As filed with the Securities and Exchange Commission on February 6, 2004
Registration No. 333-111738
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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)
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)
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. [ ]
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 FEBRUARY 6, 2004
PRELIMINARY PROSPECTUS
QUANTA SERVICES, INC.
$270,000,000 4.50% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2023
AND THE COMMON STOCK ISSUABLE UPON CONVERSION OR REPURCHASE 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 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 February 4, 2004 was $8.26
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.
i
TABLE OF CONTENTS
PAGE
Special Note Regarding Forward-Looking Statements.......................... ii
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....................................................... 55
Legal Matters.............................................................. 56
Experts.................................................................... 56
Where You Can Find More Information........................................ 56
Incorporation of Certain Documents by Reference............................ 57
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.
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;
ii
- 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.
iii
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 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.
1
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 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.
2
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 You may require us to repurchase some
at the Option of the Holder............. 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 issuable upon
conversion or repurchase of the
debentures.
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."
3
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;
5
- a change in the mix of our customers, contracts and business;
- 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:
6
- our customers cancel a significant number of contracts;
- 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;
7
- attract new customers;
- increase the number of projects performed for existing customers;
- 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
8
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.
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
9
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, 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.
10
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 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.
11
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.
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.
12
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 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
or repurchase 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, 2002
1st Quarter ..................................... $17.43 $11.53
2nd Quarter ..................................... 18.90 9.40
3rd Quarter ..................................... 10.19 1.17
4th Quarter ..................................... 3.94 1.78
YEAR ENDED DECEMBER 31, 2003
1st Quarter ..................................... $ 4.10 $ 2.10
2nd Quarter ..................................... 8.70 3.18
3rd Quarter ..................................... 9.87 4.48
4th Quarter ..................................... 9.10 6.95
On February 4, 2004, the last sale price for our common stock as reported by
the NYSE was $8.26 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.
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
14
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.
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
15
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.
16
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."
17
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
18
the "applicable conversion price," respectively, and will be subject to
adjustment as described below. You may convert fewer than all 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
19
our common stock on the last trading day of the 30 consecutive trading days.
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 "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 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."
20
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.
21
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.
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
22
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.
- 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
23
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 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.
24
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.
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
25
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 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.
26
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."
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
27
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.
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
28
- 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.
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
29
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.
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.
30
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 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").
31
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 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.
32
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 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:
33
- 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:
- 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;
34
- 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
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.
35
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;
- 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;
36
- 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 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.
37
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
- 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
38
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;
- 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;
40
- 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.
41
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.
42
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 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.
43
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 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
46
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.
47
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.
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.
48
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 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 issuable upon conversion or repurchase of the debentures
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 on
or prior to February 5, 2004. This table only reflects information regarding
selling security holders who have provided us with such information. Information
concerning the selling security holders may change from time to time and any
changed information, including the name of any transferee, pledgee, donee or
successor to a selling security holder, will be set forth in supplements to this
prospectus if and when necessary. Holders of the $6,335,000 principal amount of
debentures whose identity is presently unknown to us may not use this prospectus
for resales of the debentures or the common stock issuable upon conversion or
repurchase of the debentures unless information regarding such holders is set
forth in a post-effective amendment to the registration statement to which this
prospectus is a part.
Several of the selling security holders are affiliates of registered
broker-dealers. Each of these selling security holders has informed us that (1)
such selling security holder purchased the debentures in the ordinary course of
business and (2) at the time that the debentures were purchased, the selling
security holder had no agreements or understandings, directly or indirectly, to
distribute the debentures.
The number of shares of common stock issuable upon conversion or
repurchase 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.
49
The percentage of common stock beneficially owned and being offered is
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
or repurchase 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.
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 OF PERCENTAGE OF SHARES OF COMMON SHARES OF PERCENTAGE OF
DEBENTURES DEBENTURES STOCK BENEFICIALLY COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED OUTSTANDING OWNED PRIOR TO OFFERED OUTSTANDING
NAME AND OFFERED OFFERING
---- ------------------- ------------- ------------------ ------------ -------------
Pioneer High Yield Fund(1) $56,375,000 20.88% -- 5,062,413 4.20%
Fore Convertible Master Fund Ltd.(2) $26,000,000 9.62% -- 2,334,771 1.98%
Akela Capital Master Fund, Ltd.(3) $12,000,000 4.44% -- 1,077,587 *
The Drake Offshore Master Fund, Ltd.(4) $12,000,000 4.44% -- 1,077,587 *
Teachers Insurance and Annuity $11,500,000 4.26% -- 1,032,687 *
Association of America
Akanthos Arbitrage Master Fund, L.P.(5) $11,500,000 4.26% -- 1,032,687 *
Vanguard Convertible Securities Fund, $11,455,000 4.24% -- 1,028,646 *
Inc.(6)
Man Mac I Limited(7) $8,000,000 2.96% -- 718,391 *
Zazove Convertible Arbitrage Fund, L.P.(8) $5,800,000 2.15% -- 520,834 *
DBAG London(9) $5,200,000 1.93% -- 466,954 *
Deutsche Bank Securities Inc.(10) $5,200,000 1.93% -- 466,954 *
Guggenheim Portfolio Company VIII, LLC(11) $5,000,000 1.85% -- 448,994 *
Wachovia Securities International Ltd.(12) $5,000,000 1.85% -- 448,994 *
Pioneer U.S. High Yield Corporate Bond $5,000,000 1.85% -- 448,994 *
Sub Fund(1)
Peoples Benefit Life Insurance Company $4,000,000 1.48% -- 359,195 *
TEAMSTERS(13)
Zazove Hedged Convertible Fund L.P.(8) $3,500,000 1.29% -- 314,296 *
Guardian Life Insurance Co.(14) $3,200,000 1.18% -- 287,356 *
50
PRINCIPAL AMOUNT OF PERCENTAGE OF SHARES OF COMMON SHARES OF PERCENTAGE OF
DEBENTURES DEBENTURES STOCK BENEFICIALLY COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED OUTSTANDING OWNED PRIOR TO OFFERED OUTSTANDING
NAME AND OFFERED OFFERING
---- ------------------- ------------- ------------------ ------------ -------------
CALAMOS Convertible Fund - CALAMOS $3,155,000 1.17% -- 283,315 *
Investment Trust(15)
Chrysler Corporation Master Retirement $3,090,000 1.14% -- 277,478 *
Trust(6)
OCM Convertible Trust(6) $3,085,000 1.14% -- 277,029 *
St. Albans Partners Ltd.(13) $3,000,000 1.11% -- 269,396 *
TD Securities (USA) Inc.(16) $2,870,000 1.06% -- 257,723 *
Grace Convertible Arbitrage Fund, LTD(17) $2,500,000 * -- 224,497 *
The Coast Fund L.P.(18) $2,500,000 * -- 224,497 *
Microsoft Corporation(6) $2,405,000 * -- 215,966 *
Context Convertible Arbitrage Offshore, $2,350,000 * -- 211,027 *
LTD(19)
Zurich Institutional Benchmarks Master $2,100,000 * -- 188,578 *
Fund Ltd. (20)
Canyon Value Realization Fund (Cayman), $2,050,000 * -- 184,088 *
Ltd. (21)
San Diego County Employee Retirement $2,050,000 * -- 184,088 *
Association(20)
Maystone Continuum Master Fund, Ltd.(22) $2,000,000 * -- 179,597 *
DKR SoundShore Strategic Holding Fund $2,000,000 * -- 179,597 *
Ltd.(23)
DeepRock & Co(13) $2,000,000 * -- 179,597 *
Zazove Income Fund L.P.(8) $1,950,000 * -- 175,107 *
Quest Global Convertible Master Fund $1,837,500 * -- 165,005 *
Ltd.(24)
Zurich Institutional Benchmarks Master $1,774,000 * -- 159,303 *
Fund Ltd.(25)
Canyon Capital Arbitrage Master Fund, $1,500,000 * -- 134,698 *
Ltd.(26)
Van Kampen Harbor Fund(27) $1,500,000 * -- 134,698 *
State Employees' Retirement Fund of the $1,435,000 * -- 128,861 *
State of Delaware(6)
Delta Airlines Master Trust(6) $1,325,000 * -- 118,983 *
Boilermakers-Blacksmith Pension Trust (28) $1,295,000 * -- 116,289 *
National Bank of Canada(19) $1,250,000 * -- 112,248 *
51
PRINCIPAL AMOUNT OF PERCENTAGE OF SHARES OF COMMON SHARES OF PERCENTAGE OF
DEBENTURES DEBENTURES STOCK BENEFICIALLY COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED OUTSTANDING OWNED PRIOR TO OFFERED OUTSTANDING
NAME AND OFFERED OFFERING
---- ------------------- ------------- ------------------ ------------ -------------
CNH CA Master Account, L.P.(29) $1,100,000 * -- 98,778 *
Context Convertible Arbitrage Fund, LP(30) $1,100,000 * -- 98,778 *
HFR CA Select Fund(20) $1,100,000 * -- 98,778 *
Partner Reinsurance Company Ltd.(6) $1,085,000 * -- 97,431 *
MSD TCB, L.P.(31) $1,000,000 * -- 89,798 *
S.A.C. Capital Associates, LLC(32) $1,000,000 * 152,300 89,798 *
Mill River Master Fund L.P.(33) $1,000,000 * -- 89,798 *
Morgan Stanley Convertible Securities $1,000,000 * -- 89,798 *
Trust(34)
BP Amoco PLC Master Trust(25) $784,000 * -- 70,402 *
Canyon Value Realization Fund, L.P.(26) $750,000 * -- 67,349 *
SSI Hedged Convertible Market Neutral $654,000 * -- 58,728 *
L.P.(25)
The Dow Chemical Company Employees' $650,000 * -- 58,369 *
Retirement Plan(15)
Delta Pilots Disability and Survivorship $620,000 * -- 55,675 *
Trust - CV(6)
SSI Blended Market Neutral L.P.(25) $602,000 * -- 54,058 *
Delta Airlines Master Trust(37) $520,000 * -- 46,695 *
McMahan Securities Co. L.P.(38) $500,000 * -- 44,899 *
Pioneer High Yield VCT Portfolio(1) $500,000 * -- 44,899 *
SPT(15) $450,000 * -- 40,409 *
Guardian Pension Trust(14) $400,000 * -- 35,919 *
KBC Financial Products USA Inc.(37) $400,000 * -- 35,919 *
Associated Electric & Gas Insurance $400,000 * -- 35,919 *
Services Limited(15)
Qwest Occupational Health Trust(6) $395,000 * -- 35,470 *
Lighthouse Multi-Strategy Convertible $367,500 * -- 33,001 *
Master Fund Ltd.(24)
Sphinx Convertible Arb Fund SPC(25) $353,000 * -- 31,699 *
Boilermaker-Blacksmith Pension Trust(15) $350,000 * -- 31,429 *
Motion Picture Industry Health Plan - $345,000 * -- 30,980 *
Active Member Fund(6)
52
PRINCIPAL AMOUNT OF PERCENTAGE OF SHARES OF COMMON SHARES OF PERCENTAGE OF
DEBENTURES DEBENTURES STOCK BENEFICIALLY COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED OUTSTANDING OWNED PRIOR TO OFFERED OUTSTANDING
NAME AND OFFERED OFFERING
---- ------------------- ------------- ------------------ ------------ -------------
Union Carbide Retirement Account(15) $310,000 * -- 27,837 *
Canyon Value Realization MAC 18, LTD $300,000 * -- 26,939 *
(RMF)(26)
Delta Airlines Master Trust(15) $300,000 * -- 26,939 *
Hotel Union & Hotel Industry of Hawaii $299,000 * -- 26,849 *
Pension Plan(25)
WPG Convertible Arbitrage Overseas Master $250,000 * -- 22,449 *
Fund(38)
Duke Endowment(35) $250,000 * -- 22,449 *
Lyxor/Quest Fund Ltd.(24) $245,000 * -- 22,000 *
Travelers Indemnity Company - Commercial $225,000 * -- 20,204 *
Lines(6)
Motion Picture Industry Health Plan - $210,000 * -- 18,857 *
Retiree Member Fund(6)
Dorinco Reinsurance Company(15) $200,000 * -- 17,959 *
Sterling Invest Co.(35) $180,000 * -- 16,163 *
Port Authority of Allegheny County $160,000 * -- 14,367 *
Retirement and Disability Allowance Plan
for the Employees Represented by Local 85
of the Amalgamated Transit Union(15)
United Food and Commercial Workers Local $155,000 * -- 13,918 *
1262 and Employers Pension Fund(15)
Travelers Indemnity Company - Personal $150,000 * -- 13,469 *
Lines(6)
OCM Global Convertible Securities Fund $125,000 * -- 11,224 *
DC(6)
RBC Alternate Assets LP - CONV ARB(38) $100,000 * -- 8,979 *
Univest Multi-Strategy - CONV ARB(38) $100,000 * -- 8,979 *
The California Wellness Foundation(15) $100,000 * -- 8,979 *
Delta Pilots Disability and Survivorship $100,000 * -- 8,979 *
Trust(15)
Univar USA Inc. Retirement Plan(15) $80,000 * -- 7,183 *
Banc of America Securities LLC(39) $75,000 * -- 6,734 *
City of Knoxville Pension System(15) $75,000 * -- 6,734 *
53
PRINCIPAL AMOUNT OF PERCENTAGE OF SHARES OF COMMON SHARES OF PERCENTAGE OF
DEBENTURES DEBENTURES STOCK BENEFICIALLY COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED OUTSTANDING OWNED PRIOR TO OFFERED OUTSTANDING
NAME AND OFFERED OFFERING
---- ------------------- ------------- ------------------ ------------ -------------
Macomb County Employees' Retirement $75,000 * -- 6,734 *
System(15)
Aventis Pension Master Trust(15) $65,000 * -- 5,836 *
American AAdvantage Funds(15) $55,000 * -- 4,938 *
WPG MSA Convertible Arbitrage Fund(38) $50,000 * -- 4,489 *
CALAMOS Convertible Portfolio - CALAMOS $45,000 * -- 4,040 *
Advisors Trust(15)
SCI Endowment Care Common Trust Fund - $40,000 * -- 3,591 *
National Fiduciary Services(15)
The Fondren Foundation(15) $36,000 * -- 3,232 *
Knoxville Utilities Board Retirement $35,000 * -- 3,142 *
System(15)
CEMEX Pension Plan(15) $34,000 * -- 3,053 *
Viacom Inc. Pension Plan Master Trust(25) $28,000 * -- 2,514 *
SCI Endowment Care Common Trust Fund - $20,000 * -- 1,795 *
Suntrust(15)
SCI Endowment Care Common Trust Fund - $10,000 * -- 897 *
First Union(15)
Jefferies & Company Inc.(25) $6,000 * -- 538 *
Any other holder of debentures or future $6,335,000 2.35% -- 568,877 *
transferee, pledgee, donee or successor
of any such holder(40)
TOTAL: $270,000,000 100.0%
*Less than one percent.
----------------------------------
(1) Pioneer High Yield Fund, Pioneer U.S. High Yield Corporate Bond Sub
Fund and Pioneer High Yield VCT Portfolio are each affiliates of broker-dealers.
(2) BISYS Group Inc, as the stockholder of BISYS Hedge Fund Holdings,
Limited, has voting and dispositive power over the securities held by this
security holder.
(3) Anthony B. Bosco has voting and dispositive power over the
securities held by this security holder.
(4) Drake Partners LLC, as the stockholder of Drake Capital Management
LLC, has voting and dispositive power over the securities held by this security
holder. Anthony Faillace, Steven Luttrell and Hind Corp are stockholders of
Drake Partners LLC.
(5) Michael Kao, as the managing member of Akanthos Capital Management
LLC, the general partner of Akanthos Arbitrage Master Fund L.P., has voting and
dispositive power over the securities held by this security holder.
54
(6) Oaktree Capital Management LLC ("Oaktree"), as the investment
manager to OCM Convertible Trust, Delta Air Lines Master Trust - CV, State
Employees' Retirement Fund of the State of Delaware, Partner Reinsurance Company
Ltd., Chrysler Corporation Master Retirement Trust, Motion Picture Industry
Health Plan - Active Member Fund, Motion Picture Industry Health Plan - Retiree
Health Plan, Delta Pilots Disability & Survivorship Trust - CV, Vanguard
Convertible Securities Fund, Inc., Microsoft Corporation, Qwest Occupational
Health Trust, Travelers Indemnity Company - Commercial Lines, Travelers
Indemnity Company - Personal Lines and OCM Global Convertible Securities Fund -
DC, has voting and dispositive power over the securities held by this security
holder. Lawrence Keele is a principal of Oaktree and is the portfolio manager
for this security holder. Mr. Keele, Oaktree and all employees and members of
Oaktree disclaim beneficial ownership of the securities held by this security
holder, except for their pecuniary interest therein.
(7) Man-Diversified Fund II Ltd. has voting and dispositive power over
the securities held by the security holder. The manager shares of
Man-Diversified Fund II Ltd. are owned 75% by Albany Management Company Limited
and 25% by Man Holdings Limited. Argonaut Limited, which is controlled by
Michael Collins, is the registered stockholder of Albany Management Company
Limited. Man Holdings Limited is a subsidiary of Man Group plc, which is a
publicly-owned company listed on the London Stock Exchange.
(8) Gene T. Pretti, as the stockholder of Zazove Associates, LLC, the
general partner of Zazove Hedged Convertible Fund L.P., Zazove Convertible
Arbitrage Fund L.P. and Zazove Income Fund L.P., has voting and dispositive
power over the securities held by this security holder.
(9) DBAG London is an affiliate of a broker-dealer. Dan Azzi has voting
and dispositive power over the securities held by this security holder.
(10) Deutsche Bank Securities Inc. is a broker-dealer. Michael Gurner
has voting and dispositive power over the securities held by this security
holder.
(11) Guggenheim Advisors, LLC has voting and dispositive power over the
securities held by this security holder. Loren Katzovitz, Kevin Felix and
Patrick Hughes are stockholders of Guggenheim Advisors, LLC.
(12) Eric Peyton has voting and dispositive power over the securities
held by this security holder.
(13) Roy Aitrachan has voting and dispositive power over the securities
held by this security holder.
(14) Guardian Life Insurance Co. and Guardian Pension Trust are both
affiliates of broker-dealers. John Murphy has voting and dispositive power over
the securities held by this security holder.
(15) Nick Calamos has voting and dispositive power over the securities
held by this security holder.
(16) TD Securities (USA) Inc. is a broker-dealer. The Toronto Dominion
Bank has voting and dispositive power over the securities held by this security
holder.
(17) Grace Convertible Arbitrage Fund, LTD is an affiliate of a
broker-dealer. Bradford Whitmore and Michael Brailov have voting and dispositive
power over the securities held by this security holder.
(18) David E. Smith and Christopher D. Petitt, as the stockholders of
Coast Offshore Management (Cayman) Ltd., the managing general partner of The
Coast Fund, L.P., have voting and dispositive power over the securities held by
this security holder.
(19) Context Capital Management, LLC, as the investment advisor to
Context Convertible Arbitrage Offshore, LTD and National Bank of Canada, has
voting and dispositive power over the securities held by this security holder.
Michael Rosen and William Fertig are the investment managers of Context Capital
Management, LLC.
(20) Gene T. Pretti, as the stockholder of Zazove Associates, LLC, the
registered investment advisor to HFR CA Select Fund, San Diego County Employee
Retirement Association and Zurich Institutional Benchmarks Master Fund Ltd., has
voting and dispositive power over the securities held by this security holder.
55
(21) Canyon Value Realization Fund (Cayman), Ltd. is an affiliate of a
broker-dealer. Joshua S. Friedman, R. Christian B. Evensen and Mitchell R. Julis
have voting and dispositive power over the securities held by this security
holder.
(22) Maystone Partners, LLC, as the investment manager to Maystone
Continuum Master Fund, Ltd., has voting and dispositive power over the
securities held by this security holder. Henry J. Pizzutello and Mark R. Connors
are managing members of Maystone Partners, LLC.
(23) DKR Capital Partners L.P., as the investment manager to DKR
SoundShore Strategic Holding Fund Ltd., and Manan Rawal, as the portfolio
manager for DKR SoundShore Strategic Holding Fund Ltd., have shared voting and
dispositive power over the securities held by this security holder.
(24) Quest Investment Management LLC, as the investment advisor to
Quest Global Convertible Master Fund Ltd., Lighthouse Multi-Strategy Convertible
Master Fund Ltd. and Lyxor/Quest Fund Ltd., has voting and dispositive power
over the securities held by this security holder. Frank Campana and James Doolin
are the investment principals for Quest Investment Management LLC.
(25) SSI Investment Management Inc. has voting and dispositive power
over the securities held by this security holder. Amy Jo Gottfurcht, John
Gottfurcht and George Douglas are stockholders of SSI Investment Management Inc.
Jefferies & Company Inc. is a broker-dealer.
(26) Canyon Capital Arbitrage Master Fund, Ltd., Canyon Value
Realization Fund, L.P. and Canyon Value Realization MAC 18, LTD are each
affiliates of a broker-dealer. Canyon Capital Advisors, LLC has voting and
dispositive power over the securities held by this security holder. Joshua S.
Friedman, R. Christian B. Evensen, Mitchell R. Julis and K. Robert Turner are
the managing partners of Canyon Capital Advisors, LLC.
(27) Van Kampen Harbor Fund is a broker-dealer. Van Kampen Asset
Management Inc., as the investment advisor to Van Kampen Harbor Fund, has voting
and dispositive power over the securities held by this security holder.
(28) Ann Houlihan has voting and dispositive power over the securities
held by this security holder.
(29) CNH Partners, LLC, as the investment advisor to CNH CA Master
Account, L.P., has voting and dispositive power over the securities held by this
security holder. Robert Krail, Mark Mitchell and Todd Pulvino are the investment
principals for CNH Partners, LLC.
(30) Context Convertible Arbitrage Fund, LP is a broker-dealer. Context
Capital Management, LLC, as the general partner of Context Convertible Arbitrage
Fund, LP, has voting and dispositive power over the securities held by this
security holder. Michael Rosen and William Fertig are the investment managers of
Context Capital Management, LLC.
(31) Michael Dell and Susan Dell have voting and dispositive power over
the securities held by this security holder.
(32) S.A.C. Capital Advisors, LLC and S.A.C. Capital Management LLC
have voting and dispositive power over the securities held by this security
holder. Steven A. Cohen controls both S.A.C. Capital Advisors, LLC and S.A.C.
Capital Management LLC.
(33) Mill River Master Fund L.P. is an affiliate of a broker-dealer.
Mill River Management L.L.C. is the sole general partner of Mill River Master
Fund L.P. David L. Babson & Company Inc. is the sole member of Mill River
Management L.L.C. DLB Acquisition Corporation is the sole shareholder of David
L. Babson & Company Inc., and Massachusetts Mutual Life Insurance Company owns
approximately 98% of the shares of DLB Acquisition Corporation.
(34) Morgan Stanley Convertible Securities Trust is an affiliate of a
broker-dealer.
(35) Ann Houlihan has voting and dispositive power over the securities
held by this security holder.
(36) McMahan Securities Co. L.P. is a broker-dealer. D. Bruce McMahan
has voting and dispositive power over the securities held by this security
holder.
56
(37) KBC Financial Products USA Inc. is a broker-dealer. Luke Edwards
has voting and dispositive power over the securities held by this security
holder.
(38) Sheri Kaplan has voting and dispositive power over the securities
held by this security holder.
(39) Banc of America Securities LLC, a broker-dealer, was an initial
purchaser of the debentures. Banc of America Securities LLC is controlled by
Banc of America Corporation, which is a public company.
(40) Information about other selling security holders will be set forth
in one or more post-effective amendments to the registration statement to which
this prospectus is a part to the extent such information is received by us.
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 or upon the
repurchase of the debentures.
57
PLAN OF DISTRIBUTION
The selling security holders may from time to time sell the debentures
and the common stock issuable upon the conversion or repurchase of the
debentures 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(a)(11) of the Securities Act. Selling security holders
that are also registered broker-dealers who act in connection with the sale of
the securities hereunder are "underwriters" within the meaning 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.
Neither we nor any selling security holder can presently estimate the amount of
such compensation. Banc of America Securities LLC, Context Convertible Arbitrage
Fund, LP, Deutsche Bank Securities Inc., Jefferies & Company Inc., KBC Financial
Products USA Inc., McMahan Securities Co. L.P., TD Securities (USA) Inc. and Van
Kampen Harbor Fund have informed us that they are registered broker-dealers, and
as a result, they are underwriters in connection with the sale of the
debentures. Several of the selling security holders are affiliates of registered
broker-dealers. Each of these selling security holders has informed us that (1)
such selling security holder purchased the debentures in the ordinary course of
business and (2) at the time that the debentures were
58
purchased, the selling security holder had no agreements or understandings,
directly or indirectly, with any person to distribute the debentures.
Selling security holders who are "underwriters" within the meaning of
Section 2(a)(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act and certain statutory and regulatory
liabilities, including liabilities imposed pursuant to Sections 11, 12 and 17 of
the Securities Act and Rule 10b-5 under the Exchange 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.
To the extent required with respect to an offer of any of the
securities held by any of the selling security holders named in this prospectus,
the specific securities to be sold, the name of the applicable transferee,
pledgee, donee or successor to a selling security holder making such offer, the
respective purchase prices and public offering prices, the names of any agent,
dealer or underwriter and any applicable commissions or discounts with respect
to a particular offer will be set forth in an accompanying prospectus
supplement. To the extent required with respect to an offer of any securities
held by a holder whose identity is presently unknown to us, the foregoing
information and the name of the selling security holder will be set forth in a
post-effective amendment to the registration statement of which this prospectus
is a part.
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.
59
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.
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.
- The description of our common stock contained in our
registration statement on Form 8-A/A, filed on February 6,
1998.
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
60
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.
61
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
62
incorporated herein by reference)
5.1 Opinion of Weil, Gotshal & Manges LLP as to the legality of the securities being registered*
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*
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*
25.1 Form T-1 Statement of Eligibility of Wells Fargo Bank, N.A. as Trustee*
* Previously filed.
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
63
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in 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.
64
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 Amendment
No. 1 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 5th day of February, 2004.
QUANTA SERVICES, INC.
By: /s/ James H. Haddox
-----------------------------------
James H. Haddox
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the registration statement has been signed on February
5, 2004, by the following persons in the capacities indicated below:
SIGNATURE TITLE (CAPACITY)
--------- ----------------
*
---------------------- Chief Executive Officer, Director
John R. Colson (Principal Executive Officer)
/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
* Director
-----------------------
James R. Ball
* Director
-----------------------
Vincent D. Foster
* Director
-----------------------
Louis C. Golm
* Director
-----------------------
Ben A. Guill
* Director
-----------------------
James A. Nattier
* Director
-----------------------
Gary A. Tucci
* Director
-----------------------
John R. Wilson
* By: /s/ DANA A. GORDON
-----------------------
Dana A. Gordon
Attorney-in-Fact
65
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 *
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*
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*
25.1 Form T-1 Statement of Eligibility of Wells Fargo Bank, N.A. as
Trustee*
* Previously filed.
66