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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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QUANTA SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2851603
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1360 POST OAK BOULEVARD, SUITE 2100
HOUSTON, TEXAS 77056
(713) 629-7600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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DANA A. GORDON, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
1360 POST OAK BOULEVARD, SUITE 2100
HOUSTON, TEXAS 77056
(713) 629-7600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPY TO:
W. ROBERT SHEARER, ESQ.
WEIL, GOTSHAL & MANGES LLP
700 LOUISIANA, SUITE 1600
HOUSTON, TEXAS 77002
(713) 546-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.[X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earliest effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE REGISTRATION FEE
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4.50% Convertible Subordinated
Debentures due 2023 $270,000,000 100% (1) $270,000,000 $21,843 (2)
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Common Stock, par value
$.00001 per share (2) (2) (2) (3)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes 24,245,703 shares of common stock issuable upon conversion of the
debentures at a conversion rate of 89.7989 shares of common stock per
$1,000 principal amount of debentures. Pursuant to Rule 416 under the
Securities Act, such number of shares of common stock registered hereby
shall include an indeterminate number of shares of common stock that may
be issued in connection with a stock split, stock dividend,
recapitalization or similar event as well as pursuant to the conversion
rate adjustments described in the registration statement.
(3) Pursuant to Rule 457(i), there is no additional filing fee with respect to
the shares of common stock issuable upon conversion of the debentures
because no additional consideration will be received in connection with
the exercise of the conversion privilege.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
SUBJECT TO COMPLETION, DATED JANUARY 6, 2004
PRELIMINARY PROSPECTUS
QUANTA SERVICES, INC.
$270,000,000 4.50% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2023
AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURES
On October 17, 2003 and October 23, 2003, we issued and sold
$270,000,000 aggregate principal amount of 4.50% convertible subordinated
debentures due 2023 in private placements in reliance on an exemption from
registration under the Securities Act of 1933, as amended, or the Securities
Act. The initial purchasers of the debentures in these offerings resold the
debentures in offerings in reliance on an exemption from registration under Rule
144A of the Securities Act. The selling security holders may use this prospectus
to resell their debentures and the common stock issuable upon conversion,
redemption or repurchase of their debentures.
The debentures bear interest at the rate of 4.50% per annum. Interest
on the debentures is payable on April 1 and October 1 of each year, beginning on
April 1, 2004.
Holders may convert the debentures into shares of our common stock at a
conversion rate of 89.7989 shares per $1,000 principal amount of debentures,
subject to adjustment upon certain events, under the following circumstances:
(1) during any fiscal quarter commencing after December 31, 2003 if the last
reported sale price of our common stock is greater than or equal to 120% of the
conversion price for at least 20 trading days in the period of 30 consecutive
trading days ending on the first trading day of such fiscal quarter; (2) if we
call the debentures for redemption; (3) upon the occurrence of certain corporate
transactions; or (4) during the five business day period after any five
consecutive trading day period in which the trading price per debenture for each
day of that period was less than 98% of the product of the last reported sale
price of our common stock and the conversion rate. Upon conversion, Quanta will
have the right to deliver, in lieu of common stock, cash or a combination of
cash and common stock in the amounts described in this prospectus.
The debentures will mature on October 1, 2023, unless earlier
converted, redeemed or repurchased by us. We may redeem some or all of the
debentures in cash, at any time and from time to time, on or after October 8,
2008 at a redemption price equal to 100% of the principal amount of the
debentures to be redeemed, plus accrued and unpaid interest to but excluding the
redemption date. You may require us to repurchase some or all of your debentures
at a repurchase price equal to 100% of the principal amount of the debentures
plus accrued and unpaid interest to but excluding the applicable repurchase date
on October 1, 2008, October 1, 2013 or October 1, 2018 or at any time prior to
their maturity following a fundamental change as described in this prospectus.
We will pay cash for all debentures that holders require us to repurchase on
October 1, 2008. For any debentures that holders require us to repurchase on
October 1, 2013 or October 1, 2018 or following a fundamental change, we may, at
our option, pay the repurchase price in cash or shares of our common stock or
any combination thereof.
The debentures rank junior in right of payment to all of our existing
and future senior indebtedness. The debentures also effectively rank junior to
our subsidiaries' existing and future indebtedness and other liabilities,
including trade payables.
The debentures are not listed on any securities exchange. The
debentures are designated for trading in the PORTAL market. Our common stock is
listed on the New York Stock Exchange under the symbol "PWR." The last reported
sale price of our common stock on the New York Stock Exchange on December 31,
2003 was $7.30 per share.
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __________, 2004
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, nor is it soliciting offers to buy these securities,
in any state where the offer or sale is not permitted.
TABLE OF CONTENTS
PAGE
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Special Note Regarding Forward-Looking Statements........................ i
Summary.................................................................. 1
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 14
Price Range of Common Stock.............................................. 14
Dividend Policy.......................................................... 14
Description of Other Indebtedness........................................ 15
Description of Debentures................................................ 17
Description of Capital Stock............................................. 40
Material U.S. Federal Income Tax Considerations.......................... 44
Selling Security Holders................................................. 49
Plan of Distribution..................................................... 56
Legal Matters............................................................ 57
Experts.................................................................. 57
Where You Can Find More Information...................................... 57
Incorporation of Certain Documents by Reference.......................... 58
In making your investment decision, you should rely only on the
information contained or incorporated by reference in this prospectus. We have
not authorized anyone to provide you with any other information. If you receive
any other information, you should not rely on it.
The selling security holders are offering to sell the debentures and
the common stock issuable upon conversion of the debentures only in places where
offers and sales are permitted.
You should not assume that the information contained or incorporated by
reference in this prospectus is accurate as of any date other than the date on
the front cover of this prospectus.
In this prospectus, "Quanta," "we," "us" and "our" refer to Quanta
Services, Inc. and its subsidiaries, and "initial purchasers" refers to Banc of
America Securities LLC and J.P. Morgan Securities Inc., in each case except
where the context otherwise requires or as otherwise indicated. References in
this prospectus to our common stock include rights associated with our common
stock pursuant to our stockholder rights plan.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes statements reflecting assumptions,
expectations, projections, intentions or beliefs about future events that are
intended as "forward-looking statements" under the Private Securities Litigation
Reform Act of 1995. You can identify these statements by the fact that they do
not relate strictly to historical or current facts. They use words such as
"anticipate," "estimate," "project," "forecast," "may," "will," "should,"
"could," "expect," "believe" and other words of similar meaning. In particular,
these include, but are not limited to, statements relating to the following:
- projected operating or financial results;
- expectations regarding capital expenditures;
- the effects of competition in our markets;
- the duration and extent of the current economic downturn;
- material adverse changes in economic conditions in the markets
served by us or by our customers; and
- our ability to achieve cost savings.
i
Any or all of our forward-looking statements may turn out to be wrong.
They can be affected by inaccurate assumptions and by known or unknown risks and
uncertainties, including the following:
- the duration and extent of the current economic downturn;
- the cost of borrowing, availability of credit, debt covenant
compliance and other factors affecting our financing
activities;
- quarterly variations in our operating results due to
seasonality and adverse weather conditions;
- material adverse changes in economic conditions in the markets
served by us or by our customers;
- the adverse impact of goodwill impairments;
- replacement of our contracts as they are completed or expire;
- rapid technological and structural changes that could reduce
the demand for the services we provide;
- our ability to effectively compete for market share;
- our ability to generate internal growth;
- retention of key personnel and qualified employees;
- the impact of our unionized workforce on our operations and
acquisition strategy;
- potential exposure to environmental liabilities;
- our ability to effectively integrate the operations of our
companies;
- beliefs and assumptions about the collectibility of
receivables;
- our dependence on fixed price contracts;
- cancellation provisions within our contracts;
- beliefs or assumptions about the outlook for markets we serve;
and
- the other risks and uncertainties as are described under "Risk
Factors" and as may be detailed from time to time in our
public filings with the Securities and Exchange Commission
(SEC).
Many of these factors will be important in determining our actual
future results. Consequently, no forward-looking statement can be guaranteed.
Our actual future results may vary materially from those expressed or implied in
any forward-looking statements.
All of our forward-looking statements, whether written or oral, are
expressly qualified by these cautionary statements and any other cautionary
statements that may accompany such forward-looking statements. In addition, we
disclaim any obligation to update any forward-looking statements to reflect
events or circumstances after the date of this prospectus.
ii
SUMMARY
The following summary provides an overview of selected information
about us. This summary is qualified in its entirety by the more detailed
information, including our consolidated financial statements and related notes
thereto, included or incorporated by reference in this prospectus. You should
carefully consider the entire prospectus, including the "Risk Factors" section,
before making an investment decision.
THE COMPANY
We are a leading provider of specialized contracting services, offering
end-to-end network solutions to the electric power, gas, telecommunications, and
cable television industries. We have principal offices in 35 states and provide
services nationwide, giving us the presence and capability to quickly, reliably
and effectively complete projects throughout the United States. For the nine
months ended September 30, 2003, our end markets provided the following
percentages of our revenues:
- Electric power and natural gas (61%)
- Telecommunications (15%)
- Cable television (7%)
- Other, including industrial, commercial, and government
customers (17%)
Our primary service capabilities include the following:
- Repair
- Maintenance
- Installation
- Emergency Response
- Design
- Specialty Services
Within the electric power and natural gas end markets, services we
provide include: installation, repair and maintenance of electric power
distribution networks, electric transmission lines, substation facilities and
natural gas distribution systems, and storm damage restoration work. Within the
telecommunications and cable television end markets, services we provide
include: fiber optic, copper, and coaxial cable installation and maintenance for
video, data and voice transmission; design, construction and maintenance of DSL
networks and switching systems; engineering and erection of wireless
telecommunications towers; and residential installation and customer connects
for cable television, telephone, and Internet services.
We were founded in 1997 and began as a group of infrastructure services
companies led by our Chief Executive Officer, John Colson. We completed our
initial public offering in 1998 and since that time have expanded our geographic
coverage and service capabilities through acquisitions and internal growth. Our
operating structure allows for the flexibility of multiple operating units with
the benefit of an organization with scale. Our units are managed on a
decentralized basis, with units operated as individual profit centers. To
leverage our scale and geographic reach, our operating units have incentives to
cross-sell additional services of other operating units to customers. In
addition, our business development group promotes and markets our services for
prospective large national accounts and projects that require services from
multiple business units.
During 2002 and 2003, we have taken several actions to reduce costs. We
conducted a comprehensive cost evaluation program the scope of which ranged from
equipment utilization to cell phone expenses and has resulted in cost reductions
at our units. In addition, we consolidated various operations where there were
operational or regional synergies. We reduced salary and benefit costs through
staff reductions at several levels of the organization and increased utilization
of hourly employees. Our scaleable workforce was
1
comprised of 1,798 salaried employees and 9,945 hourly employees at December 31,
2002, and 1,439 salaried employees and 10,190 hourly employees at September 30,
2003.
Financial and economic pressures have led our customers to return to
their core competencies and focus on cost reductions, resulting in an increased
focus on outsourcing services. We believe that we are adequately positioned to
provide these services because of our proven full-service operating units with
broad geographic reach, financial capability and technical expertise.
Quanta was incorporated in 1997 as a Delaware corporation and its
common stock is traded on the New York Stock Exchange under the symbol "PWR."
Our principal executive offices are located at 1360 Post Oak Boulevard, Suite
2100, Houston, Texas 77056, and our telephone number is (713) 629-7600. We
maintain a website at www.quantaservices.com. Information on our website does
not constitute a part of this prospectus.
THE OFFERING
The following summary contains basic information about the debentures
and is not intended to be complete. It does not contain all the information that
is important to you. For a more complete understanding of the debentures, please
refer to the section of this prospectus entitled "Description of Debentures."
For purposes of the description of the debentures included in this prospectus,
references to "the company," "Quanta," "we," "us" and "our" refer only to Quanta
Services, Inc. and do not include our subsidiaries.
Securities Offered.............. $270,000,000 principal amount of 4.50%
Convertible Subordinated Debentures due 2023.
Maturity Date................... October 1, 2023, unless earlier converted,
redeemed or repurchased.
Ranking......................... The debentures rank junior in right of
payment to all of our existing and future
senior indebtedness and equally in right of
payment with all of our subordinated
indebtedness. The debentures rank equally in
right of payment with our $172.5 in aggregate
principal amount of 4% convertible
subordinated notes due 2007. Any amounts
borrowed by us under our new credit facility
will constitute senior indebtedness. The
debentures are also effectively subordinated
to the liabilities of our subsidiaries, and,
as of September 30, 2003, our subsidiaries
had approximately $6.7 million of
indebtedness.
Interest........................ 4.50% per annum on the principal amount,
payable semiannually in arrears on April 1
and October 1 of each year, beginning on
April 1, 2004.
Conversion Rights............... You may convert the debentures into shares of
our common stock at a conversion rate of
89.7989 shares per $1,000 principal amount of
debentures (equal to a conversion price of
approximately $11.14 per share), subject to
adjustment, only under the following
circumstances:
- during any fiscal quarter commencing after
December 31, 2003 if the last reported
sale price of our common stock is greater
than or equal to 120% of the conversion
price for at least 20 trading days in the
period of 30 consecutive trading days
ending on the first trading day of such
fiscal quarter;
- if the debentures have been called for
redemption by us;
- upon the occurrence of specified corporate
transactions described under "Description
of Debentures -- Conversion Upon Specified
Corporate Transactions"; or
- during the five business day period after
any five consecutive trading day period in
which the trading price per debenture for
each day of that period
2
was less than 98% of the product of the
last reported sale price of our common
stock and the number of shares issuable
upon conversion of $1,000 principal amount
of the debentures.
You will not receive any cash payment or
additional shares representing accrued and
unpaid interest upon conversion of a
debenture, except in limited circumstances.
Instead, interest will be deemed paid by the
common stock issued to you upon conversion.
Debentures called for redemption may be
surrendered for conversion prior to the close
of business on the second business day
immediately preceding the redemption date.
Upon a surrender of your debentures for
conversion, we will have the right to
deliver, in lieu of shares of our common
stock, cash or a combination of cash and
shares of common stock in amounts described
in this prospectus under "Description of
Debentures -- Conversion Rights -- Payment
upon Conversion."
Sinking Fund.................... None.
Optional Redemption............. Prior to October 8, 2008, the debentures will
not be redeemable. On or after October 8,
2008, we may redeem for cash some or all of
the debentures, at any time and from time to
time, upon at least 30 days' notice for a
price equal to 100% of the principal amount
of the debentures to be redeemed, plus any
accrued and unpaid interest to but excluding
the redemption date.
Repurchase of Debentures by Us
at the Option of the Holder..... You may require us to repurchase some or all
of your debentures on October 1, 2008,
October 1, 2013 or October 1, 2018 at a
repurchase price equal to 100% of the
principal amount of the debentures being
repurchased, plus any accrued and unpaid
interest to but excluding the applicable
repurchase date. We will pay cash for all
debentures that holders require us to
repurchase on October 1, 2008. For any
debentures that holders require us to
repurchase on October 1, 2013 or October 1,
2018, we may, at our option, pay the
repurchase price in cash or shares of our
common stock (valued using the method set
forth in "Description of Debentures --
Repurchase of Debentures by Us at the Option
of the Holder") or a combination of cash and
shares of our common stock, provided that we
will pay any accrued and unpaid interest in
cash.
Fundamental Change.............. If we undergo a fundamental change (as
defined in "Description of Debentures -
Repurchase of Debentures by Us at the Option
of the Holder upon a Fundamental Change")
prior to maturity of the debentures, you will
have the right, at your option, to require us
to repurchase some or all of your debentures
at a repurchase price equal to 100% of the
principal amount of the debentures being
repurchased, plus any accrued and unpaid
interest to but excluding the applicable
repurchase date. We may, at our option, pay
the repurchase price for such debentures in
cash or shares of our common stock (valued
using the method set forth in "Description of
Debentures -- Repurchase of Debentures by Us
at the Option of the Holder") or a
combination of cash and shares of our common
stock, provided that we will pay any accrued
and unpaid interest in cash.
Use of Proceeds................. We will not receive any of the proceeds of
the sale by the selling security holders of
the debentures or the common stock into which
the debentures may be converted.
3
Book-Entry Form................. The debentures were issued in book-entry form
and are represented by global certificates
deposited with, or on behalf of, The
Depository Trust Company (DTC) and registered
in the name of a nominee of DTC. Beneficial
interests in any of the debentures will be
shown on, and transfers will be effected only
through, records maintained by DTC or its
nominee, and any such interests may not be
exchanged for certificated securities except
in limited circumstances.
Trading......................... Since their initial issuances the debentures
have been eligible for trading on the PORTAL
market. However, debentures sold pursuant to
this prospectus are not expected to remain
eligible for trading on the PORTAL market. We
do not intend to list the debentures on any
national securities exchange or in any
automated quotation system.
Our common stock is listed on the New York
Stock Exchange under the symbol "PWR."
Limited Vote Common Stock....... As of December 31, 2003, there were
approximately 1,067,750 shares of limited
vote common stock outstanding. Our limited
vote common stock is not listed on any
securities exchange or included in any
automated quotation system. Each share of
limited vote common stock will automatically
convert into common stock on a
share-for-share basis immediately upon a sale
of such shares.
RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
---------------------------------------------------- NINE MONTHS ENDED
1998 1999 2000 2001 2002 SEPTEMBER 30, 2003
-------- -------- -------- -------- -------- --------------------
Ratio of earnings to fixed
charges(a)..................... 6.1 6.4 7.4 4.6 (b) (b)
(a) For purposes of computing the ratios of earnings to fixed charges:
(1) "earnings" consists of income before provision for income
taxes, plus fixed charges (excluding capitalized interest);
and
(2) "fixed charges" consists of interest expensed and capitalized,
amortization of debt discount and expense relating to
indebtedness and the portion of rental expense representative
of the interest factor attributable to leases for rental
property.
(b) Due to losses for the year ended December 31, 2002, and the nine months
ended September 30, 2003, the ratio of earnings to fixed charges for
such periods was less than 1:1. In order to achieve a coverage ratio of
1:1, we needed additional earnings of $193.8 million for the year ended
December 31, 2002 and $13.8 million for the nine months ended September
30, 2003.
4
RISK FACTORS
You should consider the following risk factors, in addition to the
other information presented in this prospectus and the documents incorporated by
reference in this prospectus, in evaluating us, our business and an investment
in the debentures and common stock issuable upon conversion of the debentures.
Any of the following risks, as well as other risks and uncertainties, could
seriously harm our business and financial results and cause the value of the
debentures and common stock issuable upon conversion of the debentures to
decline, which in turn could cause you to lose all or part of your investment.
RISKS RELATING TO OUR BUSINESS
A CONTINUED ECONOMIC DOWNTURN MAY LEAD TO LESS DEMAND FOR OUR SERVICES.
If the general level of economic activity remains slow or deteriorates
further, our customers may delay or cancel new projects. The telecommunications
and utility markets have experienced substantial change during 2002 as evidenced
by an increased number of bankruptcies in the telecommunications market,
continued devaluation of many of our customers' debt and equity securities and
pricing pressures resulting from challenges faced by major industry
participants. These factors have contributed to the delay and cancellation of
projects and reduction of capital spending that have impacted our operations and
ability to grow at historical levels. A number of other factors, including
financing conditions for and potential bankruptcies in the industries we serve,
could adversely affect our customers and their ability or willingness to fund
capital expenditures in the future or pay for past services. In addition,
consolidation, competition or capital constraints in the electric power, gas,
telecommunications or cable television industries may result in reduced spending
by, or the loss of, one or more of our customers.
WE MAY NOT HAVE ACCESS IN THE FUTURE TO SUFFICIENT FUNDING TO FINANCE DESIRED
GROWTH.
If we cannot secure additional financing in the future on acceptable
terms, we may be unable to support our growth strategy. We cannot readily
predict the ability of certain customers to pay for past services or the timing,
size and success of our acquisition efforts. Using cash for acquisitions limits
our financial flexibility and makes us more likely to seek additional capital
through future debt or equity financings. Our existing debt agreements contain
significant restrictions on our operational and financial flexibility, including
our ability to incur additional debt, and if we seek more debt we may have to
agree to additional covenants that limit our operational and financial
flexibility. When we seek additional debt or equity financings, we cannot be
certain that additional debt or equity will be available to us on terms
acceptable to us or at all.
OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY FROM QUARTER TO QUARTER.
We experience lower gross and operating margins during winter months
due to lower demand for our services and more difficult operating conditions.
Additionally, our quarterly results may also be materially and adversely
affected by:
- the timing and volume of work under new agreements;
- regional or general economic conditions;
- the budgetary spending patterns of customers;
- payment risk associated with the financial condition of
customers;
- variations in the margins of projects performed during any
particular quarter;
- the termination of existing agreements;
- costs we incur to support growth internally or through
acquisitions or otherwise;
- losses experienced in our operations not otherwise covered by
insurance;
- a change in the demand for our services caused by severe
weather conditions;
- a change in the mix of our customers, contracts and business;
5
- increases in construction and design costs;
- changes in bonding and lien requirements applicable to
existing and new agreements;
- the timing of acquisitions; and
- the timing and magnitude of acquisition integration costs.
Accordingly, our operating results in any particular quarter may not be
indicative of the results that you can expect for any other quarter or for the
entire year.
OUR DEPENDENCE UPON FIXED PRICE CONTRACTS COULD ADVERSELY AFFECT OUR BUSINESS.
We currently generate, and expect to continue to generate, a portion of
our revenues under fixed price contracts. We must estimate the costs of
completing a particular project to bid for fixed price contracts. The cost of
labor and materials, however, may vary from the costs we originally estimated.
These variations, along with other risks inherent in performing fixed price
contracts, may cause actual revenue and gross profits for a project to differ
from those we originally estimated and could result in reduced profitability or
losses on projects. Depending upon the size of a particular project, variations
from the estimated contract costs can have a significant impact on our operating
results for any fiscal quarter or year.
OUR RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED AS A RESULT OF GOODWILL
IMPAIRMENTS.
When we acquire a business, we record an asset called "goodwill" equal
to the excess amount we pay for the business, including liabilities assumed,
over the fair value of the tangible assets of the business we acquire. Through
December 31, 2001, pursuant to generally accepted accounting principles, we
amortized this goodwill over its estimated useful life of 40 years following the
acquisition, which directly impacted our earnings. The Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 142 which provides that goodwill and other intangible assets that have
indefinite useful lives not be amortized, but instead must be tested at least
annually for impairment, and intangible assets that have finite useful lives
should continue to be amortized over their useful lives. SFAS No. 142 also
provides specific guidance for testing goodwill and other non-amortized
intangible assets for impairment. SFAS No. 142 requires management to make
certain estimates and assumptions to allocate goodwill to reporting units and to
determine the fair value of reporting unit net assets and liabilities,
including, among other things, an assessment of market conditions, projected
cash flows, investment rates, cost of capital and growth rates, which could
significantly impact the reported value of goodwill and other intangible assets.
SFAS No. 142 requires, in lieu of amortization, an initial impairment review of
goodwill, which we performed in 2002, and annual impairment tests thereafter.
Based on our transitional impairment test performed upon adoption of
SFAS No. 142, we recognized a $488.5 million non-cash charge ($445.4 million,
net of tax), to reduce the carrying value of goodwill to the implied fair value
of our reporting units. Under SFAS No. 142, the impairment adjustment recognized
at adoption of the new rules was reflected as a cumulative effect of change in
accounting principle, net of tax, in the year ended December 31, 2002.
We further recognized an interim non-cash goodwill impairment charge of
$166.6 million during the year ended December 31, 2002. Impairment adjustments
recognized after adoption of SFAS No. 142 are required to be recognized as
operating expenses. The primary factor contributing to the interim impairment
charge was the overall deterioration of the business climate during 2002 in the
markets we serve as evidenced by an increased number of bankruptcies in the
telecommunications industry, continued devaluation of several of our customers'
debt and equity securities and pricing pressures resulting from challenges faced
by major industry participants. Fair value was determined using a combination of
the discounted cash flow, market multiple and market capitalization valuation
approaches. On an ongoing basis (absent any impairment indicators), we expect to
perform impairment tests annually during the fourth quarter. Future impairments,
if any, will be recognized as operating expenses.
MANY OF OUR CONTRACTS MAY BE CANCELED ON SHORT NOTICE, AND WE MAY BE
UNSUCCESSFUL IN REPLACING OUR CONTRACTS AS THEY ARE COMPLETED OR EXPIRE.
We could experience a decrease in our revenue, net income and liquidity
if any of the following occur:
- our customers cancel a significant number of contracts;
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- we fail to win a significant number of our existing contracts
upon re-bid;
- we complete the required work under a significant number of
non-recurring projects and cannot replace them with similar
projects; or
- we fail to reduce operating and overhead expenses consistent
with any decrease in our revenue.
Many of our customers may cancel our contracts with them on short
notice, typically 30-90 days, even if we are not in default under the contract.
Certain of our customers assign work to us on a project-by-project basis under
master service agreements. Under these agreements, our customers often have no
obligation to assign work to us. Our operations could decline significantly if
the anticipated volume of work is not assigned to us. Many of our contracts,
including our master service contracts, are opened to public bid at the
expiration of their terms. There can be no assurance that we will be the
successful bidder on our existing contracts that come up for bid.
THE INDUSTRIES WE SERVE ARE SUBJECT TO RAPID TECHNOLOGICAL AND STRUCTURAL
CHANGES THAT COULD REDUCE THE DEMAND FOR THE SERVICES WE PROVIDE.
The electric power, gas, telecommunications and cable television
industries are undergoing rapid change as a result of technological advances
that could, in certain cases, reduce the demand for our services or otherwise
negatively impact our business. New or developing technologies could displace
the wireline systems used for voice, video and data transmissions, and
improvements in existing technology may allow telecommunications and cable
television companies to significantly improve their networks without physically
upgrading them.
OUR INDUSTRY IS HIGHLY COMPETITIVE.
Our industry is served by numerous small, owner-operated private
companies, a few public companies and several large regional companies. In
addition, relatively few barriers prevent entry into our industry. As a result,
any organization that has adequate financial resources and access to technical
expertise may become one of our competitors. Competition in the industry depends
on a number of factors, including price. Certain of our competitors may have
lower overhead cost structures and may, therefore, be able to provide their
services at lower rates than we are able to provide. In addition, some of our
competitors have greater resources than we do. We cannot be certain that our
competitors will not develop the expertise, experience and resources to provide
services that are superior in both price and quality to our services. Similarly,
we cannot be certain that we will be able to maintain or enhance our competitive
position within our industry or maintain a customer base at current levels. We
may also face competition from the in-house service organizations of our
existing or prospective customers. Electric power, gas, telecommunications and
cable television service providers usually employ personnel who perform some of
the same types of services we do. We cannot be certain that our existing or
prospective customers will continue to outsource services in the future.
FAILURE TO OBTAIN OR MAINTAIN NECESSARY PERFORMANCE BONDS COULD ADVERSELY AFFECT
OUR BUSINESS.
Contracts in the industries we serve often require performance bonds or
other means of financial assurance to secure contractual performance. During
2002, the market for performance bonds tightened significantly. If we are unable
to obtain performance bonds or letters of credit in sufficient amounts or on
acceptable terms, we might be precluded from entering into additional contracts
with certain of our customers. Management believes that our current surety
arrangements will satisfy all of our bonding needs for the foreseeable future,
but there can be no assurance that such surety arrangements will be sufficient
to satisfy all of our future bonding needs.
WE MAY BE UNSUCCESSFUL AT GENERATING INTERNAL GROWTH.
Our ability to generate internal growth will be affected by, among
other factors, our ability to:
- expand the range of services we offer to customers to address
their evolving network needs;
- attract new customers;
- increase the number of projects performed for existing
customers;
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- hire and retain employees; and
- open additional facilities.
In addition, our customers may reduce the number or size of projects
available to us due to their inability to obtain capital or pay for services
provided. Many of the factors affecting our ability to generate internal growth
may be beyond our control, and we cannot be certain that our strategies will be
successful or that we will be able to generate cash flow sufficient to fund our
operations and to support internal growth. If we are unsuccessful, we may not be
able to achieve internal growth, expand our operations or grow our business.
OUR BUSINESS GROWTH COULD OUTPACE THE CAPABILITY OF OUR CORPORATE MANAGEMENT
INFRASTRUCTURE.
We cannot be certain that our infrastructure will be adequate to
support our operations as they expand. Future growth also could impose
significant additional responsibilities on members of our senior management,
including the need to recruit and integrate new senior level managers and
executives. We cannot be certain that we can recruit and retain such additional
managers and executives. To the extent that we are unable to manage our growth
effectively, or are unable to attract and retain additional qualified
management, we may not be able to expand our operations or execute our business
plan.
THE DEPARTURE OF KEY PERSONNEL COULD DISRUPT OUR BUSINESS.
We depend on the continued efforts of our executive officers and on
senior management of the businesses we acquire. Although we have entered into
employment agreements with terms of one to three years with most of our
executive officers and certain other key employees, we cannot be certain that
any individual will continue in such capacity for any particular period of time.
The loss of key personnel, or the inability to hire and retain qualified
employees, could negatively impact our ability to manage our business. We do not
carry key-person life insurance on any of our employees.
OUR UNIONIZED WORKFORCE COULD ADVERSELY AFFECT OUR OPERATIONS AND OUR ABILITY TO
COMPLETE FUTURE ACQUISITIONS.
As of September 30, 2003, approximately 41% of our employees were
covered by collective bargaining agreements. Although the majority of these
agreements prohibit strikes and work stoppages, we cannot be certain that
strikes or work stoppages will not occur in the future. Strikes or work
stoppages would adversely impact our relationships with our customers and could
cause us to lose business and decrease our revenue. In addition, our ability to
complete future acquisitions could be adversely affected because of our union
status for a variety of reasons. For instance, our union agreements may be
incompatible with the union agreements of a business we want to acquire and some
businesses may not want to become affiliated with a union based company.
OUR BUSINESS IS LABOR INTENSIVE, AND WE MAY BE UNABLE TO ATTRACT AND RETAIN
QUALIFIED EMPLOYEES.
Our ability to maintain our productivity and profitability will be
limited by our ability to employ, train and retain skilled personnel necessary
to meet our requirements. We may experience shortages of qualified journeyman
linemen. We cannot be certain that we will be able to maintain an adequate
skilled labor force necessary to operate efficiently and to support our growth
strategy or that our labor expenses will not increase as a result of a shortage
in the supply of these skilled personnel. Labor shortages or increased labor
costs could impair our ability to maintain our business or grow our revenues.
WE ARE SELF-INSURED AGAINST POTENTIAL LIABILITIES.
Although we maintain insurance policies with respect to automobile,
general liability, workers' compensation and employers' liability, those
policies are subject to deductibles of $1,000,000 to $2,000,000 per occurrence,
and we are primarily self-insured for all claims that do not exceed the amount
of the applicable deductible. We also maintain a non-union employee related
health care benefit plan that is subject to a deductible of $250,000 per
claimant per year. Losses up to the deductible amounts are accrued based upon
our estimates of the ultimate liability for claims incurred and an estimate of
claims incurred but not reported. However, insurance liabilities are difficult
to assess and estimate due to unknown factors, including the severity of an
injury, the determination of our liability in proportion to other parties, the
number of incidents not reported and the effectiveness of our safety program. If
we were to experience insurance claims or costs above our estimates, our
business could be materially and adversely affected.
8
WE COULD HAVE POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES.
Our operations are subject to various environmental laws and
regulations, including those dealing with the handling and disposal of waste
products, PCBs, fuel storage and air quality. As a result of past and future
operations at our facilities, we may be required to incur environmental
remediation costs and other cleanup expenses. In addition, we cannot be certain
that we will be able to identify or be indemnified for all potential
environmental liabilities relating to any acquired business, property or assets.
WE MAY INCUR LIABILITIES RELATING TO OCCUPATIONAL HEALTH AND SAFETY MATTERS.
Our operations are subject to extensive laws and regulations relating
to the maintenance of safe conditions in the workplace. While we have invested,
and will continue to invest, substantial resources in our occupational health
and safety programs, our industry involves a high degree of operational risk and
there can be no assurance that we will avoid significant liability exposure.
Although we have taken what we believe are appropriate precautions, we have
suffered fatalities in the past and may suffer additional fatalities in the
future. Claims for damages to persons, including claims for bodily injury or
loss of life, could result in substantial costs and liabilities.
WE MAY BE UNSUCCESSFUL AT INTEGRATING COMPANIES THAT WE EITHER HAVE ACQUIRED OR
THAT WE MAY ACQUIRE IN THE FUTURE.
We cannot be sure that we can successfully integrate our acquired
companies with our existing operations without substantial costs, delays or
other operational or financial problems. If we do not implement proper overall
business controls, our decentralized operating strategy could result in
inconsistent operating and financial practices at the companies we acquire and
our overall profitability could be adversely affected. Integrating our acquired
companies involves a number of special risks which could have a negative impact
on our business, financial condition and results of operations, including:
- failure of acquired companies to achieve the results we
expect;
- diversion of our management's attention from operational
matters;
- difficulties integrating the operations and personnel of
acquired companies;
- inability to retain key personnel of the acquired companies;
- risks associated with unanticipated events or liabilities; and
- potential disruptions of our business.
If one of our acquired companies suffers customer dissatisfaction or
performance problems, the reputation of our entire company could suffer.
FIRST RESERVE'S INVESTMENT IN US MAY RESULT IN POTENTIAL CONFLICTS OF INTEREST
WITH, OR DILUTION OF, EXISTING STOCKHOLDERS.
First Reserve Fund IX, L.P. (First Reserve) currently owns
approximately 36.6% of the outstanding shares of our common stock. By reason of
such stock ownership, conflicts of interest may arise in the future between us
and First Reserve and its affiliates with respect to, among other things,
issuances of additional shares of voting securities or the payment of dividends.
There are no contractual or other restrictions on the ability of First Reserve
or its affiliates to pursue other investment opportunities in any of the
industries we serve. In addition, First Reserve may have interests that could be
in conflict with those of the holders of the debentures or other stockholders.
YOU ARE UNLIKELY TO BE ABLE TO SEEK REMEDIES AGAINST ARTHUR ANDERSEN LLP, OUR
FORMER INDEPENDENT AUDITOR.
Our consolidated financial statements for the fiscal years ended prior
to December 31, 2002 were audited by Arthur Andersen LLP, our former independent
auditor. In June 2002 Arthur Andersen LLP was convicted of federal obstruction
of justice charges in connection with its destruction of documents. As a result
of its conviction, Arthur Andersen LLP has ceased operations and is no longer in
a position to reissue its audit reports or to provide consent to include
financial statements reported on by it in this prospectus. Because Arthur
Andersen LLP has not reissued its reports and because we are not able to obtain
a consent from Arthur Andersen LLP,
9
you will be unable to sue Arthur Andersen LLP for material misstatements or
omissions, if any, in this prospectus, including the financial statements
covered by its previously issued reports. Even if you have a basis for asserting
a remedy against, or seeking to recover from, Arthur Andersen LLP, we believe
that it is unlikely that you would be able to recover damages from Arthur
Andersen LLP.
CERTAIN PROVISIONS OF OUR CORPORATE GOVERNING DOCUMENTS COULD MAKE AN
ACQUISITION OF OUR COMPANY MORE DIFFICULT.
The following provisions of our certificate of incorporation and
bylaws, as currently in effect, as well as our stockholder rights plan and
Delaware law, could discourage potential proposals to acquire us, delay or
prevent a change in control of us or limit the price that investors may be
willing to pay in the future for shares of our common stock:
- our certificate of incorporation permits our board of
directors to issue "blank check" preferred stock and to adopt
amendments to our bylaws;
- our bylaws contain restrictions regarding the right of
stockholders to nominate directors and to submit proposals to
be considered at stockholder meetings;
- our certificate of incorporation and bylaws restrict the right
of stockholders to call a special meeting of stockholders and
to act by written consent;
- we are subject to provisions of Delaware law which prohibit us
from engaging in any of a broad range of business transactions
with an "interested stockholder" for a period of three years
following the date such stockholder became classified as an
interested stockholder; and
- on March 8, 2000, we adopted, and have subsequently amended, a
stockholder rights plan that could cause substantial dilution
to a person or group that attempts to acquire us on terms not
approved by our board of directors or permitted by the
stockholder rights plan.
RISKS RELATING TO OUR DEBENTURES
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO REPURCHASE THE
DEBENTURES UPON A FUNDAMENTAL CHANGE OR ON ANY OTHER REPURCHASE DATE, AS
REQUIRED BY THE INDENTURE GOVERNING THE DEBENTURES.
On October 1, 2008, holders of the debentures may require us to
repurchase their debentures for cash. In addition, on October 1, 2013 and
October 1, 2018, or following a fundamental change as described under
"Description of Debentures -- Repurchase of Debentures by Us at the Option of
the Holder upon a Fundamental Change," holders of debentures may require us to
repurchase their debentures, at our option in cash or shares of our common stock
or a combination thereof. A fundamental change may also constitute an event of
default under, and result in the acceleration of the maturity of, our then
existing indebtedness. We cannot assure you that we will have sufficient
financial resources or that we will be able to arrange financing to pay the
repurchase price in cash with respect to any debentures tendered by holders for
repurchase on any of these dates or upon a fundamental change.
Even if we issue shares of common stock in satisfaction of our
repurchase obligation, this may result in dilution of our common stock, which
may negatively impact the price of the debentures. In addition, restrictions in
our then existing credit facilities or other indebtedness may not allow us to
repurchase the debentures. Our failure to repurchase the debentures when
required would result in an event of default with respect to the debentures.
Such an event of default could negatively affect the trading price of the
debentures and our common stock because the event of default could lead to the
principal and accrued and unpaid interest on the outstanding debentures becoming
immediately due and payable.
AS A HOLDING COMPANY, OUR ONLY SOURCE OF CASH IS DISTRIBUTIONS FROM OUR
SUBSIDIARIES.
We are a holding company with no operations of our own and we conduct
all of our business through our subsidiaries. The debentures will be obligations
exclusively of us. Our only significant asset is the outstanding capital stock
of our subsidiaries, and this capital stock collateralizes our new senior
secured credit facility. We are wholly dependent on the cash flow of our
subsidiaries and dividends and distributions to us from our subsidiaries in
order to service our current indebtedness, including the debentures, and any of
our future obligations. Our subsidiaries are separate and distinct legal
entities and will have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the debentures or to make any funds available therefor.
The ability of our subsidiaries to pay such
10
dividends and distributions will be subject to, among other things, statutory or
contractual restrictions. We will need sufficient funds available to pay cash
interest on the debentures beginning on April 1, 2004, and to repay the
debentures when required. We cannot assure you that our subsidiaries will
generate cash flow sufficient to pay dividends or distributions to us in order
to pay interest or other payments on the debentures.
THE TRADING PRICES OF THE DEBENTURES COULD BE SIGNIFICANTLY AFFECTED BY THE
TRADING PRICES OF OUR COMMON STOCK.
We expect that the trading prices of the debentures in the secondary
market will be significantly affected by the trading prices of our common stock,
the general level of interest rates and our credit quality. As discussed above,
the market price of our common stock may be volatile. This may result in greater
volatility in the trading prices of the debentures than would be expected for
nonconvertible debt securities. It is impossible to predict whether the price of
our common stock or interest rates will rise or fall.
Trading prices of our common stock will be influenced by our operating
results and prospects and by economic, financial, regulatory and other factors.
In addition, general market conditions, including the level of, and fluctuations
in, the trading prices of stocks generally, and sales of substantial amounts of
common stock by us in the market after the offering of the debentures, or the
perception that such sales may occur, could affect the price of our common
stock.
YOUR RIGHT TO RECEIVE PAYMENTS ON THE DEBENTURES RANKS JUNIOR TO ALL OF OUR
EXISTING AND FUTURE SENIOR INDEBTEDNESS.
The debentures are our unsecured, subordinated obligations. The
debentures rank junior in right of payment to all of our existing and future
senior indebtedness, including any indebtedness incurred under our new senior
secured credit facility. In any liquidation, dissolution, bankruptcy or other
similar proceeding, the holders of our senior indebtedness will be entitled to
be paid in full and in cash before any payment may be made with respect to the
debentures. In addition, all payments on the debentures will be blocked in the
event of a payment default on senior indebtedness and may be blocked for up to
180 consecutive days in the event of certain non-payment defaults on senior
indebtedness.
In addition, our existing and future secured indebtedness, including
any indebtedness incurred under our new senior secured credit facility, will
effectively rank senior to the debentures to the extent of the assets securing
such indebtedness.
THE DEBENTURES ARE EFFECTIVELY SUBORDINATED TO THE LIABILITIES OF OUR
SUBSIDIARIES.
The debentures are not guaranteed by our subsidiaries and are
effectively subordinated to all existing and future liabilities of our
subsidiaries. Our right to receive any assets of any of our subsidiaries upon
their liquidation or reorganization, and therefore the right of holders of the
debentures to participate in those assets, is effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors. In addition,
even if we were a creditor to any of our subsidiaries, our rights as a creditor
would be subordinated to any security interest in the assets of our subsidiaries
and any indebtedness of our subsidiaries senior to that held by us. These
liabilities may include indebtedness, trade payables, guarantees, lease
obligations and letter of credit obligations.
AN ACTIVE TRADING MARKET FOR THE DEBENTURES MAY NOT DEVELOP.
The debentures are a new issue of securities for which there is
currently no public market. We do not intend to list the debentures on any
national securities exchange or automated quotation system. Although the
debentures are eligible for trading on the PORTAL market, we cannot assure you
that an active or sustained trading market for the debentures will develop or
that the holders will be able to sell their debentures. The initial purchasers
have informed us that they intend to make a market in the debentures. However,
the initial purchasers may cease their market-making at any time.
Moreover, even if you are able to sell your debentures, we cannot
assure you as to the price at which any sales will be made. Future trading
prices of the debentures will depend on many factors, including, among other
things, prevailing interest rates, our operating results, the price of our
common stock and the market for similar securities. Historically, the market for
convertible debt has been subject to disruptions that have caused volatility in
prices. It is possible that the market for the debentures will be subject to
disruptions which may have a negative effect on the holders of the debentures,
regardless of our prospects or financial performance.
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IF YOU HOLD DEBENTURES, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO
OUR COMMON STOCK, BUT YOU WILL BE SUBJECT TO ALL CHANGES MADE WITH RESPECT TO
OUR COMMON STOCK.
If you hold debentures, you will not be entitled to any rights with
respect to our common stock (including voting rights and rights to receive any
dividends or other distributions on our common stock), but you will be subject
to all changes affecting the common stock. You will have rights with respect to
our common stock only if and when we deliver shares of common stock to you upon
conversion, redemption or repurchase of your debentures and, in limited cases,
under the conversion rate adjustments applicable to the debentures. For example,
in the event that an amendment is proposed to our certificate of incorporation
or bylaws requiring stockholder approval and the record date for determining the
stockholders of record entitled to vote on the amendment occurs prior to
delivery of the common stock to you, you will not be entitled to vote on the
amendment, although you will nevertheless be subject to any changes in the
powers, preferences or special rights of our common stock.
WE MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK AND THEREBY MATERIALLY AND
ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK AND THE DEBENTURES.
We are not restricted from issuing additional common stock during the
life of the debentures. If we issue additional shares of common stock, the price
of our common stock and, in turn, the price of the debentures may be materially
and adversely affected.
CONVERSION, REDEMPTION OR REPURCHASE OF THE DEBENTURES INTO OR WITH OUR COMMON
STOCK WILL DILUTE THE OWNERSHIP INTERESTS OF EXISTING STOCKHOLDERS, INCLUDING
HOLDERS WHO HAD PREVIOUSLY CONVERTED THEIR DEBENTURES.
The conversion, redemption or repurchase of some or all of the
debentures into or with our common stock will dilute the ownership interests of
existing stockholders. Any sales in the public market of the common stock
issuable upon such conversion could adversely affect prevailing market prices of
our common stock. In addition, the existence of the debentures may encourage
short selling by market participants because the conversion of the debentures
could depress the price of our common stock.
THE CONDITIONAL CONVERSION FEATURES OF THE DEBENTURES COULD RESULT IN YOU
RECEIVING LESS THAN THE VALUE OF THE COMMON STOCK INTO WHICH A DEBENTURE IS
CONVERTIBLE.
The debentures are convertible into common stock only if specified
conditions are met. If the specific conditions for conversion are not met, you
may not be able to receive the value of the common stock into which the
debentures would otherwise be convertible.
THE DEBENTURES ARE NOT PROTECTED BY RESTRICTIVE COVENANTS.
The indenture governing the debentures does not contain any financial
covenants or restrictions on the payment of dividends. The indenture does not
restrict the issuance or repurchase of securities by us or our subsidiaries. The
indenture contains no covenants or other provisions to afford you protection in
the event of a highly leveraged transaction, such as a leveraged
recapitalization, that would increase the level of our indebtedness, or a change
in control except as described under "Description of Debentures -- Repurchase of
Debentures by Us at the Option of the Holder upon a Fundamental Change." Neither
we nor our subsidiaries are restricted from incurring additional debt, including
senior indebtedness, under the indenture. If we or our subsidiaries were to
incur additional debt or liabilities, our ability to pay our obligations on the
debentures could be adversely affected.
CHANGES IN THE RATING OF OUR DEBENTURES COULD ADVERSELY AFFECT THE MARKET PRICE
OF THE DEBENTURES AND OUR COMMON STOCK.
The market price of the debentures will be based on a number of
factors, including the rating of the debentures with major credit rating
agencies. The ratings assigned to the debentures by the rating agencies may
change if the rating agencies' view of our credit quality diminishes. The rating
agencies also may evaluate the companies in our industries as a whole and may
change their rating for our debentures based on their overall view of the
industries in which we operate. Any downgrade in the rating of the debentures is
likely to have an adverse effect on the market price of the debentures and our
common stock.
ADJUSTMENTS TO THE CONVERSION RATE ON THE DEBENTURES MAY RESULT IN A TAXABLE
DISTRIBUTION TO YOU.
The conversion ratio of the debentures will be adjusted if we
distribute cash with respect to shares of our common stock and in certain other
circumstances. Under Section 305(c) of the Internal Revenue Code, an increase in
the conversion ratio as a result of our distribution of cash to common
stockholders generally will result in a deemed distribution to you. Other
adjustments in the conversion ratio (or failures to make such adjustments) that
have the effect of increasing your proportionate interest in our assets or
earnings may have the same result. Any deemed distribution to you will be
taxable as a dividend to the extent of our current or accumulated earnings and
profits. If you are a non-U.S. holder of debentures, any deemed distribution to
you that is treated as a dividend will be subject to
12
withholding tax at a 30% rate (or such lower rate as may be specified by an
applicable income tax treaty). See "Material U.S. Federal Income Tax
Considerations."
13
USE OF PROCEEDS
We will not receive any proceeds from any sale by the selling security
holders of the debentures or the shares of common stock issuable upon conversion
of the debentures.
We received net proceeds of approximately $262.4 million from our sale
of the debentures to the initial purchasers, after deducting the discount
payable to the initial purchasers and the estimated offering expenses payable by
us. We used the net proceeds of the offering to repay $144.5 million of our
senior secured notes, to pay associated make-whole prepayment premiums in the
amount of $21.7 million, and to cash collateralize $96.2 million of outstanding
letters of credit under our then existing credit facility. When such outstanding
letters of credit were replaced with letters of credit issued under our new
senior secured credit facility, the $96.2 million in cash held as collateral for
the letters of credit was released to us.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the New York Stock Exchange, or NYSE,
under the symbol "PWR." The following table sets forth, for each of the
quarterly periods indicated, the high and low sales prices of our common stock
as reported by the NYSE.
HIGH LOW
--------- ---------
YEAR ENDED DECEMBER 31, 2001
1st Quarter................................................................... $ 36.50 $ 18.75
2nd Quarter................................................................... 37.50 20.13
3rd Quarter................................................................... 25.27 9.95
4th Quarter................................................................... 18.69 13.90
YEAR ENDED DECEMBER 31, 2002
1st Quarter................................................................... $ 17.43 $ 11.53
2nd Quarter................................................................... 18.90 9.40
3rd Quarter................................................................... 10.19 1.75
4th Quarter................................................................... 3.94 1.78
YEAR ENDED DECEMBER 31, 2003
1st Quarter................................................................... $ 4.10 $ 2.80
2nd Quarter................................................................... 8.70 3.18
3rd Quarter................................................................... 9.87 4.48
4th Quarter................................................................... 9.10 6.95
On December 31, 2003, the last sale price for our common stock as
reported by the NYSE was $7.30 per share. As of December 31, 2003 there were
1,042 holders of record of our common stock.
DIVIDEND POLICY
We have not paid cash dividends on our common stock since our initial
public offering. Further, we currently intend to retain our future earnings, if
any, to finance the growth, development and expansion of our business.
Accordingly, we do not intend to declare or pay any cash dividends on our common
stock in the immediate future. The declaration, payment and amount of future
cash dividends, if any, will be at the discretion of our board of directors
after taking into account various factors. These factors include our financial
condition, results of operations, cash flows from operations, current and
anticipated capital requirements and expansion plans, the income tax laws then
in effect and the requirements of Delaware law. In addition, the terms of our
new senior secured credit facility include, and any future financing
arrangements we enter into may also include, prohibitions on the payment of cash
dividends without the consent of the respective lenders.
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DESCRIPTION OF OTHER INDEBTEDNESS
NEW SENIOR SECURED CREDIT FACILITY
On December 19, 2003, we entered into a $185.0 million credit facility
with various lenders. The credit facility consists of a $150.0 million letter of
credit facility, which also provides for term loans, and a $35.0 million
revolving credit facility, which provides for revolving loans and letters of
credit. The letter of credit facility is linked to a $150.0 million deposit made
by the lenders, which is held in an account with Bank of America, N.A. This
deposit may be used either to support letters of credit or, to the extent that
amounts available under the facility are not used to support letters of credit,
for term loans. As of December 31, 2003, we had approximately $93.6 million of
letters of credit issued under the letter of credit facility, approximately $3.1
million of letters of credit issued under the revolving facility and $56.0
million outstanding as a term loan under the credit facility. We used the credit
facility to replace the letters of credit outstanding under our previous $120.0
million letter of credit facility and we repaid the $60.0 million term loan
outstanding under that facility.
Under the letter of credit facility, we are subject to a facility fee
equal to 3.00% of the letters of credit outstanding, plus an additional 0.15% of
the amount outstanding to the extent the funds in the deposit account do not
earn the LIBO Rate (as defined in the credit facility). Term loans under the
facility bear interest at a rate equal to either (a) the Eurodollar Rate (as
defined in the credit facility) plus 3.00% or (b) the Base Rate (as described
below) plus 3.00%. The Base Rate equals the higher of (i) the Federal Funds Rate
(as defined in the credit facility) plus 1/2 of 1% and (ii) the bank's prime
rate. The maximum availability under the facility is automatically reduced on
December 31 of each year by $1.5 million, beginning December 31, 2004.
Amounts borrowed under the revolving facility bear interest at a rate
equal to either (a) the Eurodollar Rate plus 1.75% to 3.00%, as determined by
the ratio of our total funded debt to EBITDA, or (b) the Base Rate plus 0.25% to
1.50%, as determined by the ratio of our total funded debt to EBITDA. Letters of
credit issued under the revolving facility are subject to a letter of credit fee
of 1.75% to 3.00%, based on the ratio of our total funded debt to EBITDA. If we
choose to cash collateralize letters of credit issued under the revolving
facility, those letters of credit will be subject to a letter of credit fee of
0.50%. We are also subject to a commitment fee of 0.375% to 0.625%, based on the
ratio of our total funded debt to EBITDA, on any unused availability under the
revolving facility.
The credit facility contains financial ratio and indebtedness
covenants, including a maximum funded debt to EBITDA ratio, a maximum senior
debt to EBITDA ratio, a minimum interest coverage ratio, a minimum asset
coverage ratio and a minimum consolidated net worth covenant. The credit
facility also limits acquisitions, capital expenditures and asset sales and,
subject to some exceptions, prohibits stock repurchase programs and the payment
of dividends (other than dividend payments or other distributions payable solely
in capital stock). After December 31, 2004, however, we may pay dividends and
engage in stock repurchase programs in any fiscal year in an aggregate amount up
to twenty-five percent of our consolidated net income (plus the amount of
non-cash charges that reduced such consolidated net income) for the immediately
prior fiscal year.
The credit facility is secured by a pledge of all of the capital stock
of our U.S. subsidiaries, 65% of the capital stock of our foreign subsidiaries
and substantially all of our assets, and it restricts pledges on all material
assets. Borrowings under the credit facility are to be used for working capital,
capital expenditures and for other general corporate purposes. Our U.S.
subsidiaries guarantee the repayment of all amounts due under the credit
facility. Our obligations under the credit facility constitute designated senior
indebtedness under the debentures and our convertible subordinated notes.
CONVERTIBLE SUBORDINATED NOTES
During the third quarter of 2000, we issued 4% convertible subordinated
notes due July 1, 2007, pursuant to an indenture between us and Wells Fargo
Bank, National Association, as trustee. The aggregate principal amount of the
convertible subordinated notes issued totaled $172.5 million. The convertible
subordinated notes are convertible into shares of Quanta's common stock at a
price of $54.53 per share, subject to adjustment as a result of certain events,
and require semi-annual interest payments until maturity.
We have the option to redeem some or all of the convertible
subordinated notes at specified redemption prices, together with accrued and
unpaid interest. However, redemption is prohibited by our new senior secured
credit facility. If certain fundamental changes occur, the holders of
convertible subordinated notes may require us to purchase all or part of their
convertible subordinated notes at a purchase price equal to 100% of the
principal amount, plus accrued and unpaid interest. We are not subject to any
financial covenants under the indenture and we are not restricted from paying
dividends, incurring additional indebtedness, including senior debt, or issuing
or repurchasing our securities.
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The payment of principal, premium (if any) and interest on the
convertible subordinated notes is subordinate in right of payment to all of our
senior indebtedness. The convertible subordinated notes rank equally in right of
payment with the debentures.
SENIOR SECURED NOTES
In March and September 2000, we closed private placements of $210.0
million aggregate principal amount of senior secured notes, primarily with
insurance companies, with maturity dates currently ranging from March 2005 to
September 2010. On August 12, 2002 and December 20, 2002, we amended the senior
secured notes and, as amended, they bore interest at a weighted average rate
between 8.41% and 9.91%, with a weighted average interest rate as of September
30, 2003 of 9.91%. The senior secured notes were secured by certain of our
assets and our subsidiaries guaranteed the repayment of all amounts due under
the notes. Pursuant to an intercreditor agreement, the senior secured notes
ranked equally in right of repayment with indebtedness under our existing credit
facility.
On September 30, 2003, we entered into an amendment to the senior
secured notes to permit the incurrence of the indebtedness represented by the
debentures. On October 21, 2003 and October 27, 2003, we used the net proceeds
from the sale of the debentures to repay $144.5 million of the senior secured
notes, and to pay associated make-whole prepayment premiums in the amount of
$21.7 million. Using proceeds from the $60.0 million term loan, the remaining
balance of the senior secured notes was repaid in November 2003 and an
additional $9.5 million of associated make-whole prepayment premiums were paid.
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DESCRIPTION OF DEBENTURES
We issued the debentures under an indenture dated as of October 17,
2003, between us and Wells Fargo Bank, N.A., as trustee, which we refer to in
this prospectus as the indenture. The debentures and the shares of common stock
issuable upon conversion of the debentures are covered by a registration rights
agreement. You may request a copy of the indenture and the registration rights
agreement from the trustee.
The following description is a summary of the material provisions of
the debentures, the indenture and the registration rights agreement and does not
purport to be complete. This summary is subject to and is qualified by reference
to all the provisions of the debentures and the indenture, including the
definitions of certain terms used in the indenture, and to all provisions of the
registration rights agreement. Wherever particular provisions or defined terms
of the indenture or form of debenture are referred to, these provisions or
defined terms are incorporated in this prospectus by reference. We urge you to
read the indenture because it, and not this description, defines your rights as
a holder of the debentures.
As used in this "Description of Debentures" section, references to
"Quanta," "we," "our" or "us" refer solely to Quanta Services, Inc. and not to
our subsidiaries.
GENERAL
The debentures will mature on October 1, 2023 unless earlier converted,
redeemed or repurchased. You have the option, subject to fulfillment of certain
conditions and during the periods described below, to convert your debentures
into shares of our common stock at an initial conversion rate of 89.7989 shares
of common stock per $1,000 principal amount of debentures. This is equivalent to
an initial conversion price of approximately $11.14 per share of common stock.
The "conversion price" is, as of any date of determination, a dollar amount
derived by dividing the principal amount by the conversion rate then in effect.
The conversion rate is subject to adjustment if certain events occur. Upon a
surrender of your debentures for conversion, we will have the right to deliver,
in lieu of shares of our common stock, cash or a combination of cash and shares
of common stock in amounts described below under "-- Payment upon Conversion."
Even if we elect to deliver shares of common stock upon conversion of a
debenture, you will not receive fractional shares but instead a cash payment to
account for any such fractional share. You will not receive any cash payment for
interest (or additional amounts, if any) accrued and unpaid to the conversion
date except under the limited circumstances described below.
If any interest payment date, maturity date, redemption date or
repurchase date (including upon the occurrence of a fundamental change, as
described below) falls on a day that is not a business day, the required payment
will be made on the next succeeding business day with the same force and effect
as if made on the date that the payment was due, and no additional interest will
accrue on that payment for the period from and after the interest payment date,
maturity date, redemption date or repurchase date (including upon the occurrence
of a fundamental change, as described below), as the case may be, to that next
succeeding business day.
The debentures were issued only in denominations of $1,000 principal
amount and integral multiples thereof. References to "a debenture" or "each
debenture" in this prospectus refer to $1,000 principal amount of the
debentures. The debentures are limited to $270.0 million aggregate principal
amount.
As used in this prospectus, "business day" means any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by law, regulation or executive
order to close in The City of New York.
When we refer to "common stock," we mean the common stock, par value
$.00001 per share, of Quanta Services, Inc., including the rights related to our
common stock pursuant to our stockholder rights plan.
RANKING
The payment of principal of, and interest (including additional
amounts, if any) on, the debentures, as set forth in the indenture, ranks junior
in right of payment to the prior payment in full in cash of all senior
indebtedness (as defined below). The debentures also are effectively
subordinated to all existing and future indebtedness and other liabilities,
including trade payables and lease obligations, if any, of our subsidiaries. See
"-- Subordination."
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Neither we nor our subsidiaries are prohibited from incurring
indebtedness, including senior indebtedness, under the indenture. We may from
time to time incur additional debt, including senior indebtedness. Our
subsidiaries may also from time to time incur additional indebtedness and
liabilities.
The debentures rank equally in right of payment with our $172.5 in
aggregate principal amount of 4% convertible subordinated notes due 2007. Any
amounts borrowed by us under our new credit facility will constitute senior
indebtedness. The debentures are also effectively subordinated to the
liabilities of our subsidiaries, and, as of September 30, 2003, our subsidiaries
had approximately $6.7 million of indebtedness.
INTEREST
The debentures bear interest at a rate of 4.50% per annum. Interest
(including additional amounts, if any) is payable semi-annually in arrears on
April 1 and October 1 of each year, beginning on April 1, 2004.
Interest on a debenture (including additional amounts, if any) will be
paid to the person in whose name the debenture is registered at the close of
business on the March 15 or September 15, as the case may be (each, a "record
date"), immediately preceding the relevant interest payment date (whether or not
such day is a business day); provided, however, that interest (including
additional amounts, if any) payable upon redemption or repurchase by us will be
paid to the person to whom principal is payable, unless the redemption date or
repurchase date, as the case may be, is an interest payment date. Interest will
be calculated on the basis of a 360-day year consisting of twelve 30-day months
and will accrue from October 17, 2003 or from the most recent date to which
interest has been paid or duly provided for.
OPTIONAL REDEMPTION BY US
No sinking fund is provided for the debentures. Prior to October 8,
2008, the debentures will not be redeemable. On or after October 8, 2008, we may
redeem the debentures in whole or in part at any time for a redemption price in
cash equal to 100% of the principal amount of the debentures to be redeemed,
plus any accrued and unpaid interest (including additional amounts, if any) to
but excluding the redemption date.
If the redemption date is an interest payment date, interest (including
additional amounts, if any) shall be paid on such interest payment date to the
record holder on the relevant record date.
Debentures or portions of debentures called for redemption will be
convertible by the holder until the close of business on the second business day
prior to the redemption date. Our notice of redemption will inform the holders
of our election to deliver shares of our common stock or to pay cash in lieu of
delivery of shares of common stock with respect to any debentures or portions
thereof converted prior to the redemption date.
We will provide not less than 30 nor more than 60 days' notice of
redemption by mail to each registered holder of debentures to be redeemed. If
the redemption notice is given and funds are deposited as required, then
interest will cease to accrue on and after the redemption date on those
debentures or portions of debentures called for redemption.
If we decide to redeem fewer than all of the outstanding debentures,
the trustee will select the debentures to be redeemed (in principal amounts of
$1,000 or integral multiples thereof) by lot, on a pro rata basis or by another
method the trustee considers fair and appropriate. If the trustee selects a
portion of your debentures for partial redemption and you convert a portion of
your debentures, the converted portion will be deemed to be from the portion
selected for redemption.
We may not redeem the debentures if we have failed to pay any interest
(including additional amounts, if any) on the debentures when due and such
failure to pay is continuing. We will notify all of the holders if we redeem any
of the debentures.
CONVERSION RIGHTS
Subject to the conditions and during the periods described below, you
may convert each of your debentures into shares of our common stock initially at
a conversion rate of 89.7989 shares of common stock per $1,000 principal amount
of debentures (equivalent to an initial conversion price of approximately $11.14
per share of common stock based on the issue price per debenture). The
conversion rate and the equivalent conversion price in effect at any given time
are referred to as the "applicable conversion rate" and the "applicable
conversion price," respectively, and will be subject to adjustment as described
below. You may convert fewer than all
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of your debentures so long as the debentures converted are an integral multiple
of $1,000 principal amount. Upon a surrender of your debentures for conversion,
we will have the right to deliver, in lieu of shares of our common stock, cash
or a combination of cash and shares of common stock in amounts described below
under "-- Payment upon Conversion."
You may convert your debentures into shares of our common stock only in
the following circumstances, which are described in more detail below, and to
the following extent:
- in whole or in part, upon satisfaction of a market price
condition;
- if any of your debentures are called for redemption, those
debentures that have been so called;
- in whole or in part, upon the occurrence of specified
corporate transactions; or
- in whole or in part, upon satisfaction of a trading price
condition.
If we call your debentures for redemption, you may convert the
debentures only until the close of business on the second business day prior to
the redemption date unless we fail to pay the redemption price. If you have
already delivered a repurchase election with respect to a debenture as described
under either "-- Repurchase of Debentures by Us at the Option of the Holder" or
"-- Repurchase of Debentures by Us at the Option of the Holder upon a
Fundamental Change," you may not surrender that debenture for conversion until
you have withdrawn the repurchase election in accordance with the indenture.
Upon conversion, you will not receive any payment of interest
(including additional amounts, if any) unless such conversion occurs between a
regular record date and the interest payment date to which it relates. We will
not issue fractional shares of common stock upon conversion of debentures.
Instead, we will pay cash in lieu of fractional shares. Our delivery to you of
the full number of shares of our common stock into which a debenture is
convertible, or cash or a combination of cash and shares of common stock,
including any cash payment for any fractional share, will be deemed to satisfy
our obligation to pay:
- the principal amount of the debenture; and
- accrued but unpaid interest (including additional amounts, if
any) to but excluding the conversion date.
As a result, accrued but unpaid interest (including additional amounts,
if any) to but excluding the conversion date will be deemed to be paid in full
rather than cancelled, extinguished or forfeited. For a discussion of your tax
treatment upon receipt of our common stock upon conversion, see "Material U.S.
Federal Income Tax Considerations."
Notwithstanding the preceding paragraph, if debentures are converted
after the close of business on a record date but prior to the opening of
business on the next succeeding interest payment date, holders of such
debentures at the close of business on the record date will receive the interest
(including additional amounts, if any) payable on such debentures on the
corresponding interest payment date notwithstanding the conversion. Such
debentures, upon surrender for conversion, must be accompanied by funds equal to
the amount of interest (including additional amounts, if any) payable on the
debentures so converted; provided that no such payment need be made (1) if we
have specified a redemption date that is after a record date and on or prior to
the date that is two business days after the next interest payment date, (2) if
we have specified a fundamental change repurchase date that is after a record
date and on or prior to the date that is one business day after the next
interest payment date, or (3) to the extent of any overdue interest (including
additional amounts, if any) if any overdue interest exists at the time of
conversion with respect to such debenture.
If you convert debentures, we will pay any documentary, stamp or
similar issue or transfer tax due on the issue of shares of our common stock
upon the conversion, unless the tax is due because you request the shares to be
issued or delivered to another person, in which case you will pay that tax.
CONVERSION UPON SATISFACTION OF MARKET PRICE CONDITION
You may surrender your debentures for conversion into our common stock
in any fiscal quarter after the fiscal quarter ending December 31, 2003 if the
last reported sale price of our common stock for at least 20 trading days during
the period of 30 consecutive trading days ending on the first trading day of
such fiscal quarter is greater than or equal to 120% of the conversion price per
share of our common stock on the last trading day of the 30 consecutive trading
days. Upon a surrender of your debentures for conversion, we
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will have the right to deliver, in lieu of shares of our common stock, cash or a
combination of cash and shares of common stock in amounts described below under
"-- Payment upon Conversion."
The "last reported sale price" of our common stock on any date means
the closing sale price per share (or if no closing sale price is reported, the
average of the bid and asked prices or, if more than one in either case, the
average of the average bid and the average asked prices) on such date as
reported in composite transactions for the principal United States securities
exchange on which our common stock is traded or, if our common stock is not
listed on a United States national or regional securities exchange, as reported
by the Nasdaq National Market. If our common stock is not listed for trading on
a U.S. national or regional securities exchange and not reported by the Nasdaq
National Market on the relevant date, the "last reported sale price" will be the
last quoted bid price for our common stock in the over-the-counter market on the
relevant date as reported by the National Quotation Bureau Incorporated or
similar organization. If our common stock is not so quoted, the "last reported
sale price" will be the average of the mid-point of the last bid and asked
prices for our common stock on the relevant date from each of at least three
independent nationally recognized investment banking firms selected by us for
this purpose.
CONVERSION UPON NOTICE OF REDEMPTION
If we call any or all of the debentures for redemption, you may
surrender any of your debentures that have been called for redemption for
conversion at any time prior to the close of business on the second business day
prior to the redemption date. Upon a surrender of your debentures for
conversion, we will have the right to deliver, in lieu of shares of our common
stock, cash or a combination of cash and shares of common stock in amounts
described below under "-- Payment upon Conversion."
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS
If we elect to:
- distribute to all holders of our common stock certain rights
entitling them to purchase, for a period expiring within 45
days after the date of the distribution, shares of our common
stock at less than the last reported sale price of a share of
our common stock on the trading day immediately preceding the
declaration date of the distribution; or
- distribute to all holders of our common stock, assets
(including cash), debt securities or rights to purchase our
securities, which distribution has a per share value as
determined by our board of directors exceeding 10% of the last
reported sale price of our common stock on the trading day
immediately preceding the declaration date for such
distribution,
we must notify holders of the debentures at least 20 days prior to the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their debentures for conversion at any time until the earlier of
the close of business on the business day immediately prior to the ex-dividend
date or any announcement that such distribution will not take place. No holder
may exercise this right to convert if the holder otherwise will participate in
the distribution without conversion. The "ex-dividend" date is the first date
upon which a sale of the common stock does not automatically transfer the right
to receive the relevant distribution from the seller of the common stock to its
buyer. Upon a surrender of your debentures for conversion, we will have the
right to deliver, in lieu of shares of our common stock, cash or a combination
of cash and shares of common stock in amounts described below under "-- Payment
upon Conversion."
In addition, if we are a party to a consolidation, merger or binding
share exchange, in each case pursuant to which our common stock would be
converted into cash or property other than securities, a holder may surrender
debentures for conversion at any time from and after the date which is 15 days
prior to the anticipated effective date of the transaction until and including
the date which is 15 days after the actual effective date of such transaction.
If we engage in certain reclassifications of our common stock or are a party to
a consolidation, merger, binding share exchange or transfer of all or
substantially all of our assets, in each case pursuant to which our common stock
is converted into cash, securities or other property, then at the effective time
of the transaction, the right to convert a debenture into our common stock will
be changed into a right to convert a debenture into the kind and amount of cash,
securities or other property which a holder would have received if the holder
had converted its debentures immediately prior to the applicable record date for
such transaction. If we engage in any transaction described in the preceding
sentence, the conversion rate will not otherwise be adjusted. If the transaction
also constitutes a fundamental change, a holder can require us to redeem all or
a portion of its debentures as described under "-- Repurchase of Debentures by
Us at the Option of the Holder upon a Fundamental Change."
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CONVERSION UPON SATISFACTION OF TRADING PRICE CONDITION
You may surrender your debentures for conversion into our common stock
prior to maturity during the five business day period after any five consecutive
trading day period in which the "trading price" per $1,000 principal amount of
debentures, as determined following a request by a holder of debentures in
accordance with the procedures described below, for each day of that period was
less than 98% of the product of the last reported sale price of our common stock
and the conversion rate (the "trading price condition"); provided that if, on
the date of any conversion pursuant to the trading price condition that is on or
after October 1, 2018, the sale price of our common stock on the trading day
before the conversion date is greater than 100% but less than 120% of the
conversion price, then holders surrendering debentures for conversion will
receive, in lieu of shares of our common stock based on the then applicable
conversion rate, an amount in cash or common stock or a combination of cash and
common stock, at our option, equal to the principal amount of the debentures
being converted plus accrued and unpaid interest (including additional amounts,
if any), as of the conversion date (a "principal value conversion"). Any common
stock delivered upon a principal value conversion will be valued at the greater
of the conversion price on the conversion date and the average of the last
reported sale price of our common stock for a five trading day period starting
the third trading day following the conversion date of the debentures. Upon a
surrender of your debentures for conversion, we will have the right to deliver,
in lieu of shares of our common stock, cash or a combination of cash and shares
of common stock in amounts described below under "-- Payment upon Conversion."
The "trading price" of the debentures on any date of determination
means the average of the secondary market bid quotations obtained by the trustee
for $5.0 million principal amount of the debentures at approximately 3:30 p.m.,
New York City time, on such determination date from three independent nationally
recognized securities dealers we select; provided that if at least three such
bids cannot reasonably be obtained by the trustee, but two such bids are
obtained, then the average of the two bids shall be used, and if only one such
bid can reasonably be obtained by the trustee, that one bid shall be used. If
the trustee cannot reasonably obtain at least one bid for $5.0 million principal
amount of debentures from an independent nationally recognized securities dealer
or in our reasonable judgment, the bid quotations are not indicative of the
secondary market value of the debentures, then the trading price per $1,000
principal amount of debentures will be deemed to be less than 98% of the product
of the last reported sale price of our common stock and the number of shares
issuable upon conversion of $1,000 principal amount of the debentures.
In connection with any conversion upon satisfaction of the above
trading price condition, the trustee (or other conversion agent appointed by us)
shall have no obligation to determine the trading price of the debentures unless
we have requested such determination; and we shall have no obligation to make
such request unless a holder provides us with reasonable evidence that the
trading price per $1,000 principal amount of debentures would be less than 98%
of the product of the last reported sale price of our common stock and the
number of shares of common stock issuable upon conversion of $1,000 principal
amount of the debentures. At such time, we shall instruct the trustee or
conversion agent, as the case may be, to determine the trading price of the
debentures beginning on the next trading day and on each successive trading day
until, and only until, the trading price per $1,000 principal amount of
debentures is greater than or equal to 98% of the product of the last reported
sale price of our common stock and the number of shares issuable upon conversion
of $1,000 principal amount of the debentures.
CONVERSION PROCEDURES
To convert your debenture into common stock you must do each of the
following:
- complete and manually sign the conversion notice on the back
of the debenture, or a facsimile of the conversion notice, and
deliver this notice to the conversion agent;
- surrender the debenture to the conversion agent;
- if required, furnish appropriate endorsements and transfer
documents;
- if required, pay all transfer or similar taxes; and
- if required, pay funds equal to the interest payable on the
next interest payment date.
The date you comply with all of these requirements is the conversion
date under the indenture. If your interest is a beneficial interest in a global
debenture, to convert you must comply with the last three requirements listed
above and comply with the depositary's procedures for converting a beneficial
interest in a global debenture.
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The conversion agent will, on your behalf, convert the debentures into
shares of our common stock. You may obtain copies of the required form of the
conversion notice from the conversion agent. Settlement of our obligation to
deliver shares and cash (if any) with respect to a conversion will occur on the
dates described under "-- Payment upon Conversion" below. Delivery of shares
will be accomplished by delivery to the conversion agent of certificates for the
relevant number of shares, other than in the case of holders of debentures in
book-entry form with DTC, which shares shall be delivered in accordance with DTC
customary practices. In addition, we will pay cash for any fractional shares, as
described above.
As described below under "-- Payment upon Conversion," we will have the
right to deliver, in lieu of shares of our common stock, cash or a combination
of cash and shares of common stock in amounts described below under "-- Payment
upon Conversion."
PAYMENT UPON CONVERSION
Conversion On or Prior to a Redemption Notice Date or the Final Notice
Date. In the event that we receive your notice of conversion on or prior to (1)
the date on which we give notice of our optional redemption of debentures as
described under "-- Optional Redemption by Us" (a "redemption notice date") or
(2) the date that is 20 days prior to maturity (the "final notice date"), the
following procedures will apply:
- If we choose to satisfy all or any portion of our obligation
to convert the debentures (the "conversion obligation") in
cash, we will notify holders through the trustee of the dollar
amount to be satisfied in cash (which must be expressed either
as 100% of the conversion obligation or as a fixed dollar
amount) at any time on or before the date that is two business
days following the conversion date (the "cash settlement
notice period"). If we timely elect to pay cash for any
portion of the shares otherwise issuable to holders upon
conversion, holders may retract the conversion notice at any
time during the two business days following the final day of
the cash settlement notice period (the "conversion retraction
period"). No such retraction can be made (and a conversion
notice shall be irrevocable) if we do not elect to deliver
cash in lieu of shares (other than cash in lieu of fractional
shares). Upon the expiration of a conversion retraction
period, a conversion notice shall be irrevocable. If we elect
to satisfy all or any portion of the conversion obligation in
cash, and the conversion notice has not been retracted, then
settlement (in cash or in cash and shares) will occur on the
business day following the final day of the 20 trading day
period beginning on the day after the final day of the
conversion retraction period (the "cash settlement averaging
period"). If we do not elect to satisfy any part of the
conversion obligation in cash (other than cash in lieu of any
fractional shares), delivery of the shares of common stock
into which the debentures are converted (and cash in lieu of
any fractional shares) will occur through the conversion agent
or DTC, as the case may be, as described above as soon as
practicable on or after the conversion date.
Settlement amounts will be computed as follows:
- If we elect to satisfy the entire conversion obligation in
shares, we will deliver to holders a number of shares equal to
(i) the aggregate principal amount of debentures to be
converted divided by $1,000 multiplied by (ii) the applicable
conversion rate. In addition, we will pay cash for any
fractional share of common stock based on the last reported
sale price of the common stock on the trading day immediately
preceding the conversion date.
- If we elect to satisfy the entire conversion obligation in
cash, we will deliver to holders cash in an amount equal to
the product of:
- a number equal to (i) the aggregate principal amount
of debentures to be converted divided by $1,000
multiplied by (ii) the conversion rate, and
- the average last reported sale price of shares of our
common stock during the cash settlement averaging
period.
- If we elect to satisfy a fixed portion (other than 100%) of
the conversion obligation in cash, we will deliver to holders
the specified cash amount (the "cash amount") and a number of
shares of our common stock equal to the greater of (i) zero
and (ii) the excess, if any, of the number of shares
calculated as if we elected to satisfy the entire conversion
obligation in shares over the number of shares equal to the
sum, for each day of the cash settlement averaging period, of
(x) the cash amount divided by the number of days in the cash
settlement averaging period, divided by (y) the last reported
sale price of shares of our common stock. In addition, we will
pay cash for all fractional shares of common stock based on
the average last reported sale price of the common stock
during the cash settlement averaging period.
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- Additionally, if we are obligated to deliver shares to
holders, then if on the date you submit your notice of
conversion (x) you hold debentures that are neither registered
under the Securities Act nor immediately freely saleable
pursuant to Rule 144(k) under the Securities Act and (y) there
exists a registration default as defined under "--
Registration Rights," we will deliver to holders an additional
number of shares equal to 3% of the number of shares
calculated above.
"Trading day" means a day during which trading in securities generally
occurs on the New York Stock Exchange or, if our common stock is not listed on
the New York Stock Exchange, on the principal other national or regional
securities exchange on which our common stock is then listed or, if our common
stock is not listed on a national or regional securities exchange, on the
National Association of Securities Dealers Automated Quotation System or, if our
common stock is not quoted on the National Association of Securities Dealers
Automated Quotation System, on the principal other market on which our common
stock is then traded (provided that no day on which trading of our common stock
is suspended on such exchange or other trading market will count as a trading
day).
Conversion After a Redemption Notice Date or the Final Notice Date.
With respect to conversion notices that we receive after a redemption notice
date or the final notice date, we will not send individual notices of our
election to satisfy all or any portion of the conversion obligation in cash. If
we elect to redeem all or a portion of the debentures, our notice of redemption
will inform the holders of our election to deliver shares of our common stock or
cash with respect to debentures converted prior to the redemption date as
described above under "-- Optional Redemption." In addition, if we choose to
satisfy all or any portion of the conversion obligation with respect to
conversions after the final notice date in cash, on or before the final notice
date we will send a single notice to holders indicating the dollar amount to be
satisfied in cash (which must be expressed either as 100% of the conversion
obligation or as a fixed dollar amount).
In the event that we receive notice of conversion after a redemption
notice date or the final notice date from holders of debentures, settlement
amounts will be computed and settlement dates will be determined in the same
manner as set forth above under "-- Conversion On or Prior to a Redemption
Notice Date or the Final Notice Date," except that the "cash settlement
averaging period" shall be the 20 trading day period beginning on the trading
day after the conversion date. If a conversion notice is received from holders
of debentures after a redemption notice date or the final notice date, such
holders will not be allowed to retract the conversion notice. Settlement (in
cash and/or shares) will occur on the business day following the final day of
such cash settlement averaging period. If we do not elect to satisfy any part of
the conversion obligation in cash (other than cash in lieu of any fractional
shares), delivery of shares of common stock into which the debentures are
converted (and cash in lieu of any fractional shares) will occur through the
conversion agent or DTC, as the case may be, as described above as soon as
practicable on or after the conversion date.
CONVERSION RATE ADJUSTMENTS
The applicable conversion rate will be subject to adjustment, without
duplication, upon the occurrence of any of the following events:
(1) the payment to all holders of common stock of dividends or
other distributions payable in shares of our common stock;
(2) the issuance to all holders of our common stock of rights,
warrants or options (other than pursuant to any dividend reinvestment
or share purchase plans) entitling them, for a period of up to 45 days
from the date of issuance of the rights, warrants or options, to
subscribe for or purchase common stock at less than the current market
price thereof, provided that the applicable conversion rate will be
readjusted to the extent that such rights, warrants or options are not
exercised prior to their expiration;
(3) subdivisions, splits and combinations of our common stock;
(4) distributions to all holders of our common stock of
evidences of our indebtedness, shares of capital stock, securities,
cash, property or assets (excluding any dividend or distribution
covered by clause (1) or (2) above and any dividend or distribution
paid exclusively in cash); in the event that we make a distribution to
all holders of our common stock consisting of capital stock of, or
similar equity interests in, a subsidiary or other business unit of
ours, the conversion rate will be adjusted based on the market value of
the securities so distributed relative to the current market price of
our common stock, in each case based on the average closing sale prices
of those securities for the 10 trading days commencing on and including
the fifth trading day after the date on which "ex-dividend trading"
commences for such dividend or distribution on the New York Stock
Exchange or such other national or regional exchange or market on which
the securities are then listed or quoted;
(5) the payment of dividends or distributions consisting
exclusively of cash to all holders of our common stock, excluding (a)
any dividend or distribution on our common stock paid after October 1,
2008 to the extent that the aggregate amount of such
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payment per share of common stock in any twelve month period does not
exceed 5% of the average of the last reported sale price of the common
stock during the ten trading days immediately prior to the declaration
date for such dividend or distribution; or (b) any dividend or
distribution in connection with our liquidation, dissolution or winding
up; or
(6) a payment by us or one of our subsidiaries in respect of a
tender or exchange offer for our common stock to the extent that the
cash and value of any other consideration included in the payment per
share of common stock exceeds the last reported sale price per share of
our common stock on the trading day next succeeding the last date on
which tenders or exchanges may be made pursuant to the tender or
exchange offer.
If an adjustment is required to be made under clause (5) above, the
conversion rate will be adjusted by multiplying the conversion rate in effect on
the record date with respect to the cash distribution by a fraction, (1) the
numerator of which will be the current market price of a share of our common
stock on the record date, and (2) the denominator of which will be the same
price of a share on the record date less the amount of the distribution that
exceeds the amount of dividends and distributions permitted to be excluded
pursuant to clause (5).
If we or one of our subsidiaries makes a payment in respect of a tender
or exchange offer described in clause (6) above, the conversion rate will be
adjusted by multiplying the conversion rate by a fraction, (1) the numerator of
which will be the sum of (x) the fair market value, as determined by our board
of directors, of the aggregate consideration payable for all shares of our
common stock that we purchase in the tender or exchange offer and (y) the
product of the number of shares of our common stock outstanding, less any
purchased shares, and the last reported sale price of our common stock on the
trading day next succeeding the expiration of the tender or exchange offer and
(2) the denominator of which will be the product of the number of shares of our
common stock outstanding, including any purchased shares, and the last reported
sale price of our common stock on the trading day next succeeding the expiration
of the tender or exchange offer.
Holders of debentures will receive, upon conversion of debentures, in
addition to shares of our common stock, the rights under our existing rights
plan unless, prior to the conversion, the rights have expired, terminated or
been redeemed or unless the rights have separated from our common stock, in
which case the applicable conversion rate will be adjusted at the time of
separation as if we distributed to all holders of our common stock shares of our
common stock, evidences of indebtedness or assets described in clause (4) above,
subject to readjustment upon the subsequent expiration, termination or
redemption of the rights. In lieu of any such adjustment, we may amend our
rights agreement to provide that upon conversion of the debentures the holders
will receive, in addition to our common stock issuable upon such conversion, the
rights which would have attached to such shares of our common stock if the
rights had not become separated from our common stock under our rights
agreement. See "Description of Capital Stock -- Stockholder Rights Plan." To the
extent that we adopt any future rights plan, upon conversion of the debentures
into our common stock, you will receive, in addition to our common stock, the
rights under the future rights plan whether or not the rights have separated
from our common stock at the time of conversion and no adjustment to the
conversion rate will be made in accordance with clause (4) above.
In addition to these adjustments, we may increase the conversion rate
as our board of directors deems advisable to avoid or diminish any income tax to
holders of our capital stock resulting from any dividend or distribution of
capital stock (or rights to acquire capital stock) or from any event treated as
such for income tax purposes. We may also, from time to time, to the extent
permitted by applicable law, increase the conversion rate by any amount for any
period of at least 20 days if our board of directors has determined that such
increase would be in our best interests. If our board of directors makes such a
determination, it will be conclusive. We will give holders of debentures at
least 15 days' notice of such an increase in the conversion rate. For a
discussion of the United States federal income tax treatment of an adjustment to
the conversion rate of the debentures, see "Material U.S. Federal Income Tax
Considerations --U.S. Holders -- Constructive Dividends" and "-- Non-U.S.
Holders -- Our Common Stock."
The "current market price" per share of common stock on any day means
the average of the last reported sale price for the 10 consecutive trading days
ending not later than the earlier of the day in question and the day before the
ex-dividend trading with respect to the issuance or distribution requiring the
computation. For purposes of this paragraph, the term "ex-dividend trading,"
when used with respect to any issuance or distribution, will mean the first date
on which the common stock trades regular way on the applicable exchange or in
the applicable market without the right to receive the issuance or distribution.
No adjustment to the conversion rate or the ability of a holder of a
debenture to convert will be made if the holder will otherwise participate in
the distribution without conversion.
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The applicable conversion rate will not be adjusted:
- upon the issuance of any shares of our common stock pursuant
to any present or future plan providing for the reinvestment
of dividends or interest payable on our securities and the
investment of additional optional amounts in shares of our
common stock under any plan;
- upon the issuance of any shares of our common stock or options
or rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan or
program of or assumed by us or any of our subsidiaries;
- upon the issuance of any shares of our common stock pursuant
to any option, warrant, right or exercisable, exchangeable or
convertible security not described in the preceding bullet and
outstanding as of the date the debentures were first issued;
- for a change in the par value of the common stock; or
- for accrued and unpaid interest (including additional amounts,
if any).
Adjustments to the applicable conversion rate will be calculated to the
nearest 1/10,000th of a share. No adjustment to the applicable conversion rate
will be required unless the adjustment would require an increase or decrease of
at least 1% of the applicable conversion rate. However, any adjustments which
are not required to be made because they would have required an increase or
decrease of less than 1% will be carried forward and taken into account in any
subsequent adjustment.
REPURCHASE OF DEBENTURES BY US AT THE OPTION OF THE HOLDER
You have the right to require us to repurchase all or a portion of your
debentures on October 1, 2008, October 1, 2013 and October 1, 2018 (each, a
"repurchase date").
We will be required to repurchase any outstanding debenture for which
you deliver a written repurchase notice to the paying agent (which will
initially be the trustee). This notice must be delivered during the period
beginning at any time from the opening of business on the date that is 20
business days prior to the repurchase date until the close of business on the
business day prior to the repurchase date. You may withdraw your repurchase
notice at any time prior to the close of business on the business day prior to
the repurchase date. If a repurchase notice is given and withdrawn during that
period, we will not be obligated to repurchase the debentures listed in the
notice. Our repurchase obligation will be subject to certain additional
conditions described below.
The repurchase price payable will be equal to 100% of the principal
amount of the debentures to be repurchased plus any accrued and unpaid interest
(including additional amounts, if any) to, but excluding, the repurchase date.
In the case of any debentures that you require us to repurchase on
October 1, 2008, we are required to pay the repurchase price in cash. In the
case of any debentures that you require us to repurchase on October 1, 2013 or
October 1, 2018, we may choose to pay the repurchase price in cash or shares of
our common stock or a combination of cash and shares of our common stock
(provided that in any event we will pay any accrued and unpaid interest
(including additional amounts, if any) in cash). Our right to pay all or any of
the repurchase price in shares of our common stock is subject to additional
conditions specified below.
If we elect, for the October 1, 2013 or October 1, 2018 repurchase
date, to pay the repurchase price in whole or in part in shares of common stock,
the number of shares of common stock to be delivered by us will be equal to the
portion of the purchase price to be paid in shares of common stock divided by
98.5% of the market price of our common stock. The market price of our common
stock will be determined prior to the applicable repurchase date, as described
below. If we elect to pay the repurchase price in whole or in part in shares of
common stock, we will pay cash in lieu of fractional shares in an amount based
upon the market price of our common stock.
As used under this caption and under "-- Repurchase of Debentures by Us
at the Option of the Holder upon a Fundamental Change," "market price" means,
with respect to any repurchase date (including upon the occurrence of a
fundamental change) or other date of determination, the average of the last
reported sale price of our common stock for the 20 consecutive trading days
ending on the third business day prior to the applicable repurchase date or date
of determination, as the case may be (or, if such third business day is not a
trading day, then ending on the last trading day prior to such third business
day), appropriately adjusted to take into account the occurrence, during the
period commencing on the first trading day of such 20 trading-day period and
ending on the
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applicable repurchase date or date of determination, as the case may be, of any
event requiring an adjustment of the conversion rate under the indenture.
Because the market price of our common stock is determined prior to the
applicable repurchase date, you will bear the market risk with respect to the
value of the shares of our common stock, if any, to be received from the date
the market price is determined to the date you receive such shares. In addition,
the market price of our common stock is an average price rather than the price
as of a single date.
On or before the 25th business day prior to each repurchase date, we
will provide to the trustee, the paying agent and all holders of debentures at
their addresses shown in the register of the registrar, and to beneficial owners
as required by applicable law, a notice stating, among other things:
- the repurchase price;
- the last date on which a holder may exercise the repurchase
right;
- the repurchase date;
- whether we will pay the repurchase price in cash, common stock
or a combination thereof, specifying the percentage or amount
of each;
- if we elect to pay the repurchase price in whole or in part in
shares of our common stock, the method of calculating the
market price of our common stock;
- the name and address of the paying agent and the conversion
agent;
- the applicable conversion rate and any adjustments to the
applicable conversion rate;
- that the debentures with respect to which a repurchase
election has been given by the holder may be converted only if
the holder withdraws the repurchase election in accordance
with the terms of the indenture; and
- the procedure that holders must follow to require us to
repurchase their debentures.
To exercise the repurchase right, you must deliver prior to the close
of business on the business day immediately preceding the repurchase date,
subject to extension to comply with applicable law, the debentures to be
repurchased, duly endorsed for transfer, together with a written repurchase
election and the form entitled "Form of Repurchase Notice" on the reverse side
of the debentures duly completed, to the paying agent. Your repurchase election
must state:
- if certificated debentures have been issued, the certificate
numbers of the debentures to be repurchased;
- the portion of the principal amount of debentures to be
repurchased, which must be $1,000 or an integral multiple
thereof;
- that the debentures are to be repurchased by us pursuant to
the applicable provisions of the debentures and the indenture;
and
- if we have elected to pay the repurchase price in shares of
our common stock but the repurchase price is ultimately to be
paid to the holder entirely in cash because any of the
conditions to payment in common stock is not satisfied prior
to the close of business on the business day immediately
preceding the repurchase date, whether you elect:
- to withdraw the repurchase election as to some or all
of the debentures to which it relates; or
- to receive cash in respect of the entire repurchase
price for all debentures subject to the repurchase
election.
If you fail to indicate your choice with respect to this election, you
will be deemed to have elected to receive cash in respect of the entire
repurchase price for all debentures subject to the repurchase election in these
circumstances. For a discussion of the tax treatment of a holder receiving cash,
shares of common stock or any combination thereof, see "Material U.S. Federal
Income Tax Considerations."
26
If your debentures are not in certificated form, your repurchase notice
must comply with appropriate DTC procedures.
No debentures may be repurchased at the option of holders if there has
occurred and is continuing an event of default other than an event of default
that is cured by the payment of the repurchase price of the debentures.
You may withdraw any repurchase notice (in whole or in part) by
delivering a written notice of withdrawal to the paying agent prior to the close
of business on the business day prior to the repurchase date. The notice of
withdrawal must state:
- the principal amount of the withdrawn debentures;
- if certificated debentures have been issued, the certificate
numbers of the withdrawn debentures; and
- the principal amount, if any, which remains subject to the
repurchase notice.
If your debentures are not in certificated form, your withdrawal notice
must comply with appropriate DTC procedures.
To receive payment of the repurchase price, you must either effect
book-entry transfer of your debentures or deliver your debentures, together with
necessary endorsements, to the office of the paying agent after delivery of your
repurchase notice. Payment of the repurchase price for a debenture will be made
promptly following the later of the repurchase date and the time of book-entry
transfer or delivery of the debenture.
If the paying agent holds money or securities sufficient to pay the
repurchase price of the debentures on the business day following the repurchase
date, then, on and after such date:
- the debentures will cease to be outstanding and interest will
cease to accrue (whether or not book-entry transfer of the
debentures has been made or the debentures have been delivered to
the paying agent); and
- all other rights of the holders will terminate (other than the
right to receive the repurchase price upon transfer or delivery
of the debentures).
Our right to pay the repurchase price for debentures in whole or in
part in shares of our common stock is subject to various conditions, including:
- our providing timely written notice, as described above, of our
election to pay all or part of the repurchase price in shares of
common stock;
- our common stock being then listed on a national or regional
securities exchange or quoted on the Nasdaq Automated Quotation
System;
- information necessary to calculate the market price of our common
stock being published in a daily newspaper of national
circulation or being otherwise readily publicly available;
- registration of the shares of our common stock under the
Securities Act or the Exchange Act, in each case if required; and
- our obtaining any necessary qualification or registration under
applicable state securities law or the availability of an
exemption from such qualification and registration.
If the required conditions are not satisfied with respect to a holder
prior to the close of business on the business day immediately preceding the
repurchase date, we will pay the repurchase price for such holder's debentures
entirely in cash. We may not change our election with respect to the form in
which we will pay the repurchase price once we have given the notice that we are
required to give, except as described in the preceding sentence.
We will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Exchange Act that may be applicable at the time of our
repurchase notice. If then required by the applicable rules, we will file a
Schedule TO or any other schedule required in connection with any offer by us to
repurchase the debentures.
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REPURCHASE OF DEBENTURES BY US AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL
CHANGE
If a fundamental change (as defined below in this section) occurs at
any time prior to the maturity date, you will have the right, at your option, to
require us to repurchase any or all of your debentures, or any portion of the
principal amount thereof that is equal to $1,000 or an integral multiple of
$1,000. The fundamental change repurchase price we are required to pay is equal
to 100% of the principal amount of the debentures to be purchased plus accrued
and unpaid interest (including additional amounts, if any) to but excluding the
fundamental change repurchase date.
We may choose to pay the fundamental change repurchase price in cash or
shares of our common stock or a combination of cash and shares of our common
stock (provided that in any event we will pay any accrued and unpaid interest
(including additional amounts, if any) in cash).
If we elect to pay the fundamental change repurchase price in whole or
in part in shares of common stock, the number of shares of common stock to be
delivered by us will be equal to the portion of the fundamental change
repurchase price to be paid in shares of common stock divided by 98.5% of the
market price of our common stock. The market price of our common stock will be
determined prior to the applicable fundamental change repurchase date, as
described under "-- Repurchase of Debentures by Us at the Option of the Holder."
If we elect to pay the fundamental change repurchase price in whole or in part
in shares of common stock, we will pay cash in lieu of fractional shares in an
amount based upon the market price of our common stock.
Because the market price of our common stock is determined prior to the
applicable fundamental change repurchase date, you will bear the market risk
with respect to the value of the shares of our common stock, if any, to be
received from the date the market price is determined to the date you receive
such shares. In addition, the market price of our common stock is an average
price rather than the price as of a single date.
A "fundamental change" will be deemed to have occurred at the time
after the debentures are originally issued that any of the following occurs:
- a "person" or "group" within the meaning of Section 13(d) of the
Exchange Act other than us, our subsidiaries or our or their
employee benefit plans, files a Schedule TO or any other
schedule, form or report under the Exchange Act disclosing that
such person or group has become the direct or indirect ultimate
"beneficial owner," as defined in Rule 13d-3 under the Exchange
Act, of more than 50% of the total voting power of all shares of
our capital stock that are entitled to vote generally in the
election of directors; or
- consummation of any share exchange, consolidation or merger of us
or any sale, lease or other transfer in one transaction or a
series of transactions of all or substantially all of the
consolidated assets of us and our subsidiaries, taken as a whole,
to any person other than us or one or more of our subsidiaries,
pursuant to which our common stock will be converted into cash,
securities or other property; provided, however, that a
transaction where the holders of our voting capital stock
immediately prior to such transaction have, directly or
indirectly, more than 50% of the aggregate voting power of all
shares of capital stock of the continuing or surviving
corporation or transferee entitled to vote generally in the
election of directors immediately after such event shall not be a
fundamental change.
A fundamental change will not be deemed to have occurred in respect of
either of the foregoing, however, if either:
- the last reported sale price of our common stock for any five
trading days within the 10 consecutive trading days ending
immediately before the later of the fundamental change or the
public announcement thereof, equals or exceeds 105% of the
applicable conversion price of the debentures immediately before
the fundamental change or the public announcement thereof; or
- at least 90% of the consideration, excluding cash payments for
fractional shares, in the transaction or transactions
constituting the fundamental change consists of shares of capital
stock traded on a national securities exchange or quoted on the
Nasdaq National Market or which will be so traded or quoted when
issued or exchanged in connection with a fundamental change
(these securities being referred to as "publicly traded
securities") and as a result of this transaction or transactions
the debentures become convertible into such publicly traded
securities, excluding cash payments for fractional shares.
28
For purposes of the above paragraph the term "capital stock" of any
person means any and all shares (including ordinary shares or American
Depositary Shares), interests, participations or other equivalents however
designated of corporate stock or other equity participations, including
partnership interests, whether general or limited, of such person and any rights
(other than debt securities convertible or exchangeable into an equity
interest), warrants or options to acquire an equity interest in such person.
Not less than 25 business days before the fundamental change repurchase
date, we will provide to all holders of the debentures and the trustee and
paying agent a notice of the occurrence of the fundamental change and of the
resulting repurchase right. Such notice shall state, among other things:
- the events causing a fundamental change;
- the date of the fundamental change;
- the fundamental change repurchase price;
- the last date on which a holder may exercise the fundamental
change repurchase right;
- the fundamental change repurchase date;
- whether we will pay the fundamental change repurchase price in
cash, common stock or a combination thereof, specifying the
percentage or amount of each;
- if we elect to pay the fundamental change repurchase price in
whole or in part in common stock, the method of calculating the
market price of our common stock;
- the name and address of the paying agent and the conversion
agent;
- the applicable conversion rate and any adjustments to the
applicable conversion rate;
- that the debentures with respect to which a fundamental change
repurchase election has been given by the holder may be converted
only if the holder withdraws the fundamental change repurchase
election in accordance with the terms of the indenture; and
- the procedure that holders must follow to require us to
repurchase their debentures.
To exercise the repurchase right, you must deliver prior to the close
of business on the business day immediately preceding the fundamental change
repurchase date, subject to extension to comply with applicable law, the
debentures to be repurchased, duly endorsed for transfer, together with a
written fundamental change repurchase election and the form entitled "Form of
Fundamental Change Repurchase Notice" on the reverse side of the debentures duly
completed, to the paying agent. Your fundamental change repurchase election must
state:
- if certificated debentures have been issued, the certificate
numbers of the debentures to be delivered for repurchase;
- the portion of the principal amount of debentures to be
repurchased, which must be $1,000 or an integral multiple
thereof;
- that the debentures are to be repurchased by us pursuant to the
applicable provisions of the debentures and the indenture; and
- if we have elected to pay the fundamental change repurchase price
in shares of our common stock but the fundamental change
repurchase price is ultimately to be paid to the holder entirely
in cash because any of the conditions to payment in common stock
is not satisfied prior to the close of business on the business
day immediately preceding the fundamental change repurchase date,
whether you elect:
- to withdraw the fundamental change repurchase election as to
some or all of the debentures to which it relates; or
- to receive cash in respect of the entire fundamental change
repurchase price for all debentures subject to the
fundamental change repurchase election.
29
If you fail to indicate your choice with respect to this election, you
will be deemed to have elected to receive cash in respect of the entire
fundamental change repurchase price for all debentures subject to the
fundamental change repurchase election in these circumstances. For a discussion
of the tax treatment of a holder receiving cash, shares of common stock or any
combination thereof, see "Material U.S. Federal Income Tax Considerations."
If the debentures are not in certificated form, your notice must comply
with appropriate DTC procedures.
No debentures may be repurchased at the option of holders upon a
fundamental change if there has occurred and is continuing an event of default
other than an event of default that is cured by the payment of the fundamental
change repurchase price of the debentures.
You may withdraw any fundamental change repurchase election (in whole
or in part) by delivering a written notice of withdrawal to the paying agent
prior to the close of business on the business day prior to the fundamental
change repurchase date. The notice of withdrawal must state:
- the principal amount of the withdrawn debentures;
- if certificated debentures have been issued, the certificate
numbers of the withdrawn debentures; and
- the principal amount, if any, which remains subject to the
fundamental change repurchase notice.
If the debentures are not in certificated form, your notice must comply
with appropriate DTC procedures.
To receive payment of the fundamental change repurchase price, you must
either effect book-entry transfer of your debentures or deliver your debentures,
together with necessary endorsements, to the office of the paying agent after
delivery of your fundamental change repurchase notice. Payment of the
fundamental change repurchase price for a debenture will be made promptly
following the later of the fundamental change repurchase date and the time of
book-entry transfer or delivery of the debenture.
We will be required to repurchase the debentures no later than 35
business days after the occurrence of the relevant fundamental change but in no
event prior to the date on which such fundamental change occurs. You will
receive payment of the fundamental change repurchase price promptly following
the later of the fundamental change repurchase date or the time of book-entry
transfer or the delivery of the debentures. If the paying agent holds money or
securities sufficient to pay the fundamental change repurchase price of the
debentures on the business day following the fundamental change repurchase date,
then, on and after such date:
- the debentures will cease to be outstanding and interest will
cease to accrue (whether or not book-entry transfer of the
debentures has been made or the debentures have been delivered to
the paying agent); and
- all other rights of the holders will terminate (other than the
right to receive the fundamental change repurchase price upon
transfer or delivery of the debentures).
Our right to pay the fundamental change repurchase price for debentures
in whole or in part in shares of our common stock is subject to the conditions
described under "-- Repurchase of Debentures by Us at the Option of the Holder."
If the required conditions are not satisfied with respect to a holder prior to
the close of business on the business day immediately preceding the fundamental
change repurchase date, we will pay the fundamental change repurchase price for
such holder's debentures entirely in cash. We may not change our election with
respect to the form in which we will pay the fundamental change repurchase price
once we have given the notice that we are required to give, except as described
in the preceding sentence.
We will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Exchange Act that may be applicable at the time of our
repurchase of debentures upon a fundamental change. If then required by the
applicable rules, we will file a Schedule TO or any other schedule required in
connection with any offer by us to repurchase the debentures.
The rights of the holders to require us to repurchase their debentures
upon a fundamental change could discourage a potential acquirer of us. The
fundamental change repurchase feature, however, is not the result of
management's knowledge of any specific effort to accumulate shares of our common
stock, to obtain control of us by any means or part of a plan by management to
adopt a series of anti-takeover provisions. Instead, the fundamental change
repurchase feature is a standard term contained in other offerings
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of debt securities similar to the debentures that have been marketed by the
initial purchasers. The terms of the fundamental change repurchase feature
resulted from negotiations between the initial purchasers and us.
The term "fundamental change" is limited to specified transactions and
may not include other events that might adversely affect our financial
condition. In addition, the requirement that we offer to repurchase the
debentures upon a fundamental change may not protect holders in the event of a
highly leveraged transaction, reorganization, merger or similar transaction
involving us.
The definition of fundamental change includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our consolidated assets. There is no precise, established definition of the
phrase "substantially all" under applicable law. Accordingly, the ability of a
holder of the debentures to require us to repurchase its debentures as a result
of the conveyance, transfer, sale, lease or other disposition of less than all
of our assets may be uncertain.
If a fundamental change were to occur, we may not have enough funds to
pay the fundamental change repurchase price. If we fail to repurchase the
debentures when required following a fundamental change, we will be in default
under the indenture. In addition, we have, and may in the future incur, other
indebtedness (including our new senior secured credit facility) with similar
change in control provisions permitting our holders to accelerate or to require
us to purchase our indebtedness upon the occurrence of similar events or on some
specific dates.
Our obligation to make a repurchase upon a fundamental change will be
satisfied if a third party makes the fundamental change repurchase offer in the
manner and at the times and otherwise in compliance in all material respects
with the requirements applicable to a fundamental change repurchase offer made
by us, purchases all debentures properly tendered and not withdrawn under the
fundamental change repurchase offer and otherwise complies with its obligations
in connection therewith.
SUBORDINATION
Payment on the debentures is, to the extent provided in the indenture,
subordinated in right of payment to the prior payment in full of all of our
senior indebtedness. The debentures also are effectively subordinated to all
debt and other liabilities, including trade payables and lease obligations, if
any, of our subsidiaries.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization of Quanta, whether voluntary or involuntary and
whether or not involving bankruptcy, or upon any assignment for the benefit of
creditors or any other marshalling of our assets and liabilities, payment of the
principal of, or premium, if any, and interest on the debentures will be
subordinated in right of payment to the prior payment in full of all senior
indebtedness in cash or other payment satisfactory to the holders of senior
indebtedness.
We may not make any payment on, or repurchase or redeem, the debentures
if:
- a default occurs in the payment of principal of, premium, if any,
or interest on any senior indebtedness when due (called a
"payment default") whether by acceleration or otherwise; or
- a default other than a payment default on any designated senior
indebtedness (as defined below) occurs and is continuing (or
would occur as a result of such payment) that permits holders of
such designated senior indebtedness to accelerate its maturity,
and we and the trustee receive a notice of such default (called a
"payment blockage notice") from any holder of such designated
senior indebtedness (called a "non-payment default").
We may resume payments and distributions on the debentures:
- in case of a payment default, upon the date on which such default
(including any acceleration) is cured or waived or ceases to
exist; and
- in case of a non-payment default, upon the earliest of (1) the
date on which such non-payment default is cured or waived or
ceases to exist, (2) 180 days after the date on which the payment
blockage notice is received or (3) the date the payment blockage
is terminated by notice to the trustee and us from the person who
gave the payment blockage notice.
No new period of payment blockage may be commenced pursuant to a
payment blockage notice unless 360 days have elapsed since the initial
effectiveness of the immediately prior payment blockage notice, and there must
be at least 181 consecutive days in
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each 360-day period when no payment blockage is in effect. No payment default or
non-payment default that existed or was continuing on the date of commencement
of any payment blockage period shall be the basis for the commencement of a
subsequent payment blockage period, unless such default has been cured for a
period of at least 90 consecutive days.
If the trustee or any holder of the debentures receives any payment in
contravention of the subordination provisions on the debentures before all
senior indebtedness is paid in full in cash or other payment satisfactory to the
holders of senior indebtedness, then such payment must be paid over for the
benefit of the holders of senior indebtedness to the extent necessary to make
payment in full to the holders of all unpaid senior indebtedness.
Upon (but not before) the payment in full of all designated senior
indebtedness, the holders of the debentures shall (to the extent that amounts
otherwise payable to such holders have been paid to the holders of designated
senior indebtedness) be subrogated to the rights of any holder of designated
senior indebtedness to receive any further payments or distributions applicable
to the designated senior indebtedness until the debentures are paid in full; and
such payments or distributions received by the holders of the debentures by
reason of such subrogation, which otherwise would be paid or distributed to the
holders of designated senior indebtedness, shall, as between Quanta and its
creditors other than the holder of designated senior indebtedness, on the one
hand, and the holders of debentures, on the other hand, be deemed to be a
payment by Quanta on account of designated senior indebtedness and not on
account of the debentures.
In the event of our bankruptcy, dissolution or reorganization, holders
of senior indebtedness may receive more, ratably, and holders of the debentures
may receive less, ratably, than our other creditors. This subordination will not
prevent the occurrence of any event of default under the indenture. See "--
Events of Default; Notice and Waiver" for a description of the events of default
and associated remedies.
The debentures are exclusively obligations of Quanta. Our operations
are conducted through our subsidiaries. As a result, our cash flow and our
ability to service our debt, including the debentures, is dependent upon the
earnings of our subsidiaries. In addition, we are dependent on the distribution
of earnings, loans or other payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our
subsidiaries have no obligation to pay any amounts due on the debentures. Our
subsidiaries are not required to provide us with funds for our payment
obligations, whether by dividends, distributions, loans or other payments. In
addition, any payment of dividends, distributions, loans or advances by our
subsidiaries to us could be subject to statutory or contractual restrictions.
Payments to us by our subsidiaries will also be contingent upon our
subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders to
participate in those assets, will be effectively subordinated to the claims of
that subsidiary's creditors, including trade creditors. In addition, even if we
were a creditor to any of our subsidiaries, our rights as a creditor would be
subordinated to any security interest in the assets of our subsidiaries and any
indebtedness of our subsidiaries' senior to that held by us.
The debentures rank equally in right of payment with our $172.5 in
aggregate principal amount of 4% convertible subordinated notes due 2007. Any
amounts borrowed by us under our new credit facility will constitute senior
indebtedness. The debentures are also effectively subordinated to the
liabilities of our subsidiaries, and, as of September 30, 2003, our subsidiaries
had approximately $6.7 million of indebtedness. Neither we nor our subsidiaries
are prohibited from incurring indebtedness, including senior indebtedness, under
the indenture. We may from time to time incur additional indebtedness, including
senior indebtedness. Our subsidiaries may also from time to time incur other
additional indebtedness and liabilities.
We are obligated to pay reasonable compensation to the trustee and to
indemnify the trustee against certain losses, liabilities or expenses incurred
by the trustee in connection with its duties under the indenture. The trustee's
claims for these payments will generally be senior to those of holders of
debentures in respect of all funds collected by the trustee.
"Credit Agreement" means the Fourth Amended and Restated Secured Credit
Agreement, dated as of November 12, 2003, among Quanta, the lenders named
therein and Bank of America, N.A., as administrative agent, including any
debentures, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended (including any
amendment and restatement thereof), modified, extended, renewed, refunded,
substituted or replaced or refinanced from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder or adding
subsidiaries of Quanta as additional borrowers or guarantors thereunder), all or
any
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portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agents, creditor, lender or group
of creditors or lenders.
"Designated senior indebtedness" means senior indebtedness under the
Credit Agreement and our obligations under any other particular senior
indebtedness that expressly provides that such senior indebtedness shall be
"designated senior indebtedness" for purposes of the indenture.
"Indebtedness" means:
(1) all indebtedness, obligations and other liabilities for
borrowed money, including commitment or standby fees, enforcement
expenses, collateral protection expenses and other reimbursement
indemnity obligations with respect to such indebtedness, overdrafts,
foreign exchange contracts, currency exchange agreements, interest rate
protection agreements, and any loans or advances from banks, or
evidenced by bonds, debentures, notes or similar instruments, other
than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection
with the obtaining of materials or services;
(2) obligations with respect to letters of credit, bank
guarantees or bankers' acceptances;
(3) obligations in respect of leases required in conformity
with generally accepted accounting principles to be accounted for as
capitalized lease obligations on our balance sheet;
(4) all obligations and other liabilities under any lease or
related document in connection with the lease of real property that
provides that we are contractually obligated to purchase or cause a
third party to purchase the leased property and thereby guarantee a
minimum residual value of the leased property to the lessor and our
obligations under the lease or related document to purchase or to cause
a third party to purchase the leased property;
(5) all obligations with respect to an interest rate or other
swap, cap or collar agreement or foreign currency hedge, exchange or
purchase agreement;
(6) all direct or indirect guaranties or similar agreements in
respect of our obligations or liabilities to purchase, acquire or
otherwise assure a creditor against loss in respect of, indebtedness,
obligations or liabilities of others of the type described in (1)
through (5) above;
(7) any obligations described in (1) through (5) above secured
by any mortgage, pledge, lien or other encumbrance existing on property
which is owned or held by us; and
(8) any renewals, extensions, refundings, refinancings,
restructurings, amendments or modifications to (1) through (7) above.
"Senior indebtedness" means the principal, premium, if any, interest,
including any interest accruing after bankruptcy, and rent or termination
payments on or other amounts due on our current or future Indebtedness, whether
created, incurred, assumed, guaranteed or in effect guaranteed by us, but only
to the extent that the same are not treated as "unsecured indebtedness" for
purposes of section 279 of the Internal Revenue Code. However, all amounts owing
by Quanta under the Credit Agreement will constitute senior indebtedness, and
senior indebtedness will not include:
- Indebtedness that expressly provides that it shall not be senior
in right of payment to the debentures or expressly provides that
it is on the same basis or junior to the debentures;
- our Indebtedness to any of our majority-owned subsidiaries; and
- the debentures.
MERGER AND SALE OF ASSETS BY US
The indenture provides that we may not consolidate with or merge with
or into any other person or sell, convey, transfer or lease our properties and
assets substantially as an entirety to another person, unless:
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- we are the surviving person, or the resulting, surviving or
transferee person, if other than us, is organized and existing
under the laws of the United States, any state thereof or the
District of Columbia;
- the successor person assumes all of our obligations under the
debentures and the indenture;
- immediately after giving effect to such transaction, there is no
event of default or event that, with notice or passage of time or
both, would become an event of default; and
- we have delivered to the trustee an officers' certificate and an
opinion of counsel each stating that such consolidation, merger,
sale, conveyance, transfer or lease complies with these
requirements.
Upon any permitted consolidation, merger, conveyance, transfer or
lease, the resulting, surviving or transferee person shall succeed to and be
substituted for us, and may exercise our rights and powers under the indenture
and the debentures, and after any such contemplated transaction, we will be
relieved of all obligations and covenants under the indenture and the
debentures.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following will be events of default under the indenture:
- we fail to pay principal of the debentures when due at maturity,
upon redemption, upon repurchase or otherwise;
- we fail to pay any interest (including additional amounts, if
any) on the debentures when due and such failure continues for a
period of 30 days;
- we fail to provide notice of the occurrence of a fundamental
change on a timely basis;
- we default in our obligation to convert the debentures upon
exercise of a holder's conversion right;
- we default in our obligation to repurchase the debentures at the
option of a holder upon a fundamental change or on any other
repurchase date;
- we default in our obligation to redeem the debentures after we
have exercised our option to redeem;
- we fail to perform or observe any of the other covenants in the
indenture for 60 days after written notice to us from the trustee
or the holders of at least 25% in aggregate principal amount of
the outstanding debentures;
- default by us or any of our subsidiaries in the payment of the
principal or interest on any mortgage, agreement or other
instrument under which there may be outstanding, or by which
there may be secured or evidenced, any of our indebtedness or
indebtedness of any of our subsidiaries for money borrowed in
excess of $10.0 million in the aggregate, whether such
indebtedness now exists or shall hereafter be created, resulting
in such indebtedness becoming or being declared due and payable,
and such acceleration shall not have been rescinded or annulled
within 30 days after written notice of such acceleration has been
received by us or such subsidiary;
- final unsatisfied judgments not covered by insurance aggregating
in excess of $10.0 million rendered against us or any of our
subsidiaries and not stayed, bonded or discharged within 60 days;
or
- certain events involving our bankruptcy, insolvency or
reorganization.
Our obligations under the indenture are not intended to provide
creditors' rights in bankruptcy for amounts in excess of par plus accrued and
unpaid interest (including additional amounts, if any). The trustee may withhold
notice to the holders of the debentures of any default, except defaults in
payment of principal or interest (including additional amounts, if any) on the
debentures. However, the trustee must consider it to be in the interest of the
holders of the debentures to withhold this notice.
If an event of default occurs and is continuing, the trustee or the
holders of at least 25% in aggregate principal amount of the outstanding
debentures may declare the principal and accrued and unpaid interest (including
additional amounts, if any) on the outstanding debentures to be immediately due
and payable. In case of certain events of bankruptcy or insolvency involving us,
the
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principal and accrued and unpaid interest (including additional amounts, if any)
on the debentures will automatically become due and payable. However, if we cure
all defaults, except the non-payment of principal or interest (including
additional amounts, if any) that became due as a result of the acceleration, and
meet certain other conditions, with certain exceptions, this declaration may be
cancelled and the holders of a majority of the principal amount of outstanding
debentures may waive these past defaults.
The holders of a majority of outstanding debentures will have the right
to direct the time, method and place of any proceedings for any remedy available
to the trustee, subject to limitations specified in the indenture.
No holder of the debentures may pursue any remedy under the indenture,
except in the case of a default in the payment of principal or interest
(including additional amounts, if any) on the debentures, unless:
- the holder has given the trustee written notice of an event of
default;
- the holders of at least 25% in aggregate principal amount of
outstanding debentures make a written request, and offer
reasonable indemnity, to the trustee to pursue the remedy;
- the trustee does not receive an inconsistent direction from the
holders of a majority in principal amount of the debentures;
- the holder or holders have offered reasonable security or
indemnity to the trustee against any costs, liability or expense
of the trustee; or
- the trustee fails to comply with the request within 60 days after
receipt of the request and offer of reasonable indemnity.
The indenture requires us every year to deliver to the trustee a
statement as to performance of our obligations under the indenture and as to any
defaults.
A default in the payment of the debentures, or a default with respect
to the debentures that causes them to be accelerated, may give rise to a
cross-default under our credit facility or other indebtedness.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The indenture will generally cease to be of any further effect with
respect to the debentures, if:
- we have delivered to the trustee for cancellation all outstanding
debentures (with certain limited exceptions); or
- all debentures not previously delivered to the trustee for
cancellation have become due and payable, whether at stated
maturity or any redemption date or any repurchase date (including
upon the occurrence of a fundamental change), or upon conversion
or otherwise, and we have deposited with the trustee as trust
funds the entire amount in cash and/or our common stock (as
applicable under the terms of the indenture) sufficient to pay
all the outstanding debentures,
and if, in either case, we also pay or cause to be paid all other sums payable
under the indenture by us.
MODIFICATION AND WAIVER
The consent of the holders of a majority in principal amount of the
outstanding debentures is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each outstanding
debenture if it would:
- extend the fixed maturity of any debenture;
- reduce the rate or extend the time for payment of interest
(including additional amounts, if any) on any debenture;
- reduce the principal amount of any debenture;
- reduce any amount payable upon redemption or repurchase of any
debenture;
- affect our obligation to redeem any debentures on a redemption
date in a manner adverse to such holder;
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- affect our obligation to repurchase any debenture at the option
of the holder in a manner adverse to such holder;
- affect our obligation to repurchase any debenture upon a
fundamental change in a manner adverse to such holder;
- impair the right of a holder to institute suit for payment on any
debenture;
- change the currency in which any debenture is payable;
- impair the right of a holder to convert any debenture or reduce
the number of shares of common stock or any other property
receivable upon conversion;
- reduce the quorum or voting requirements under the indenture;
- change any obligation of ours to maintain an office or agency in
the places and for the purposes specified in the indenture;
- subject to specified exceptions, modify certain of the provisions
of the indenture relating to modification or waiver of provisions
of the indenture; or
- reduce the percentage of debentures required for consent to any
modification of the indenture.
We are permitted to modify certain provisions of the indenture without
the consent of the holders of the debentures, including to:
- secure any debentures;
- add a guarantor under the indenture;
- evidence the assumption of our obligations by a successor person;
- surrender any of our rights or powers under the indenture
(including, without limitation, our right to pay any part of the
repurchase price of the debentures with shares of common stock as
provided for by the indenture existing on a date after the date
of such amendment);
- add covenants for the benefit of the holders of debentures;
- cure any ambiguity or correct any inconsistency in the indenture;
- make any changes or modifications necessary in connection with
the registration of the debentures under the Securities Act as
contemplated by the registration rights agreement, so long as any
such change or modification will not materially adversely affect
the interests of the holders of the debentures;
- modify or amend the indenture to permit the qualification of the
indenture or any supplemental indenture under the Trust Indenture
Act of 1939 as then in effect;
- evidence the acceptance of appointment by a successor trustee;
and
- make other changes to the indenture or forms or terms of the
debentures, provided no such change individually or in the
aggregate with all other such changes has or will have a material
adverse effect on the interests of the holders of the debentures.
CALCULATIONS IN RESPECT OF DEBENTURES
Unless otherwise specified, we will be responsible for making all
calculations called for under the debentures. These calculations include, but
are not limited to, determinations of the market prices of our common stock, the
amount of accrued interest (including additional amounts, if any) payable on the
debentures and the conversion price of the debentures. We will make all these
calculations in good faith, and, absent manifest error, our calculations will be
final and binding on holders of debentures. We will provide a
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schedule of our calculations to each of the trustee and the conversion agent,
and each of the trustee and the conversion agent is entitled to rely upon the
accuracy of our calculations without independent verification. The trustee will
forward our calculations to any holder of debentures upon the request of that
holder.
INFORMATION CONCERNING THE TRUSTEE
We have appointed Wells Fargo Bank, N.A., the trustee under the
indenture, as paying agent, conversion agent, debenture registrar and custodian
for the debentures. The trustee or its affiliates may also provide banking and
other services to us in the ordinary course of their business.
GOVERNING LAW
The debentures and the indenture are governed by, and construed in
accordance with, the laws of the State of New York.
FORM, DENOMINATION, EXCHANGE, REGISTRATION AND TRANSFER
The debentures were issued:
- in fully registered form;
- without interest coupons; and
- in denominations of $1,000 principal amount and integral
multiples of $1,000.
Holders may present debentures for conversion, registration of transfer
and exchange at the office maintained by us for such purpose, which will
initially be the Corporate Trust Office of the trustee in The City of New York.
PAYMENT AND PAYING AGENT
We will maintain an office in the Borough of Manhattan, The City of New
York, where we will pay the principal on the debentures and you may present the
debentures for conversion, registration of transfer or exchange for other
denominations, which shall initially be an office or agency of the trustee. We
may pay interest by check mailed to your address as it appears in the debenture
register, provided that if you are a holder with an aggregate principal amount
in excess of $2.0 million, you will be paid, at your written election, by wire
transfer in immediately available funds.
However, payments to The Depository Trust Company, New York, New York,
which we refer to as DTC, will be made by wire transfer of immediately available
funds to the account of DTC or its nominee.
NOTICES
Except as otherwise described herein, notice to registered holders of
the debentures will be given by mail to the addresses as they appear in the
security register. Notices will be deemed to have been given on the date of such
mailing.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial
purchasers pursuant to which we are, at our cost, for the benefit of the holders
of the debentures and the common stock issuable upon conversion of the
debentures, filing with the SEC a shelf registration statement, of which this
prospectus is a part, covering resales of the debentures and the common stock
issuable upon conversion of the debentures. We will use commercially reasonable
efforts to cause the shelf registration statement to be declared effective under
the Securities Act and to keep the shelf registration statement effective until
the earlier of:
- the second anniversary of the last date of original issuance
of the debentures;
- the expiration of the holding period applicable to the
debentures and the shares of common stock issuable upon
conversion of the debentures held by non-affiliates under Rule
144(k) under the Securities Act; and
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- such time as all of the debentures and the common stock
issuable upon conversion thereof cease to be outstanding or
have been sold either pursuant to the shelf registration
statement or pursuant to Rule 144 under the Securities Act or
any similar provision then in force.
We may suspend the effectiveness of the shelf registration statement or
the use of the prospectus that is part of the shelf registration statement
during specified periods under certain circumstances relating to pending
corporate developments, public filings with the SEC and similar events. Any
suspension period shall not exceed an aggregate of:
- 45 days in any 90-day period; or
- 120 days for all periods in any 360-day period.
However, if the disclosure relates to a previously undisclosed proposed
or pending material business transaction, the disclosure of which we determine
in good faith would be reasonably likely to impede our ability to consummate
such transaction, we may extend the suspension period from 45 days to 60 days.
We need not specify the nature of the event giving rise to a suspension in any
notice to holders of the debentures of the existence of such a suspension. Each
holder, by its acceptance of the debentures, agrees to hold any communication by
us in response to a notice of a proposed sale in confidence.
We refer to each of the following as a registration default:
- the registration statement has not been filed prior to or on
the 90th day following the first date of original issuance of
any of the debentures; or
- the registration statement has not been declared effective
prior to or on the 210th day following the first date of
original issuance of any of the debentures, which we refer to
as the effectiveness target date; or
- at any time after the effectiveness target date, the
registration statement ceases to be effective or fails to be
usable and (1) we do not cure the registration statement
within ten business days by a post-effective amendment,
prospectus supplement or report filed pursuant to the Exchange
Act, (2) if applicable, we do not terminate the suspension
period, described in the preceding paragraph, by the 45th or
60th day, as the case may be, or (3) a suspension period, when
aggregated with other suspension periods during the prior
360-day period, continues, unterminated, for more than 120
days.
If a registration default occurs (other than a registration default
relating to a failure to file or have an effective registration statement with
respect to the shares of common stock), liquidated damages in the form of
additional cash interest, which we refer to as "additional amounts," will accrue
on the debentures that are transfer restricted securities, from and including
the day following the registration default to but excluding the earlier of (1)
the day on which the registration default has been cured, and (2) the date the
registration statement is no longer required to be kept effective. Additional
amounts will be paid semiannually in arrears on each April 1 and October 1 and
will accrue at a rate per year equal to:
- 0.25% of the principal amount of a debenture to and including
the 90th day following such registration default; and
- 0.50% of the principal amount of a debenture from and after
the 91st day following such registration default.
In no event will additional amounts exceed 0.50% per year. If a holder
converts some or all of its debentures into common stock when there exists a
registration default with respect to the common stock, the holder will not be
entitled to receive additional amounts on such common stock, but will receive
additional shares upon conversion equal to 3% of the applicable conversion rate
for each $1,000 original principal amount of debentures (except to the extent we
elect to deliver cash upon conversion). In addition, such holder will receive,
on the settlement date for any debentures submitted for conversion during a
registration default, accrued and unpaid additional amounts to the conversion
date relating to such settlement date. If a registration default with respect to
the common stock occurs after a holder has converted its debentures into common
stock, such holder will not be entitled to any compensation with respect to such
common stock.
A holder who elects to sell securities pursuant to the shelf
registration statement will:
- be required to be named as a selling security holder in the
related prospectus;
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- be required to deliver a prospectus to purchasers;
- be subject to the civil liability provisions under the
Securities Act in connection with any sales; and
- be subject to the provisions of the registration rights
agreement, including indemnification provisions.
Under the registration rights agreement we will:
- pay all expenses of the shelf registration statement;
- provide each registered holder with copies of the prospectus;
- notify holders when the shelf registration statement has
become effective; and
- take other reasonable actions as are required to permit
unrestricted resales of the debentures and common stock issued
upon conversion of the debentures in accordance with the terms
and conditions of the registration rights agreement.
Holders must complete and deliver to us a form of notice and
questionnaire prior to any intended distribution of debentures or common stock
issuable upon conversion of the debentures pursuant to the shelf registration
statement. Holders must complete and deliver the questionnaire to us on or prior
to the 15th business day before the effectiveness of the registration statement
in order to be named as a selling security holder in the related prospectus at
the time of effectiveness. Upon receipt of a completed questionnaire after that
time, together with any other information we may reasonably request from a
security holder, we will, within ten business days of receipt, file any
amendments to the shelf registration statement or supplements to the related
prospectus as are necessary to permit the holder to deliver a prospectus to
purchasers of such debentures or shares of common stock, subject to our right to
suspend the use of the prospectus. We will pay the predetermined additional
amounts described above to the holder if we fail to make the filing in the time
required or, if such filing is a post-effective amendment to the shelf
registration statement required to be declared effective under the Securities
Act, if such amendment is not declared effective within 60 days of the date on
which the amendment was required to be filed. Any holder that does not timely
complete and deliver a questionnaire or provide the other information we may
request will not be named as a selling security holder in the prospectus and
will not be permitted to sell the securities pursuant to the shelf registration
statement.
39
DESCRIPTION OF CAPITAL STOCK
GENERAL
Under our certificate of incorporation, our authorized capital stock
consists of 300,000,000 shares of common stock, par value $.00001 per share,
3,345,333 shares of limited vote common stock, par value $.00001 per share, and
10,000,000 shares of preferred stock, par value $.00001 per share. As of
December 31, 2003, there were approximately 115,514,509 shares of common stock,
and approximately 1,067,750 shares of limited vote common stock, issued and
outstanding. As of the date of this prospectus, we have no preferred stock
outstanding.
The following description of our capital stock is subject to our
certificate of incorporation, bylaws, stockholder rights plan and the applicable
provisions of Delaware law.
COMMON STOCK AND LIMITED VOTE COMMON STOCK
Holders of common stock are entitled to one vote for each share held of
record on all matters on which stockholders are entitled or permitted to vote,
including the election of directors. There is no cumulative voting for the
election of directors.
Holders of limited vote common stock are entitled to elect one member
of our board of directors but are not otherwise entitled to vote on the election
of directors. Holders of limited vote common stock are entitled to one-tenth of
one vote for each share held of record on all other matters on which
stockholders are entitled or permitted to vote.
Subject to preferences that may be applicable to any outstanding shares
of preferred stock, holders of common stock and limited vote common stock are
entitled to receive dividends, on a pro rata basis, when and as declared by the
board of directors out of legally available funds. In the event of our
liquidation, dissolution or winding up, holders of common stock and limited vote
common stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any then outstanding shares of
preferred stock. Holders of common stock and limited vote common stock have no
preemptive rights. Shares of common stock are not subject to any redemption
provisions and are not convertible into any of our other securities. Shares of
limited vote common stock are not subject to any redemption provisions and are
not convertible into any other securities, except that each share of limited
vote common stock will automatically convert into common stock on a
share-for-share basis immediately upon a sale of such shares.
Our common stock is traded on the NYSE under the symbol "PWR" and the
transfer agent and registrar for the common stock is American Stock Transfer &
Trust Company.
PREFERRED STOCK
Our certificate of incorporation authorizes our board of directors to
provide for the issuance of preferred stock in one or more series, without
stockholder action. Our board of directors is authorized to fix the designation,
powers, preferences and rights, and the qualifications, limitations and
restrictions of the shares of each series of preferred stock we issue. For each
series of preferred stock our board is able to specify the following:
- the designation of each series;
- the number of shares of each series;
- the rate of any dividends;
- whether any dividends shall be cumulative or non-cumulative;
- the terms of any redemption rights;
- whether there will be any sinking fund for the redemption of
any shares;
- the terms of any conversion or exchange right;
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- any restrictions on the issuance of shares of the same series
or any other series;
- the amount payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of our
company; and
- the extent to which holders of the shares will be entitled to
vote.
Although no shares of preferred stock are currently outstanding and we
have no current plans to issue preferred stock, except for such shares of Series
D Junior Participating Preferred Stock issuable upon exercise of the rights
under our stockholder rights plan, the issuance of shares of our preferred
stock, or the issuance of rights to purchase shares of our preferred stock,
could be used to discourage an unsolicited acquisition proposal. For example, we
could impede a business combination by issuing a series of our preferred stock
containing class voting rights that would enable the holder or holders of such
series to block that transaction. Alternatively, we could facilitate a business
combination by issuing a series of our preferred stock having sufficient voting
rights to provide a required percentage vote of the stockholders. In addition,
under some circumstances, the issuance of preferred stock could adversely affect
the voting power and other rights of the holders of our common stock. Although
our board is required to make any determination to issue any preferred stock
based on its judgment as to the best interests of our stockholders, it could act
in a manner that would discourage an acquisition attempt or other transaction
that some, or a majority, of our stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
prevailing market prices of the stock. Our board does not at present intend to
seek stockholder approval prior to any issuance of currently authorized stock
unless otherwise required by law or applicable stock exchange requirements.
FIRST RESERVE'S PREEMPTIVE RIGHTS
In October 2002 we entered into an Investor's Rights Agreement with
First Reserve pursuant to which we granted First Reserve a preemptive right to
purchase a proportionate number of shares of our common stock to allow it to
maintain the same voting percentage of our common stock that it had immediately
prior to the issuance of our common stock or securities convertible into common
stock to third parties. First Reserve's purchase price for each share of our
common stock purchased pursuant to this right equals the closing price per share
of our common stock on the date of issuance of the shares of common stock to
third parties. First Reserve will have 15 business days after the end of any
quarter in which we issue new shares of common stock or securities convertible
into common stock to exercise its preemptive right with respect to issuances
during the quarter. First Reserve waived its preemptive right in connection with
the issuance of the debentures and any common stock issued upon conversion,
redemption or repurchase of the debentures. First Reserve's preemptive right
will terminate if First Reserve's voting percentage is less than 10%.
SERIES D JUNIOR PARTICIPATING PREFERRED STOCK
Shares of Series D Junior Preferred Stock purchasable upon exercise of
the rights described below under " -- Stockholder Rights Plan" will not be
redeemable or convertible. Shares of Series D Junior Preferred Stock will be
entitled to cumulative dividends equal to the greater of $10 per share or,
subject to adjustment, an aggregate dividend of 1,000 times the dividend
declared per share of common stock for any quarterly period. In the event of
liquidation, the holders of the Series D Junior Preferred Stock will be entitled
to a minimum preferential liquidation payment of $1,000 per share plus accrued
and unpaid dividends, whether or not declared, provided that the holders of the
shares of Series D Junior Preferred Stock shall be entitled to an aggregate
payment per share, subject to adjustment, of 1,000 times the aggregate amount
distributed per share to holders of common stock. In the event of any merger,
consolidation or similar transaction in which shares of common stock are
exchanged, each share of Series D Junior Preferred Stock will be entitled to
receive, subject to adjustment, 1,000 times the amount received per share of
common stock. Each holder of a share of Series D Junior Preferred Stock will
have 1,000 votes on all matters submitted to a vote of stockholders and will
vote together with the holders of our common stock. These rights are protected
by customary anti-dilution provisions. Due to the nature of the Series D Junior
Preferred Stock dividend, liquidation and voting rights, the value of the one
one-thousandth interest in a share of Series D Junior Preferred Stock
purchasable upon exercise of each right should approximate the value of one
share of common stock.
STOCKHOLDER RIGHTS PLAN
We have adopted a stockholder rights plan pursuant to which one right
will be issued and attached to each outstanding share of common stock. The
following description of our stockholder rights plan and the certificate of
designations setting forth the terms and conditions of the Series D Junior
Preferred Stock are intended as summaries only and are qualified in their
entirety by reference to the form of stockholder rights plan and certificate of
designations to the certificate of incorporation filed with the SEC.
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Until a distribution date occurs, the rights can be transferred only
with the common stock. On the occurrence of a distribution date, the rights will
separate from the common stock and become exercisable as described below.
A "distribution date" will occur upon the earlier of:
- the tenth day after a public announcement that a person or
group of affiliated or associated persons other than us and
certain exempt persons (an "acquiring person") has acquired
beneficial ownership of 15% or more of the total voting rights
of the then outstanding shares of our common stock (or, in the
case of First Reserve, 37% or more of the total voting
rights); or
- the tenth business day following the commencement of a tender
or exchange offer that would result in such person or group
becoming an acquiring person.
The total voting rights of the common stock will be determined based on the
voting rights of holders of outstanding shares of our common stock at the time
of any determination.
Following the distribution date, holders of rights will be entitled to
purchase from us one one-thousandth (1/1000th) of a share of Series D Junior
Preferred Stock at a purchase price of $153.33, subject to adjustment.
In the event that any person or group becomes an acquiring person,
proper provision shall be made so that each holder of a right, other than rights
beneficially owned by the acquiring person, will thereafter have the right to
receive upon payment of the purchase price, that number of shares of common
stock having a market value equal to the result obtained by (A) multiplying the
then current purchase price by the number of one one-thousandths of a share of
Series D Junior Preferred Stock for which the right is then exercisable, and
dividing that product by (B) 50% of the current per share market price of our
shares of common stock on the date of such occurrence. If, following the date of
a public announcement that an acquiring person has become such, (1) we are
acquired in a merger or other business combination transaction and we are not
the surviving corporation, (2) any person consolidates or merges with us and all
or part of the common stock is converted or exchanged for securities, cash or
property of any other person, or (3) 50% or more of our assets or earning power
is sold or transferred, then the rights will "flip-over." At that time, each
right will entitle its holder to purchase, for the purchase price, a number of
shares of common stock of the surviving entity in any such merger, consolidation
or other business combination or the purchaser in any such sale or transfer with
a market value equal to the result obtained by (X) multiplying the then current
purchase price by the number of one one-thousandths of a share of Series D
Junior Preferred Stock for which the right is then exercisable, and dividing
that product by (Y) 50% of the current per share market price of the shares of
common stock of the surviving entity on the date of consummation of such
consolidation, merger, sale or transfer.
The rights will expire on March 8, 2010, unless we terminate them
before that time. Our board of directors may redeem all of the rights upon
payment of $0.01 per right until the earlier of:
- a "flip-in event;" or
- March 8, 2010.
If our board redeems any of the rights, it must redeem all of the
rights. Once our board acts to redeem the rights, the right to exercise the
rights will terminate and each right will become null and void.
A holder of a right will not have any rights as a stockholder of
Quanta, including the right to vote or to receive dividends, until a right is
exercised.
At any time prior to the occurrence of a redemption date, we may,
except with respect to the redemption price, supplement or amend any provision
of our stockholder rights plan in any manner, whether or not such supplement or
amendment is adverse to any holders of the rights. From and after the occurrence
of a redemption date, we may, except with respect to the redemption price,
supplement or amend our stockholder rights plan in any manner that does not
adversely affect the interests of the holders of rights, other than an acquiring
person.
DELAWARE LAW AND SPECIFIED CHARTER AND BYLAW PROVISIONS
Business combinations. We are subject to the provisions of section 203 of
the Delaware General Corporation Law. Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a
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period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is, or the
transaction by which such stockholder became an "interested stockholder" was,
approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to specified exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years did own, 15% or more of the corporation's voting stock.
Limitation of liability; indemnification. Our charter contains
provisions permitted under the Delaware General Corporation Law relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty,
acts or omissions that involve intentional misconduct or a knowing violation of
law or transactions from which the director derived an improper personal
benefit. This limitation of liability does not alter the liability of our
directors and officers under federal securities laws. Furthermore, our bylaws
contain provisions to indemnify our directors and officers to the fullest extent
permitted by the Delaware General Corporation Law. These provisions do not limit
or eliminate our right or the right of any of our stockholders to seek
non-monetary relief, such as an injunction or rescission in the event of a
breach by a director or an officer of his or her duty of care. We believe that
these provisions will assist us in attracting and retaining qualified
individuals to serve as directors.
Stockholder action; special meeting of stockholders. Our certificate of
incorporation provides that stockholders may take action only at a duly called
annual or special meeting of stockholders and may not act by written consent.
Our bylaws further provide that special meetings of our stockholders may be
called only by the chairman of the board of directors pursuant to a resolution
approved by a majority of the board of directors.
Advance notice requirements for stockholder proposals and director
nominations. Our bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must meet specified
procedural requirements. These provisions may preclude stockholders from
bringing matters before an annual meeting of stockholders or from making
nominations for directors at an annual or special meeting of stockholders.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain material U.S. federal
income tax aspects of the acquisition, ownership and disposition of the
debentures, and where noted, our common stock. This summary is based upon
current provisions of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations promulgated thereunder and
current administrative rulings and court decisions, all as in effect on the date
hereof. All of the foregoing are subject to change, possibly on a retroactive
basis, and any such change could affect the continuing validity of this
discussion.
This discussion is a summary for general information only and does not
consider all aspects of U.S. federal income taxation that may be relevant to the
acquisition, ownership and disposition of the debentures and our common stock by
a prospective investor in light of his, her or its personal circumstances. For
example, this discussion does not address the U.S. federal income tax
consequences to investors subject to special treatment under the U.S. federal
income tax laws, such as:
- dealers in securities or foreign currency;
- investors that have elected mark-to-market accounting;
- banks, thrifts, insurance companies, regulated investment
companies or other financial institutions;
- tax-exempt entities;
- persons that hold the debentures or our common stock as part
of a "straddle," "hedge," "conversion transaction" or other
integrated transaction;
- persons that have a "functional currency" other than the U.S.
dollar; and
- partnerships and other pass-through entities (or investors
holding interests in partnerships or pass-through entities)
that hold the debentures or our common stock.
In addition, this discussion is limited to the U.S. federal income tax
consequences to persons who are beneficial owners of the debentures or our
common stock and who hold the debentures or common stock as capital assets
within the meaning of Section 1221 of the Code, i.e., generally, property held
for investment. Moreover, this discussion does not describe any tax consequences
arising out of the U.S. alternative minimum tax law, the tax laws of any state,
local or foreign jurisdiction or, except to a limited extent under the caption
"Non-U.S. Holders," any possible applicability of the U.S. federal gift or
estate tax law.
We have not requested a ruling from the U.S. Internal Revenue Service
(the "IRS") on the tax consequences of owning the debentures or our common
stock. As a result, the IRS could disagree with portions of this discussion. For
example, based upon currently applicable authorities, we will treat the
debentures as indebtedness for U.S. federal income tax purposes. However, as the
debentures have certain equity characteristics, it is possible that the IRS will
contend that the debentures should be treated as an equity interest in, rather
than indebtedness of, our company. The remainder of this discussion assumes that
the debentures will constitute indebtedness for U.S. tax purposes.
U.S. HOLDERS
For purposes of the following discussion, a "U.S. Holder" is a
beneficial owner of a debenture or our common stock that is:
- a citizen or resident of the U.S., including an alien resident
who is a lawful permanent resident of the U.S. or meets the
"substantial presence" test under Section 7701(b) of the Code;
- a corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in the
U.S. or under the laws of the U.S. or any State thereof or the
District of Columbia;
- an estate whose income is includible in gross income for U.S.
federal income tax purposes regardless of its source; or
- a trust, if (1) a U.S. court is able to exercise primary
supervision over administration of the trust and one or more
U.S. persons have the authority to control all substantial
decisions of the trust or (2) such trust was in existence on
August 1, 1996 and has a valid election in effect under
applicable Treasury Regulations to be treated as a U.S.
person.
Stated Interest on the Debentures. Interest on a debenture (including a
payment made pursuant to a guarantee) will be taxable to a U.S. Holder as
ordinary interest income at the time it accrues or is received in accordance
with such holder's method of accounting for U.S. federal income tax purposes.
44
Sale, Exchange, or Retirement of the Debentures for Cash. Upon the
disposition of a debenture by sale, exchange, redemption or repayment or other
taxable disposition, and subject to the market discount discussion below, a U.S.
Holder generally will recognize gain or loss equal to the difference between (i)
the amount realized on the disposition (i.e., the amount of cash and the fair
market value of any property received in exchange for the debenture, but not
including any amounts attributable to accrued but unpaid interest which, if not
yet taken into income, generally will be taxable as ordinary income) and (ii)
the U.S. Holder's adjusted tax basis in the debenture. A U.S. Holder's adjusted
tax basis in the debenture generally will equal the cost of the debenture (net
of accrued interest), increased by any market discount or decreased by any
amortizable bond premium, in each case provided that the holder elected to
accrue the amounts thereof for U.S. federal income tax purposes.
Because the debenture is held as a capital asset, such gain or loss
will generally be capital gain or loss and will be long-term capital gain if the
debenture is held for longer than one year. Currently, non-corporate taxpayers
are generally subject to a maximum regular federal income tax rate of 15% on net
long-term capital gain. The deductibility of capital losses is subject to
certain limitations.
Were we to obtain a discharge of the indenture within one year before
the debentures became due and payable, with respect to all of the debentures
then outstanding, as described above under "Description of Debentures --
Satisfaction and Discharge of the Indenture," such discharge would generally be
deemed to constitute a taxable exchange of the debentures outstanding for other
property, namely, the funds deposited with the trustee. In such case, a U.S.
Holder would be required to recognize capital gain or loss in connection with
such deemed exchange in the manner comparable to that discussed above. In
addition, after such deemed exchange, a U.S. Holder might also be required to
recognize income from the property deemed to have been received in such exchange
over the remaining life of the transaction in a manner or amount that is
different than had the discharge not occurred. U.S. Holders should consult their
tax advisors as to the specific consequences arising from a discharge in their
particular situations.
Market Discount. If a U.S. Holder purchases a debenture at a price that
is less than its stated redemption price at maturity then, subject to a de
minimis exception, the debenture will be deemed to carry "market discount."
Subject to a limited exception, these provisions generally require a U.S. Holder
that acquires a debenture having market discount to treat as ordinary income any
gain recognized on the disposition of that debenture to the extent of the
accrued market discount on that debenture at the time of maturity or
disposition, unless the U.S. Holder elects to include such accrued market
discount in income over the life of the debenture.
The election to include market discount in income over the life of the
debenture, once made, applies to all market discount obligations acquired on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS. In general, market discount
will be treated as accruing on a straight-line basis over the remaining term of
the debenture at the time of acquisition, or, at the election of the U.S.
Holder, under a constant yield method. If a constant yield election is made, it
will apply only to the debenture with respect to which it is made, any may not
be revoked. A U.S. Holder that acquires a debenture at a market discount and
does not elect to include accrued market discount in income over the life of the
debenture may be required to defer the deduction of all or a portion of the
interest on any indebtedness incurred or maintained to purchase or carry the
debenture until maturity or until the debenture is disposed of in a taxable
transaction.
Amortizable Premium. A U.S. Holder that purchases a debenture at a
premium over its stated principal amount, plus accrued interest, generally may
elect to amortize that premium (referred to as Section 171 premium) from the
purchase date to the debenture's maturity date under a constant yield method
that reflects semiannual compounding based on the debenture's payment period.
Amortizable premium, however, will not include any premium attributable to a
debenture's conversion feature. The premium attributable to the conversion
feature is the excess, if any, of the debenture's purchase price over what the
debenture's fair market value would be if there were no conversion feature.
Amortizable Section 171 premium is treated as an offset to interest income on a
debenture and not as a separate deduction. The election to amortize premium on a
constant yield method, once made, applies to all debt obligations held or
subsequently acquired by the electing U.S. Holder on or after the first day of
the first taxable year to which the election applies and may not be revoked
without the consent of the IRS.
Conversion of Debentures Into Common Stock. A U.S. Holder's conversion
of a debenture solely into our common stock (including upon a put to us
whereunder we exercise our option to issue our common stock) will not be a
taxable event, except with respect to cash received in lieu of a fractional
share of our common stock. A U.S. Holder will recognize gain or loss upon the
receipt of cash in lieu of a fractional share of our common stock, measured by
the difference between the cash received and the U.S. Holder's tax basis
attributable to the fractional share. The fair market value of our common stock
received with respect to accrued and unpaid interest will be taxed as a payment
of interest (as described above).
A U.S. Holder's tax basis in our common stock received upon a
conversion of a debenture will be the same as the U.S. Holder's basis in the
debenture at the time of conversion, reduced by any basis allocated to a
fractional share and increased, for a cash method
45
holder, by the amount of income recognized with respect to accrued interest. The
U.S. Holder's holding period for the common stock received will include the
holder's holding period for the debenture converted, except that the holding
period of any common stock received with respect to accrued and unpaid interest
will commence on the day after the date of conversion.
Repurchase of the Debentures at the Option of the Holder. If a U.S.
Holder of a debenture exercises its right to require us to repurchase a
debenture and we deliver our common stock in full satisfaction of the repurchase
price (other than the portion of the repurchase price, if any, attributable to a
fractional share or to accrued but unpaid interest, which will be paid in cash),
the exchange of the debenture for our common stock should be treated in the same
manner described above under "U.S. Holders -- Conversion of Debentures Into
Common Stock."
If a U.S. Holder receives a combination of cash and our common stock
upon the exercise of either a put to us or a conversion right, the U.S. federal
income tax consequences to the U.S. Holder are unclear. There are several
possible tax treatments, the two most likely of which are:
- a partial taxable sale of the debenture resulting in gain or
loss to the U.S. Holder and a partial tax-free conversion of
the debenture under which the U.S. Holder would apply the
principles described above under both "U.S. Holders -- Sale,
Exchange, or Retirement of the Debentures for Cash" and "U.S.
Holders -- Conversion of Debentures Into Common Stock,"
respectively, based upon a proration of the debenture between
the amount of cash and the fair market value of our common
stock received; or
- a recapitalization under which the U.S. Holder would recognize
gain, but not loss, on the repurchase equal to the lesser of
(a) the amount of cash received (other than in respect of a
fractional share or in respect of accrued but unpaid interest)
and (b) the amount of gain realized (equal to the excess, if
any, of (i) the amount of cash the holder receives (other than
in respect of a fractional share or of accrued but unpaid
interest) plus (ii) the fair market value of common stock the
holder receives over (iii) his, her, or its tax basis in the
debenture).
Any U.S. Holders of debentures who receive a combination of cash and our common
stock should consult their tax advisors as to the U.S. federal income tax
consequences to them.
If a U.S. Holder of a debenture exercises his, her or its right to
require us to repurchase a debenture and we deliver cash in full satisfaction of
the repurchase price, the repurchase will be treated the same as a sale of the
debenture, as described above under "U.S. Holders -- Sale, Exchange or
Retirement of the Debentures for Cash."
Constructive Dividends. The conversion ratio of the debentures will be
adjusted if we distribute cash in excess of specified amounts with respect to
shares of our common stock and in certain other circumstances. An increase in
the conversion ratio as a result of our distribution of cash to common
stockholders generally will result in a deemed distribution to U.S. Holders. If
we were to make a distribution of property to stockholders (for example,
distributions of evidences of indebtedness or assets, but generally not stock
dividends or rights to subscribe for our common stock) and the conversion price
underlying the debentures was decreased pursuant to the anti-dilution provisions
of the indenture, such decrease would be deemed to be a distribution to U.S.
Holders. In addition, other decreases in the conversion price of the debentures
may, depending on the circumstances, be deemed to be distributions to U.S.
Holders. Any such deemed distribution will be generally taxed in the same manner
as an actual dividend distribution. In certain circumstances, the reverse may be
true -- namely the failure to make an adjustment of the conversion price under
the indenture may result in a taxable distribution to holders of our common
stock.
Taxation of Distributions on Our Common Stock. Distributions paid on
our common stock received upon the conversion of a debenture, other than certain
pro rata distributions of common shares, will be treated as a dividend to the
extent paid out of current or accumulated earnings and profits (as determined
under U.S. federal income tax principles) and will be includible in income by
the U.S. Holder and taxable as ordinary income when received. Under recently
enacted legislation, dividends received by a noncorporate U.S. Holder may be
subject to U.S. federal income tax at lower rates than other types of ordinary
income if certain conditions are met. U.S. Holders should consult their own tax
advisers regarding the implications of this new legislation in their particular
circumstances. If a distribution exceeds our current and accumulated earnings
and profits, the excess will be first treated as a tax-free return of the U.S.
Holder's investment, up to the U.S. Holder's tax basis in our common stock. Any
remaining excess will be treated as a capital gain.
Sale or Other Disposition of Our Common Stock. Unless a nonrecognition
provision applies, gain or loss realized by a U.S. Holder on the sale or other
disposition of our common stock received upon the conversion of a debenture will
be recognized as capital
46
gain or loss for U.S. federal income tax purposes, and will be long-term capital
gain or loss if the U.S. Holder held the common stock for more than one year.
The amount of the U.S. Holder's gain or loss will be equal to the difference
between the U.S. Holder's tax basis in the common stock disposed of and the
amount realized on the disposition. Long-term capital gains recognized by
certain non-corporate U.S. Holders, including individuals, will generally be
subject to a reduced tax rate. The deductibility of capital losses is subject to
limitations. Further, a U.S. Holder who sells the stock at a loss that meets
certain thresholds may be required to file a disclosure statement with the IRS
under recently promulgated Treasury Regulations.
Backup Withholding and Information Reporting. A U.S. Holder of a
debenture or common stock may be subject, under certain circumstances, to
information reporting and backup withholding at the then applicable rate
(currently at a rate of 28%, which rate is scheduled to be increased to 31% for
2011 and thereafter) with respect to payments of interest and dividends on, and
gross proceeds from a sale, exchange, redemption or other disposition of, a
debenture or common stock. These backup withholding rules apply if the U.S.
Holder, among other things: (i) fails to furnish a social security number or
other taxpayer identification number ("TIN") certified under penalties of
perjury within a reasonable time after the request therefor; (ii) furnishes an
incorrect TIN; (iii) fails to properly report interest; or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN furnished is the correct number and that such U.S. Holder
is not subject to backup withholding.
A U.S. Holder of a debenture or common stock who does not provide his,
her or its correct taxpayer identification number also may be subject to
penalties imposed by the IRS. Backup withholding is not an additional tax. Any
amount paid as backup withholding is creditable against the U.S. Holder's
federal income tax liability, provided the requisite information is provided
timely to the IRS. Certain persons are exempt from backup withholding, including
corporations and tax-exempt entities, provided their exemption from backup
withholding is properly established. U.S. Holders of debentures and our common
stock should consult their tax advisors as to their qualifications for exemption
from backup withholding and the procedure for obtaining such exemption.
We will report to the IRS and to the holders of the debentures and our
common stock the amount of any payments of interest on the debentures and
dividends on our common stock made by us, as well as any amounts withheld with
respect to the debentures or our common stock, during the calendar year.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income and
U.S. federal estate tax consequences to a holder of a debenture or our common
stock that is a beneficial owner and that is an individual, corporation, estate
or trust other than either a U.S. Holder or a person subject to rates applicable
to former citizens and long-term residents of the United States (a "Non-U.S.
Holder"). In addition, this discussion does not address the U.S. federal income
tax consequences to Non-U.S. Holders subject to special treatment under the
Code, such as "controlled foreign corporations," "foreign investment companies,"
"foreign personal holding companies" and foreign corporations that accumulate
earnings to avoid U.S. federal income tax.
Payments on the Debentures. All payments on the debentures made to a
Non-U.S. Holder, including a payment in our common stock or cash pursuant to a
conversion, retirement, or repurchase, and any gain realized on a sale or
exchange of the debentures will be exempt from U.S. federal income and
withholding tax, provided that:
- the Non-U.S. Holder (i) does not actually or constructively
own 10% or more of the total combined voting power of all
classes of our stock entitled to vote, (ii) is not a
"controlled foreign corporation" with respect to which we are
a "related person" within the meaning of the Code, and (iii)
is not a bank receiving certain types of interest;
- the Non-U.S. Holder certifies, under penalties of perjury, on
a properly executed IRS Form W-8BEN (or any successor form)
prior to the payment of interest that such holder is not a
U.S. person and provides such holder's name and address or a
financial institution holding the debentures on behalf of the
Non-U.S. Holder certifies, under penalties of perjury, that it
has received an IRS Form W-8BEN (or successor form) from the
Non-U.S. Holder or the beneficial owner and provides us with a
copy;
- the payments are not effectively connected with conduct by the
Non-U.S. Holder of a trade or business in the United States;
and
- in the case of gain realized on the sale, exchange, conversion
or retirement of the debentures, we are not, and have not been
within the shorter of the five-year period preceding such
sale, exchange, conversion or retirement and the period the
Non-U.S. Holder held the debentures, a U.S. real property
holding corporation, or certain de minimis ownership rules
apply to the debentures held by the Non-U.S. Holders. We
believe that we are not, and do not anticipate becoming, a
U.S. real property holding corporation for U.S. federal income
tax purposes.
Conversion into Common Stock. A Non-U.S. Holder's conversion of a
debenture into our common stock will not be a taxable event. However, to the
extent that a Non-U.S. Holder receives cash in lieu of a fractional share upon
conversation or is deemed to receive accrued and unpaid interest, any such gain
and/or interest would be subject to the rules described above.
47
Our Common Stock. Dividends (including constructive dividends on the
debentures described above under "U.S. Holders -- Constructive Dividends") paid
to a Non-U.S. Holder of our common stock generally will be subject to U.S.
withholding tax at a 30% rate, subject to reduction under an applicable income
tax treaty. In order to obtain a reduced rate of withholding, a Non-U.S. Holder
will be required to provide a properly executed IRS Form W-8BEN certifying its
entitlement to benefits under a treaty. Such form must be updated periodically.
A Non-U.S. Holder that is claiming the benefits of an income tax treaty also may
be required in certain circumstances to provide a TIN or certain documentary
evidence issued by foreign governmental authorities to prove residence in the
foreign country. A Non-U.S. Holder who is subject to withholding tax under such
circumstances should consult his, her or its own tax adviser as to whether such
holder can obtain a refund for all or a portion of the withholding tax.
A Non-U.S. Holder generally will not be subject to U.S. federal income
or withholding tax on gain realized on a sale or other disposition of common
stock received upon a conversion of a debenture, unless:
- the gain is effectively connected with the conduct by such
Non-U.S. Holder of a trade or business in the United States;
- in the case of a Non-U.S. Holder who is a nonresident alien
individual, the individual is present in the United States for
183 or more days in the taxable year of the disposition and
certain other conditions are met; or
- we are or have been a U.S. real property holding corporation
at any time within the shorter of the five-year period
preceding such sale, exchange or disposition and the period
the Non-U.S. Holder held the common stock and the debenture,
or certain de minimis ownership rules do not apply. We believe
that we are not, nor do we anticipate becoming, a U.S. real
property holding corporation for U.S. federal income tax
purposes.
U.S. Trade or Business. For purposes of the discussion below, income or
gain is generally considered U.S. trade or business income if such income or
gain is:
- effectively connected with the Non-U.S. Holder's conduct of a
U.S. trade or business; or
- in the case of a treaty resident, attributable to a U.S.
permanent establishment (or, in the case of an individual, a
fixed base) maintained by the Non-U.S. Holder in the United
States.
If a Non-U.S. Holder of a debenture or our common stock is engaged in a
trade or business in the United States, and if payments on a debenture,
dividends paid on our common stock or gain on the disposition of a debenture or
our common stock is effectively connected with the conduct of that trade or
business, the Non-U.S. Holder will generally be taxed in the same manner as a
U.S. Holder (see "U.S. Holders" above). These Non-U.S. Holders should consult
their own tax advisers with respect to other tax consequences of the ownership
of the debentures or of our common stock including, in the case of a Non-U.S.
Holder that is a corporation, the possible imposition of a branch profits tax at
a rate of 30%, subject to reduction by an applicable income tax treaty, on their
effectively connected income.
Federal Estate Tax. Any debenture held (or treated as held) by an
individual who is a Non-U.S. Holder at the time of his death will not be subject
to U.S. federal estate tax, provided that the individual does not actually or
constructively own 10% or more of the total voting power of all of our classes
of stock entitled to vote and income on the debentures was not U.S. trade or
business income. However, our common stock held by an individual who is a
Non-U.S. Holder at the time of his death will be included in the gross estate of
the Non-U.S. Holder for U.S. federal estate tax purposes unless an applicable
estate tax treaty provides otherwise.
Information Reporting and Backup Withholding. We must report annually
to the IRS and to each Non-U.S. Holder any interest or dividends that are paid
to the Non-U.S. Holder. Copies of these information returns also may be made
available under the provisions of a specific treaty or other agreement to the
tax authorities of the country in which the Non-U.S. Holder resides.
Treasury Regulations provide that the backup withholding tax (currently
at a rate of 28%, which rate is scheduled to be increased to 31% for 2011 and
thereafter) and certain information reporting will not apply to payments of
interest or dividends with respect to which either the requisite certification
that the Non-U.S. Holder is not a U.S. person, as described above, has been
received or an exemption otherwise has been established, provided that neither
we nor our paying agent have actual knowledge, or reason to know, that the
Non-U.S. Holder is a U.S. person or that the conditions of any other exemption
are not, in fact, satisfied.
The payment of the gross proceeds from the sale, exchange, redemption
or other disposition of the debentures or our common stock to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding unless the Non-U.S. Holder certifies
as to its non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge, or reason to
know, that the Non-U.S. Holder is a U.S. person or
48
that the conditions of any other exemption are not, in fact, satisfied. The
payment of the gross proceeds from the sale, exchange, redemption or other
disposition of the debentures or our common stock to or through a non-U.S.
office of a non-U.S. broker will not be subject to information reporting or
backup withholding unless the non-U.S. broker has certain types of relationships
with the United States (a "U.S. related person"). In the case of the payment of
the gross proceeds from the sale, exchange, redemption or other disposition of
the debentures or our common stock to or through a non-U.S. office of a broker
that is either a U.S. person or a U.S. related person, the Treasury Regulations
require information reporting (but not back-up withholding) on the payment
unless the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder and the broker has no knowledge, or reason to know, to the
contrary.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be refunded or credited against the Non-U.S.
Holder's U.S. federal income tax liability, provided that the required
information is provided to the IRS.
All certifications described above under the heading "Non-U.S. Holders"
are subject to special rules with respect to reliance standards, under which
certifications provided by holders may not be relied on under certain
circumstances (for example, if we, our paying agent, or the broker had actual
knowledge or reason to know that the certification is false).
THE PRECEDING DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE DEBENTURES OR
OUR COMMON STOCK IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH INVESTOR IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR
AS TO PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF
DEBENTURES AND, WHERE APPLICABLE, OUR COMMON STOCK, INCLUDING THE APPLICABILITY
AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED
CHANGES IN APPLICABLE LAW.
SELLING SECURITY HOLDERS
We originally issued the debentures to the initial purchasers, Banc of
America Securities LLC and J.P. Morgan Securities Inc., in a private placement
in October 2003. The debentures were resold by the initial purchasers in
transactions exempt from registration under Rule 144A under the Securities Act.
Selling security holders, which term includes their transferees, pledgees,
donees or their successors, may from time to time offer and sell the debentures
and the common stock into which the debentures are convertible pursuant to this
prospectus or any applicable prospectus supplement.
The following table sets forth certain information with respect to the
selling security holders and the principal amount of debentures and the number
of shares of common stock beneficially owned by each selling security holder
that may be offered from time to time under this prospectus. We prepared this
table based on the information supplied to us by the selling security holders
named in the table and we have not sought to verify such information. This table
only reflects information regarding selling security holders who have provided
us with such information. We will supplement or amend this prospectus to include
additional selling security holders upon request and upon provision of all
required information to us. Information concerning the selling security holders
may change from time to time and any changed information will be set forth in
supplements to this prospectus if and when necessary.
The number of shares of common stock issuable upon conversion of the
debentures shown in the table below assumes conversion of the full amount of the
debentures held by each selling security holder at an initial conversion rate of
89.7989 shares per $1,000 principal amount of debentures. This conversion rate
is subject to adjustment in certain events. Accordingly, the number of
conversion shares may increase or decrease from time to time.
The percentage of common stock beneficially owned and being offered are
based on the number of shares of our common stock that were outstanding as of
December 31, 2003. Because the selling security holders may offer all or some
portion of the debentures or the shares of common stock issuable upon conversion
of the debentures pursuant to this prospectus, we have assumed for purposes of
the table below that the selling security holders will sell all of the
debentures and all of the shares of common stock offered by this prospectus
pursuant to this prospectus. In addition, the selling security holders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their debentures in transactions exempt from the registration
requirements of the Securities Act since the date on which they provided the
information to us regarding their holdings. As of December 31, 2003, we had
$270,000,000 in principal amount of the debentures and 115,514,509 shares of
common stock outstanding.
49
Based on information provided by the selling security holders, none of
the selling security holders has held any position or office or has had any
material relationship with us within the past three years.
PRINCIPAL AMOUNT SHARES OF CONVERSION
OF DEBENTURES PERCENTAGE COMMON STOCK SHARES OF PERCENTAGE
BENEFICIALLY OF BENEFICIALLY COMMON OF COMMON
OWNED AND DEBENTURES OWNED PRIOR TO STOCK STOCK
NAME OFFERED OUTSTANDING OFFERING OFFERED OUTSTANDING
Pioneer High Yield Fund $53,250,000 20.0% -- 4,781,791 3.98%
Akela Capital Master Fund, Ltd. $12,000,000 4.44% -- 897,989 *
Vanguard Convertible Securities Fund, Inc. $11,455,000 4.24% -- 1,028,646 *
Teachers Insurance and Annuity Association of America $10,500,000 3.89% -- 942,888 *
Highbridge International LLC $10,000,000 3.70% -- 897,989 *
Akanthos Arbitrage Master Fund, L.P. $10,000,000 3.70% -- 897,989 *
Wachovia Securities International Ltd. $ 9,000,000 3.33% -- 808,190 *
Zazove Hedged Convertible Fund L.P. $ 8,000,000 2.96% -- 718,391 *
Grace Convertible Arbitrage Fund, LTD $ 5,750,000 2.13% -- 516,343 *
DBAG London $ 5,200,000 1.93% -- 466,954 *
The Coast Fund L.P. $ 5,000,000 1.85% -- 448,994 *
Pioneer U.S. High Yield Corporate Bond Sub Fund $ 5,000,000 1.85% -- 448,994 *
Maystone Continuum Master Fund, Ltd. $ 4,950,000 1.83% -- 444,504 *
Zazove Convertible Arbitrage Fund, L.P. $ 4,800,000 1.78% -- 431,034 *
Deutsche Bank Securities Inc. $ 4,400,000 1.63% -- 395,115 *
Peoples Benefit Life Insurance Company TEAMSTERS $ 4,000,000 1.48% -- 359,195 *
Guardian Life Insurance Co. $ 3,200,000 1.18% -- 287,356 *
CALAMOS Convertible Fund - CALAMOS Investment Trust $ 3,155,000 1.17% -- 283,315 *
Chrysler Corporation Master Retirement Trust $ 3,090,000 1.14% -- 277,478 *
50
PRINCIPAL AMOUNT SHARES OF CONVERSION
OF DEBENTURES PERCENTAGE COMMON STOCK SHARES OF PERCENTAGE
BENEFICIALLY OF BENEFICIALLY COMMON OF COMMON
OWNED AND DEBENTURES OWNED PRIOR TO STOCK STOCK
NAME OFFERED OUTSTANDING OFFERING OFFERED OUTSTANDING
OCM Convertible Trust $ 3,085,000 1.14% -- 277,029 *
Canyon Value Realization Fund (Cayman), Ltd. $ 3,075,000 1.14% -- 276,131 *
St. Albans Partners Ltd. $ 3,000,000 1.11% -- 269,396 *
Microsoft Corporation $ 2,405,000 * -- 215,966 *
Canyon Capital Arbitrage Master Fund, LTD $ 2,250,000 * -- 202,047 *
Context Convertible Arbitrage Offshore, LTD $ 2,150,000 * -- 193,067 *
TD Securities (USA) Inc. $ 2,018,000 * -- 181,214 *
DKR SoundShore Strategic Holding Fund Ltd. $ 2,000,000 * -- 179,597 *
DeepRock & Co $ 2,000,000 * -- 179,597 *
McMahan Securities Co. L.P. $ 2,000,000 * -- 179,597 *
Zazove Income Fund L.P. $ 1,950,000 * -- 175,107 *
Quest Global Convertible Master Fund Ltd. $ 1,837,500 * -- 165,005 *
Zurich Institutional Benchmarks Master Fund Ltd. $ 1,774,000 * -- 159,303 *
Zurich Institutional Benchmarks Master Fund Ltd. $ 1,600,000 * -- 143,678 *
San Diego County Employee Retirement Association $ 1,550,000 * -- 139,188 *
Van Kampen Harbor Fund $ 1,500,000 * -- 134,698 *
State Employees' Retirement Fund of the State of Delaware $ 1,435,000 * -- 128,861 *
Delta Airlines Master Trust $ 1,325,000 * -- 118,983 *
Boilermakers Blacksmith Pension Trust $ 1,295,000 * -- 116,289 *
National Bank of Canada $ 1,250,000 * -- 112,248 *
Canyon Value Realization Fund, L.P. $ 1,125,000 * -- 101,023 *
CNH CA Master Account, L.P. $ 1,100,000 * -- 98,778 *
Context Convertible Arbitrage Fund, LP $ 1,100,000 * -- 98,778 *
HFR CA Select Fund $ 1,100,000 * -- 98,778 *
Partner Reinsurance Company Ltd. $ 1,085,000 * -- 97,431 *
Fore Convertible Master Fund Ltd. $ 1,050,000 * -- 94,288 *
51
PRINCIPAL AMOUNT SHARES OF CONVERSION
OF DEBENTURES PERCENTAGE COMMON STOCK SHARES OF PERCENTAGE
BENEFICIALLY OF BENEFICIALLY COMMON OF COMMON
OWNED AND DEBENTURES OWNED PRIOR TO STOCK STOCK
NAME OFFERED OUTSTANDING OFFERING OFFERED OUTSTANDING
S.A.C. Capital Associates, LLC $ 1,000,000 * 152,300 89,798 *
Mill River Master Fund L.P. $ 1,000,000 * -- 89,798 *
Wachovia Risk Services $ 1,000,000 * -- 89,798 *
Morgan Stanley Convertible Securities Trust $ 1,000,000 * -- 89,798 *
TQA Master Plus Fund, Ltd. $ 880,000 * -- 79,023 *
BP Amoco PLC Master Trust $ 784,000 * -- 70,402 *
Southern Farm Bureau Life Insurance $ 755,000 * -- 67,798 *
TQA Master Fund, Ltd. $ 737,000 * -- 66,181 *
SSI Hedged Convertible Market Neutral L.P. $ 654,000 * -- 58,728 *
The Dow Chemical Company Employees' Retirement Plan $ 650,000 * -- 58,369 *
Delta Pilots Disability and Survivorship Trust - CV $ 620,000 * -- 55,675 *
SSI Blended Market Neutral L.P. $ 602,000 * -- 54,058 *
Guardian Pension Trust $ 600,000 * -- 53,879 *
Delta Airlines Master Trust $ 520,000 * -- 46,695 *
Pioneer High Yield VCT Portfolio $ 500,000 * -- 44,899 *
Canyon Value Realization MAC 18, LTD (RMF) $ 450,000 * -- 40,409 *
SPT $ 450,000 * -- 40,409 *
Associated Electric & Gas Insurance Services Limited $ 400,000 * -- 35,919 *
Qwest Occupational Health Trust $ 395,000 * -- 35,470 *
Lighthouse Multi-Strategy Convertible Master Fund Ltd. $ 367,500 * -- 33,001 *
Sphinx Convertible Arb Fund SPC $ 353,000 * -- 31,699 *
52
PRINCIPAL AMOUNT SHARES OF CONVERSION
OF DEBENTURES PERCENTAGE COMMON STOCK SHARES OF PERCENTAGE
BENEFICIALLY OF BENEFICIALLY COMMON OF COMMON
OWNED AND DEBENTURES OWNED PRIOR TO STOCK STOCK
NAME OFFERED OUTSTANDING OFFERING OFFERED OUTSTANDING
Boilermaker Blacksmith Pension Trust $ 350,000 * -- 31,429 *
Motion Picture Industry Health Plan - Active Member Fund $ 345,000 * -- 30,980 *
Union Carbide Retirement Account $ 310,000 * -- 27,837 *
Delta Airlines Master Trust $ 300,000 * -- 26,939 *
Hotel Union & Hotel Industry of Hawaii Pension Plan $ 299,000 * -- 26,849 *
WPG Convertible Arbitrage Overseas Master Fund $ 250,000 * -- 22,449 *
Duke Endowment $ 250,000 * -- 22,449 *
Lyxor/Quest Fund Ltd. $ 245,000 * -- 22,000 *
Man Mac I Limited $ 230,000 * -- 20,653 *
Guggenheim Portfolio Company VIII, LLC $ 230,000 * -- 20,653 *
Travelers Indemnity Company - Commercial Lines $ 225,000 * -- 20,204 *
Motion Picture Industry Health Plan - Retiree Member Fund $ 210,000 * -- 18,857 *
Dorinco Reinsurance Company $ 200,000 * -- 17,959 *
Sterling Invest Co. $ 180,000 * -- 16,163 *
Port Authority of Allegheny County Retirement and $ 160,000 * -- 14,367 *
Disability Allowance Plan for the Employees Represented
by Local 85 of the Amalgamated Transit Union
United Food and Commercial Workers Local 1262 and $ 155,000 * -- 13,918 *
Employers Pension Fund
Travelers Indemnity Company - Personal Lines $ 150,000 * -- 13,469 *
Xavex Convertible Arbitrage 7 Fund $ 147,000 * -- 13,200 *
53
PRINCIPAL AMOUNT SHARES OF CONVERSION
OF DEBENTURES PERCENTAGE COMMON STOCK SHARES OF PERCENTAGE
BENEFICIALLY OF BENEFICIALLY COMMON OF COMMON
OWNED AND DEBENTURES OWNED PRIOR TO STOCK STOCK
NAME OFFERED OUTSTANDING OFFERING OFFERED OUTSTANDING
OCM Global Convertible Securities Fund DC $ 125,000 * -- 11,224 *
Zurich Institutional Benchmarks Master Fund Ltd. $ 120,000 * -- 10,775 *
RBC Alternate Assets LP - CONV ARB $ 100,000 * -- 8,979 *
Univest Multi-Strategy - CONV ARB $ 100,000 * -- 8,979 *
The California Wellness Foundation $ 100,000 * -- 8,979 *
Delta Pilots Disability and Survivorship Trust $ 100,000 * -- 8,979 *
Univar USA Inc. Retirement Plan $ 80,000 * -- 7,183 *
City of Knoxville Pension System $ 75,000 * -- 6,734 *
Macomb County Employees' Retirement System $ 75,000 * -- 6,734 *
LDG Limited $ 66,000 * -- 5,926 *
Aventis Pension Master Trust $ 65,000 * -- 5,836 *
American AAdvantage Funds $ 55,000 * -- 4,938 *
WPG MSA Convertible Arbitrage Fund $ 50,000 * -- 4,489 *
CALAMOS Convertible Portfolio - CALAMOS Advisors Trust $ 45,000 * -- 4,040 *
SCI Endowment Care Common Trust Fund - National Fiduciary $ 40,000 * -- 3,591 *
Services
The Fondren Foundation $ 36,000 * -- 3,232 *
Knoxville Utilities Board Retirement System $ 35,000 * -- 3,142 *
CEMEX Pension Plan $ 34,000 * -- 3,053 *
Sphinx Fund $ 32,000 * -- 2,873 *
Viacom Inc. Pension Plan Master Trust $ 28,000 * -- 2,514 *
54
PRINCIPAL AMOUNT SHARES OF CONVERSION
OF DEBENTURES PERCENTAGE COMMON STOCK SHARES OF PERCENTAGE
BENEFICIALLY OF BENEFICIALLY COMMON OF COMMON
OWNED AND DEBENTURES OWNED PRIOR TO STOCK STOCK
NAME OFFERED OUTSTANDING OFFERING OFFERED OUTSTANDING
SCI Endowment Care Common Trust Fund - Suntrust $ 20,000 * -- 1,795 *
Lexington Vantage Fund $ 18,000 * -- 1,616 *
SCI Endowment Care Common Trust Fund - First Union $ 10,000 * -- 897 *
Jefferies & Company Inc. $ 6,000 * -- 538 *
Any other holder of debentures or future transferee, $31,822,000 11.79% -- 2,857,581 2.41%
pledgee, donee or successor of any holder (1)
*Less than one percent
(1) Assumes that any other holders of debentures, or any future
transferees, pledgees, donees or successors of or from any such other
holders of debentures, do not beneficially own any common stock other
than the common stock issuable upon conversion of the debentures at the
initial conversion rate.
55
PLAN OF DISTRIBUTION
The selling security holders may from time to time sell the debentures
and the common stock into which the debentures are convertible covered by this
prospectus, which we collectively refer to in this section as the securities,
directly to purchasers or offer the securities through underwriters,
broker-dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the selling security
holders and/or the purchasers of securities for whom they may act as agent,
which discounts, concessions or commissions as to any particular underwriter,
broker-dealer or agent may be in excess of those customary in the types of
transactions involved.
The securities may be sold in one or more transactions:
- at fixed prices;
- at prevailing market prices at the time of sale;
- at varying prices determined at the time of sale; or
- at negotiated prices.
These sales may be effected in transactions that may involve crosses or
block transactions, in the following manner:
- on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of
sale, including the New York Stock Exchange in the case of our
common stock;
- in the over-the-counter market;
- in transactions otherwise than on these exchanges or services
or in the over-the-counter market; or
- through the writing and exercise of options, whether these
options are listed on any options exchange or otherwise.
In connection with the sale of the securities, the selling security
holders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the
securities in the course of hedging positions they assume. The selling security
holders may sell the securities short and deliver securities to close out short
positions, or loan or pledge the securities to broker-dealers that in turn may
sell these securities.
Our outstanding common stock is listed for trading on the New York
Stock Exchange under the symbol "PWR." We do not intend to list the debentures
on any securities exchange. We cannot assure you as to the liquidity of any
trading market for the debentures that may develop.
In order to comply with the securities laws of some jurisdictions, if
applicable, the holders of securities may offer and sell those securities in
such jurisdictions only through registered or licensed brokers or dealers. In
addition, under certain circumstances, in some jurisdictions the securities may
not be offered or sold unless they have been registered or qualified for sale in
the applicable jurisdiction or an exemption from registration or qualification
requirements is available and is complied with.
The selling security holders, and any underwriters, broker-dealers or
agents that participate in the sale of securities, may be "underwriters" within
the meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any sale of the securities may be
underwriting compensation under the Securities Act. The selling security holders
have acknowledged that they understand their obligations to comply with the
provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M, and have agreed that they will not
engage in any transaction in violation of such provisions.
If required, at the time of a particular offering of securities by a
selling security holder, a supplement to this prospectus will be circulated
setting forth the name or names of any underwriters, broker-dealers or agents,
any discounts, commissions or other terms constituting compensation for
underwriters and any discounts, commissions or concessions allowed or reallowed
or paid to agents or broker-dealers.
56
To our knowledge, there are currently no plans, arrangements or
understandings between any selling security holders and any underwriter,
broker-dealer or agent regarding the sale of the debentures and the underlying
common stock by the selling security holders. Selling security holders may be
able to sell the debentures and the underlying common stock pursuant to an
exemption from the registration requirements of the Securities Act rather than
making sales pursuant to this prospectus. In addition, we cannot assure you that
any such selling security holder will not transfer, devise or gift the
debentures and the underlying common stock by other means not described in this
prospectus.
We entered into a registration rights agreement for the benefit of
holders of the securities to register their securities under applicable federal
and state securities laws under specific circumstances and at specific times.
The registration rights agreement provides for cross indemnification of the
selling security holders and us and their and our respective directors, officers
and controlling persons against specific liabilities in connection with the
offer and sale of the securities, including liabilities under the Securities
Act. Pursuant to the registration rights agreement, we will bear all fees and
expenses incurred in connection with the registration of the securities, except
that selling security holders will pay all broker's commissions.
LEGAL MATTERS
Weil, Gotshal & Manges LLP has passed upon the validity of the
debentures offered hereby and the common stock issuable upon conversion of the
debentures on behalf of Quanta.
EXPERTS
The consolidated financial statements of Quanta as of and for the year
ended December 31, 2002, incorporated by reference in this prospectus and in the
registration statement by reference to the Annual Report on Form 10-K/A for the
year ended December 31, 2002, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
PricewaterhouseCoopers LLP's report refers to the adoption of the
provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets," and to its audit of the transitional disclosures for
2000 and 2001, as more fully described in Note 2 to the financial statements.
However, PricewaterhouseCoopers LLP was not engaged to audit, review or apply
any procedures to the 2000 and 2001 consolidated financial statements other than
with respect to such disclosures. Additionally, PricewaterhouseCoopers LLP's
report refers to Quanta's restatement of earnings per share data in 2002, as
more fully described in Note 3 to the financial statements.
The consolidated financial statements of Quanta as of and for each of
the two years in the period ended December 31, 2001, from our Annual Report on
Form 10-K/A for the year ended December 31, 2002, incorporated by reference in
this prospectus, have been audited by Arthur Andersen LLP, independent
accountants, as stated in their reports appearing therein, and are incorporated
by reference herein in reliance upon the authority of said firm as experts in
auditing and accounting.
We have not been able to obtain, after reasonable efforts, the written
consent of Arthur Andersen LLP to our naming it in this prospectus or the shelf
registration statement as having certified our consolidated financial statements
for the two years ended December 31, 2001, as required by Section 7 of the
Securities Act. We have dispensed with the requirement to file its consent in
reliance on the temporary relief provided by the SEC under Rule 437(a) of the
Securities Act. Accordingly, you will not be able to sue Arthur Andersen LLP
pursuant to Section 11(a) of the Securities Act and therefore your right of
recovery under that section will be limited as a result of the lack of consent.
Even if you have a basis for asserting a remedy against, or seeking to recover
from, Arthur Andersen LLP, we believe that it is unlikely that you would be able
to recover damages from Arthur Andersen LLP.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You can read and copy any materials we file with
the SEC at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can obtain information about the operation of the SEC's Public
Reference Room by calling the SEC at 1-800-SEC-0330. Copies can be obtained from
the SEC upon payment of the prescribed fees. The SEC also maintains a web site
that contains information we file electronically with the SEC, which you can
access over the Internet at http://www.sec.gov. In addition, you can obtain
information about us at the offices of the New York Stock Exchange at 20 Broad
Street, New York, New York 10005.
57
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We "incorporate by reference" into this prospectus certain information
we file with the SEC, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus. Any statement made in a
document incorporated by reference in this prospectus is deemed to be modified
or superseded for purposes of this prospectus to the extent that a statement in
this prospectus or in any other subsequently filed document, which is also
incorporated by reference, modifies or supersedes the statement. Any statement
made in this prospectus is deemed to be modified or superseded to the extent a
statement in any subsequently filed document, which is incorporated by reference
in this prospectus, modifies or supersedes such statement. Any statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
We incorporate by reference the filings listed below, which have
previously been filed with the SEC, and any future filings made with the SEC
prior to the termination of this offering under Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act (other than current reports furnished under Item 9 or
Item 12 of Form 8-K unless specifically incorporated by reference by us). All of
these filings, which contain important information about us, are considered a
part of this prospectus.
- Our amended and restated annual report on Form 10-K/A for the
year ended December 31, 2002, filed on October 2, 2003.
- Our amended and restated quarterly report on Form 10-Q/A for
the quarter ended March 31, 2003, filed on October 2, 2003.
- Our amended and restated quarterly report on Form 10-Q/A for
the quarter ended June 30, 2003, filed on October 2, 2003.
- Our quarterly report on Form 10-Q for the quarter ended
September 30, 2003, filed on November 14, 2003.
- Our current reports on Form 8-K filed on October 3, 2003,
October 9, 2003, October 10, 2003, October 17, 2003, October
21, 2003 and October 24, 2003.
You may obtain copies of documents incorporated by reference in this
document, without charge, by writing to us at the following address or calling
us at the telephone number listed below:
Quanta Services, Inc.
1360 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
(713) 629-7600
Attention: Corporate Secretary
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act covering the debentures and the shares of common stock
issuable upon conversion of the debentures to be offered and sold by this
prospectus. This prospectus does not contain all of the information included in
the registration statement, some of which is contained in exhibits to the
registration statement. The registration statement, including the exhibits, can
be read at the SEC web site or at the SEC offices referred to above. Any
statement made or incorporated by reference into this prospectus concerning the
contents of any contract, agreement or other document is only a summary of the
actual contract, agreement or other document. If we have filed any contract,
agreement or other document as an exhibit to the registration statement, you
should read the exhibit for a more complete understanding of the document or
matter involved. Each statement regarding a contract, agreement or other
document is qualified in its entirety by reference to the actual document.
58
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
registrant in connection with the resales of the securities to be registered,
other than underwriting commissions. All amounts shown are estimates except the
SEC registration statement filing fee. The selling security holders will pay
none of the expenses listed below:
Amount to be Paid
Securities and Exchange Commission filing fee $ 21,843
Printing fees and expenses 100,000
Legal fees and expenses 350,000
Accounting fees and expenses 150,000
Other 62,366
-----------------
Total $ 684,209
=================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law provides that a corporation may,
and in certain circumstances must, indemnify its directors, officers, employees
and agents for expenses, judgments or settlements actually and reasonably
incurred by them in connection with suits and other legal actions or proceedings
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. In any such suit or action brought by or on behalf of the
corporation, such indemnification is limited to expenses incurred in defense or
settlement of the suit or action. Delaware law also permits a corporation to
adopt procedures for advancing expenses to directors, officers and others
without the need for a case-by-case determination of eligibility, so long as, in
the case of officers and directors, they undertake to repay the amounts advanced
if it is ultimately determined that the officer or director was not entitled to
be indemnified.
Article Tenth of our Restated Certificate of Incorporation and Article
Seven of our Amended and Restated Bylaws contain provisions for indemnification
of directors and officers and for the advancements of expenses to any director
or officer to the fullest extent permitted by Delaware law. Additionally,
Article Eleventh of our Restated Certificate of Incorporation provides that no
director shall be liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director to the fullest extent permitted by
Delaware law.
The Delaware General Corporation Law also permits corporations to
purchase and maintain insurance for directors and officers against liability for
expenses, judgments or settlements, whether or not the corporation would have
the power to indemnify such persons therefor. Article Seven of our Amended and
Restated Bylaws permits us to purchase such insurance. We have director and
officer insurance in place for our directors and officers.
ITEM 16. EXHIBITS
4.1 Form of Common Stock certificate (previously filed as Exhibit
4.1 to Quanta's Registration Statement on Form S-1 (No.
333-42957) filed December 22, 1997 and incorporated herein by
reference)
4.2 Indenture relating to Quanta Services, Inc.'s 4.50%
Convertible Subordinated Debentures due 2023, dated October
17, 2003 (previously filed as Exhibit 4.1 to Quanta's Form
10-Q (No. 001-13831) filed November 14, 2003 and incorporated
herein by reference)
4.3 Form of Debenture (previously filed as Exhibit A to the
Indenture relating to Quanta's 4.5% Convertible Subordinated
Debentures, filed as Exhibit 4.1 to Quanta's Form 10-Q (No.
001-13831) filed November 14, 2003 and incorporated herein by
reference)
4.4 Rights Agreement dated as of March 8, 2000 between Quanta
Services, Inc. and American Stock Transfer & Trust Company, as
Rights Agent, which includes as Exhibit B thereto the Form of
Right Certificate (previously filed as Exhibit 4.1 to the
Company's Form 8-K (No. 011-13831) filed March 20, 2000 and
incorporated herein by reference)
59
5.1 Opinion of Weil, Gotshal & Manges LLP as to the legality of
the securities being registered (filed herewith)
10.1 Resale Registration Rights Agreement dated October 17, 2003
among Quanta Services, Inc. and Banc of America Securities LLC
and J.P. Morgan Securities Inc. (previously filed as Exhibit
10.1 to Quanta's Form 10-Q (No. 001-13831) filed November 14,
2003 and incorporated herein by reference)
12.1 Statement regarding computation of earnings to fixed charges
(filed herewith)
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
23.2 Consent of Weil, Gotshal & Manges LLP (see Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
25.1 Form T-1 Statement of Eligibility of Wells Fargo Bank, N.A. as
Trustee (filed herewith)
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however, that clauses (i) and (ii) do not apply if
the information required to be included in a post-effective amendment by such
clauses is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the Exchange
At) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 15 of this
registration statement or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in
60
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under section 305(b)(2) of
the Act.
61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 6th day of January,
2004.
QUANTA SERVICES, INC.
By: /s/ John R. Colson
----------------------------------
John R. Colson
Chief Executive Officer
62
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
and appoints Dana A. Gordon and James H. Haddox, and each of them, with full
power of substitution and resubstitution and full power to act without the
other, as his true and lawful attorney-in-fact and agent to act in his name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file any and all
amendments to this registration statement, including any and all post-effective
amendments and amendments thereto, and any registration statement relating to
the same offering as this registration statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing, ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed on January 6, 2004, by the
following persons in the capacities indicated below:
SIGNATURE TITLE (CAPACITY)
--------- ----------------
/s/ John R. Colson Chief Executive Officer, Director
----------------------- (Principal Executive Officer)
John R. Colson
/s/ James H. Haddox Chief Financial Officer (Principal Financial Officer)
-----------------------
James H. Haddox
/s/ Derrick A. Jensen Vice President, Controller and Chief Accounting Officer
-----------------------
Derrick A. Jensen
/s/ James R. Ball Director
-----------------------
James R. Ball
/s/ Vincent D. Foster Director
-----------------------
Vincent D. Foster
/s/ Louis C. Golm Director
-----------------------
Louis C. Golm
/s/ Ben A. Guill Director
-----------------------
Ben A. Guill
/s/ James A. Nattier Director
-----------------------
James A. Nattier
/s/ Gary A. Tucci Director
-----------------------
Gary A. Tucci
/s/ John R. Wilson Director
-----------------------
John R. Wilson
63
INDEX TO EXHIBITS
4.1 Form of Common Stock certificate (previously filed as Exhibit
4.1 to Quanta's Registration Statement on Form S-1 (No.
333-42957) filed December 22, 1997 and incorporated herein by
reference)
4.2 Indenture relating to Quanta Services, Inc.'s 4.50%
Convertible Subordinated Debentures due 2023, dated October
17, 2003 (previously filed as Exhibit 4.1 to Quanta's Form
10-Q (No. 001-13831) filed November 14, 2003 and incorporated
herein by reference)
4.3 Form of Debenture (previously filed as Exhibit A to the
Indenture relating to Quanta's 4.5% Convertible Subordinated
Debentures, filed as Exhibit 4.1 to Quanta's Form 10-Q (No.
001-13831) filed November 14, 2003 and incorporated herein by
reference)
4.4 Rights Agreement dated as of March 8, 2000 between Quanta
Services, Inc. and American Stock Transfer & Trust Company, as
Rights Agent, which includes as Exhibit B thereto the Form of
Right Certificate (previously filed as Exhibit 4.1 to the
Company's Form 8-K (No. 011-13831) filed March 20, 2000 and
incorporated herein by reference)
5.1 Opinion of Weil, Gotshal & Manges LLP as to the legality of
the securities being registered (filed herewith)
10.1 Resale Registration Rights Agreement dated October 17, 2003
among Quanta Services, Inc. and Banc of America Securities LLC
and J.P. Morgan Securities Inc. (previously filed as Exhibit
10.1 to Quanta's Form 10-Q (No. 001-13831) filed November 14,
2003 and incorporated herein by reference)
12.1 Statement regarding computation of earnings to fixed charges
(filed herewith)
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
23.2 Consent of Weil, Gotshal & Manges LLP (see Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
25.1 Form T-1 Statement of Eligibility of Wells Fargo Bank, N.A. as
Trustee (filed herewith)