranche I
Closing Date, that the Company is in good standing;
(f) No Material Adverse Effect. No event or change
has occurred which has had, or could reasonably be expected to have, a
Material Adverse Effect;
(g) Investor's Rights Agreement. The Investor's
Rights Agreement, in the form attached hereto as Exhibit C, shall have
been executed and delivered by the Company;
(h) Legal Opinion. Purchaser shall have received from
legal counsel to the Company and Winston & Strawn opinions addressed to
it, dated as of the Tranche I Closing Date, in the forms substantially
similar in substance to the forms of opinions attached hereto as
Exhibits A-1 and A-2; and
(i) Aquila Consent. The Aquila Consent shall have
been executed and delivered by Aquila and the Company and be in full
force and effect.
Section 5.02 Conditions to the Purchaser's Obligation to
Purchase Shares at the Tranche II Closing. In addition to any other applicable
conditions set forth herein, Purchaser's obligation to purchase the Shares at
the Tranche II Closing is subject to the satisfaction of the following
conditions, each of which may be waived in the sole discretion of Purchaser:
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(a) Representations and Warranties True; Performance
of Obligations. The representations and warranties made by the Company
in Article III hereof shall be true and correct in all material
respects (other than the representations and warranties set forth in
Sections 3.17, 3.23 and 3.24 hereof, which shall be true and correct in
all respects) as of the Tranche II Closing Date, except (A) for changes
contemplated by this Agreement and (B) for those representations and
warranties that address matters only as of a particular date (which
representations and warranties which address matters only as of a
particular date shall be true and correct in all respects or in all
material respects, as the case may be, as of such particular date). The
Company shall have performed all obligations and satisfied all
conditions herein required to be performed or observed or satisfied by
it on or prior to the Tranche II Closing Date; provided, however, that
the Company shall not be deemed to make the representations and
warranties set forth in Section 3.03 as of the Tranche II Closing
Date).
(b) Legal Investment. On the Tranche II Closing Date,
subject to, in the case of the Conversion Shares, the receipt of the
Required Stockholder Vote, the sale and issuance of the Shares shall be
legally permitted by all laws, regulations and NYSE listing rules to
which Purchaser and the Company are subject;
(c) Consents, Permits, and Waivers. The Company shall
have obtained all consents, permits and waivers necessary for
consummation of the Tranche II Closing Date transactions contemplated
by this Agreement and the other Basic Documents;
(d) Corporate Documents. The Company shall have
delivered to Purchaser or its counsel, copies of all corporate
documents of the Company as Purchaser shall reasonably request;
(e) Secretary's Certificate; Good Standing
Certificate. The Company shall have delivered to Purchaser a
certificate executed by the Secretary of the Company, dated the Tranche
II Closing Date, certifying as to (A) the resolutions of the Board of
Directors evidencing approval of the transactions contemplated by and
from this Agreement and the Basic Documents and the authorization of
the named officer or officers to execute and deliver this Agreement and
the Basic Documents, (B) the Certificate of Incorporation and the
Bylaws of the Company, in each case, as amended, and (C) certain of the
officers of the Company, their titles and examples of their signatures.
The Company shall have delivered to Purchaser a certificate, dated as
of the Tranche II Closing Date, certifying as to the fulfillment of the
condition set forth in Section 5.02(a) hereof. The Company shall have
delivered to Purchaser a certificate of the Secretary of State of the
State of Delaware, dated a recent date in relation to the Tranche II
Closing Date, that the Company is in good standing;
(f) Legal Opinion. Purchaser shall have received from
the Company's legal counsel and Winston & Strawn opinions addressed to
it, dated as of the Tranche II Closing Date, in the forms substantially
similar in substance to the forms of opinions attached hereto as
Exhibits A-1 and A-2;
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(g) Certificate of Designation. The Certificate of
Designation, in the form set forth in Exhibit B, shall have been
adopted and executed by the Company and filed with and certified by the
Secretary of State of the State of Delaware;
(h) Covenant Amendments. The Company's financial
covenants set forth in the Senior Loan Documents and the Note Purchase
Agreement shall have been amended effective upon the Tranche II Closing
in a manner reasonably acceptable to Purchaser;
(i) Aquila Consent. The Aquila Consent shall have
been executed and delivered by Aquila and the Company and be in full
force and effect; and
Section 5.03 Conditions to Obligations of the Company. In
addition to any other applicable conditions set forth herein, the Company's
obligation to issue and sell the Shares at the Tranche I Closing or Tranche II
Closing, as applicable, is subject to the satisfaction, on or prior to such
Closing, of the following conditions, each of which may be waived in the sole
discretion of the Company:
(a) Representations and Warranties True. The
representations and warranties made by Purchaser in Article IV hereof
that are qualified as to materiality or Material Adverse Effect shall
be true and correct in all respects and the representations and
warranties made by the Company in Article IV hereof that are not so
qualified shall be true and correct in all material respects at each
Closing Date except (A) for changes contemplated by this Agreement and
(B) for those representations and warranties that address matters only
as of a particular date (which representations and warranties which
address matters only as of a particular date shall be true and correct
in all respects or in all material respects, as the case may be, as of
such particular date) and (C) where the failure to be true and correct
would not reasonably be expected to result in a material adverse effect
on the ability of Purchaser to consummate the transactions contemplated
by this Agreement. Purchaser shall have performed all obligations
herein required to be performed or complied with by it on or before
such Closing Date;
(b) Consents, Permits, and Waivers. The Company shall
have obtained all consents, permits and waivers necessary for
consummation on such Closing Date of the transactions contemplated by
this Agreement and the other Basic Documents;
(c) Investor's Rights Agreement. With respect to the
Tranche I Closing only, the Investor's Rights Agreement, in the form
attached hereto as Exhibit C, shall have been executed and delivered by
Purchaser;
(d) Covenant Amendments. With respect to the Tranche
II Closing Date, the Company's financial covenants set forth in the
Senior Loan Documents and the Note Purchase Agreement shall have been
amended effective upon the Tranche II Closing in a manner reasonably
acceptable to the Company.
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ARTICLE VI.
COVENANTS
Section 6.01 Financial Statements and Reports. The Company
shall deliver, or shall cause to be delivered, to Purchaser:
(a) Annual Financial Statements. As soon as available
and in any event within 90 days after the end of each fiscal year of
the Company, the audited consolidated statements of income,
stockholders' equity, changes in financial position and cash flow of
the Company and its Consolidated Subsidiaries for such fiscal year, and
the related consolidated balance sheets of the Company and its
Consolidated Subsidiaries as at the end of such fiscal year, and
setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by the related
opinion of independent public accountants of recognized national
standing, which opinion shall state that said financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its Consolidated Subsidiaries as at the
end of, and for, such fiscal year and that such financial statements
have been prepared in accordance with GAAP except for such changes in
such principles with which the independent public accountants shall
have concurred. The provisions of this Section 6.01(a) shall be deemed
satisfied as long as the Company timely files financial statements in
accordance with, and meeting the requirements of, the Exchange Act,
without extension.
(b) Quarterly Financial Statements. As soon as
available and in any event within 45 days after the end of each of the
first three fiscal quarterly periods of each fiscal year of the
Company, consolidated statements of income, stockholder's equity,
changes in financial position and cash flow of the Company and its
Consolidated Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related consolidated balance sheets as of the end of the prior
fiscal year and at the end of such period, accompanied by the
certificate of a Responsible Officer, which certificate shall state
that said financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Consolidated Subsidiaries in accordance with GAAP, as at the end of,
and for, such period (subject to normal year-end audit adjustments).
The provisions of this Section 6.01(b) shall be deemed satisfied as
long as the Company timely files financial statements in accordance
with, and meeting the requirements of, the Exchange Act, without
extension.
(c) SEC Filings, Etc. Promptly upon its becoming
available, each financial statement, report, notice or proxy statement
sent by the Company to stockholders generally and each regular or
periodic report and any registration statement or prospectus in respect
thereof filed by the Company with any securities exchange or the
Commission or any successor agency. The requirements of this Section
6.01(c) shall be deemed to be satisfied as to those documents that are
filed with the Commission upon the timely filing of such documents with
the Commission.
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(d) Other Matters. Subject to any applicable
restrictions on disclosure, from time to time such other information
regarding the business, affairs or financial condition of the Company
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as
Purchaser may reasonably request; provided, however, that the Company
shall not be obligated pursuant to this Section 6.01 to provide access
to any information that it reasonably considers to be a trade secret or
similar confidential information.
Section 6.02 Maintenance, Etc. The Company shall and shall
cause each Subsidiary to: (a) upon reasonable notice, permit representatives of
Purchaser, during normal business hours, to examine, copy and make extracts from
its financial books and records, to inspect its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably required by
Purchaser; provided, however, that the Company shall not be obligated pursuant
to this Section 6.02 to provide access to any information that it reasonably
considers to be a trade secret or similar confidential information; (b) preserve
and maintain its corporate existence and all of its material attendant rights,
privileges and franchises, keep appropriate books of record and account in
relation to its business and activities; provided, however, that the Company may
purchase or otherwise acquire all or substantially all of the stock or assets
of, or otherwise acquire by merger or consolidation, any of its Subsidiaries,
and any such Subsidiary may merge into, or consolidate with, or purchase or
otherwise acquire all or substantially all of the assets or stock of, or sell
all or substantially all of its assets or stock to, any other Subsidiary of the
Company or the Company, in each case so long as (i) if the transaction is with
the Company, the Company shall be the surviving entity to any such merger or
consolidation or (ii) if the transaction is not with the Company, a Subsidiary
shall be the surviving entity to any such merger or consolidation; (c) comply
with all Governmental Requirements, including, without limitation, any
Environmental Laws, except where the failure to comply would not reasonably be
expected to have a Material Adverse Effect; and (d) pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income or
profits or on any of its Property, except for any such tax, assessment, charge
or levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained.
Section 6.03 Further Assurances. The Company will cure
promptly any defects in the creation and issuance of the Shares and the
Conversion Shares and the execution and delivery of the Basic Documents. The
Company at its expense will promptly execute and deliver to Purchaser, upon
request, all such other documents, agreements and instruments to correct any
omissions in the Basic Documents or to make any recordings, to file any notices
or obtain any consents, all as may reasonably be necessary or appropriate in
connection therewith.
Section 6.04 Efforts; Performance of Obligations. Each party
agrees to use commercially reasonable efforts to take any and all actions
required to consummate the transactions contemplated in this Agreement and the
other Basic Documents. Each party will do and perform every act and discharge
all of the obligations to be performed and discharged by it under the
Certificate of Designation and the other Basic Documents, at the time and times
and in the manner specified.
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Section 6.05 Shares. The Company shall at all times during the
term of the Preferred Shares maintain a sufficient number of shares of Common
Stock of the Company to be issued as Conversion Shares upon the conversion of
all or part of the Preferred Shares.
Section 6.06 Insurance. The Company shall maintain such
insurance as to comply with all requirements of law and agreements to which the
Company or any subsidiary is a party and otherwise sufficient to adequately
insure against such risks as are usually insured against in the same general
area by companies engaged in the same or similar business for the assets and
operations of the Company and each Subsidiary.
Section 6.07 Use of Proceeds. The Company shall use the net
proceeds from the purchase and sale of the Shares solely (a) for the Company's
acquisition program, (b) for general working capital, and (c) to reduce senior
debt.
Section 6.08 Notification of Certain Matters. The Company
shall give prompt notice to Purchaser of the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause the
failure of the Company to comply with or satisfy any covenant or agreement under
this Agreement.
Section 6.09 Nomination of First Reserve Director Designee(s).
If at any time First Reserve would be entitled to elect one or more directors to
the Company's Board of Directors pursuant to the terms of Article VII of the
Investor's Rights Agreement, but for the unenforceability of such provision
under applicable law, the Company agrees to cause the person(s) that would have
been designated by First Reserve under such section to be nominated as directors
to the Company's Board of Directors.
Section 6.10 Venture Capital Operating Companies. The Company
shall cooperate reasonably with Purchaser so that Purchaser may treat the
purchase of the Shares as contemplated by this Agreement as "venture capital
investments" within the meaning of the applicable "Venture Capital Operating
Company" rules issued by the Department of Labor under ERISA.
Section 6.11 Covenant Amendments. Promptly following the date
hereof, Purchaser and the Company shall cooperate reasonably to develop a
proposal with respect to financial covenant amendments to be negotiated among
the Company, the Senior Lenders and the Note Holders. The Company and Purchaser
shall use their respective commercially reasonable efforts to cause such
amendments (with such changes as Company and Purchaser shall agree, acting
reasonably) to be effected as promptly as practicable following the date hereof.
Section 6.12 Calling of Stockholders' Meeting. The Company
shall, upon Purchaser's written request, call a special meeting of the
stockholders of the Company before the end of the calendar year 2002 and its
Board of Directors shall recommend the approval by the Company's stockholders of
(A) the conversion rights of the Preferred Stock and (B) the issuance of such
number of shares of Common Stock as shall be issuable upon the conversion of the
Preferred Stock. If the stockholders do not approve such matters at such 2002
special meeting, the Company's Board of Directors shall, upon Purchaser's
written request, which written request
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may be repeated in 2003, 2004, 2005 and 2006, if necessary, recommend the
actions set forth in the previous sentence.
Section 6.13 Fees and Expenses. The Company shall pay (i) all
filing fees associated with all filings required under the HSR Act and any other
notification or request for consent, approval or permission that may be required
by statute, regulation or judicial decrees in connection with the proposed
transaction, (ii) upon the Tranche I Closing, the Company shall reimburse
Purchaser for all reasonable fees and expenses incurred by Purchaser in
connection therewith and (iii) upon the Tranche II Closing, the Company shall
reimburse Purchaser for all reasonable fees and expenses incurred by Purchaser
in connection therewith (and, to effect such reimbursements, Purchaser shall be
entitled to deduct such amount from any amounts payable to the Company pursuant
to this Agreement).
Section 6.14 Termination of Certain Covenants. The covenants
set forth in Sections 6.01, 6.02, 6.06, 6.07, 6.08 (with respect to covenants
which have terminated pursuant to this Section 6.14) and 6.12 shall terminate
and be of no further force and effect if the Voting Percentage of Purchaser and
its affiliates is less than 10%.
Section 6.15 Grounds for Termination. This Agreement may be
terminated at any time prior to the Tranche II Closing:
(a) by mutual written agreement of the Company and
Purchaser;
(b) by either the Company or Purchaser if the Tranche
II Closing shall not have been consummated on or before December 7,
2002, unless extended by mutual agreement or unless the failure to
consummate the Closing is attributable to a failure on the part of the
party seeking to terminate this Agreement to perform any obligation
required to be performed by such party at or prior to the Tranche II
Closing Date; or
(c) by either the Company or Purchaser if
consummation of the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment of any court or
Governmental Authority having competent jurisdiction.
Any party desiring to terminate this Agreement pursuant to
Section 6.15(b) or 6.15(c) shall promptly give notice of such termination to the
other party hereto.
Section 6.16 Effect of Termination. If this Agreement is
terminated as permitted by Section 6.16, such termination shall be without
liability of any party (or any stockholder, director, officer, employee, agent,
consultant or representative of such party) to the other parties to this
Agreement; provided that if such termination shall result from the willful (a)
failure of any party to fulfill a condition to the performance of the
obligations of the other parties, (b) failure to perform a covenant of this
Agreement or (c) breach by any parties hereto of any representation or warranty
or agreement contained herein, such party shall be fully liable for any and all
losses incurred or suffered by the other parties as a result of such failure or
breach. The provisions of Sections 6.16, 7.06, 7.07, 7.08, 7.09, 7.10 shall
survive any termination hereof pursuant to Section 6.16.
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Section 6.18 NYSE Listing of Shares. Promptly after the
Tranche I Closing Date, the Company shall file a supplemental listing
application and obtain the authorization of the NYSE for the issuance of the
Common Shares. Promptly after the Company obtains the Required Stockholder Vote,
the Company shall file a supplemental listing application and obtain the
authorization of the NYSE for the issuance of the Conversion Shares.
Section 6.19 Waiver of Accrued Series A Dividends. Purchaser
waives any and all rights and benefits in and to any accrued and unpaid
dividends which have accrued up to the date hereof and which are unpaid, whether
declared or undeclared, with respect to any Series A Preferred Stock being
purchased by Purchaser pursuant to the Aquila Sale.
ARTICLE VII.
MISCELLANEOUS
Section 7.01 Interpretation and Survival of Provisions.
Article, Section, Schedule, and Exhibit references are to this Agreement, unless
otherwise specified. All references to instruments, documents, contracts, and
agreements are references to such instruments, documents, contracts, and
agreements as the same may be amended, supplemented, and otherwise modified from
time to time, unless otherwise specified. The word "including" shall mean
"including but not limited to." Whenever the Company has an obligation under the
Basic Documents, the expense of complying with that obligation shall be an
expense of the Company unless otherwise specified. Whenever any determination,
consent, or approval is to be made or given by Purchaser, such action shall be
in Purchaser's sole discretion unless otherwise specified in this Agreement. If
any provision in the Basic Documents is held to be illegal, invalid, not
binding, or unenforceable, such provision shall be fully severable and the Basic
Documents shall be construed and enforced as if such illegal, invalid, not
binding, or unenforceable provision had never comprised a part of the Basic
Documents, and the remaining provisions shall remain in full force and effect.
The Basic Documents have been reviewed and negotiated by sophisticated parties
with access to legal counsel and shall not be construed against the drafter. The
representation and warranties of the Company shall survive for the applicable
two-year period identified in the first paragraph of Article III above, and the
covenants made in this Agreement, or any other Basic Document shall survive the
closing of the transactions described herein and remain operative and in full
force and effect regardless of (a) any investigation made by or on behalf of the
Company or Purchaser or (b) acceptance of any of the Securities and payment
therefor and repayment or repurchase thereof. All indemnification obligations of
the Company and the provisions of Section 7.02 shall remain operative and in
full force and effect unless such obligations are expressly terminated in a
writing referencing those individual Sections, regardless of any purported
general termination of this Agreement.
Section 7.02 Indemnification, Costs and Expenses.
(a) Indemnification Regarding Company Activities. The
Company agrees to indemnify Purchaser, and its officers, directors,
employees, representatives, agents, attorneys, and Affiliates
(collectively, "Related Parties") from, hold each of them harmless
against and promptly upon demand pay or reimburse each of them for, any
and all actions, suits, proceedings (including any investigations,
litigation, or inquiries), claims, demands, and causes of action, and,
in connection therewith, all reasonable costs,
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losses, liabilities, damages, or expenses of any kind or nature
whatsoever, net of any insurance paid to Purchaser under the Company's
insurance arrangements, (collectively, the "Indemnity Matters") that
may be incurred by them or asserted against or involve any of them as a
result of a claim by a Person that is not an Affiliate of Purchaser or
any Related Parties under clauses (i), (ii), (iii) and (v) below
(whether or not any of them is designated a party thereto) as a result
of, arising out of, or in any way related to (i) any actual or proposed
use by the Company of the proceeds of any sale of the Securities, (ii)
the operations of the business of the Company or any of its Affiliates,
(iii) the failure of the Company or any of its Affiliates to comply
with any Governmental Requirement, (iv) the breach of the
representations, warranties and covenants of the Company contained
herein or in any of the other Basic Documents, provided such claim for
indemnification relating to a breach of the representations and
warranties is made prior to the expiration of such representations and
warranties, or (v) any other aspect of this Agreement and the other
Basic Documents, including, without limitation, the reasonable fees and
disbursements of counsel and all other reasonable expenses incurred in
connection with investigating, defending or preparing to defend any
such action, suit, proceeding (including any investigations,
litigation, or inquiries), or claim and INCLUDING ALL INDEMNITY MATTERS
ARISING BY REASON OF THE NEGLIGENCE OF ANY INDEMNITEE (but not
Indemnity Matters related to the gross negligence or willful misconduct
of any Indemnitee).
(b) Indemnification Regarding Taxes. The Company
agrees to pay and hold Purchaser harmless from and against any and all
present and future stamp and other similar taxes with respect to this
Agreement and Basic Documents and save Purchaser harmless from and
against any and all liabilities with respect to or resulting from any
delay or omission to pay such taxes, and will indemnify Purchaser for
the full amount of taxes paid by Purchaser (not to include income or
gross receipt tax liability) in respect of payments made or to be made
under this Agreement or any other Basic Document and any liability
(including penalties, interest, and expenses) arising therefrom or with
respect thereto, whether or not such taxes were correctly or legally
asserted.
(c) Indemnification Regarding Environmental Matters.
The Company agrees to indemnify and hold harmless from time to time
Purchaser and its Related Parties from and against any and all losses,
claims, cost recovery actions, administrative orders or proceedings,
damages, and liabilities to which Purchaser and its Related Parties may
incur, have asserted against them or involve any of them pursuant to a
claim by a Person that is not an Affiliate of Purchaser or any Related
Parties (i) under any Environmental Law applicable to the Company, any
Subsidiary, or any of their respective Properties, (ii) as a result of
the breach or non-compliance by the Company or any Subsidiary with any
Environmental Law applicable to the Company or any Subsidiary, or any
of their respective Properties, (iii) due to the ownership by the
Company or any Subsidiary of their respective Properties or any
activity on any of their respective Properties, or any past activity on
any of their respective Properties which, though lawful and fully
permissible at the time, could result in present liability under any
Environmental Law, (iv) the presence, use, release, storage, treatment,
or disposal of hazardous substances on or at any of the properties
owned or operated by the Company or any Subsidiary, or (v) any other
environmental, health, or safety condition in
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connection with this Agreement or any other Basic Document; provided,
however, that the Company shall not be required to indemnify Purchaser
or its Related Parties for any diminution in the value of its
investment in the Company resulting from any environmental matter
described in this Section 7.02(c).
(d) Indemnification Procedure. Promptly after
Purchaser or other Person indemnified hereunder (hereinafter, the
"Indemnified Party") has received notice or has knowledge of any claim
for indemnification hereunder, or the commencement of any action or
proceeding by a third person, that the Indemnified Party believes in
good faith is an indemnifiable claim under this Agreement, the
Indemnified Party shall give the Company written notice of such claim
or the commencement of such action or proceeding, but failure so to
notify the Company will not relieve the Company of any liability which
it may have to such Indemnified Party hereunder except to the extent
that the Company is materially prejudiced by such failure. Such notice
shall state the nature and the basis of such claim. The Company shall
have the right to defend and settle, at its own expense and by its own
counsel, any such matter. If the Company undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention
to do so, and the Indemnified Party shall cooperate with the Company
and its counsel in all commercially reasonable respects in the defense
thereof and the settlement thereof. Such cooperation shall include, but
shall not be limited to, furnishing the Company with any books, records
and other information reasonably requested by the Company and in the
Indemnified Party's possession or control. Such cooperation of the
Indemnified Party shall be at the cost of the Company. After the
Company has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, the Company
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such
asserted liability; provided, however, that the Indemnified Party shall
be entitled (i) at its expense, to participate in the defense of such
asserted liability and the negotiations of the settlement thereof or
(ii) if (A) the Company has failed to assume the defense and employ
counsel or (B) if the defendants in any such action include both the
Indemnified Party and the Company and counsel to the Indemnified Party
shall have concluded that there may be reasonable defenses available to
the Indemnified Party that are different from or additional to those
available to the Company or if the interests of the Indemnified Party
reasonably may be deemed to conflict with the interests of the Company,
then the Indemnified Party shall have the right to select a separate
counsel and to assume such legal defense and otherwise to participate
in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the Company as incurred, and the Company shall not settle
any such claim without the consent of the Indemnified Party unless the
settlement thereof imposes no liability or obligation on, and includes
a complete release from liability of, the Indemnified Party. If the
Indemnified Party undertakes such a defense through counsel of its
choice, the Indemnified Party may settle such matter, and the Company
shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith.
(e) Survival. The Company's obligations under this
Section 7.02 shall survive any termination of this Agreement and the
payment of the Obligations.
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(f) ACKNOWLEDGEMENT. THE INDEMNIFICATION AND RELEASE
PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER
OR NOT THE LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY
OR IN PART FROM (i) THE ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE
(EXCEPT THAT THE COMPANY WILL NOT INDEMNIFY ANY INDEMNIFIED PARTY FOR
ANY LOSSES, COSTS, EXPENSES AND DAMAGES ARISING SOLELY OR IN PART FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY),
OR OTHER FAULT OF ANY INDEMNIFIED PARTY OR (ii) ANY ACTION THAT
SUBJECTS THE INDEMNIFIED PARTY TO CLAIMS PREMISED IN WHOLE OR IN PART
IN STRICT LIABILITY. THE COMPANY AND PURCHASER ACKNOWLEDGE THAT THIS
STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
Section 7.03 No Waiver; Modifications in Writing.
(a) Delay. No failure or delay on the part of either
party in exercising any right, power, or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any
such right, power, or remedy preclude any other or further exercise
thereof or the exercise of any right, power, or remedy. The remedies
provided for herein are cumulative and are not exclusive of any
remedies that may be available to a party at law or in equity or
otherwise.
(b) Specific Waiver. Except as otherwise provided
herein, no amendment, waiver, consent, modification, or termination of
any provision of this Agreement or any other Basic Document shall be
effective unless signed by the Company and Purchaser. Any amendment,
supplement or modification of or to any provision of this Agreement or
any other Basic Document, any waiver of any provision of this Agreement
or any other Basic Document, and any consent to any departure by the
Company from the terms of any provision of this Agreement or any other
Basic Document shall be effective only in the specific instance and for
the specific purpose for which made or given.
Section 7.04 Binding Effect; Assignment.
(a) Binding Effect. This Agreement shall be binding
upon the Company, Purchaser, and their respective successors and
permitted assigns. Except as expressly provided in this Agreement, this
Agreement shall not be construed so as to confer any right or benefit
upon any Person other than the parties to this Agreement, and their
respective successors and permitted assigns.
(b) Assignment of Shares. All or any portion of
Shares or the Conversion Shares purchased pursuant to this Agreement
may be sold, assigned or pledged by Purchaser, subject to compliance
with applicable securities laws and the restrictions on transfer set
forth in the Investor's Rights Agreement.
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(c) Assignment of Rights. All or any portion of the
rights and obligations of Purchaser under this Agreement with respect
to the Basic Documents, except as set forth therein, may be transferred
by Purchaser; provided, however, that the rights set forth in the
Investor's Rights Agreement may not be transferred to a transferee of
the Shares or Conversion Shares, except in the case of transfers to one
or more Affiliates of Purchaser in accordance with the terms and
conditions of the Investor's Rights Agreement; provided, however, that
Purchaser may not transfer any rights or obligations under this
Agreement to any Competitor (as defined in the Investor's Rights
Agreement). Purchaser acknowledges and agrees that it may not transfer
any rights or obligations under this Agreement without compliance with
all relevant restrictions on transfer of any Common Stock or Preferred
Stock imposed by any Basic Document. Without limiting the foregoing,
Purchaser shall not transfer Shares representing 15% or more of the
outstanding Voting Securities to any one person in a transaction or a
series of transactions, unless any such transferee provides to the
Company an agreement reasonably acceptable to a majority of the
Company's directors that were not appointed (pursuant to Article VII of
the Investor's Rights Agreement) by, or affiliated with, Purchaser
pursuant to which such transferee agrees to be bound by all provisions
of this Agreement applicable to Purchaser; provided, that in no case
shall the Voting Percentage ownership of any such transferee exceed the
Standstill Amount. Upon any permitted assignment of the Basic
Documents, the assignee shall succeed to all of the assignor's rights
and obligations under the Basic Documents to the extent assigned and
Purchaser shall be automatically released from any such obligations
hereunder with respect to the Basic Documents to the extent assigned,
except in the case of an assignment to an Affiliate of Purchaser in
which event Purchaser shall be secondarily liable in respect of its
obligations under the Basic Documents. Upon the request of Purchaser in
connection with any transfer of the Shares or Conversion Shares, the
Company shall execute and deliver any amendment to this Agreement, and
the other Basic Documents reasonably requested by Purchaser to reflect
the transfer and delineate the rights of the transferor and the
transferee provided that the Company shall not be liable for the
expenses incurred in documenting such amendment.
Section 7.05 Replacement Securities. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any certificate or certificates representing Shares or Conversion Shares and, in
the case of any such loss, theft, or destruction, upon delivery of any indemnity
or other obligation reasonably requested by the Company or its transfer agent to
the Company or, in the case of any such mutilation, upon surrender or
cancellation thereof, the Company will issue a new certificate or certificates.
Section 7.06 Communications. All notices and demands provided
for hereunder shall be in writing and shall be given by registered or certified
mail, return receipt requested, telecopy, air courier guaranteeing overnight
delivery or personal delivery to the following addresses:
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If to Purchaser:
First Reserve Fund IX, L.P.
c/o First Reserve Corporation
600 Travis Street
Suite 6000
Houston, Texas 77002
Attention: Ben A. Guill
Telecopier: (713) 224-0771
With a copy to:
Skadden, Arps, Slate, Meagher &
Flom LLP
Four Times Square
New York, New York 10036
Attention: Howard L. Ellin
Telecopier: (212) 735-2000
If to the Company:
Quanta Services, Inc.
1360 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
Attention: Vice President and General Counsel
Telecopier: (713) 629-7676
or to such other address as the Company or any Purchaser may
designate in writing. All other communications may be by regular mail or
Internet electronic mail. All notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; upon
actual receipt if sent by certified mail, return receipt requested; when receipt
acknowledged, if telecopied; and upon actual receipt when delivered to an air
courier guaranteeing overnight delivery.
Section 7.07 Governing Law; Consent to Jurisdiction. This
Agreement will be construed in accordance with and governed by the laws of the
State of Delaware without regard to principles of conflicts of laws. Any
judicial proceedings with respect to this Agreement shall be brought in a
federal or state court located in the State of Delaware, and by execution and
delivery of this Agreement, each party submits, irrevocably and unconditionally,
to the exclusive jurisdiction of such court and any related appellate court,
irrevocably agrees to be bound by any judgment rendered thereby, and waives any
objection to the laying of venue in any such proceedings in such courts. To the
fullest extent permitted by law, the parties hereto further agree that service
of any process, summons, notice or document by U.S. certified or registered mail
to such party's address for notices as set forth in Section 7.06 shall be
effective service of process in any action, suit or proceeding in Delaware with
respect to any matters to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions, including preliminary
-33-
relief, to prevent breaches of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
they are entitled at law or in equity. If any party shall institute any action
or proceeding to enforce the provisions hereof, the party against whom such
action or proceeding is brought hereby waives any claim or defense therein that
the plaintiff party has an adequate remedy at law. The parties hereto hereby
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding brought in such court has
been brought in an inconvenient forum and waive, to the fullest extent permitted
by law, all rights to trial by jury in any action, proceeding or counterclaim
(whether based upon contract, tort or otherwise) arising out of or relating to
this Agreement or any of the transactions contemplated hereby.
Section 7.08 Expenses. Except as set forth in Section 6.13
hereof, each party to this Agreement shall each bear its own expenses incurred
in connection with the transactions contemplated by this Agreement and the Basic
Documents.
Section 7.09 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 7.10 No Third Party Beneficiaries. Nothing contained
in this Agreement is intended to confer upon any Person other than the parties
hereto and their respective successors and permitted assigns, any benefit, right
or remedies under or by reason of this Agreement; provided, however, that the
parties hereto hereby acknowledge and agree that the Indemnified Parties are
third party beneficiaries of this Agreement.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties hereto execute this Agreement,
effective as of the date first above written.
QUANTA SERVICES, INC.,
a Delaware corporation
By:
--------------------------------------
Name:
Title:
FIRST RESERVE FUND IX, L.P.
By: First Reserve GP IX, L.P., General
Partner
By: First Reserve G.P. IX, Inc., General
Partner
By:
--------------------------------------
Name:
Title:
SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT
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EXHIBIT A-1
FORM OF OPINION OF COMPANY COUNSEL
-36-
EXHIBIT A-2
FORM OF OPINION OF WINSTON & STRAWN
-37-
EXHIBIT B
CERTIFICATE OF DESIGNATION
-38-
EXHIBIT C
INVESTOR'S RIGHTS AGREEMENT
-39-
EXHIBIT D
AQUILA CONSENT
-40-
EXHIBIT C
AQUILA, INC.
20 WEST NINTH STREET
KANSAS CITY, MISSOURI 64105
October 15, 2002
First Reserve Fund IX, L.P.
c/o First Reserve Corporation
600 Travis Street
Houston, Texas 77002
Ladies and Gentlemen:
This letter agreement (this "Agreement") sets forth the terms and
conditions pursuant to which Aquila, Inc. ("Aquila") will sell to First Reserve
Fund IX, L.P., a Delaware limited partnership ("First Reserve"), and First
Reserve will purchase from Aquila, (i) 3,303,100 shares of common stock, par
value $0.00001 per share (the "Common Stock") of Quanta Services, Inc., a
Delaware corporation ("Quanta") and (ii) 939,380 shares of Series A Convertible
Preferred Stock, par value $0.00001 per share, of Quanta (the "Series A
Preferred Stock") owned by Aquila. First Reserve and Aquila can be referred to
collectively as "Parties" or individually as a "Party" under this Agreement.
This Agreement is being entered into in connection with (i) the
Securities Purchase Agreement between Quanta and First Reserve (the "Purchase
Agreement"), to be dated October 15, 2002, and the other agreements contemplated
thereunder, whereby First Reserve is purchasing shares of capital stock of
Quanta, and (ii) the Consent Letter Agreement between Aquila and Quanta, dated
October 15, 2002 (the "Consent Letter"), by which Aquila has agreed to various
consents and waivers with respect to the transactions effected by this Agreement
and the Purchase Agreement.
1. Number of Shares. The number of shares of Common Stock that Aquila
will sell to First Reserve under this Agreement will be 3,303,100 shares (the
"Quanta Common Shares"), and the number of shares of Series A Preferred Stock
that Aquila will sell to First Reserve under this Agreement will be 939,380
shares (the "Quanta Preferred Shares" and, together with the Quanta Common
Shares, the "Quanta Shares").
2. Price. First Reserve shall purchase from Aquila (i) the Quanta
Common Shares at $3.00 per share and (ii) the Quanta Preferred Shares at $15.00
per share.
3. Representations and Warranties of First Reserve. By signing this
Agreement, First Reserve hereby makes the following representations and
warranties:
a. First Reserve qualifies as an "accredited investor," as such
term is defined in Rule 501(a) of Regulation D under the
Securities Act of 1933.
b. First Reserve has reasonable access to, and has had sufficient
opportunity to carefully review and analyze, all material
information about Quanta's business, financial condition,
operations and value that First Reserve believes to be
relevant to its purchase of the Quanta Shares (including,
without limitation, a release of Quanta's quarterly financial
results for the fiscal quarter ended June 30, 2002). First
Reserve is sophisticated and experienced in evaluating the
merits and risks involving an investment in Quanta securities
and the particulars of the purchase of the Quanta Shares.
First Reserve has the ability to bear the economic risks of
its purchase of the Quanta Shares, and has been able to obtain
all information required in making an informed decision
regarding its investment.
c. First Reserve is acquiring the Quanta Shares for its own
account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any
present intention of distributing or selling the same.
4. Representations and Warranties of Aquila. By signing this Agreement,
Aquila hereby makes the following representations and warranties:
a. Aquila has reasonable access to, and has had sufficient
opportunity to carefully review and analyze, all material
information about Quanta's business, financial condition,
operations and value that Aquila believes to be relevant to
its sale of the Quanta Shares (including, without limitation,
a release of Quanta's quarterly financial results for the
fiscal quarter ended June 30, 2002).
b. At the time immediately before the completion of the sale and
purchase of the Quanta Shares in accordance with this
Agreement, the Quanta Shares shall be Aquila's absolute
property free of any security, lien, encumbrance or adverse
interest whatsoever and together with all benefits or
entitlements applicable to such Quanta Shares, except for
those transfer restrictions that might be applicable to the
Quanta Shares pursuant to the securities laws.
c. Aquila has executed and delivered the Consent Letter, a copy
of which has been provided to First Reserve.
5. Acknowledgement and Disclaimer. First Reserve further acknowledges
that Aquila may possess certain information regarding Quanta or otherwise
(including, but not limited to, its plans and intentions regarding Quanta) that
First Reserve may not possess, that such undisclosed information may be material
to the value of the Quanta Shares and is not being disclosed to First Reserve
and First Reserve has not requested such
disclosure. Aquila further acknowledges that First Reserve may possess certain
information regarding Quanta or otherwise (including, but not limited to, its
plans and intentions regarding Quanta) that Aquila may not possess, and such
undisclosed information may be material to the value of the Quanta Shares and is
not being disclosed to Aquila and Aquila has not requested such disclosure.
Neither Party has relied on any information provided by, or any representation
or warranty of, the other Party, except as expressly set forth in this
Agreement. Under no circumstances may a Party hold the other Party liable for
not disclosing any information.
6. Closing and Payment. Upon the execution of this Agreement by First
Reserve, each respective Party shall simultaneously do the following:
a. First Reserve shall immediately pay Aquila US$24,000,000 by
wire transfer to an account designated by Aquila in writing;
and
b. Aquila shall immediately deliver to First Reserve (i) the
stock certificates representing the Quanta Preferred Shares,
(ii) the Stock Power with respect to the Quanta Preferred
Shares (a sample of which is attached hereto), and (iii) a
copy of the transfer instructions from Aquila to Raymond James
(where such Quanta Common Shares are held), instructing
Raymond James to transfer such shares to an account specified
by First Reserve (and Aquila shall take all necessary action
to ensure that such transfer is effected).
7. Governing Law and Dispute Resolution. This Agreement in all respects
will be interpreted, construed and governed by and in accordance with the laws
of the State of Delaware, U.S. Any disputes or disagreements arising under or
related to this Agreement will be subject to the exclusive jurisdiction of the
Courts of the State of Delaware or the United States District Court for the
District of Delaware.
8. Indemnification. Each Party acknowledges that (a) it understands the
meaning and legal consequences of the representations, warranties and agreements
contained herein; (b) the other Party is relying on the accuracy of such
representations, warranties and agreements; and (c) the other Party would not
have entered into this transaction if any representation, warranty or agreement
were known to be materially false. Accordingly, each Party agrees to indemnify
and hold harmless the other from and against any and all loss, damage,
liability, cost or expense due to or arising out of a breach of any of its
representations, warranties or agreements contained herein. This indemnity will
survive the purchase and sale of the Quanta Shares herein.
9. Binding Effect. This Agreement will be binding upon and inure to the
benefit of the parties and their heirs, successors, legal representatives and
assigns.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the Parties pertaining to the purchase and sale of the Quanta Shares and
supersedes any prior understanding.
11. Counterparts; Facsimile Signatures. This Agreement may be executed
in several counterparts, each of which will be deemed an original and which
together will constitute one and the same instrument. This Agreement may be
executed by facsimile signatures.
Very truly yours,
AQUILA, INC.
By:
-----------------------------------------
Name:
Title:
Date: October __, 2002
Agreed to and accepted:
FIRST RESERVE FUND IX, L.P.
By: First Reserve GP IX, L.P.,
General Partner
By: First Reserve G.P. IX, Inc.
General Partner
By:
---------------------------------
Name:
Title:
Date: October __, 2002
STOCK POWER
ASSIGNMENT SEPARATE FROM CERTIFICATE
ASSIGNMENT OF STOCK
FOR VALUE RECEIVED, Aquila, Inc. (formerly known as UtiliCorp United Inc.)
hereby sells, assigns and transfers unto FIRST RESERVE FUND IX, L.P., 939,380
shares of the Series A Convertible Preferred Stock of QUANTA SERVICES, INC.
("Quanta"), standing in its name on the books of Quanta, represented by
Certificate No. A-002 herewith, and does hereby irrevocably constitute and
appoint the Secretary of Quanta to transfer the said 939,380 shares of the
Series A Convertible Preferred Stock on the books of Quanta with full power of
substitution in the premises.
Aquila, Inc.
By:
-------------------------------
Printed Name:
---------------------
Title:
----------------------------
Date: October __, 2002
In Presence of:
------------------------
Date: October __, 2002
EXHIBIT D
FIRST RESERVE INVESTOR'S RIGHTS AGREEMENT
THIS FIRST RESERVE INVESTOR'S RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of October 15, 2002, by and between
Quanta Services, Inc., a Delaware corporation (the "Company"), and First Reserve
Fund IX, L.P., a Delaware limited partnership ("Investor").
RECITALS
WHEREAS, this Agreement is made pursuant to the Securities
Purchase Agreement, dated as of October 15, 2002, by and between the Company and
Investor (the "Securities Purchase Agreement");
WHEREAS, in order to induce Investor to enter into the
Securities Purchase Agreement, the Company has agreed to provide the
registration and other rights set forth in this Agreement;
WHEREAS, the Company has previously entered into that certain
Amended and Restated Investor's Rights Agreement dated as of May 20, 2002 (the
"Aquila Investor's Rights Agreement") pursuant to which the Company granted
Aquila, Inc., a Delaware corporation, certain registration and other rights;
WHEREAS, pursuant to the Securities Purchase Agreement,
Investor will acquire shares of the Company's Common Stock, par value $0.00001
per share, and Series E Preferred Stock (the "Preferred Stock"); and
WHEREAS, the execution and delivery of this Agreement shall
occur contemporaneously with the Tranche I Closing (as defined in the Securities
Purchase Agreement).
AGREEMENT
The parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used herein without
definition shall have the meanings given to them in the Securities Purchase
Agreement. The terms set forth below are used herein as so defined:
"Acceptable Securities" has the meaning specified therefor in
Section 6.2(c) of this Agreement.
"Affiliate" of any Person shall mean:
(a) For purposes of Article III or Article VI, (i)
any Person directly or indirectly controlled by, controlling or under common
control with such first Person, (ii) any director or officer of such first
Person or of any Person referred to in clause (i) above and (iii) if any Person
in clause (i) above is an individual, any member of the immediate family
(including parents, spouse and children) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
For purposes of this definition, any Person which owns directly or indirectly
20% or more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 20% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
such corporation or other Person; and
(b) For purposes of Article IV, (i) any Subsidiary of
such Person or (ii) a Parent of such Person.
"Beneficial Ownership," "Beneficial Owner," and "Beneficially
Own" have the meanings ascribed to such terms in Rule 13d-3 under the Exchange
Act.
"Business Day" means any day other than a Saturday, Sunday, or
a legal holiday for commercial banks in Houston, Texas, or New York, New York.
"Capital Stock Equivalents" has the meaning specified therefor
in Section 4.2(b) of this Agreement.
"Change of Control" shall be deemed to have occurred if (i)
any Person acquires, directly or indirectly, the Beneficial Ownership of any
Voting Security of the Company and immediately after such acquisition such
Person is, directly or indirectly, the Beneficial Owner of Voting Securities
representing 50% or more of the total voting power of all the then outstanding
Voting Securities of the Company entitled to vote generally in the election of
directors; or (ii) individuals who on the Tranche I Closing Date (as defined in
the Securities Purchase Agreement) constitute the Company's Board of Directors,
or their successors the election or nomination for the election by the Company's
stockholders of whom was approved by vote of at least 2/3rds of the directors
then still in office who were directors on the Tranche I Closing Date or their
successors approved in accordance with the terms hereof, cease for any reason to
constitute at least a majority of the Board of Directors.
"Commission" means the United States Securities and Exchange
Commission.
"Closing Price" has the meaning specified therefor in Section
4.2(d) of this Agreement.
"Common Stock" means the common stock, par value $0.00001 per
share, of the Company.
"Company" has the meaning specified therefor in the
introductory paragraph of this Agreement.
2
"Competitor" means a provider to third parties of specialized
contracting and maintenance services, primarily for electric,
telecommunications, cable television, natural gas, and/or transportation
infrastructure (and with respect to natural gas and transportation
infrastructure, only if and when such business lines are a significant part of
the Company's overall business), in the United States and/or in other countries,
but only in any of such other countries if and when the Company develops a
substantial market for its services in such country.
"Conversion Shares" means the shares of Common Stock issuable
on conversion of the Preferred Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
"Holder" means the record holder of any Registrable
Securities.
"Initial Buyer" has the meaning specified therefor in Section
6.2(a)(ii) of this Agreement.
"Inspectors" has the meaning specified therefor in Section
3.3(g) of this Agreement.
"Investor" has the meaning specified therefor in the
introductory paragraph of this Agreement.
"Losses" has the meaning specified therefor in Section 3.8(a)
of this Agreement.
"Matching Proposal" has the meaning specified therefor in
Section 6.2(a)(i) of this Agreement.
"NASDAQ" has the meaning specified therefor in Section 4.2(d)
of this Agreement.
"New Securities" has the meaning specified therefor in Section
4.2(b) of this Agreement.
"Other Holders" has the meaning specified therefor in Section
3.1(d) of this Agreement.
"Parent" means any corporation or other legal entity which at
the time directly or indirectly controls at least a majority of the equity of
such entity having by the terms thereof ordinary voting power to elect a
majority of the Board of Directors, managers, general partner(s), or other
equivalent governing body of such entity (irrespective of whether at the time
equity of any other class or classes of such entity might have voting power by
reason of the happening of any contingency).
"Permitted Transfer Percentage" means 15% from the date of
this Agreement until the third anniversary of this Agreement and 10% thereafter.
3
"Person" means any individual, corporation, company, voluntary
association, partnership, joint venture, trust, limited liability company,
unincorporated organization, government or any agency, instrumentality or
political subdivision thereof, or any other form of entity.
"Pre-Emptive Purchasers" has the meaning specified therefor in
Section 4.1 of this Agreement.
"Pre-Emptive Right" has the meaning specified therefor in
Section 4.1 of this Agreement.
"Preferred Stock" has the meaning specified therefor in the
recitals hereof.
"Proportionate Number" has the meaning specified therefor in
Section 4.2(a) of this Agreement.
"Records" has the meaning specified therefor in Section 3.3(g)
of this Agreement.
"Registrable Securities" means the Conversion Shares and the
shares of Common Stock purchased by the Investor on the date of this Agreement
and any other shares of Common Stock acquired by the Investor (or any Person or
Persons to which all or a portion of Investor's rights under this Agreement are
assigned in accordance with the terms of this Agreement) after the date of this
Agreement, whether in privately negotiated or open market transactions, pursuant
to the exercise of rights to purchase shares granted pursuant to this Agreement
or pursuant to stock dividends, stock splits or other distributions in respect
of the Common Stock, until such time as any such securities cease to be
Registrable Securities pursuant to Section 1.2 hereof.
"Registration Expenses" has the meaning specified therefor in
Section 3.7(a) of this Agreement.
"Registration Statement" has the meaning specified therefor in
Section 3.1(b) of this Agreement.
"Requesting Holder(s)" has the meaning specified therefor in
Section 3.1(a) and (b), as applicable, of this Agreement.
"Request Notice" has the meaning specified therefor in Section
3.1(a) of this Agreement.
"Selling Expenses" has the meaning specified therefor in
Section 3.7(a) of this Agreement.
"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a Registration Statement.
"Shelf Request" has the meaning specified therefor in Section
3.1(b) of this Agreement.
4
"Standstill Amount" has the meaning specified therefor in the
Securities Purchase Agreement.
"Subsidiary" means any corporation or other legal entity of
which the Company is the Parent.
"Superior Proposal" has the meaning specified therefor in
Section 6.2(b) of this Agreement.
"Third Party Proposer" has the meaning specified therefor in
Section 6.2(a)(i) of this Agreement.
"Third Party Tender Offer" shall mean a bona fide public offer
subject to the provisions of Regulation 14D under the Exchange Act, by a Person
(which is not made by and does not include the Investor or its Affiliates) to
purchase or exchange for cash or other consideration any Voting Stock of the
Company and which consists of an offer to acquire 30% or more of the Voting
Securities of the Company.
"Topping Period" has the meaning specified therefor in Section
6.2(a)(i) of this Agreement.
"Transfer" has the meaning specified therefor in Section 5.1
of this Agreement.
"Voting Capital Stock" has the meaning specified therefor in
Section 4.2(c) of this Agreement.
"Voting Percentage" has the meaning specified therefor in the
Securities Purchase Agreement.
"Voting Securities" has the meaning specified therefor in the
Securities Purchase Agreement.
Registrable Securities. Any Registrable Security will cease to
be a Registrable Security when (a) a Registration Statement covering such
Registrable Security has been declared effective by the Commission and such
Registrable Security has been sold or disposed of pursuant to such effective
Registration Statement; (b) such Registrable Security is disposed of pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act; (c)
such Registrable Security is eligible to be, and at the time of determination
can be, disposed of pursuant to paragraph (k) of Rule 144 (or any similar
provision then in force) under the Securities Act; or (d) such Registrable
Security is held by the Company or one of its Subsidiaries.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties by the Investor.
The Investor hereby represents and warrants to the Company as follows: (a) such
Investor has all requisite partnership and other power and authority (if
applicable) to execute, deliver and perform their respective obligations under
this Agreement; (b) the execution, delivery and performance of this Agreement
5
by such Investor and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite partnership and other action (if
applicable) on the part of such Investor; (c) this Agreement has been duly
executed and delivered by such Investor and constitutes a legal, valid and
binding obligation of such Investor, enforceable against such Investor in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting creditors
rights generally or by general principles of equity; (d) no governmental
consent, approval, authorization, license or clearance, or filing or
registration, by such Investor, with any governmental or regulatory authority,
is required in order to permit such Investor to perform its obligations under
this Agreement, except for such as have been obtained; and (e) prior to the
consummation of the transactions contemplated by the Securities Purchase
Agreement and the Aquila Sale, the Investor does not Beneficially Own any shares
of Common Stock and does not have the right to vote any shares of capital stock
of the Company.
Section 2.2 Representations and Warranties of the Company. The
Company represents and warrants to the Investors as follows: (a) The Company has
all requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement; (b) the execution, delivery and performance of
this Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of the Company; (c) this Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency or similar laws affecting creditors rights generally or by general
principles of equity; and (d) no governmental consent, approval, authorization,
license or clearance, or filing or registration with any governmental or
regulatory authority, is required in order to permit the Company to perform its
obligations under this Agreement, except for such as have been obtained.
ARTICLE III
REGISTRATION RIGHTS
Section 3.1 Demand Registration.
(a) Request for Registration. At any time after the
date hereof, any Holder or Holders who collectively Beneficially Own at least
the minimum number of Registrable Securities specified in Section 3.1(b) below
may request (a "Request Notice") the Company to register under the Securities
Act all or any portion of the Registrable Securities that are held by such
Holder or Holders (collectively, the "Requesting Holder") for sale in the manner
specified in the Request Notice; provided, however, that, with respect to a
Request Notice that is not a Shelf Request (as defined below), no such request
may be made until six (6) months after the date on which the Registrable
Securities covered by the Request Notice were issued; provided, further, that
with respect to a Request Notice that is a Shelf Request, no such request may be
made until one (1) year after the date on which the Registrable Securities
covered by the Request Notice were issued; and provided, further, that no such
request pursuant to this Section 3.1(a) may be made so long as the Company is
currently acting upon the request of Aquila, Inc. to effect a registration
pursuant to Section 2.1(a) of the Aquila Investor's Rights Agreement.
6
(b) Company's Obligations. Promptly following receipt
of a Request Notice, the Company shall (i) notify each Holder (except the
Requesting Holder) of the receipt of a Request Notice and (ii) shall use its
commercially reasonable efforts to effect such registration (including, without
limitation, preparing and filing a registration statement under the Securities
Act (each such registration statement, a "Registration Statement") effecting the
registration under the Securities Act, for public sale in accordance with the
method of disposition specified in such Request Notice) of the Registrable
Securities specified in the Request Notice (and in any notices that the Company
receives from other Holders no later than the 15th calendar day after receipt of
the notice sent by the Company) (such other Holders and the Requesting Holders,
the "Requesting Holders"); provided, however, that the Company's obligations
under this Section 3.1(b) shall be subject to such registration being for no
less than the higher of 500,000 shares and 1% of the outstanding Voting
Securities. If such method of disposition shall be an underwritten public
offering, the Company may designate the managing underwriter of such offering,
subject to the approval of the Requesting Holders holding a majority of the
Registrable Securities to be registered, which approval shall not be withheld
unreasonably. The Company shall be obligated to register Registrable Securities
pursuant to this Section 3.1 on not more than three (3) occasions in the
aggregate on behalf of all Holders (including any transferees or assignees of
Investor pursuant to Section 3.10); provided, however, that the Company shall
not be required to file a Registration Statement pursuant to a Request Notice
less than six (6) months following the later of the effective date of the most
recent Registration Statement filed pursuant to a Request Notice or the last
sale of securities pursuant to any such Registration Statement; and provided,
further, that one of such three demand registrations (the "Shelf Request") may
be used for a shelf registration statement (which (i) shall include as selling
stockholders, if requested by Investor, any limited partners of Investor to
which Investor has distributed Registrable Securities and (ii) the Company shall
not be required to maintain the effectiveness thereof beyond one year (but the
Company may, in its sole discretion, maintain the effectiveness thereof for such
longer period as it desires)).
(c) Deferral by the Company. If the Company has
received a Request Notice, whether or not a Registration Statement with respect
thereto has been filed or has become effective, or an event referred to in
Section 3.3(e) has occurred, and the Company furnishes to the Requesting Holders
a copy of a resolution of the Board of Directors of the Company certified by the
Secretary of the Company stating that, in the good faith judgment of the Board
of Directors, it would not be in the best interest of the Company's stockholders
for such Registration Statement (i) to be filed on or before the date such
filing would otherwise be required hereunder, (ii) to become effective or (iii)
to be updated by post-effective amendment or prospectus supplement because (A)
such action would materially interfere with a significant acquisition, corporate
reorganization or other similar transaction involving the Company, (B) such
action would require premature disclosure of material information that the
Company has a bona fide business purpose for preserving as confidential, or (C)
the Company is unable to comply with requirements of the Commission, then the
Company shall have the right, but not more than once in any 365-day period with
respect to any Request Notice, to defer such filing, effectiveness or update for
such period as may be reasonably necessary (which period shall not, in any
event, exceed 90 calendar days from the date the response period for Holders
pursuant to Section 3.1(b) expires).
7
(d) Participation Rights of the Company and Others.
The Company shall be entitled to include in any Registration Statement filed
pursuant to this Section 3.1, for sale in accordance with the method of
disposition specified by the Requesting Holder, securities of the Company
entitled to vote generally in the election of directors (or any securities
convertible into or exchangeable for or exercisable for the purchase of
securities so entitled generally to vote in the election of directors (whether
or not then convertible, exchangeable or exercisable)) (collectively, "Company
Registrable Securities") to be sold by the Company for its own account, except
as and to the extent that, in the opinion of the managing underwriter (if such
method of disposition shall be an underwritten public offering), such inclusion
would materially jeopardize the successful marketing of the Registrable
Securities to be sold. Any Person other than a Holder (the "Other Holders")
entitled to piggy-back registration rights with respect to a Registration
Statement filed pursuant to this Section 3.1 (by virtue of another agreement
with the Company granting such Other Holder registration rights with respect to
Voting Securities of the Company (an "Other Registration Rights Agreement")) may
include Voting Securities of the Company with respect to which such rights apply
in such Registration Statement for sale in accordance with the method of
disposition specified by the Requesting Holder, except and to the extent that,
in the opinion of the managing underwriter (if such method of disposition shall
be an underwritten public offering), such inclusion would materially jeopardize
the successful marketing of the Registrable Securities to be sold and except as
such Other Holder's rights may be subject to underwriter's cut-backs and other
restrictions as set forth in such Other Registration Rights Agreement. Except as
provided in this subsection (d) and in Section 3.6 of this Agreement, the
Company will not effect any other registration of its Company Registrable
Securities (except with respect to registration statements (i) on Form S-4 or
S-8 or any forms succeeding thereto for purposes permissible under such forms as
of the date hereof or (ii) filed in connection with an exchange offer or an
offering of securities solely to the Company's existing stockholders or such
other Registration Statements (A) for the resale of shares issued pursuant to an
employee stock ownership trust or other benefit plan of a business acquired in
an acquisition by the Company or (B) in connection with non-underwritten resales
of securities issued to owners of a business acquired in an acquisition by the
Company), whether for its own account or that of any Other Holder, from the date
of receipt of a Request Notice requesting the registration of an underwritten
public offering until the completion or abandonment of the distribution by the
underwriters of all securities thereunder; provided, however, such restricted
period shall not extend beyond the date 90 calendar days subsequent to the
effective date of such Registration Statement.
(e) Prohibition on Future Grants. From and after the
date of this Agreement and until no Registrable Securities remain outstanding,
the Company shall not grant any demand registration rights to any Person unless
such rights are expressly made subject to the right of the Holders to include an
equal number of shares of the Registrable Securities along with the other
Person's shares in any registration relating to an underwritten public offering,
except and to the extent that, in the opinion of the managing underwriter, the
inclusion of all shares requested to be registered by all Persons holding
registration rights, would materially jeopardize the successful marketing of the
securities (including the Registrable Securities) to be sold.
(f) Participation Rights of Aquila, Inc.
Notwithstanding anything in Section 3.1(d) to the contrary, the demand
registration rights granted to the Holders pursuant to this Agreement are
subject to the prior rights of Holders (as defined in the Aquila Investor's
8
Rights Agreement), to include in any registration relating to an underwritten
public offering, an equal number of shares of Registrable Securities (as defined
in the Aquila Investor's Rights Agreement), except and to the extent that, in
the opinion of the managing underwriter, the inclusion of all shares requested
to be registered by all Persons holding registration rights, would materially
jeopardize the successful marketing of the securities (including the Registrable
Securities (as defined in the Aquila Investor's Rights Agreement)) to be sold;
and provided, that nothing in this Agreement shall be construed to limit Aquila,
Inc.'s rights to demand registrations under the Aquila Investor's Rights
Agreement. For the avoidance of doubt, the term "Holders" as used in this
Section 3.1(f) herein shall include the Holders (as defined in the Aquila
Investor's Rights Agreement).
Section 3.2 Piggy-Back Registration.
(a) Company Notice. If the Company proposes to
register any Company Registrable Securities under the Securities Act for sale to
the public for cash, whether for its own account or for the account of Other
Holders or both (except with respect to registration statements on Forms S-4 or
S-8 or any forms succeeding thereto for purposes permissible under such forms as
of the date hereof or filed in connection with a merger, consolidation,
acquisition or similar transaction, or an exchange offer or an offering of
securities solely to the Company's existing stockholders), each such time it
will give written notice to all Holders of its intention to do so no less than
20 calendar days prior to the anticipated filing date.
(b) Request. Upon the written request of any Holder
received by the Company no later than the 15th calendar day after receipt by
such Holder of the notice sent by the Company, to register, on the same terms
and conditions as the securities otherwise being sold pursuant to such
registration, any of its Registrable Securities (which request shall state the
intended method of disposition thereof), the Company will use its commercially
reasonable efforts to cause the Registrable Securities as to which registration
shall have been so requested to be included in the securities to be covered by
the registration statement proposed to be filed by the Company, on the same
terms and conditions as any similar securities included therein, all to the
extent requisite to permit the sale or other disposition by each Holder (in
accordance with its written request) of such Registrable Securities so
registered; provided, however, that the Company may at any time, in its sole
discretion and without the consent of any Holder, abandon the proposed offering
in which any Holder had requested to participate.
(c) Underwriter's Cut-Back. The number of Registrable
Securities to be included in such a registration may be reduced or eliminated if
and to the extent that, in the case of an underwritten offering, the managing
underwriter shall render to the Company its opinion that such inclusion would
materially jeopardize the successful marketing of the securities (including the
Registrable Securities) proposed to be sold therein; provided, however, that (a)
in the case of a Registration Statement filed pursuant to the exercise of demand
registration rights of any Other Holders, priority shall be given in the
following manner of allocation: (i) first, to the Other Holders demanding such
registration; (ii) then to the Company; (iii) then equally (on a share-for-share
basis) to the holders of the Company's Series A preferred stock and the Holders
and (iv) then to Other Holders or other stockholders of the Company desiring to
participate with the Company's consent (other than the Other Holders entitled to
participate under clause (i) or (ii)), and (b) in the case of a Registration
Statement the filing of which is initiated by the
9
Company, priority shall be given in the following order of allocation: (i) first
to the Company; (ii) then equally (on a share-for-share basis) to the holders of
the Company's Series A preferred stock and the Holders and (iii) then to Other
Holders (other than Other Holders entitled to participate under clause (ii)). In
the event that the number of Registrable Securities to be included in a
registration is to be reduced as provided above, within 10 business days after
receipt by each Holder proposing to sell Registrable Securities pursuant to the
registered offering of the opinion of such managing underwriter, all such
Selling Holders may allocate among themselves the number of shares of such
Registrable Securities which such opinion states may be distributed without
adversely affecting the distribution of the securities covered by the
Registration Statement or, if less, the number of such shares allocable to
Holders of Registrable Securities after reduction for any allocations to the
Company or Other Holders in accordance with the priority provisions set forth in
the preceding sentence, and if such Holders are unable to agree among themselves
with respect to such allocation, such allocation shall be made in proportion to
the respective numbers of shares specified in their respective written requests.
(d) Prohibition on Future Grants. From and after the
date of this Agreement and until no Registrable Securities remain outstanding,
the Company shall not grant any piggy-back registration rights to any Person
unless such rights are expressly made subject to the prior right of Holders to
include their Registrable Securities on a pro-rata basis in any registration
relating to an underwritten public offering, except and to the extent that, in
the opinion of the managing underwriter, the inclusion in the offering of all
shares requested to be registered by all Persons holding registration rights
would materially jeopardize the successful marketing of the securities
(including the Registrable Securities) to be sold.
Section 3.3 Registration Procedures. If and whenever the
Company is required pursuant to this Agreement to effect the registration of any
of the Registrable Securities under the Securities Act, the Company will, as
expeditiously as reasonably possible:
(a) prepare and afford counsel for the Selling
Holders a reasonable opportunity to review and comment thereon and file with the
Commission a Registration Statement, on a form available to the Company, with
respect to such securities (which filing shall be made within 30 calendar days
after the receipt by the Company of a Request Notice) and use its commercially
reasonable efforts to cause such Registration Statement to become and remain
effective for the period of the distribution contemplated thereby (determined
pursuant to subsection (g) below);
(b) prepare and afford counsel for the Selling
Holders a reasonable opportunity to review and comment thereon and file with the
Commission such amendments and supplements to such Registration Statement and
the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the distribution period (determined
pursuant to subsection (g) below) and as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement;
(c) furnish to each Selling Holder and to each
underwriter such number of copies of the Registration Statement and the
prospectus included therein (including each preliminary prospectus and each
document incorporated by reference therein to the extent
10
then required by the rules and regulations of the Commission) as such Persons
may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such Registration
Statement;
(d) if applicable, use its commercially reasonable
efforts to register or qualify the Registrable Securities covered by such
Registration Statement under the securities or blue sky laws of such
jurisdictions as the Selling Holders or, in the case of an underwritten public
offering, the managing underwriter, shall reasonably request, provided that the
Company will not be required to qualify generally to transact business in any
jurisdiction where it is not then required to so qualify or to take any action
which would subject it to general service of process in any such jurisdiction
where it is not then so subject;
(e) immediately notify each Selling Holder and each
underwriter, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus contained in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and as
promptly as practicable amend or supplement the prospectus or take other
appropriate action so that the prospectus does not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(f) in the case of an underwritten public offering,
furnish upon request, (i) on the date that Registrable Securities are delivered
to the underwriters for sale pursuant to such Registration Statement, an opinion
of counsel for the Company dated as of such date and addressed to the
underwriters and to the Selling Holders, stating that such Registration
Statement has become effective under the Securities Act and that (A) to the best
knowledge of such counsel, no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (B) the Registration
Statement, the related prospectus, and each amendment or supplement thereof
comply as to form in all material respects with the requirements of the
Securities Act and the applicable rules and regulations thereunder of the
Commission (except that such counsel need express no opinion as to the financial
statements, or any expertized schedule, report or information contained or
incorporated therein) and (C) to such other effects as may reasonably be
requested by counsel for the underwriters, and (ii) on the effective date of the
Registration Statement and on the date that Registrable Securities are delivered
to the underwriters for sale pursuant to such Registration Statement, a letter
dated such dates from the independent accountants retained by the Company,
addressed to the underwriters and, if available, to the Selling Holders, stating
that they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements of the Company and the schedules thereto that are included or
incorporated by reference in the Registration Statement or the prospectus, or
any amendment or supplement thereof, comply as to form in all material respects
with the applicable requirements of the Securities Act and the published rules
and regulations thereunder, and such letter shall additionally address such
other financial matters (including information as to the period ending no more
than five business days prior to the date of such letter) included in the
Registration
11
Statement in respect of which such letter is being given as the underwriters may
reasonably request;
(g) subject to applicable confidentiality
obligations, make available for inspection by one representative of the Selling
Holders, designated by a majority thereof, any underwriter participating in any
distribution pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by such representative of the Selling Holders
or underwriter (the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection with such
Registration Statement; provided, however, that with respect to any Records that
are confidential, the Inspectors shall take such action as the Company may
reasonably request to maintain the confidentiality of the Records. For purposes
of subsections (a) and (b) above with respect to demand registration only, the
period of distribution of Registrable Securities in a firm commitment
underwritten public offering shall be deemed to extend until the earlier of (a)
the date each underwriter has completed the distribution of all securities
purchased by it or (b) the date 90 calendar days subsequent to the effective
date of such Registration Statement, and the period of distribution of
Registrable Securities in any other registration shall be deemed to extend until
the earlier of the sale of all Registrable Securities covered thereby or one
year;
(h) cause all such Registrable Securities registered
pursuant to this Agreement to be listed on each securities exchange on which
similar securities issued by the Company are then listed;
(i) use its commercially reasonable efforts to keep
effective and maintain for the period specified in subsection (g) a
registration, qualification, approval or listing obtained to cover the
Registrable Securities as may be necessary for the Selling Holders to dispose
thereof and shall from time to time amend or supplement any prospectus used in
connection therewith to the extent necessary to comply with applicable law;
(j) use its commercially reasonable efforts to cause
the Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Selling Holders to
consummate the disposition of such Registrable Securities; and
(k) enter into customary agreements and take such
other actions as are reasonably requested by the Selling Holders or the
underwriters, if any, to expedite or facilitate the disposition of such
Registrable Securities.
Each Selling Holder, upon receipt of notice from the Company
of the happening of any event of the kind described in subsection (e) of this
Section 3.3, shall forthwith discontinue disposition of the Registrable
Securities until such Selling Holder's receipt of the copies of the supplemented
or amended prospectus contemplated by subsection (e) of this Section 3.3 or
until it is advised in writing by the Company that the use of the prospectus may
be resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the prospectus, and, if so directed by the
Company, such Selling Holder will, or
12
will request the managing underwriter or underwriters, if any, to deliver to the
Company (at the Company's expense) all copies in their possession or control,
other than permanent file copies then in such Selling Holder's possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice. If the Company shall give any such notice, the time
periods mentioned in subsection (g) of this Section 3.3 shall be extended by the
number of days during the period from and including the date of the giving of
such notice to and including the date when each Selling Holder shall have
received the copies of the supplemented or amended prospectus contemplated by
subsection (e) of this Section 3.3 hereof or the notice that they may resume use
of the prospectus.
In connection with each registration hereunder with respect to
an underwritten public offering, the Company and each Selling Holder agrees to
enter into a written agreement with the managing underwriter or underwriters
selected in the manner herein provided in form and containing provisions as are
customary in the securities business for such an arrangement between
underwriters and companies of the Company's size and investment stature.
Section 3.4 Cooperation By Selling Holders. The Company shall
have no obligation to include in any Registration Statement shares of a Selling
Holder who has failed to timely furnish such information which, in the written
opinion of counsel to the Company, is reasonably required for the Registration
Statement to comply with the Securities Act.
Section 3.5 Restrictions on Public Sale by Selling Holders of
Registrable Securities. To the extent not inconsistent with applicable law,
including insurance codes, each Selling Holder of Registrable Securities that is
included in a registration statement that registers Registrable Securities
pursuant to this Agreement agrees not to effect any public sale or distribution
of the issue being registered (or any securities of the Company convertible into
or exchangeable or exercisable for securities of the same type as the issue
being registered) during the 14 business days before, and during the 90 calendar
day period beginning on, the effective date of a registration statement filed by
the Company (except as part of such registration), but only if and to the extent
requested in writing (with reasonable prior notice) by the managing underwriter
or underwriters in the case of an underwritten public offering by the Company of
securities of the same type as the Registrable Securities, provided that the
duration of the foregoing restrictions shall be no longer than the duration of
the shortest restriction imposed by the underwriters on the officers or
directors or any other stockholder of the Company on whom a restriction is
imposed; and, provided further that to the extent the Selling Holders do not
participate in the underwritten public offering, the period of time for which
the Company is required to keep any other Registration Statement which includes
Registrable Securities that is effective concurrently with the holdback period
described above continuously effective shall be increased by a period equal to
such requested holdback period.
Section 3.6 Restrictions on Public Sale by the Company. To the
extent required by an underwriter in an underwritten public offering, the
Company agrees not to effect on its own behalf any public sale or distribution
of any securities similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities, during the
14 business days before, and during the 90 calendar day period beginning on, the
effective date of any Registration Statement filed pursuant to Section 3.1
except pursuant to such registration statement or a registration statement on
Form S-8 or Form S-4 or such other registration
13
statements for (a) the resale of shares issued pursuant to an employee stock
ownership trust or other benefit plan of a business acquired in an acquisition
by the Company or (b) in connection with non-underwritten commitments to
register the resale of securities issued to owners of a business acquired in an
acquisition by the Company.
Section 3.7 Expenses.
(a) Certain Definitions. "Registration Expenses"
means all expenses incident to the Company's performance under or compliance
with this Agreement, including, without limitation, all registration and filing
fees, blue sky fees and expenses, printing expenses, listing fees, fees and
disbursements of counsel and independent public accountants for the Company,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, costs of insurance and reasonable
out-of-pocket expenses, including, without limitation, all reasonable expenses
incurred directly by the Selling Holders for one legal counsel, but excluding
any Selling Expenses. "Selling Expenses" means all underwriting fees, discounts
and selling commissions allocable to the sale of the Registrable Securities.
(b) Parties' Obligations. The Company will pay all
Registration Expenses in connection with each Registration Statement filed
pursuant to this Agreement, whether or not the Registration Statement becomes
effective, and the Selling Holders shall pay all Selling Expenses.
Section 3.8 Indemnification.
(a) By the Company. In the event of a registration of
any Registrable Securities under the Securities Act pursuant to this Agreement,
the Company will indemnify and hold harmless each Selling Holder thereunder and
each underwriter, pursuant to the applicable underwriting agreement with such
underwriter, and each Person, if any, who controls such Selling Holder or
underwriter within the meaning of the Securities Act and the Exchange Act,
against any losses, claims, damages or liabilities (including reasonable
attorneys' fees) (collectively, "Losses"), joint or several, to which such
Selling Holder or underwriter or controlling Person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Securities were registered under the
Securities Act pursuant to this Agreement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such Selling Holder, each such
underwriter and each such controlling Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Loss or actions; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by such Selling Holder, such underwriter or such controlling Person in
writing specifically for use in such Registration Statement or prospectus.
14
(b) By the Selling Holder(s). Each Selling Holder
agrees to indemnify and hold harmless the Company, its directors, officers,
employees and agents and each Person, if any, who controls the Company within
the meaning of the Securities Act or of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Selling Holder, but only with
respect to information regarding such Selling Holder furnished in writing by or
on behalf of such Selling Holder expressly for inclusion in any Registration
Statement or prospectus relating to the Registrable Securities, or any amendment
or supplement thereto; provided, however, that the liability of such Selling
Holder shall not be greater in amount than the dollar amount of the proceeds
(net of any Selling Expenses) received by such Selling Holder from the sale of
the Registrable Securities giving rise to such indemnification.
(c) Notice. Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it of any
liability that it may have to any indemnified party other than under this
Section 3.8. The indemnifying party shall be entitled to participate in and, at
its election, to the extent it shall wish, to assume and undertake the defense
of any such action with counsel reasonably satisfactory to such indemnified
party and, after notice from the indemnifying party to such indemnified party of
its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 3.8 for
any legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; provided, however, that, (i) if the
indemnifying party has failed to assume the defense and employ counsel or (ii)
if the defendants in any such action include both the indemnified party and the
indemnifying party and counsel to the indemnified party shall have concluded
that there may be reasonable defenses available to the indemnified party that
are different from or additional to those available to the indemnifying party or
if the interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, then the indemnified party shall
have the right to select a separate counsel and to assume such legal defense and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other reasonable expenses related
to such participation to be reimbursed by the indemnifying party as incurred.
(d) Contribution. If the indemnification provided for
in this Section 3.8 is held by a court or government agency of competent
jurisdiction to be unavailable to the Company or the Selling Holders or is
insufficient to hold them harmless in respect of any Losses, then each such
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Losses as between the Company on the one hand and each Selling Holder on
the other, in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and of each Selling Holder on the other in
connection with the statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations; provided, however, that in no
event shall a Selling Holder be required to contribute an aggregate amount in
excess of the dollar amount of proceeds (net of Selling Expenses) received by
such Selling Holder from the sale of Registrable Securities giving rise to such
indemnification. The relative fault of the Company on the one hand and each
Selling Holder on the other shall be determined by reference to, among other
things,
15
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact has been made by, or
relates to, information supplied by such party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who is not guilty of such fraudulent
misrepresentation.
Section 3.9 Rule 144 Reporting. With a view to making
available the benefits of certain rules and regulations of the Commission that
may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use commercially reasonable efforts to:
(a) Make and keep public information regarding the
Company available, as those terms are understood and defined in Rule 144 of the
Securities Act, at all times from and after the Closing Date;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at all times from and after the Closing Date; and
(c) So long as a Holder owns any Registrable
Securities, furnish to the Holder forthwith upon written request a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
Section 3.10 Transfer or Assignment of Registration Rights.
The rights to cause the Company to register Registrable Securities granted to
Investor by the Company under this Article III may be transferred or assigned by
Investor, all or in part, only to a transferee or assignee of such Registrable
Securities permitted under Article V hereof and only if the Company is given
written notice prior to said transfer or assignment, stating the name and
address of such transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned,
and, provided further, that such transferee or assignee assumes in writing the
restrictions on Investor under this Agreement. Such registration rights shall
not otherwise be transferable, except for a Change of Control of Investor.
ARTICLE IV
PRE-EMPTIVE RIGHT
Section 4.1 Pre-Emptive Right. Subject to Section 4.5 hereof,
the Company hereby grants to each Holder (the "Pre-Emptive Purchasers") an
irrevocable right to purchase a Proportionate Number (as defined in Section
4.2(a)) of shares of Common Stock in respect of the issuance or sale (or deemed
issuance or sale) by the Company, from time to time during each month commencing
with the month during which this Agreement becomes effective, of New Securities
to third parties (the "Pre-Emptive Right"); provided that no Holder shall
exercise such
16
Pre-Emptive Right in connection with the exercise of any pre-emptive rights held
by any other person. The Pre-Emptive Right shall be subject to the following
provisions of this Article IV.
Section 4.2 Certain Definitions and Determinations.
(a) Proportionate Number. The "Proportionate Number"
of shares of Common Stock that may be purchased by a Pre-Emptive Purchaser in
respect of the applicable month shall be the number of shares of Common Stock
that such Pre-Emptive Purchaser would be required to purchase in order that such
Pre-Emptive Purchaser's Voting Percentage, after giving effect to the issuance
of the number of New Securities issued or sold (or deemed to be issued or sold)
by the Company to third parties during such applicable month would be equal to
such Pre-Emptive Purchaser's Voting Percentage at the beginning of such month.
(b) "New Securities" shall mean (i) any Voting
Capital Stock of the Company whether now or hereafter authorized including,
without limitation, issuances by the Company in connection with acquisitions and
issuances in connection with pre-emptive rights of the holder(s) of the
Company's Series A preferred stock and (ii) in the case of the issuance or sale
of rights, options, or warrants to purchase such Voting Capital Stock, and
securities of any type whatsoever that are, or may become, convertible into
Voting Capital Stock (collectively, "Capital Stock Equivalents"), the Voting
Capital Stock issued upon the exercise or conversion of such Capital Stock
Equivalents (including securities issued upon conversion or exercise of any
currently outstanding Capital Stock Equivalents); provided that the term "New
Securities" does not include (i) securities issuable upon conversion of the
Preferred Stock or the Series A preferred stock; (ii) securities issued in
connection with any stock split, stock dividend or recapitalization of the
Company; or (iii) securities issued upon conversion or exercise of any Capital
Stock Equivalents if the Pre-Emptive Right was provided upon the issuance of
such Capital Stock Equivalent.
(c) "Voting Capital Stock" shall mean Common Stock or
other capital stock which is entitled to vote generally with the Common Stock
upon the election of directors and other matters submitted to a general vote of
stockholders.
(d) "Closing Price" shall mean on any particular date
(i) if the Common Stock is listed on a stock exchange, the last sale price per
share of Common Stock on such date on the principal stock exchange on which the
Common Stock has been listed or, if there is no such price on such date, then
the last sale price on such exchange on the date nearest preceding such date,
(ii) if the Common Stock is not listed on any stock exchange, the final bid
price for a share of Common Stock in the over-the-counter market, as reported by
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") at the close of business on such date, or the last sales price if
such price is reported and final bid prices are not available, (iii) if the
Common Stock is not quoted on the NASDAQ, the bid price for a share of Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices), or (iv) if the Common Stock is no longer
publicly traded, as determined in good faith by the Board of Directors of the
Company based upon the price that would be paid by a willing buyer of the shares
at issue, in a sale process designed to maximize value and attract a reasonable
number of participants to provide a fair determination of such value.
17
Section 4.3 Mechanics. In the event the Company issues or
sells (or is deemed to issue or sell) New Securities during any month, within
five (5) Business Days after the end of such month, the Company shall give each
Pre-Emptive Purchaser written notice of the issuance or sale, describing the
type of New Securities issued or sold, the date of the issuance or sale (or
deemed issuance or sale), the Proportionate Number of shares of Common Stock
that it may acquire as a result of the issuance or sale of such New Securities
and the aggregate purchase price payable by it upon exercise of its Pre-Emptive
Right (including relevant details as to the calculation of such purchase price).
The purchase price for each such share of Common Stock shall be equal to the
Closing Price of the Common Stock on the date of issuance or sale (or deemed
issuance or sale) of the corresponding New Security. Each Pre-Emptive Purchaser
shall exercise its Pre-Emptive Right (if at all) by delivering, within fifteen
(15) Business Days after the end of such month in which the New Securities were
issued or sold (or deemed to be issued or sold), (a) notice to the Company
stating therein the quantity of its Proportionate Number of shares of Common
Stock to be purchased and (b) payment to the Company of the aggregate purchase
price for such shares in immediately available funds. Any such exercise may be
for any or all of the Proportionate Number of shares set forth in the Company's
notice. Thereupon, the Company shall promptly issue and deliver such Pre-Emptive
Purchaser a certificate or certificates for the number of shares of Common Stock
that the Pre-Emptive Purchaser has elected to purchase. Notwithstanding the
foregoing, in the event that the Company shall notify a Pre-Emptive Purchaser in
writing that the Company intends to effect a public offering of any New
Securities in any manner or an offering under Rule 144A of the Securities Act
(which notice shall include the proposed maximum number of securities to be
offered and the estimated price range per share), such Pre-Emptive Purchaser
shall notify the Company within 72 hours after receipt of such notice as to such
Pre-Emptive Purchaser's election to participate as a purchaser in such offering
with respect to the number of shares of Common Stock in such offering, if any,
subject to such Pre-Emptive Purchaser's Pre-Emptive Rights. A Pre-Emptive
Purchaser's participation in such offering shall supersede any Pre-Emptive Right
with respect to the securities which are the subject of such offering, and in
the event a Pre-Emptive Purchaser elects not to participate as a purchaser in
such offering, such Pre-Emptive Purchaser shall not have any Pre-Emptive Right
with respect to the securities so offered.
Section 4.4 Adjustments. The applicable purchase price and the
Proportionate Number shall be adjusted appropriately to reflect stock dividends,
combinations, splits, reclassifications, exchanges, substitutions or other
similar adjustments with respect to the Common Stock during the relevant month
that occur prior to the exercise of the applicable Pre-Emptive Right.
Section 4.5 Transfer of Pre-Emptive Right. Subject to Section
4.6, all or a portion of the Pre-Emptive Right set forth in this Article IV may
be transferred or assigned by Investor, only to a transferee or assignee of
Registrable Securities permitted under Article V hereof and only if (x) the
Company is given written notice prior to said transfer or assignment, stating
the name and address of such transferee or assignee and identifying the
securities with respect to which such Pre-Emptive Rights are being transferred
or assigned, (y) such transferee or assignee assumes in writing the obligations
of such Pre-Emptive Purchaser under this Agreement and (z) in the case of a
partial transfer, Investor retains a pro rata Pre-Emptive Right to the extent of
any Registrable Securities not transferred or assigned. Such pre-emptive rights
shall not otherwise be transferable, except for a Change of Control of Investor.
18
Section 4.6 Termination of Pre-Emptive Right. The Pre-Emptive
Right granted under this Agreement shall terminate as to any Holder if
Investor's Voting Percentage is less than 10%.
Section 4.7 Waiver of Pre-Emptive Rights and Anti-dilution
Adjustments. Investor hereby waives any Pre-Emptive Rights and anti-dilution
adjustment rights that may be triggered by the Aquila Sale and the consummation
of the transactions contemplated by the Securities Purchase Agreement, that it
may have pursuant to this Agreement, the Certificate of Designation (as defined
in the Securities Purchase Agreement), the Certificate of Designation with
respect to the Series A Preferred Stock acquired by Investor in the Aquila Sale,
or otherwise.
ARTICLE V
TRANSFERS OF SHARES
Section 5.1 Transfers. Except as otherwise expressly provided
herein and subject to applicable law, a Holder may, voluntarily or
involuntarily, directly or indirectly, sell, transfer, assign, donate, pledge or
otherwise encumber or dispose of any interest in all or any portion of the
shares of Voting Securities (a "Transfer") without restriction.
(a) Investor may, subject to the next sentence,
transfer, in a transaction or series of related transactions, shares
constituting 15% or more of the Voting Securities to any one transferee
(including any Affiliates of such transferee) only if (x) the Company is given
written notice prior to said transfer or assignment, stating the name and
address of such transferee or assignee and identifying the Voting Securities
which are being transferred or assigned and (y) such transferee or assignee
assumes in writing the obligations of the Investor under this Agreement. Any
Transfer permitted by this Section 5.1 shall be exempt from the Stockholders'
Rights Plan, provided that any transferee that Beneficially Owns more than five
percent of the Voting Securities prior to such Transfer shall not as a result of
such Transfer obtain Beneficial Ownership of Voting Securities having a greater
Voting Percentage than the Standstill Amount. Nothing in this Section 5.1 is
intended to limit (i) Investor's ability to transfer shares in blocks smaller
than 15%, (ii) transfers of shares in connection with transfers by all
stockholders of the Company or (iii) transfers of shares pursuant to the
registration rights granted under this Agreement; provided, that any transferee
of Shares consulting less than the Permitted Transfer Percentage of the Voting
Securities shall not receive any rights granted by the Company to Investor
pursuant to the terms of this Agreement, including, without limitation, any
registration rights pursuant to Article III hereof or pre-emptive rights
pursuant to Article IV hereof.
(b) Notwithstanding any other provision of this
Agreement, no Transfer of shares may be made by Investor unless such Transfer
complies with all applicable laws in addition to all applicable provisions of
this Agreement. An opinion of Investor's general counsel shall be satisfactory
evidence that such Transfer complies with all applicable securities laws in
addition to all applicable provisions of this Agreement.
Section 5.2 Securities Laws; Assignment of Obligations. A
Holder shall not effect any Transfer until:
19
(a) There is then in effect a Registration Statement
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(b) Such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition is exempt from registration under the Securities Act; provided
however, that it is agreed that the Company will not require opinions of
Holder's counsel for transactions made pursuant to Rule 144 except in unusual
circumstances as reasonably determined by the Company.
Section 5.3 Permitted Transfers. A Holder may Transfer any
portion of the Common Stock or Preferred Stock to one or more transferees (other
than to any Competitor), subject to compliance with the provisions of Section
5.1 of this Agreement and securities laws (and an opinion of Investor's counsel
shall be satisfactory evidence that such Transfer complies with all applicable
securities laws). In addition to a Holder's rights contained elsewhere herein,
including Section 5.1 hereof, a Holder may Transfer any portion of the Common
Stock or Preferred Stock: (i) to the Company; (ii) in response to a bona fide
public tender offer or exchange offer subject to Regulation 14D or Rule 13e-3 of
the rules and regulations promulgated under the Exchange Act for cash or other
consideration that is made by or on behalf of the Company; (iii) in response to
a Third Party Tender Offer with respect to which the Board of Directors of the
Company shall have recommended to the stockholders of the Company that they
accept such offer pursuant to Rule 14d-9 of the rules and regulations
promulgated under the Exchange Act and shall have not withdrawn such
recommendation prior to such Transfer; (iv) in connection with a Change in
Control of the Company that has received approval by the majority of the
directors of the Company's Board of Directors unaffiliated with Investor or (v)
in any general distribution of Registrable Securities to the limited partners of
Investor. Any attempted Transfer of any of the Preferred Stock or Common Stock
or Conversion Shares by Investor or any other person that is a party to this
Agreement that is not in compliance with the provisions of this Article V, shall
be null and void ab initio.
Section 5.4 Legend.
(a) Each certificate representing Preferred Stock
shall (unless otherwise permitted by the provisions of this Agreement) be
stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR UNLESS THE
COMPANY HAS
20
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION.
THE SALE, TRANSFER OR PLEDGE OF THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN FIRST RESERVE INVESTOR'S RIGHTS
AGREEMENT BETWEEN THE COMPANY AND CERTAIN HOLDERS OF ITS SECURITIES, AS
THE SAME MAY BE AMENDED AND IN EFFECT FROM TIME TO TIME. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY. THE SALE, TRANSFER OR PLEDGE OF THIS CERTIFICATE IS SUBJECT TO
THE TERMS AND CONDITIONS OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF THE COMPANY, AS THE SAME MAY BE AMENDED AND IN EFFECT
FROM TIME TO TIME. COPIES OF SUCH CERTIFICATE MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.
(b) The Company shall be obligated to reissue
promptly unlegended certificates at the request of any Holder if the Holder
shall have obtained an opinion of counsel at such Holder's expense (which
counsel may be counsel to the Company) reasonably acceptable to the Company to
the effect that the securities proposed to be disposed of may lawfully be so
disposed of under Rule 144(k) (or any successor thereto or substantially
equivalent exemption) without registration, qualification or legend.
Section 5.5 Improper Transfer. Any attempt to Transfer any
Preferred Stock that is not in accordance with this Agreement shall be null and
void, and the Company shall not give any effect to such attempted Transfer in
the records of the Company.
ARTICLE VI
STANDSTILL PROVISIONS
Section 6.1 Standstill. Subject to the provisions of Article
V, Investor will not, and will not assist or encourage any other Person
(including by providing financing) to, directly or indirectly through its
Affiliates (other than any actions otherwise prohibited by this Section 6.1 that
are taken by an officer and/or director of Investor serving on the Board of
Directors of the Company solely in his capacity as a member of the Board of
Directors), (i) acquire Beneficial Ownership of Voting Securities representing
more, in the aggregate, when taken together with any other Voting Securities of
the Company owned by such Person directly or indirectly through its Affiliates,
than the Standstill Amount, without the prior written consent of a majority of
the directors of the Company that were not appointed by Investor (provided that
the foregoing shall not impede (a) Investor's ability to transfer its Preferred
Stock, Common Stock or Conversion Shares as permitted by this Agreement,
exercise its Pre-Emptive Rights as permitted by this Agreement, convert shares
of Preferred Stock in accordance with the terms thereof or receive shares
pursuant to the provisions of Certificate of Designation in respect of the
Preferred Stock or pursuant to stock splits, dividends or any other transactions
in which Investor receives proportionate shares to other stockholders of the
Company or (b) any director's right to receive
21
compensation for serving as a director of the Company), (ii) engage in any
"solicitation" of "proxies" (as such terms are used in the proxy rules
promulgated under the Exchange Act), or form, join or in any way participate in
a "group" (as defined in Regulation 13D under the Exchange Act) with respect to
the capital stock of the Company, (iii) grant any proxies with respect to any
capital stock of the Company, other than in connection with a solicitation of
proxies by the Board of Directors, (iv) make any stockholder proposals in
respect of the Company, including but not limited to proposals (A) to nominate
directors to be elected at any annual or special meeting of the stockholders of
the Company (other than nominations that Investor is entitled to make under the
Company's Restated Certificate of Incorporation in its capacity as the holder of
Preferred Stock) or (B) to terminate (or redeem any rights granted under) the
Company's rights plan, or publicly comment on any proposal to amend or rescind
the Stockholders' Rights Plan that is not recommended for approval by the
Company's directors that are not affiliated with the Investor, (v) authorize or
make a tender offer, exchange offer or other offer to acquire Voting Securities,
(vi) deposit any Voting Securities in a voting trust or, except as otherwise
provided or contemplated herein or subject any Voting Securities to any
arrangement or agreement with any third party with respect to the voting of such
Voting Securities, (vii) act, along or in concert with others, directly or
indirectly, to publicly state its intention or desire to acquire the Company or
all or a material portion of assets of the Company, (viii) engage in a
transaction that would result in a Change of Control of the Company, (ix) enter
into any negotiations, agreements, arrangements or understandings with any
Person with respect to any of the foregoing, or (x) make any public proposals
with respect to any of the foregoing or make any public request to amend, modify
or rescind any provision of this Agreement, in each case without the prior
written consent of a majority of the directors of the Company that were not
appointed (pursuant to Article VII hereof) by, or affiliated with, Investor.
Section 6.2 Third Party Offers.
(a) Investor shall have no obligation to support any
third party proposal to effect a business combination transaction with the
Company or to offer a transaction providing value to the Company's public
shareholders equivalent to that provided by any third party proposal, except in
the following circumstances:
(i) If a third party (an "Third Party Proposer")
proposes a bona fide business combination or other acquisition transaction to
the Board of Directors, then Investor shall have ten Business Days or such
longer period as the Board of Directors may determine (the "Topping Period") to
offer an alternative transaction that is, in the judgment of the Board of
Directors (after receipt of advice from a nationally recognized investment
banking firm as to the fairness from a financial point of view of the price
offered), at least as favorable from a financial point of view to the public
shareholders of the Company (a "Matching Proposal") as the best proposal
theretofore made by the Third Party Proposer. If Investor does not within the
Topping Period make a Matching Proposal, then Investor shall be obligated to
support (including by voting for or tendering into) such proposal of the Third
Party Proposer if such proposal is a Superior Proposal of the Third Party
Proposer (or, in the event of any subsequent Superior Proposal from a third
party, to support the most favorable transaction that is available to the
Company from a financial point of view, in the good faith judgment of the Board
of Directors); provided, however, that if the consideration offered in the Third
Party Proposer's Superior Proposal does not consist entirely of cash, then
Investor shall not be obligated to support the
22
proposed transaction with the Third Party Proposer, and may vote its shares of
Common Stock against such proposal (and will also have no obligation to make a
Matching Proposal), if any special committee of the Board of Directors does not
reconfirm, within five Business Days prior to the shareholder vote in respect of
the proposed transaction with the Third Party Proposer if there is one (or, if
not, within five days prior to the initial scheduled closing of a tender or
exchange offer) (based on market conditions prevailing at that time, including
the prices of the Acceptable Securities and any securities included in the best
offer made by Investor during the Topping Period), that the proposed transaction
with the Third Party Proposer continues to meet the standards required for a
Superior Proposal in comparison to the best offer made by Investor during the
Topping Period; provided, further, that in the event Investor does withdraw its
support for the proposed transaction with the Third Party Proposer in accordance
with this provision, Investor may not propose a business combination or Share
acquisition transaction to the Company for a period of six months (unless
permitted to do so by the Board of Directors). Any agreement with Investor or
with an Third Party Proposer providing for a transaction of the type described
in this Section 6.2(a)(i) shall include a "fiduciary out" provision allowing the
Company to comply with this Section 6.2(a)(i).
(ii) If Investor agrees to a merger, tender or
exchange offer or other business combination transaction with any party directly
involving the Company, or agrees to sell any of its shares of Common Stock or
Preferred Stock to one or more parties other than the Company in a transaction
to which Section 5.3 applies (in either such case, such other parties are
referred to as the "Initial Buyer") and a third party Third Party Proposer
proposes an alternative transaction that the Board of Directors determines to be
a Superior Proposal to the transaction with the Initial Buyer, then the Company
shall agree to such Superior Proposal, and Investor shall not use its voting
power to block such Superior Proposal, but shall support (including by voting
for or tendering into) such Superior Proposal (or, in the event of any
subsequent Superior Proposal from a third party, to support the most favorable
transaction that is available to the Company from a financial point of view, in
the good faith judgment of the Board of Directors). Any agreement with an
Initial Buyer providing for a transaction of the type described in this Section
6.2(a)(ii) shall include a "fiduciary out" provision allowing the Company to
comply with this Section 6.2(a)(ii).
(b) "Superior Proposal" means a proposal (i) that is
reasonably capable of being consummated, (ii) in which all the consideration
offered consists entirely of any combination of at least fifty percent (50%)
cash and the remainder in Acceptable Securities and (iii) that the Board of
Directors considers, after receiving advice from a nationally recognized
investment banking firm, to be advisable and in the best interest of the Company
and the shareholders of the Company; provided, that for purposes of its advice
to the Board of Directors such investment bank shall have been instructed to
view any securities to be received by Investor in the transaction on a fully
distributed basis (that is, assuming that the prices to be received by Investor
shall be measured by the value that Investor would receive in connection with
Investor selling all of its securities as part of such distribution).
(c) "Acceptable Securities" means securities of a
class that is already listed and traded on a stock exchange or quoted and traded
on NASDAQ and that will be fully registered and capable of public distribution
immediately upon receipt by Investor.
23
Section 6.3 After Acquired Securities. All of the provisions
of this Agreement shall apply to all capital stock of the Company now owned by,
or which may be issued or transferred hereafter to, Investor or any of its
wholly-owned subsidiaries in consequence of any additional issuance, purchase,
exchange or reclassification of any of such capital stock, corporate
reorganization, or any other form of recapitalization, consolidation, merger,
share split or share dividend, or which are acquired by Investor or any of its
wholly-owned subsidiaries pursuant to its Pre-Emptive Rights.
ARTICLE VII
BOARD REPRESENTATION
Section 7.1 Board Representation Rights. Investor shall have
no rights to designate directors to the Company's Board of Directors as a result
of the Tranche I Closing. Upon the receipt of any required approval of the
purchase of the Shares under the HSR Act or the termination or expiration of any
applicable waiting periods under the HSR Act, Investor shall have the right,
pursuant to this Article VII, to designate one (1) director to the Company's
Board of Directors. Upon the later of (i) the receipt of any required approval
of the purchase of the Shares under the HSR Act or the termination or expiration
of any applicable waiting periods under the HSR Act or (ii) the approval by the
Company's stockholders of the conversion rights of the Preferred Stock, Investor
shall have the right, pursuant to this Article VII, to designate two (2)
additional directors, for a total of three (3) director designees, to the
Company's Board of Directors. Notwithstanding the foregoing, if at any time
Investor's Voting Percentage falls below 10%, the rights of the holder(s) of the
Preferred Stock to designate any directors to the Company's Board of Directors
pursuant to this Article VII shall cease. Such rights shall not be returned to
the holder(s) of the Preferred Stock even if it acquires sufficient Preferred
Stock and/or Common Stock so that Investor's Voting Percentage again exceeds
10%.
Section 7.2 Reduction of Board Representation Rights. Only
after the granting to Investor of the right to designate the two additional
directors as discussed in Section 7.1 above, shall the provisions of this
Section 7.2 apply. The directors of the Company designated by the Preferred
Stock shall be elected as follows:
(a) A majority of the outstanding shares of Preferred
Stock and the Conversion Shares (assuming, for purposes of this Section 7.2(a),
that such shares of Preferred Stock are then convertible) (to the extent
permitted by applicable law) held by Investor, voting exclusively and as a
separate class, shall be entitled to elect three of the total number of
directors of the Company, subject to the limitations set forth in subsections
(b), (c) and (d) below.
(b) In the event that Investor's Voting Percentage is
equal to or greater than 30%, then a majority of the outstanding shares of
Preferred Stock and the Conversion Shares (to the extent permitted by applicable
law) held by Investor, voting exclusively and as a separate class, shall be
entitled to elect three of the total number of directors of the Company. If at
any time Investor's Voting Percentage falls below 30%, the rights of the
Preferred Stock pursuant to this subsection shall cease. Such rights shall not
be returned to the Preferred Stock even if it acquires sufficient Preferred
Stock and/or Common Stock so that Investor's Voting Percentage again exceeds
30%.
24
(c) In the event that Investor's Voting Percentage is
less than 30% but equal to or greater than 20%, then a majority of the
outstanding shares of Preferred Stock and the Conversion Shares (to the extent
permitted by applicable law) held by Investor shall only be entitled (voting
exclusively and as a separate class) to elect two of the total number of
directors of the Company. If at any time Investor's Voting Percentage falls
below 20%, the rights of the Preferred Stock pursuant to this subsection shall
cease. Such rights shall not be returned to the Preferred Stock even if it
acquires sufficient Preferred Stock and/or Common Stock so that Investor's
Voting Percentage again exceeds 20%.
(d) In the event that Investor's Voting Percentage is
less than 20% but equal to or greater than 10%, then a majority of the
outstanding shares of Preferred Stock and the Conversion Shares (to the extent
permitted by applicable law) held by Investor shall only be entitled (voting
exclusively and as a separate class) to elect one of the total number of
directors of the Company. If at any time Investor's Voting Percentage falls
below 10%, the rights of the Preferred Stock pursuant to this subsection shall
cease. Such rights shall not be returned to the Preferred Stock even if it
acquires sufficient Preferred Stock and/or Common Stock so that Investor's
Voting Percentage again exceeds 10%.
(e) In the event that Investor's Voting Percentage is
less than 10%, then a majority of the outstanding shares of Preferred Stock and
the Conversion Shares (to the extent permitted by applicable law) held by
Investor shall have no right (voting exclusively and as a separate class) to
elect any directors to the Board of Directors.
(f) To the extent any nominee of the holders of the
Preferred Stock is not an officer of Investor, the Board of Directors of the
Company shall have the right to approve such nominee, such approval not to be
unreasonably withheld. Only the holders of the Preferred Stock and the
Conversion Shares (to the extent permitted by applicable law) shall be entitled
to remove from office such directors nominated by the holders of the Preferred
Stock and the Conversion Shares (to the extent permitted by applicable law) or
to fill any vacancy caused by the resignation, death or removal of such
directors.
Section 7.3 Information Rights. So long as Investor is
entitled to designate at least one director to the Company's Board of Directors,
Investor shall have a right (i) to receive all notices, reports and other
communications sent to the Company's directors at such time as they are
transmitted to the Company's directors and to receive reasonable notice of and
to have one representative attend, any meeting of the Board of Directors, (ii)
consult with and advise members of senior management of the Company and (iii)
upon reasonable notice, to have equivalent access to the books and records of
the Company as that generally afforded to the Company's directors.
Section 7.4 Committee Membership. So long as Investor is
entitled to designate at least one director to the Company's Board of Directors,
one of such designees shall be a member of all committees of the Board of
Directors unless any applicable corporate governance rules and/or regulations
require all members of a particular committee to be independent.
25
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Communications. All notices and other
communications provided for or permitted hereunder shall be made in writing by
telecopy, courier service or personal delivery:
(a) if to a Holder, at the most current address given
by such Holder to the Company in accordance with the provisions of this Section
8.1, which address initially is, with respect to Investor, the address set forth
in the Securities Purchase Agreement, and
(b) if to the Company, initially at its address set
forth in the Securities Purchase Agreement and thereafter at such other address,
notice of which is given in accordance with the provisions of this Section 8.1.
All such notices and communications shall be deemed to have been received at the
time delivered by hand, if personally delivered; when receipt acknowledged, if
telecopied; and when actually received, if sent by any other means.
Section 8.2 Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties, including subsequent holders of Registrable Securities as set forth in
Article V.
Section 8.3 Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.
Section 8.4 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 8.5 Governing Law; Consent to Jurisdiction. This
Agreement will be construed in accordance with and governed by the laws of the
State of Delaware without regard to principles of conflicts of laws. Any
judicial proceedings with respect to this Agreement shall be brought in a
federal or state court located in the State of Delaware, and by execution and
delivery of this Agreement, each party submits, irrevocably and unconditionally,
the exclusive jurisdiction of such court and any related appellate court,
irrevocably agrees to be bound by any judgment rendered thereby, and waives any
objection to the laying of venue in any such proceedings in such courts. The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. To the fullest extent permitted by
law, the parties hereto further agree that service of any process, summons,
notice or document by U.S. certified or registered mail to such party's address
for notices as set forth in Section 8.1 shall be effective service of process in
any action, suit or proceeding in the State of Delaware with respect to any
maters to which it has submitted to jurisdiction as set forth in the immediately
preceding sentence. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions, including preliminary relief, to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which they are entitled at
law or in equity. If any party shall institute any action or proceeding to
enforce the
26
provisions hereof, the party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law. The parties hereto hereby irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in such court has been brought in an
inconvenient forum and waive, to the fullest extent permitted by law, all rights
to trial by jury in any action, proceeding or counterclaim (whether based upon
contract, tort or otherwise) arising out of or relating to this Agreement or any
of the transactions contemplated hereby.
Section 8.6 Severability of Provisions. If any provision of
this Agreement is held to be illegal, invalid or unenforceable under any current
or future law, and if the rights or obligations of the parties under this
Agreement would not be materially and adversely affected thereby, such provision
shall be fully separable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
thereof, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance therefrom. In lieu of such illegal,
invalid or unenforceable provision, there shall be added simultaneously as a
part of this Agreement, a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible,
and the parties thereto request the court or any arbitrator to whom disputes
relating to this Agreement are submitted to reform the otherwise illegal,
invalid or unenforceable provision in accordance with this Section 8.6.
Section 8.7 Entire Agreement. This Agreement and the other
Basic Documents (as defined in the Securities Purchase Agreement) concurrently
executed and delivered by the Company and Investor, are intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the rights granted by the Company set forth herein. This
Agreement and such other Basic Documents supersede all prior agreements and
understandings between the parties with respect to such subject matter. Without
limiting the foregoing, to the extent that any provision in the Securities
Purchase Agreement is inconsistent with, or deals with the same subject matter
as, any provision of this Agreement, the Securities Purchase Agreement is hereby
superseded.
Section 8.8 Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement, the successful party shall
be entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
Section 8.9 Amendment. This Agreement may be amended only by
means of a written amendment signed by the Company and by Holders owning a
majority of the Registrable Securities.
Section 8.10 Rights of Assignee. Subject to the provisions of
Sections 3.10 and 4.5 and Article V hereof, the rights of an assignee under this
Section 8.10 shall be the same rights granted to the assigning Holder under this
Agreement. In connection with any such assignment, the term "Holder" as used
herein shall, where appropriate to assign the rights and obligations of the
assigning Holder hereunder to such assignee, be deemed to refer to the assignee.
27
Section 8.11 No Presumption. In the event any claim is made by
a party relating to any conflict, omission, or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular party
or its counsel.
Section 8.12 References to this Agreement. References to
numbered or lettered articles, section, and subsections refer to articles,
sections, and subsections, respectively, of this Agreement unless otherwise
expressly stated.
Section 8.13 Expenses. Each party to this Agreement shall bear
its own expenses incurred in connection with the transactions contemplated by
this Agreement, provided, however, that upon each of the Tranche I Closing and
the Tranche II Closing (each as defined in the Securities Purchase Agreement),
and upon the closing of any subsequent purchase of equity securities by Investor
directly from the Company, the Company shall reimburse Investor for all
reasonable fees and expenses incurred by Investor in connection therewith (and,
to effect such reimbursement, Investor shall be entitled to deduct such amount
from any proceeds to the Company in respect of such purchases.).
Section 8.14 No Third Party Beneficiaries. Nothing contained
in this Agreement is intended to confer upon any Person other than the parties
hereto and their respective successors and permitted assigns, any benefit, right
or remedies under or by reason of this Agreement; provided, however, that the
parties hereto hereby acknowledge and agree that the indemnified parties
hereunder are third party beneficiaries of this Agreement.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
QUANTA SERVICES, INC.
By:
--------------------------------
Name:
Title:
FIRST RESERVE FUND IX, L.P.
By: First Reserve GP IX, L.P., General Partner
By: First Reserve G.P. IX, Inc., General Partner
By:
--------------------------------
Name:
Title:
SIGNATURE PAGE TO FIRST RESERVE
INVESTOR'S RIGHTS AGREEMENT
EXHIBIT E
CERTIFICATE OF DESIGNATION, RIGHTS, AND LIMITATIONS
OF THE SERIES E CONVERTIBLE PREFERRED STOCK
OF QUANTA SERVICES, INC.
Quanta Services, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority conferred upon the
Board of Directors of the Corporation (the "Board of Directors") by the Amended
and Restated Certificate of Incorporation of the Corporation (the "Certificate
of Incorporation"), and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, as amended (the "DGCL"), the
Board of Directors, on ____________, 2002, adopted the following resolution
creating and issuing a series of its Preferred Stock, par value $0.00001 per
share:
RESOLVED, that (1) pursuant to the authority conferred upon
the Board of Directors of the Corporation by the Certificate of Incorporation of
the Corporation, the Board of Directors hereby designates 3,918,209 shares of
the preferred stock par value $0.00001 per share, of the Corporation as "Series
E Convertible Preferred Stock" (the "Series E Preferred Stock"), and the powers,
designations, preferences and relative, participating, optional and other rights
of the Series E Preferred Stock and the qualifications, limitations and
restrictions thereof, be, and the hereby are, as set forth below (the
"Certificate of Designation") and (2) in connection therewith, the officers of
the Corporation be, and each of them hereby is, authorized, empowered and
directed on behalf of the Corporation and in its name to execute and file the
Certificate of Designation with the Delaware Secretary of State:
1. Designation. Three Million, Nine Hundred Eighteen Thousand, Two
Hundred Nine (3,918,209) shares of the authorized and unissued preferred stock
of the Corporation, $0.00001 par value per share, are hereby designated "Series
E Convertible Preferred Stock".
2. Dividends.
(a) Preferred Dividend. Subject to the immediately following
sentence and Section 2(b), no dividends shall be payable on the Series E
Preferred Stock. Notwithstanding the first sentence of this Section 2(a), if
after the fourth (4th) anniversary of the Original Issue Date (as defined
below), the Series E Preferred Stock shall not have been converted into Common
Stock pursuant to Section 6 hereof, then the Series E Preferred Stock shall
accrue dividends at a rate of 8.0% per annum, when and as declared by the Board
of Directors, payable in shares of Series E Preferred Stock legally available
for that purpose (the "Preferred Dividend"), retroactive to the Original Issue
Date; provided, that the accrual of Preferred Dividends may not cause First
Reserve's (as defined below) Voting Percentage to exceed the Standstill Amount
(as defined in the Securities Purchase Agreement, dated as of October __, 2002,
between the Corporation and First Reserve (the "Purchase Agreement")). In the
event that the payment of Preferred Dividends to First Reserve causes First
Reserve's Voting Percentage to exceed the Standstill Amount, the Preferred
Dividends shall cease accruing for so long as First Reserve's Voting Percentage
exceeds the Standstill Amount, and the Series E Preferred Stock shall accrue
dividends in cash at a rate of 8.0% per annum (the "Cash Dividend"). In such
event, and if in such event the Cash Dividends may not be payable under the
terms of the Corporation's outstanding debt instruments,
the Corporation shall make reasonable best efforts to obtain all required
approvals necessary to permit the payment of the Cash Dividend. If First
Reserve's Voting Percentage ceases to exceed the Standstill Amount, the Cash
Dividend shall cease, and the Series E Preferred Stock shall again begin to
accrue the Preferred Dividend. Upon the effectiveness of the Preferred Dividend,
the Preferred Dividend on each share of Series E Preferred Stock shall be
cumulative from the date of issuance of such share, whether or not earned,
whether or not shares of the Corporation are legally available for therefor and
whether or not declared by the Board of Directors, but such dividend shall be
payable only when, as, and if declared by the Board of Directors. Subject to the
rights of the holders of the Corporation's outstanding Series A Convertible
Preferred Stock, par value $0.00001 per share (the "Series A Preferred Stock"),
so long as any shares of Series E Preferred Stock shall be outstanding, (i) no
dividend, whether in cash, stock or property, shall be paid or declared, nor
shall any other distribution be made, on any shares of the common stock of the
Corporation, par value $0.00001 per share (the "Common Stock"), or any other
class or series of capital stock of the Corporation, (ii) nor shall any class or
series of capital stock of the Corporation be redeemed, purchased or otherwise
acquired for value by the Corporation (except for acquisitions of Common Stock
by the Corporation pursuant to (A) agreements which permit the Corporation to
repurchase such shares upon termination of services to the Corporation entered
into on or before the date on which the shares of Series E Preferred Stock were
first issued (the "Original Issue Date") or (B) in satisfaction of an
indemnification obligation to the Corporation upon a breach by the holder of
Common Stock of a representation, warranty or covenant in any agreement for the
acquisition by the Corporation of a business (as defined in Rule 11-01(d) of
Regulation S-X adopted by the Securities and Exchange Commission) pursuant to
the Corporation's acquisition program (an "Acquisition"), in each case, until
all dividends set forth in this Section 2(a) on the Series E Preferred Stock
shall have been paid or declared and set apart. "Voting Percentage" has the
definition set forth in the Securities Purchase Agreement. "First Reserve" means
First Reserve Fund IX, L.P., a Delaware limited partnership, or a permitted
transferee that is an Affiliate (as defined in the Purchase Agreement) of First
Reserve under the provisions of the Investor's Rights Agreement, dated as of
October __, 2002, between First Reserve and the Corporation.
(b) Participating Dividend. The shares of Series E Preferred
Stock shall be entitled to receive, out of any funds legally available therefor,
the amount of any cash or non-cash dividends or distributions declared and paid
on the shares of Common Stock, as if the shares of Series E Preferred Stock had
been converted immediately prior to the record date for payment of such
dividends or distributions (the "Participating Dividend"); provided, however,
the shares of Series E Preferred Stock shall not be entitled to receive any
non-cash dividend or distribution if the number or kind of securities issuable
upon conversion of the Series E Preferred Stock is adjusted under Section 7
hereof in connection therewith. The Participating Dividend on each share of
Series E Preferred Stock shall be cumulative from the date of issuance of such
share, whether or not earned, whether or not the Corporation has funds legally
available for therefor and whether or not declared by the Board of Directors,
but such dividend shall be payable only when, as, and if declared by the Board
of Directors.
(c) Termination of Preferred and Participating Dividends. The
Preferred Dividends and Participating Dividends, except accrued and unpaid
Preferred Dividends and
2
Participating Dividends, will terminate on the date that the Series E Preferred
Stock is converted into shares of the Corporation's Common Stock.
3. Voting Rights.
(a) General. Except as set forth in Section 3(b) hereof, the
Series E Preferred Stock shall have no voting rights.
(b) Veto Rights. So long as the outstanding shares of Series E
Preferred Stock represent 10% or more of the Voting Securities, the approval by
the vote or written consent of the holders of at least two-thirds of the then
outstanding shares of Series E Preferred Stock, voting together as a single
class, shall be necessary before the Corporation may:
(i) Authorize, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of (A) any
authorized but unissued shares of Series E Preferred Stock or any other
class or series of capital stock senior to or on par with the Series E
Preferred Stock as to dividend rights or (B) any notes or debt
securities containing equity features, including, without limitation,
any notes or debt securities convertible into or exchangeable for
equity securities, having dividend rights on par with or senior to the
Series E Preferred Stock;
(ii) Redeem or purchase or otherwise acquire any of
its capital stock, now or hereafter issued, of any class, except for
(A) any repurchase of shares of capital stock pursuant to any employee
benefit plan adopted by the Corporation and (B) any acquisition of
shares of capital stock by the Corporation pursuant to agreements which
permit the Corporation to repurchase such shares (1) upon termination
of services to the Corporation entered into on or before the Original
Issue Date or (2) in satisfaction of an indemnification obligation to
the Corporation upon a breach by the holder of Common Stock of a
representation, warranty or covenant in any agreement for an
Acquisition;
(iii) Enter into a transaction or series of
transactions resulting in the sale, lease, transfer or other
disposition of all or substantially all of the assets of the
Corporation in which the holders of the Series E Preferred Stock would
receive less than the Common Stock for each share of Series E Preferred
Stock held by them;
(iv) Liquidate, dissolve or wind up the Corporation
in any form of transaction; or
(v) Amend the Corporation's Certificate of
Incorporation or Bylaws or the organizational documents of a subsidiary
of the Corporation (whether by merger, consolidation or otherwise
(including the filing of, or amending, a certificate of designation)),
in each case as amended, or file with any governmental authority any
resolution of the Board of Directors containing in each case any
provisions that would adversely affect or otherwise impair the voting
powers, preferences or other special rights or privileges,
qualifications, limitations or restrictions of the Series E Preferred
Stock (including, without limitation, an amendment or resolution to
increase the number of directors of the Corporation to a number greater
than 12).
3
4. Liquidation, Dissolution or Winding Up; Redemption.
(a) Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, voluntary or
otherwise, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series E Preferred Stock unless, prior thereto, the holders
of shares of Series E Preferred Stock shall have received an amount per share
(the "Series E Liquidation Preference") equal to the greater of (i) the initial
purchase price of the Series E Preferred Stock plus any accrued Preferred
Dividends that would have accrued pursuant to Section 2(a) hereof had such
provision applied, and (ii) the amount payable if such Series E Preferred Stock
had been converted into Common Stock immediately prior to any such liquidation,
dissolution or winding up. In the event, however, that there are not sufficient
assets available to permit payment in full of the Series E Liquidation
Preference and the liquidation preferences of all other classes and series of
stock of the Corporation, if any, that rank on a parity with the Series E
Preferred Stock in respect thereof, then the assets available for such
distribution shall be distributed ratably to the holders of the Series E
Preferred Stock and the holders of such parity shares in proportion to their
respective liquidation preferences. Neither the merger or consolidation of the
Corporation into or with another corporation or other entity nor the merger or
consolidation of any other corporation or other entity into or with the
Corporation shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 4.
(b) Redemption.
(i) So long as any shares of Series E Preferred Stock
are outstanding, the occurrence of (A) an Approved Sale, (B) the fifth
(5th) anniversary of the Original Issue Date or (C) an underwritten
public offering lead managed by a nationally recognized investment bank
pursuant to a registration statement declared effective under the
Securities Act of 1933, as amended, covering the offering and sale of
Voting Securities in which net proceeds received by the Corporation in
such public offering, after all costs and expenses, including without
limitation, underwriting discounts and commissions, equals or exceeds
$215,000,000, and in which the price per share to the public is at
least $4.40 (a "Qualified Financing"), shall be a redemption event
("Redemption Event"). Upon the approval by vote or written consent of
the holders of at least a majority of the then outstanding shares of
Series E Preferred Stock, an Approved Sale or Qualified Financing shall
not be deemed to be a Redemption Event within the meaning of this
Section 4(b). Upon the occurrence of a Redemption Event, if the
Corporation or the holder(s) of a majority of the outstanding Series E
Preferred Stock give written notice to the other (in accordance with
Section 4(b)(ii) below) that such party intends to request redemption,
the shares of Series E Preferred Stock shall be redeemed by the
Corporation, and the holder of each share of Series E Preferred Stock
shall be entitled to receive the Series E Redemption Amount (as defined
below). The term "Approved Sale" shall mean (i) any sale, transfer,
issuance or redemption or series of sales, transfers, issuances or
redemptions (or any combination thereof) of shares of the Corporation's
capital stock by the holders thereof or the Corporation, or any merger,
consolidation, reclassification or other transaction, which results in
any person or entity
4
or group of affiliated persons or entities (other than the owners of
the Corporation's capital stock (on a fully diluted basis) immediately
prior to any such transaction or series of transactions) beneficially
owning, directly or indirectly more than 50% of, respectively, the then
outstanding equity securities, or the combined voting power of the then
outstanding capital stock entitled to vote generally in the election of
the Board of Directors, or (ii) a sale or other transfer of all or
substantially all of the assets of the Corporation and its Subsidiaries
on a consolidated basis in any transaction or series of related
transactions (other than sales in the ordinary course of business) as
the case may be, which is approved by a majority of the directors of
the Corporation not designated by the holder(s) of the Series E
Preferred Stock. The term "Subsidiary" shall mean any person or entity
of which securities or other ownership interests representing more than
50% of the ordinary voting power or equity interests of such person or
entity are at the time owned or controlled, directly or indirectly, by
the Corporation.
(ii) If a Qualified Financing or Approved Sale is
intended to occur, the Corporation will notify each holder of Series E
Preferred Stock in writing of such pending event no less than 10 days
prior to the consummation thereof. Such notice will describe the
material terms and conditions of such event (including, but not limited
to, the amount and nature of the total consideration to be paid in
connection therewith). The holder(s) of the Series E Preferred Stock
shall be entitled to receive an amount per share (the "Series E
Redemption Amount") equal to the higher of (i) the Original Issue Price
(calculated assuming the accrual of dividends from the Original Issue
Date), or (ii) an amount equal to the product of the then-current
market price of a share of Common Stock (on any national securities
exchange on which the Common Stock is then listed, or if the Common
Stock is not then so listed, as determined in the good faith judgment
of the Corporation's board of directors) multiplied by the number of
shares of Common Stock that would have been received by the holder(s)
of the Series E Preferred Stock upon conversion of the Series E
Preferred Stock into Common Stock, taking into account all accrued
Preferred Dividends. The "Original Issue Price" of the Series E
Preferred Stock shall equal the purchase price originally paid with
respect to each share plus accrued and unpaid dividends (as adjusted
for any stock dividends, combinations, splits and the like with respect
to such shares). The right of redemption set forth in this Section 4(b)
shall terminate upon the conversion of the Series E Preferred Stock
into Common Stock. The right of the holder(s) of the Series E Preferred
Stock to receive the Redemption Amount shall be explicitly subordinate
to the Corporation's obligations pursuant to the terms of any
indebtedness, whether secured or unsecured.
5. Ranking. The Series E Preferred Stock shall rank equally with the
Series A Preferred Stock as to the distributions of assets upon liquidation,
dissolution or winding up and shall rank senior to the Common Stock on such
matter.
6. Conversion. The Corporation and holders of the Series E Preferred
Stock shall have, and be subject to, the conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. Subject to and in compliance with the
provisions of this Section 6, any shares of Series E Preferred Stock may, at the
option of the holder or the Corporation, be converted at any time following the
Convertibility Date (as defined below) into
5
fully paid and nonassessable shares of Common Stock; provided, that if the
Corporation enters into a definitive agreement with respect to a Change of
Control (as defined below) transaction within 60 days following the date of
issuance of the Series E Preferred Stock, then the Series E Preferred Stock
shall not be deemed to be convertible (or to have been converted) into Common
Stock for purposes of the per share Common Stock consideration payable in
connection with such Change of Control transaction; provided, further, that in
the event of a Change of Control transaction within the period as specified in
the proviso immediately prior to this proviso, the holder of the Series E
Preferred stock shall be entitled upon consummation of such transaction to a
cash payment equal to the Original Issue Price (calculated assuming the accrual
of dividends from the Original Issue Date). The number of shares of Common Stock
to which a holder of Series E Preferred Stock shall be entitled upon conversion
by the holder shall be the product obtained by multiplying the Series E
Preferred Stock Rate then in effect (determined as provided in Section
6(b)(iii)) times the number of shares of Series E Preferred Stock being
converted by such holder. Any conversion of Series E Preferred Stock pursuant to
this Section 6 shall, in the case of a conversion requested by a holder of
Series E Preferred Stock, be for all, and not less than all, of the shares of
Series E Preferred Stock held by such holder and, in the case of a conversion
requested by the Corporation, be for all, and not less than all, of the
outstanding Series E Preferred Stock.
(b) Certain Definitions and Determinations. As used in Section
6, the following terms shall have the following meanings:
(i) "Change of Control" shall be deemed to have
occurred if (i) any Person acquires, directly or indirectly, the
beneficial ownership of any voting security of the Corporation and
immediately after such acquisition such person is, directly or
indirectly, the beneficial owner of voting securities representing 50%
or more of the total voting power of all the then outstanding voting
securities of the Corporation entitled to vote generally in the
election of directors; or (ii) individuals who on the initial issuance
of the Series E Preferred Stock constitute the Corporation's Board of
directors, or their successors approved in accordance with the terms
below, cease for any reason to constitute at least a majority thereof,
unless the election or nomination for the election by the Corporation's
stockholders of each new director was approved by vote of at least
2/3rds of the directors then still in office who were directors on the
initial issuance of the Series E Preferred Stock or their successors
approved in accordance with the terms hereof.
(ii) "Closing Price" means on any particular date (A)
the last sale price per share of the Common Stock on such date on the
principal stock exchange on which the Common Stock has been listed or,
if there is no such price on such date, then the last sale price on
such exchange on the date nearest preceding such date, (B) if the
Common Stock is not listed on any stock exchange, the final bid price
for a share of Common Stock in the over-the-counter market, as reported
by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") at the close of business on such date, or the last
sales price if such price is reported and final bid prices are not
available, (C) if the Common Stock is not quoted on the NASDAQ, the bid
price for a share of Common Stock in the over-the-counter market as
reported by the National
6
Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting prices), or (D) if the Common
Stock is no longer publicly traded, as determined by an investment
banking firm selected in good faith by the Board of Directors based
upon the price that would be paid by a willing buyer of the shares at
issue, in a sale process designed to maximize value and attract a
reasonable number of participants to provide a fair determination of
such value, provided, that none of the transactions related to the
foregoing shall include purchases by any "affiliate" (as defined in
Rule 12b-2 under the Securities Act of 1933) of the Corporation.
(iii) The conversion rate in effect at any time for
conversion of the Series E Preferred Stock (the "Preferred Stock Rate")
shall be the quotient obtained by dividing the Original Issue Price (as
defined above) by the Conversion Price, calculated as provided in
Section 6(b)(v).
(iv) "Convertibility Date" means the later of (i) the
expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, in
respect of the transactions contemplated by the Purchase Agreement, and
(ii) such time as the Corporation's stockholders have approved the
conversion rights of the Series E Preferred Stock, including the
issuance of Common Stock upon the conversion thereof.
(v) The conversion price shall initially be $[____]
[INSERT THE PER PREFERRED SHARE PURCHASE PRICE DIVIDED BY 10] (the
"Conversion Price"). The initial Conversion Price shall be adjusted
from time to time in accordance with the provisions of Section 7. All
references to the Conversion Price herein shall mean the Conversion
Price as so adjusted.
(c) Automatic Conversion Prior to Liquidation. In the event of
a liquidation of the Corporation, the Conversion Rights shall be automatically
exercised at the close of business on the first full business day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Common Stock.
(d) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Series E Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series E Preferred Stock by a holder shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. In lieu of any fractional shares to which the holder would
otherwise be entitled, the Corporation shall pay cash equal to such fractional
share of Common Stock multiplied by the Closing Price of the Common Stock on the
business day immediately prior to the date on which conversion is deemed to
occur (as determined in subsection 6(e)(ii) below).
(e) Mechanics of Conversion.
(i) In order for a holder of Series E Preferred Stock
to convert shares of Series E Preferred Stock into shares of Common
Stock, such holder shall surrender the
7
certificate or certificates for such shares of Series E Preferred
Stock, at the office of the transfer agent for the Series E Preferred
Stock (or at the principal office of the Corporation if the Corporation
serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the
Series E Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names
of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued.
(ii) If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a
written instrument or instruments of transfer, in form satisfactory to
the Corporation, duly executed by the registered holder or his, her or
its attorney duly authorized in writing. Provided that the certificates
of the Series E Preferred Stock have been surrendered as provided
above, the Corporation shall, as soon as practicable, issue and deliver
at such office to such holder of Series E Preferred Stock, or to his,
her or its nominees, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled, together
with cash in lieu of any fraction of a share. In the event less than
all shares represented by such certificate are converted, a new
certificate shall be issued by the Corporation representing the
unconverted shares. Such conversion shall be deemed to have been made
at the close of business on the date of such surrender of the
certificates representing the shares of Series E Preferred Stock to be
converted, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date.
(f) Reservation of Common Stock. The Corporation shall, at all
times when the Series E Preferred Stock shall be outstanding, reserve and keep
available (free from preemptive rights) out of its authorized but unissued
stock, for the purpose of issuing upon conversion of the Series E Preferred
Stock, such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding Series E Preferred Stock. All shares of Common
Stock so issuable shall, upon issuance, be duly and validly issued and fully
paid and nonassessable. Before taking any action that would cause an adjustment
reducing the Conversion Price below the then par value of the shares of Common
Stock issuable upon conversion of the Series E Preferred Stock, the Corporation
will take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Corporation may validly and legally issue fully paid
and nonassessable shares of Common Stock at such adjusted Conversion Price.
(g) Notices. Any notice required herein shall be in writing
and shall be deemed effectively given: (i) upon personal delivery to the party
to be notified, (ii) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient; if not, then on the next business day,
(iii) five business days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All notices shall be addressed
to each holder of record at the address of such holder appearing on the books of
the Corporation.
8
(h) Payment of Taxes. The Corporation will pay all taxes
(other than taxes based upon income or gross receipts) and other governmental
charges that may be imposed with respect to the issue or delivery of shares of
Common Stock upon conversion of shares of Series E Preferred Stock, excluding
any tax or other charge imposed in connection with any transfer involved in the
issue and delivery of shares of Common Stock in a name other than that in which
the shares of Series E Preferred Stock so converted were registered.
7. Antidilution Adjustments. The number and kind of securities issuable
upon the conversion of the Series E Preferred Stock shall be subject to
adjustment, without duplication, from time to time upon the happening of certain
events occurring on or after the Original Issue Date as follows:
(a) Adjustment for Stock Splits and Combinations. In case the
Corporation shall (i) subdivide its outstanding Common Stock into a greater
number of shares, (ii) combine its outstanding Common Stock into a smaller
number of shares, (iii) pay a dividend or make a distribution on its outstanding
Common Stock in shares of its capital stock or (iv) issue by reclassification of
its outstanding Common Stock (whether pursuant to a merger or consolidation or
otherwise) any other shares of capital stock of the Corporation, the Series E
Preferred Stock surrendered for conversion after the record date fixed by the
Board of Directors for such subdivision, combination, dividend, distribution or
reclassification shall be entitled to receive the aggregate number and kind of
shares of capital stock of the Corporation that, if this Series E Preferred
Stock had been converted immediately prior to such record date at the Conversion
Price then in effect, such holder would have been entitled to receive by virtue
of such subdivision, combination, dividend, distribution or reclassification;
and the Conversion Price shall be deemed to have been adjusted after such record
date to apply to such aggregate number and kind of shares. Such adjustment shall
be made successively whenever any of the events listed above shall occur.
(b) Adjustment for Dividends and Distributions. In case the
Corporation shall pay a dividend or make a distribution on any class of capital
stock of the Corporation in shares of Common Stock, the Conversion Price in
effect immediately prior to the record date for the determination of
stockholders entitled to receive such dividend or distribution shall be reduced
by multiplying such Conversion Price by a fraction of which (A) the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the day immediately prior to such record date and (B) the
denominator shall be the sum of such number of shares and the total number of
shares issued in such dividend or other distribution.
(c) Adjustment for Rights to Acquire Common Stock Below Market
Price. Subject to Section 7(m) below, in case the Corporation shall issue to all
holders of Common Stock rights or warrants entitling them to subscribe for or
purchase Common Stock at a price per share less than the current market price
per share (as determined pursuant to Section 7(h) below), the Conversion Price
in effect from and after the record date therefor shall be reduced so that it
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction, of which (i) the numerator
shall be the number of shares of Common Stock outstanding on such record date
plus the number of shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock so offered for subscription or
purchase would purchase at such current market price and (ii) the denominator
9
shall be the number of shares of Common Stock outstanding on such record date
plus the number of additional shares of Common Stock so offered for subscription
or purchase. For the purpose of this Section 7(c), the issuance of rights or
warrants to subscribe for or purchase securities convertible into Common Stock
shall be deemed to be the issuance of rights or warrants to purchase the Common
Stock into which such securities are convertible (without regard to any
antidilution provision contained therein for a subsequent adjustment of such
number) at an aggregate offering price equal to the aggregate offering price of
such securities plus the minimum aggregate amount (if any) payable upon (or in
connection with) the exercise of such securities for Common Stock. Such
adjustment shall be made successively whenever such a record date is fixed. In
case such rights or warrants are not issued after such a record date has been
fixed, the Conversion Price shall be readjusted to the Conversion Price which
would have been in effect if such record date had not been fixed.
(d) Adjustment for Distribution of Debt or Assets. In case the
Corporation shall distribute to all holders of Common Stock (whether pursuant to
a merger or consolidation or otherwise) evidences of its indebtedness or assets
(excluding shares of capital stock of the Corporation and cash dividends out of
retained earnings), or rights to subscribe for Common Stock at a price less than
the current market price per share (excluding those referred to in Section 7(c)
above), then in each such case the Conversion Price in effect from and after the
record date therefor shall be adjusted so that it shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
such record date by a fraction, of which (i) the numerator shall be the current
market price per share (determined as provided in Section 7(h) below) of the
Common Stock on such record date less the fair market value (as determined by
the Board of Directors, whose determination in good faith shall be conclusive)
of the portion of the evidences of indebtedness or assets so distributed or of
such rights to subscribe applicable to one share of Common Stock and (ii) the
denominator shall be such current market price per share of Common Stock. Such
adjustment shall be made successively whenever any such a record date is fixed.
In case such distribution is not made after such a record date has been fixed,
the Conversion Price shall be readjusted to the Conversion Price which would
have been in effect if such record date had not been fixed.
(e) Adjustment for Sales of Common Stock Below Market Price
(But Above Conversion Price). If the Corporation shall issue any additional
shares of Common Stock (other than as provided in Sections 7(a) through 7(d)
above) at a price per share less than the current market price per share of
Common Stock but above the Conversion Price in respect of the Series E Preferred
Stock, then the Conversion Price shall be adjusted to the price determined by
multiplying the Conversion Price by a fraction of which (i) the numerator shall
be (A) the sum of (1) the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares of Common Stock
multiplied by the current market price and (2) the consideration, if any,
received and deemed received by the Corporation upon the issuance of such
additional shares of Common Stock (B) divided by the total number of shares of
Common Stock outstanding immediately after the issuance of such additional
shares of Common Stock, and (ii) the denominator shall be the current market
price.
(f) Adjustment for Sales of Common Stock Below Conversion
Price. If the Corporation shall issue any additional shares of Common Stock
(other than as provided in
10
Sections 7(a) through 7(e) above) at a price per share less than the Conversion
Price, then the Conversion Price shall be adjusted to the price determined by
multiplying the Conversion Price times a fraction of which (i) the numerator
shall be (A) the sum of (1) the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares of Common Stock
multiplied by the Conversion Price and (2) the consideration, if any, received
and deemed received by the Corporation upon the issuance of such additional
shares of Common Stock (B) divided by the total number of shares of Common Stock
outstanding immediately after the issuance of such additional shares of Common
Stock, and (ii) the denominator shall be the Conversion Price.
(g) Certain Determinations.
(i) In case the Corporation shall issue any security
or evidence of indebtedness that is convertible into or exchangeable
for Common Stock ("Convertible Security"), or any warrant, option or
other rights to subscribe for or purchase Common Stock or any
Convertible Security (together with Convertible Securities, "Common
Stock Equivalent"), or if, after any such issuance, the price per share
for which such additional shares of Common Stock may be issuable
thereunder is amended, then, for purposes of Sections 7(e) and (f), (A)
the maximum number of additional shares of Common Stock issuable
pursuant to all such Common Stock Equivalents (without regard to any
antidilution provision contained therein for a subsequent adjustment of
such number) shall be deemed to have been issued as of the earlier of
(1) the date on which the Corporation shall enter into a firm contract
for the issuance of such Common Stock Equivalent or (2) the date of
actual issuance of such Common Stock Equivalent, and (B) the aggregate
consideration for such maximum number of additional shares of Common
Stock shall be deemed to be the minimum consideration received and
receivable by the Corporation for the issuance of such additional
shares of Common Stock pursuant to such Common Stock Equivalent. No
adjustment of the Conversion Price shall be made under this paragraph
upon the issuance or deemed issuance of any shares of Common Stock
pursuant to the exercise of any conversion or exchange rights of any
Convertible Security or pursuant to the exercise of any warrants,
options, or other subscription or purchase rights, if any adjustments
shall previously have been made in the Conversion Price then in effect
upon the issuance of such Convertible Securities, warrants, options or
other rights pursuant hereto.
(ii) The following provisions shall be applicable to
making of adjustments in the Conversion Price hereinbefore provided in
Sections 7(c), (d), (e) and (f):
(A) The consideration received by the
Corporation shall be deemed to be the following:
(1) (x) To the extent that any
additional shares of Common Stock or any
Common Stock Equivalents shall be issued for
cash consideration, the consideration
received by the Corporation therefor, or,
(y) if such additional shares of Common
Stock or Common Stock Equivalents are
offered by the
11
Corporation for subscription, the
subscription price, or, (z) if such
additional shares of Common Stock or Common
Stock Equivalents are sold to underwriters
or dealers for public offering without a
subscription offering, the initial public
offering price, in any such case excluding
any amounts paid or receivable for accrued
interest or accrued dividends and without
deduction of any compensation, discounts,
commissions or expenses paid or incurred by
the Corporation for and in the underwriting
of, or otherwise in connection with, the
issue thereof;
(2) To the extent that such
issuance shall be for a consideration other
than cash, then, except as herein otherwise
expressly provided, the fair market value of
such consideration at the time of such
issuance as determined in good faith by the
Board of Directors. In any case in which the
consideration to be received or paid shall
be other than cash, the Board of Directors
of the Corporation shall notify promptly
each holder of the Series E Preferred Stock
of its determination of the fair market
value of such consideration;
(3) The consideration for any
additional shares of Common Stock issuable
pursuant to any Common Stock Equivalents
shall be the consideration received by the
Corporation for issuing such Common Stock
Equivalents, plus the additional
consideration payable to the Corporation
upon the exercise, conversion or exchange of
such Common Stock Equivalents; and
(4) In case of the issuance at any
time of any additional shares of Common
Stock or Common Stock Equivalents in payment
or satisfaction of any dividend upon any
class of stock other than Common Stock, the
Corporation shall be deemed to have received
for such additional shares of Common Stock
or Common Stock Equivalents a consideration
equal to the amount of such dividend so paid
or satisfied.
(B) Upon the expiration of the right to
convert, exchange or exercise any Common Stock
Equivalent the issuance of which effected an
adjustment in the Conversion Price, if any such
Common Stock Equivalent shall not have been
converted, exercised or exchanged, (1) the number of
shares of Common Stock deemed to be issued and
outstanding by reason of the fact that they were
issuable upon conversion, exchange or exercise of any
such Common Stock Equivalent shall no longer be
computed as set forth above, (2) the Conversion Price
shall forthwith be readjusted and thereafter be the
price which it would have been (but reflecting any
other adjustments in the Conversion Price made
pursuant to the provisions of this Section 7 after
the issuance of such Common Stock Equivalent) had the
adjustment of the Conversion Price made upon the
12
issuance or sale of such Common Stock Equivalent been
made on the basis of the issuance only of the number
of additional shares of Common Stock actually issued
upon exercise, conversion or exchange of such Common
Stock Equivalent, and (3) thereupon only the number
of additional shares of Common Stock actually so
issued shall be deemed to have been issued and only
the consideration actually received by the
Corporation (computed as in clause (A) above) shall
be deemed to have been received by the Corporation.
(iii) The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Corporation or
its subsidiaries.
(iv) No adjustments of the Conversion Price shall be
made pursuant to Sections 7(c), (e) and (f) upon the issuance of shares
of Common Stock that are issued pursuant to (x) any employee benefit
plan, program or policy approved by the Board of Directors of the
Corporation, including thrift plans, stock purchase plans, stock bonus
plans, stock options plans, employee stock ownership plans or other
incentive or profit sharing arrangements, for the benefit of employees,
officers or directors of the Corporation or its "affiliates" (as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended) or (y) Acquisitions made by the Corporation.
(h) Current Market Price. For the purpose of any computation
under Sections 7(c), (d) and (e) above, the current market price shall be deemed
to be the following:
(i) With respect to a bona fide underwritten public
offering, the offering price agreed to by the underwriter;
(ii) With respect to binding agreements made by the
Corporation to issue shares of Common Stock for a price that is (A)
determined as of the date of the agreement with reference to a market
price contemporaneous with the date of the binding agreement and (B)
without full adjustment to the Closing Price on the day of issuance,
the price as determined by such binding agreement; or
(iii) With respect to all other situations, the
average of the daily Closing Prices for 30 consecutive trading days
commencing 45 trading days before the date in question.
(i) Deferral of Share Issuance. In any case in which this
Section 7 shall require that an adjustment as a result of any event becomes
effective from and after a record date, the Corporation may elect to defer until
after the occurrence of such event (i) issuing to the holder of Series E
Preferred Stock converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
over and above the shares issuable on the basis of the Conversion Price in
effect immediately prior to adjustment and (ii) paying to such holder any amount
in cash in lieu of a fractional share of Common Stock pursuant to Section 6(d)
above. In lieu of the shares the issuance of which is deferred pursuant to this
Section 7(i), the Corporation shall issue or cause a transfer agent to
13
issue due bills or other appropriate evidence of the right to receive such
shares promptly after the occurrence of such event.
(j) De Minimis Adjustments. Any adjustment in the Conversion
Price otherwise required by this Section 7 to be made may be postponed until the
date of the next adjustment otherwise required to be made if such adjustment
(together with any other adjustments postponed pursuant to this Section 7 and
not theretofore made) would not require an increase or decrease of more than 1%
in such price, but in the case of an adjustment required as a result of a
dividend or distribution on any class of capital stock of the Corporation in
shares of Common Stock, such adjustment must be made no later than the earlier
of (a) 3 years after the date of the stock dividend or distribution or (b) the
date as of which the aggregate stock dividends or distributions for which
adjustment of the Conversion Price has not previously been made total at least
3% of the issued and outstanding capital stock of the Corporation with respect
to which such stock dividends or distributions were made. All calculations under
this Section 7 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be.
(k) Applicability to Other Shares. In case at any time, as a
result of an adjustment made pursuant to Section 7(a)(iii) or (iv) above, the
holders of the Series E Preferred Stock thereafter surrendered for conversion
shall become entitled to receive any shares of capital stock of the Corporation
other than Common Stock, the number and kind of such other shares so receivable
upon conversion of Series E Preferred Stock shall thereafter be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
clauses (a) to (g), inclusive, above, and the other provisions of this Section 7
with respect to the Common Stock shall apply on like terms to any such other
shares.
(l) Board Determinations. The Board of Directors may make such
reductions in the Conversion Price, in addition to those required by this
Section 7, as shall be determined by the Board of Directors to be advisable to
avoid taxation so far as practicable of any dividend of stock or stock rights or
any event treated as such for federal income tax purposes to the recipients. The
Board of Directors shall have the power to resolve any ambiguity or correct any
error in this Section 7, and (absent manifest error by the Board of Directors)
its action in so doing shall be final and conclusive.
(m) Rights Plan. With respect to any stockholder rights plan
(the "Rights Plan") pursuant to which "rights" would be issued or issuable to
stockholders of the Corporation, no adjustment shall be made to the Conversion
Price as a result of such Rights Plan in the event that an appropriate amount of
"rights" are either (i) reserved for issuance in connection with the issuance of
Conversion Shares to the holders of Series E Preferred Stock or (ii) are issued
to holders of Series E Preferred Stock on an as converted basis. Unless rights
are so issued pursuant to clause (ii) of this Section 7(m), if and when the
rights become exercisable, an appropriate adjustment to the Conversion Price in
accordance with the terms of the Rights Plan shall be made pursuant to this
Section 7.
(n) Notices of Adjustment. In each case of an adjustment or
readjustment of the Conversion Price for the number of shares of Common Stock or
other securities issuable upon conversion of shares of Series E Preferred Stock,
if the Series E Preferred Stock is then
14
convertible pursuant to Section 6, the Corporation, at its expense, shall
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjustment or readjustment, and shall
deliver such certificate to each registered holder of Series E Preferred Stock.
The certificate shall set forth such adjustment or readjustment, showing in
detail the facts upon which such adjustment or readjustment is based, including
(without limitation) a statement of (i) the consideration received or deemed to
be received by the Corporation for any additional securities issued or sold or
deemed to have been issued or sold, (ii) the Conversion Price at the time in
effect, (iii) the number of additional securities and (iv) the type and amount,
if any, of other property which at the time would be received upon conversion of
the Series E Preferred Stock.
(o) Notices of Record Date. Upon the fixing by the Board of
Directors of a record date for the purpose of determining the holders of any
class of securities who are entitled to receive any dividend or other
distribution, including, but not limited to in connection with any capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation with or into any other corporation, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
send to each holder of the Series E Preferred Stock at least 20 calendar days
prior to the record date specified therein a notice specifying (A) the record
date for the purpose of such dividend or distribution and a description of such
dividend or distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (C) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up.
THE REMAINDER OF THIS PAGE INTENTIONALLY BLANK.
15
IN WITNESS WHEREOF, QUANTA SERVICES, INC. has caused this Certificate
of Designation to be executed on its behalf by its President, and attested to by
its Secretary _____, this _______day of ________, 2002.
QUANTA SERVICES, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE UNDERSIGNED, the Secretary of Quanta Services, Inc. hereby
acknowledges, in the name and on behalf of said corporation, the foregoing
Certificate of Designation to be the corporate act of said corporation and
further certifies that, to the best of his knowledge, information and belief,
the matters and facts set forth therein with respect to the approval thereof or
otherwise required to be verified under oath are true in all material respects,
under the penalties of perjury.
By:
----------------------------------
Name: Dana Gordon
Title: Vice President, Secretary and
General Counsel
SIGNATURE PAGE TO
CERTIFICATE OF DESIGNATION