<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NO. 001-13831
QUANTA SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 74-2851603
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1360 POST OAK BLVD. 3555 TIMMONS LANE
SUITE 2100 SUITE 610
HOUSTON, TEXAS 77056 HOUSTON, TEXAS 77027
(ADDRESS OF PRINCIPAL EXECUTIVE (FORMER ADDRESS)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 629-7600
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
16,594,419 shares of Common Stock were outstanding as of August 13, 1998. As
of the same date, 3,345,333 shares of Limited Vote Common Stock were
outstanding.
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<PAGE>
QUANTA SERVICES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
QUANTA SERVICES, INC. PRO FORMA COMBINED
Supplemental Pro Forma Combined Financial Information................. 1
Supplemental Pro Forma Combined Statements of Operations for the six
months ended
June 30, 1997 and 1998............................................... 2
QUANTA SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets........................................... 4
Consolidated Statements of Operations................................. 5
Consolidated Statements of Cash Flows................................. 6
Notes to Condensed Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 11
PART II. OTHER INFORMATION
Item 2. Use of Proceeds................................................. 16
Item 6. Exhibits and Reports on Form 8-K................................ 17
Signature............................................................... 18
</TABLE>
<PAGE>
QUANTA SERVICES, INC.
PART I, ITEM 1--FINANCIAL INFORMATION
SUPPLEMENTAL PRO FORMA COMBINED FINANCIAL INFORMATION
OVERVIEW AND BASIS OF PRESENTATION
Quanta Services, Inc., a Delaware corporation ("Quanta" or the "Company"),
was founded in August 1997 to create a leading provider of specialty
electrical contracting and maintenance services primarily related to electric
and telecommunications infrastructure in North America. In February 1998,
Quanta completed its initial public offering (the "Offering"), concurrent with
which Quanta acquired, in separate transactions, four entities (the "Founding
Companies"). From the date of the Offering through June 30, 1998, the Company
has acquired three additional businesses for approximately $23.5 million in
cash and 2,248,685 shares of Common Stock. Of these additional acquired
businesses, one was accounted for as a pooling-of-interests and is referred to
herein as the "Pooled Company." The remaining acquired businesses were
accounted for as purchases and are referred to herein as the "Purchased
Companies." Quanta intends to continue to acquire through merger or purchase
similar companies to expand its national and regional operations.
Pursuant to the Securities and Exchange Commission's Staff Accounting
Bulletin No. 97 (SAB 97), the financial statements of Quanta for periods prior
to February 18, 1998 (the effective closing date of the acquisitions of the
Founding Companies) are the financial statements of PAR Electrical
Contractors, Inc. ("PAR" or the "Accounting Acquiror"). The operations of the
other Founding Companies and Quanta, acquired by the Accounting Acquiror, have
been included in the Company's historical financial statements beginning
February 19, 1998.
The accompanying pro forma combined statements of operations of the Company
for the six months ended June 30, 1997 and 1998, respectively, include the
combined operations of the Pooled Company and the Founding Companies from
January 1, 1997, and the Purchased Companies from the date of their respective
acquisition.
The unaudited pro forma combined statements of operations for the six months
ended June 30, 1997 and 1998 assume that the Offering and related transactions
were closed on January 1, 1997 and present certain data for the Company as
adjusted for: 1) the acquisition of the Founding Companies; 2) the IPO
completed on February 18, 1998; 3) certain reductions in salaries, bonuses and
benefits to former owners of the Founding Companies; 4) amortization of
goodwill resulting from the acquisition of the Founding Companies; 5)
reduction in interest expense, net of interest expense on borrowings to fund S
corporation distributions by certain of the Founding Companies, and 6)
adjustments to the federal and state income tax provision based on pro forma
operating results.
The unaudited pro forma combined statements of operations are presented
herein as the Company believes certain investors find the information useful.
This statement should be read in conjunction with the Company's historical
unaudited financial statements and notes thereto included in this Form 10-Q.
The pro forma adjustments are based on estimates, available information and
certain assumptions which may be revised as additional information becomes
available. The pro forma financial data does not purport to represent what the
Company's combined financial position or results of operations would actually
have been if such transactions had in fact occurred on those dates and are not
necessarily representative of the Company's financial position or results of
operations for any future period. Since Quanta, the Founding Companies, the
Pooled Company and the Purchased Companies were not under common control or
management for a portion of the periods presented, historical combined results
may not be comparable to, or indicative of, future performance.
Operating results for the interim periods are not necessarily indicative of
the results for full years. The results of the Company have historically been
subject to significant seasonal fluctuations. It is suggested that these pro
forma combined financial statements be read in conjunction with the pro forma
combined financial statements and the notes thereto included in the Company's
Registration Statement on Form S-4, as amended, (Reg. No. 333-47083), which
was filed with the Securities and Exchange Commission ("SEC") on February 27,
1998.
1
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
SUPPLEMENTAL PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1997 1998
------- --------
<S> <C> <C>
Revenues...................................................... $79,024 $108,253
Cost of services (including depreciation).......................66,039 88,854
------- --------
Gross profit................................................ 12,985 19,399
Selling, general & administrative expenses 6,953 9,845
Merger expenses--pooling...................................... -- 231
Goodwill amortization......................................... 848 967
------- --------
Income from operations...................................... 5,184 8,356
------- --------
Other income (expense):
Interest expense............................................ (657) (1,012)
Other income (expense), net................................. 162 237
------- --------
(495) (775)
------- --------
Income before income tax expense.............................. 4,689 7,581
Provision for income taxes.................................... 2,136 3,477
------- --------
Net income.................................................... $ 2,553 $ 4,104
======= ========
Basic earnings per share...................................... $ .15 $ .23
======= ========
Diluted earnings per share.................................... $ .15 $ .23
======= ========
Diluted earnings per share before merger expenses............. $ .15 $ .24
======= ========
Shares used in computing pro forma earnings per share--
Basic....................................................... 16,995 17,834
======= ========
Diluted..................................................... 16,995 17,942
======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial statements.
2
<PAGE>
(1) Shares Used in Computing Pro Forma Earnings Per Share
The 16,995,056 shares used in the calculation of unaudited pro forma
combined basic and diluted earnings per share for the six months ended June
30, 1997 include (i) 7,527,000 shares of Common Stock issued to the owners of
the Founding Companies, (ii) 951,945 shares issued for the acquisition of the
Pooled Company, (iii) 3,345,333 shares of Limited Vote Common Stock issued to
the initial stockholders and certain management personnel of the Company, and
(iv) 5,750,000 shares of Common Stock, net of 579,222 shares representing net
cash to Quanta, sold in the Offering to pay the cash portion of the
consideration for the Founding Companies, to repay expenses incurred in
connection with the Offering and to retire debt.
The 17,834,154 shares used in the calculation of unaudited pro forma
combined basic earnings per share for the six months ended June 30, 1998
include (i) 7,527,000 shares of Common Stock issued to the owners of the
Founding Companies, (ii) 951,945 shares issued for the acquisition of the
Pooled Company, (iii) the weighted average portion of the shares issued in
acquisitions accounted for as purchases, (iv) 3,345,333 shares of Limited Vote
Common Stock issued to the initial stockholders and certain management
personnel of the Company, and (v) 5,750,000 shares of Common Stock, net of
357,174 shares representing net cash to Quanta, sold in the Offering to pay
the cash portion of the consideration for the Founding Companies, to repay
expenses incurred in connection with the Offering and to retire debt.
Shares used in the calculation of unaudited pro forma combined diluted
earnings per share for the six months ended June 30, 1998 include (i) the
17,834,154 shares described above, and (ii) the dilution attributable to
outstanding options to purchase Common Stock, using the treasury stock method.
3
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 489 $ 1,778
Accounts receivable, net of allowance of $193 and
$972............................................... 12,878 43,856
Costs and profits recognized in excess of billings.. 1,746 18,221
Inventories......................................... 865 1,750
Prepaid expenses and other.......................... 724 1,198
------- --------
Total current assets.............................. 16,702 66,803
PROPERTY AND EQUIPMENT, NET........................... 18,286 44,088
OTHER ASSETS.......................................... 645 1,170
GOODWILL, NET......................................... 114 93,765
------- --------
Total assets...................................... $35,747 $205,826
======= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt................ $ 7,200 $ 3,946
Accounts payable and accrued expenses............... 6,578 33,301
Billings in excess of costs and profits recognized.. 738 2,832
------- --------
Total current liabilities......................... 14,516 40,079
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities........... 7,542 33,112
Deferred income taxes............................... 2,479 3,879
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock..................................... -- --
Common Stock........................................ -- --
Limited Vote Common Stock........................... -- --
Unearned ESOP shares................................ (1,831) (1,831)
Additional paid-in capital.......................... 1,238 115,375
Retained earnings................................... 11,803 15,212
------- --------
Total stockholders' equity........................ 11,210 128,756
------- --------
Total liabilities and stockholders' equity........ $35,747 $205,826
======= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ------------------
1997 1998 1997 1998
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................. $ 20,226 $ 63,679 $ 34,799 $ 93,717
Cost of services (including
depreciation)....................... 15,973 51,225 28,861 76,681
--------- --------- -------- --------
Gross profit....................... 4,253 12,454 5,938 17,036
Selling, general & administrative
expenses............................ 2,647 5,545 4,855 8,889
Merger expenses pooling.............. -- 231 -- 231
Goodwill amortization................ 14 553 28 749
--------- --------- -------- --------
Income from operations............. 1,592 6,125 1,055 7,167
Other income (expense):..............
Interest expense................... (287) (656) (557) (1,049)
Other income (expense), net........ (54) 116 (94) 191
--------- --------- -------- --------
(341) (540) (651) (858)
--------- --------- -------- --------
Income before income tax expense..... 1,251 5,585 404 6,309
Provision for income taxes........... 513 2,544 136 2,900
--------- --------- -------- --------
Net income......................... $ 738 $ 3,041 $ 268 $ 3,409
========= ========= ======== ========
Basic earnings per share............. $ .19 $ .16 $ .07 $ .24
========= ========= ======== ========
Diluted earnings per share........... $ .19 $ .16 $ .07 $ .24
========= ========= ======== ========
Diluted earnings per share before
merger expenses..................... $ .19 $ .18 $ .07 $ .25
========= ========= ======== ========
Shares used in computing earnings per
share--
Basic.............................. 3,952 18,444 3,952 14,399
========= ========= ======== ========
Diluted............................ 3,952 18,606 3,952 14,506
========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
1997 1998 1997 1998
--------- --------- ------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 738 $ 3,041 $ 268 $ 3,409
Adjustments to reconcile net income
to net cash provided by operating
activities--
Depreciation and amortization....... 803 2,217 1,606 3,364
Gain (loss) on sale of property and
equipment.......................... 5 (8) 2 (57)
Deferred income taxes............... (2) 87 15 192
Changes in operating assets and
liabilities--
(Increase) decrease in--
Accounts receivable............... (2,760) (502) (406) (3,163)
Inventories....................... (65) 478 47 (128)
Costs and estimated earnings in
excess of billings on uncompleted
contacts......................... (262) (4,514) (857) (5,643)
Prepaid expenses and other current
assets........................... 58 35 128 41
Increase (decrease) in--
Accounts payable and accrued
expenses......................... 1,605 1,205 1,641 5,768
Billings in excess of costs and
estimated earnings on uncompleted
contracts........................ (445) 1,754 (1,090) 184
Other, net........................ (33) (438) (33) (442)
-------- --------- ------- --------
Net cash provided by (used in)
operating activities............... (358) 3,355 1,321 3,525
-------- --------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of properties and
equipment........................... 68 153 95 969
Additions of property and equipment.. (2,536) (4,342) (3,939) (7,266)
Cash paid for acquisitions, net of
cash acquired....................... -- (22,716) -- (34,773)
-------- --------- ------- --------
Net cash used in investing
activities......................... (2,468) (26,905) (3,844) (41,070)
-------- --------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt......... 292 159 1,692 564
Payments of long-term debt........... (733) (8,795) (1,645) (24,838)
Issuances of Common Stock, net of
offering costs...................... -- -- -- 45,109
Net (payments)/borrowings under lines
of credit........................... 3,143 28,895 1,964 26,369
Distributions to stockholders........ -- -- -- (8,370)
-------- --------- ------- --------
Net cash provided by financing
activities......................... 2,702 20,259 2,011 38,834
-------- --------- ------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................... (124) (3,291) (512) 1,289
-------- --------- ------- --------
CASH AND CASH EQUIVALENTS, beginning of
period................................ 124 5,069 512 489
-------- --------- ------- --------
CASH AND CASH EQUIVALENTS, end of
period................................ $ -- $ 1,778 $ -- $ 1,778
======== ========= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for--
Interest............................. $ 288 $ 577 $ 540 $ 935
======== ========= ======= ========
Income taxes......................... $ 5 $ 536 $ 33 $ 799
======== ========= ======= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS AND ORGANIZATION:
Quanta Services, Inc., a Delaware corporation ("Quanta" or the "Company"),
was founded in August 1997 to create a leading provider of specialty
electrical contracting and maintenance services primarily related to electric
and telecommunications infrastructure in North America.
In February 1998, Quanta completed its initial public offering (the
"Offering"), concurrent with which Quanta acquired, in separate transactions,
four entities (the "Founding Companies"). Subsequent to the date of the
Offering, and through June 30, 1998, the Company has acquired three additional
businesses for approximately $23.5 million in cash and 2,248,685 shares of
Common Stock. Of these additional acquired businesses, one was accounted for
as a pooling-of-interests and is referred to herein as the "Pooled Company."
The remaining acquired businesses were accounted for as purchases and are
referred to herein as the "Purchased Companies." Quanta intends to continue to
acquire through merger or purchase similar companies to expand its national
and regional operations.
Pursuant to the Securities and Exchange Commission's Staff Accounting
Bulletin No. 97 ("SAB 97"), the financial statements of Quanta for periods
prior to February 18, 1998 (the effective closing date of the acquisitions of
the Founding Companies), are the financial statements of PAR Electrical
Contractors, Inc. ("PAR" or the "Accounting Acquiror") as restated for the
acquisition of the Pooled Company in June 1998. The operations of the other
Founding Companies and Quanta, acquired by the Accounting Acquiror, have been
included in the Company's historical financial statements beginning February
19, 1998.
Interim Condensed Consolidated Financial Information
The unaudited condensed consolidated financial statements have been prepared
pursuant to the rules of the Securities Exchange Commission ("SEC"). Certain
information and footnote disclosures, normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to fairly present the financial position, results of operations and
cash flows with respect to the interim consolidated financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the audited financial statements and notes thereto of
Quanta and the Founding Companies included in the Company's Registration
Statement on Form S-4, as amended, (Reg. No. 333-47083) which was filed with
the SEC on February 27, 1998.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
by management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. BUSINESS COMBINATIONS:
Pooling
During the second quarter of 1998, the Company acquired all of the
outstanding stock of a company in exchange for 951,945 shares of Common Stock.
This Company provides outside and inside fiber optic networks
7
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
and technical services support for the telecommunications industry. This
acquisition has been accounted for as a pooling-of-interests and the results
of its operations are included for all periods presented herein.
Purchases
During the second quarter of 1998, the Company completed two acquisitions
accounted for as purchases. The aggregate consideration paid in these
transactions consisted of $23.5 million in cash and 1,296,740 shares of Common
Stock. The accompanying balance sheet as of June 30, 1998 includes preliminary
allocations of the respective purchase prices and is subject to final
adjustment. Set forth below are unaudited pro forma combined revenue and
income data reflecting the pro forma effect of these acquisitions on the
Companys results of operations for the year ended December 31, 1997 and the
six months ended June 30, 1998. The unaudited data presented below consists of
the income statement data as presented in these condensed consolidated
financial statements plus (i) the income statement data of the Founding
Companies for the periods prior to February 19, 1998, (ii) the effects of the
Pooled Company and (iii) all Purchased Companies as if the acquisitions were
effective on the first day of the year being reported. The revenue and net
income data are in thousands.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------------
<S> <C> <C>
Revenues.......................................... $223,110 $132,555
Net income........................................ $ 13,279 $ 5,542
Earnings per share (basic and diluted)............ $ .73 $ .29
</TABLE>
Pro forma adjustments included in the amounts above primarily relate to: (a)
reductions in former owners and certain key employees salaries and benefits;
(b) adjustment to depreciation and amortization expense due to the purchase
price allocations; (c) elimination of historical interest expense related to
certain obligations which were repaid or not assumed by the Company, and to
record interest expense on cash expended in the acquisitions of the Purchased
Companies; (d) elimination of non-recurring acquisition costs associated with
the Pooled Company; and (e) adjustment to the federal and state income tax
provisions based on the combined operations. The pro forma financial data does
not purport to represent what the Company's combined financial position or
results of operations would actually have been if such transactions had in
fact occurred on those dates and are not necessarily representative of the
Company's financial position or results of operations for any future period.
3. PER SHARE INFORMATION:
For financial statement presentation purposes, PAR has been identified as
the accounting acquiror as its shareholders represented the largest
shareholding interest in Quanta as of the Offering. The computation of basic
and diluted earnings per share for the three and six months ended June 30,
1997 is based upon the 3,000,000 shares of Common Stock issued in connection
with PAR and 951,945 shares issued in connection with the acquisition of the
Pooled Company during the quarter ended June 30, 1998.
The computation of basic earnings per share for the three and six months
ended June 30, 1998 is based upon 18,444,423 and 14,398,526 weighted average
shares of Common Stock outstanding which includes (i) 7,527,000 shares of
Common Stock issued to the owners of the Founding Companies, (ii) 3,345,333
shares of Limited Vote Common Stock issued to the initial stockholders and
certain management personnel of the Company, (iii) 5,750,000 shares of Common
Stock sold in the Offering to pay the cash portion of the consideration for
the Founding Companies to repay expenses incurred in connection with the
Offering and to retire debt, (iv) 951,945 shares issued for the acquisition of
the Pooled Company, and (v) the weighted average portion of the 1,296,740
shares issued in acquisitions accounted for as purchases.
8
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Shares used in the calculation of the diluted earnings per share for the
three and six months ended June 30, 1998 include (i) the shares described
above, and (ii) the dilution attributable to outstanding options to purchase
Common Stock, using the treasury stock method.
4. INCOME TAXES:
Certain of the acquisitions were S corporations for income tax purposes and,
accordingly, any income tax liabilities for the periods prior to the
acquisitions are the responsibility of the respective stockholders. Effective
with the acquisitions, the S corporations converted to C corporations.
Accordingly, an estimated deferred tax liability has been recorded to provide
for the estimated future income tax liability as a result of the difference
between the book and tax bases of the net assets of these former S
corporations. For purposes of these consolidated financial statements, federal
and state income taxes have been provided for the post-acquisition periods.
5. STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," allows entities to choose between a new fair value
method of accounting for employee stock options or similar equity instruments
and the current method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, under which compensation expense is recorded to the
extent that the fair market value of the related stock is in excess of the
options' exercise price at date of grant. Entities electing to remain with the
accounting in APB Opinion No. 25 must make pro forma disclosures of net income
and earnings per share as if the fair value method of accounting prescribed in
SFAS No. 123 had been applied. The Company will measure compensation expense
attributable to stock options based on the method prescribed in APB Opinion
No. 25 and will provide the required pro forma disclosure of net income and
earnings per share, as applicable, in notes to future consolidated annual
financial statements.
6. COMMITMENTS AND CONTINGENCIES:
The Company issued shares of Common Stock to an Employee Stock Ownership
Plan (the "ESOP") in connection with the acquisition of the Pooled Company.
The ESOP was terminated on July 31, 1998, and pending a favorable
determination letter from the Internal Revenue Service, a portion of the
shares of the Company's Common Stock held by the ESOP will be sold to repay
debt owed by the ESOP to the Company and the remaining portion of the
unallocated shares will be distributed to its participants. The cost of the
unallocated ESOP shares is reflected as a reduction in the Company's
stockholders' equity at June 30, 1998. Upon distribution from the ESOP, the
Company will owe an excise tax equal to 10% of the value of the Company's
Common Stock distributed. In addition, the Company will eliminate the
remaining balance reflected as Unearned ESOP Shares on the Company's balance
sheet and will have to recognize a non-cash non-recurring compensation charge
equal to the value of the unallocated shares held by the ESOP at the time it
allocates and distributes such shares. Although the Company currently cannot
determine the amount of the excise tax that will be owed or the non-cash non-
recurring compensation charge that will be recognized the amount of such
obligations would not be material to the Company's financial condition based
on the market price for the Company's Common Stock on August 13, 1998.
7. NEW PRONOUNCEMENTS:
In the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires the display of comprehensive income and
its components in the financial statements. Comprehensive income represents
all changes in equity of an entity during the reporting period, including net
income and charges directly to equity, which are excluded from net income. For
the quarters ended June 30, 1998 and 1997, there are no material differences
between the Company's "traditional" and "comprehensive" net income.
9
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
which establishes standards for the way public enterprises are to report
information about operating segments in annual financial statements and
requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. SFAS No. 131 also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for the
Company for its year ended December 31, 1998, at which time the Company will
adopt the provision. The Company is currently evaluating the impact on the
Company's financial disclosures.
In February 1998, the FASB issued SFAS No. 132, "Employers Disclosures about
Pensions and Other Postretirement Benefits," which becomes effective for
financial statements for the year ended December 31, 1998. SFAS No. 132
requires revised disclosures about pension and other postretirement benefit
plans. The Company is currently assessing the impact of this statement on its
annual financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which becomes effective for financial
statements beginning January 1, 2000. SFAS No. 133 requires a company to
recognize all derivative instruments (including certain derivative instruments
embedded in other contracts) as assets or liabilities in its balance sheet and
measure them at fair value. The statement requires that changes in the
derivatives fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company is evaluating SFAS No. 133 and
the impact on existing accounting policies and financial reporting
disclosures. However, the Company has not to date engaged in activities or
entered into arrangements normally associated with derivative instruments.
In March 1998 the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." The SOP provides guidance
with respect to accounting for the various types of costs incurred for
computer software developed or obtained for the Company's use. The Company is
required to, and will adopt SOP 98-1 by the first quarter of fiscal 1999 and
believes that adoption will not have a material effect on its consolidated
financial statements.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities," which requires costs of start-up activities to be expensed as
incurred, and upon adoption, previously deferred costs should be charged as a
cumulative effect of a change in accounting principle. The statement is
effective for financial statements beginning after December 15, 1998, and the
Company expects to adopt the new standard in January 1999. The adoption of
this standard is not expected to have a material effect on the Company's
financial position or result of operations.
8. SUBSEQUENT EVENTS:
Business Combinations
Subsequent to June 30, 1998, the Company has acquired four additional
companies for an aggregate consideration of $25.1 million in cash, $2.25
million in notes payable and 1,068,734 shares of Common Stock. The cash
portion of such consideration was provided by borrowings under the Company's
credit facility. The Company has also announced the signing of non-binding
letters of intent to acquire three additional companies having estimated
combined annual revenues of $50 million. The consideration related to these
companies is under negotiation.
Credit Facility
In April 1998, the Company obtained a $50.0 million revolving credit
facility (the "Credit Facility") from two commercial banks. In August 1998,
the Company amended its Credit Facility to increase it to $125.0 million.
10
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
The Credit Facility is secured by a pledge of all of the capital stock of the
Company's material operating subsidiaries and is to provide funds to be used
for working capital, to finance acquisitions and for other general corporate
purposes. Amounts borrowed under the Credit Facility bear interest at a rate
equal to either (a) the London Interbank Offered Rate ("LIBOR") plus 0.75% to
1.75%, as determined by the ratio of the Company's total funded debt to EBITDA
(as defined in the Credit Facility) or (b) the bank's prime rate plus up to
0.25%, as determined by the ratio of the Company's total funded debt to
EBITDA. Commitment fees of 0.175% to 0.30% (based on certain financial ratios)
are due on any unused borrowing capacity under the Credit Facility. The
Company's existing and future subsidiaries will guarantee the repayment of all
amounts due under the facility and the facility restricts pledges on all
material assets. The Credit Facility contains usual and customary covenants
for a credit facility of this nature including the prohibition of the payment
of dividends, certain financial ratio covenants and the consent of the lenders
for acquisitions exceeding a certain level of cash consideration.
Strategic Investment
In August 1998, the Company entered into a non-binding letter of intent with
Enron Capital & Trade Resources Corp. (ECT), a subsidiary of Enron Corp.,
pursuant to which ECT or its affiliated companies will make an investment of
$50 million in Quanta. The investment will take the form of a Convertible
Subordinated Note. Additionally, Quanta and ECT will enter into a strategic
alliance pursuant to which ECT and Quanta will exchange information regarding
the design, construction and maintenance of electric power transmission and
distribution systems and fiber optic communications systems for ECT and its
affiliates. The investment and strategic alliance is subject to approval of
the Boards of Directors of Quanta and Enron, negotiation of definitive
documentation and certain other conditions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes thereto included elsewhere in this
Quarterly Report on Form 10-Q. Except for the historical financial information
contained herein, the matters discussed in this Quarterly Report on Form 10-Q
may be considered "forward-looking" statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include
declarations regarding the intent, belief or current expectations of the
Company and its management, statements regarding the future results of
acquired companies, the Company's gross margins and the Company's expectations
regarding Year 2000 issues. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties. Actual results could differ
materially from those indicated by such forward-looking statements. Among the
important factors that could cause actual results to differ materially from
those indicated by such forward-looking statements are the risk factors
identified in the Company's Registration Statement on Form S-4, as amended,
which was filed with the Securities and Exchange Commission on February 27,
1998, and which is available at the SEC's Web site at www.sec.gov.
The Company's revenues are derived from providing specialty electrical
contracting and maintenance services related to electric and
telecommunications infrastructure, providing electrical contracting services
to the commercial and industrial markets and installing transportation control
and lighting systems. Costs of services consist primarily of salaries and
benefits to employees, depreciation, fuel and other vehicle expenses,
equipment rentals, subcontracted services, materials, parts and supplies. The
Company's gross margin, which is gross profit expressed as a percentage of
revenues, is typically higher on projects where labor, rather than materials,
constitutes a greater portion of the cost of services. Labor costs can be
predicted with relatively less accuracy than materials costs. Therefore, to
compensate for the potential variability of labor costs, the Company seeks to
11
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
maintain higher margins on its labor-intensive projects. The Company is
subject to a $500,000 deductible for workers compensation insurance on certain
of its operations. Fluctuations in insurance accruals related to this
deductible could have a significant impact on gross margins in the period in
which such adjustments are made. Selling, general and administrative expenses
consist primarily of compensation and related benefits to officers,
administrative salaries and benefits, marketing expenses, office rent and
utilities, communication and professional expenses.
RESULTS OF OPERATIONS--PRO FORMA COMBINED
The unaudited pro forma combined statements of operations for the three and
six months ended June 30, 1997 and 1998 assume that the acquisition of the
Founding Companies, the Offering and related transactions were closed on
January 1, 1997, as restated for the pooling-of-interests acquisition in June
1998, and present certain data for the Company as adjusted for: 1) the
acquisition of the Founding Companies, 2) the IPO completed on February 18,
1998, 3) certain reductions in salaries, bonuses and benefits to former owners
of the Founding Companies, 4) amortization of goodwill resulting from the
acquisition of the Founding Companies, 5) reduction in interest expense, net
of interest expense on borrowings to fund S corporation distributions by
certain of the Founding Companies and 6) adjustments to the federal and state
income tax provision based on pro forma operating results.
The Company has begun to realize savings by consolidating certain general
administrative and purchasing functions and reducing insurance expenses. In
addition, the Company has begun to realize savings from its ability to borrow
at lower interest rates than the Founding Companies and the subsequent
acquisitions. These savings are being partially offset by the costs of being a
public company and the incremental increase in costs related to the Company's
new corporate management. Neither these savings nor the costs associated
therewith for the periods prior to the Offering have been included in the pro
forma financial information discussed below. As a result, pro forma results
may not be comparable to, or indicative of, future performance.
The pro forma adjustments are based on estimates, available information and
certain assumptions which may be revised as additional information becomes
available. The pro forma financial data does not purport to represent what the
Company's combined financial position or results of operations would actually
have been if such transactions had in fact occurred on those dates and are not
necessarily representative of the Company's financial position or results of
operations for any future period. Since Quanta, the Founding Companies, the
Pooled Company and the Purchased Companies were not under common control or
management, historical combined results may not be comparable to, or
indicative of, future performance.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- -----------------------------
1997 1998 1997 1998
------------- ------------- ------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $44,677 100.0% $63,679 100.0% $79,024 100.0% $108,253 100.0%
Cost of services........ 36,497 81.7 51,225 80.4 66,039 83.6 88,854 82.1
------- ----- ------- ----- ------- ----- -------- -----
Gross profit............ 8,180 18.3 12,454 19.6 12,985 16.4 19,399 17.9
Selling, general and
administrative
expenses............... 3,565 8.0 5,545 8.7 6,953 8.8 9,845 9.1
Merger expenses-pooling. -- -- 231 0.4 -- -- 231 0.2
Goodwill amortization... 424 0.9 553 0.9 848 1.0 967 0.9
------- ----- ------- ----- ------- ----- -------- -----
Income from operations.. $ 4,191 9.4% $ 6,125 9.6% $ 5,184 6.6% $ 8,356 7.7%
======= ===== ======= ===== ======= ===== ======== =====
</TABLE>
12
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Pro Forma Combined Results For The Three and Six Months Ended June 30, 1997,
Compared To The Three and Six Months Ended June 30, 1998
Revenues. Pro forma combined revenues increased $19.0 million and $29.2
million, or 42.5% and 37.0%, to $63.7 million and $108.3 million for the three
and six months ended June 30, 1998, primarily due to higher demand for the
Company's electrical infrastructure services in Nevada, California and the
Midwest as well as significant growth in telecommunication infrastructure
services in the Northwest. Revenues also increased during the three and six
months ended June 30, 1998 as a result of the acquisition of the Purchased
Companies.
Gross profit. Pro forma combined gross profit increased $4.3 million and
$6.4 million, or 52.2% and 49.4%, to $12.5 million and $19.4 million for the
three and six months ended June 30, 1998. As a percentage of pro forma
combined revenues, pro forma combined gross profit increased from 18.3% to
19.6% for the three months ended June 30, 1998 and from 16.4% to 17.9% for the
six months ended June 30, 1998. This increase in pro forma combined gross
margin was a result of improved asset utilization and a higher proportion of
relatively higher margin telecommunication revenues to total revenues.
Selling, general and administrative expenses. Pro forma combined selling
general and administrative expenses increased $2.0 million and $2.9 million,
or 55.5% and 41.6%, to $5.5 million and $9.8 million for the three and six
months ended June 30, 1998, primarily due to increases in selling and
administrative salaries required to support the higher level of revenues
generated from an increased volume of projects, as well as the establishment
of a corporate office and administrative infrastructure during 1998.
RESULTS OF OPERATIONS--HISTORICAL
The unaudited historical combined statements of operations for the three and
six months ended June 30, 1997 and 1998 reflect the historical operations of
PAR and the Pooled Company. The operations of the Founding Companies have been
included in the Company's historical financial statements beginning February
19, 1998 and the operations of the Purchased Companies have been included from
their respective acquisition dates.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
1997 1998 1997 1998
------------- ------------- ------------- -------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $20,226 100.0% $63,679 100.0% $34,799 100.0% $93,717 100.0%
Cost of services........ 15,973 79.0 51,225 80.4 28,861 82.9 76,681 81.8
------- ----- ------- ----- ------- ----- ------- -----
Gross profit............ 4,253 21.0 12,454 19.6 5,938 17.1 17,036 18.2
Selling, general and
administrative
expenses............... 2,647 13.1 5,545 8.7 4,855 14.0 8,889 9.5
Merger expenses-pooling. -- -- 231 0.4 -- -- 231 0.2
Goodwill amortization... 14 -- 553 0.9 28 0.1 749 0.8
------- ----- ------- ----- ------- ----- ------- -----
Income from operations.. $ 1,592 7.9% $ 6,125 9.6% $ 1,055 3.0% $ 7,167 7.7%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Historical Combined Results For The Three and Six Months Ended June 30, 1997,
Compared To The Three and Six Months Ended June 30, 1998
Revenues. Historical revenues increased $43.5 million and $58.9 million, or
214.8% and 169.3%, to $63.7 million and $93.7 million for the three and six
months ended June 30, 1998, due to the acquisition of the Founding Companies
on February 18, 1998 and subsequent acquisitions of the Purchased Companies.
Gross profit. Gross profit increased $8.2 million and $11.1 million, or
192.8% and 186.9%, to $12.5 million and $17.0 million for the three and six
months ended June 30, 1998. As a percentage of revenues, gross profit
decreased from 21.0% for the three months ended June 30, 1997 to 19.6% for the
three months ended June 30,
13
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
1998. This decrease was due to the acquisition of the Founding Companies in
February 1998 which reflect a greater impact of seasonality which was
partially offset by the increase in the proportionate amount of higher margin
telecommunication service revenues. Gross margins increased from 17.1% for the
six months ended June 30, 1997 to 18.2% for the six months ended June 30,
1998. This increase in gross margin was a result of the acquisition of the
Founding Companies on February 18, 1998, improved asset utilization and a
higher proportion of relatively higher margin telecommunication revenues to
total revenues.
Selling, general and administrative expenses. Selling general and
administrative expenses increased $2.9 million and $4.0 million, or 109.5% and
83.1%, to $5.5 million and $8.9 million for the three and six months ended
June 30, 1998, due to the acquisition of the Founding Companies on February
18, 1998, the acquisition of the Purchased Companies and increases in selling
and administrative salaries required to support the higher level of revenues
generated from an increased volume of projects, as well as the establishment
of a corporate office and administrative infrastructure during 1998.
LIQUIDITY AND CAPITAL RESOURCES
In February 1998, Quanta completed its initial public offering which
involved the issuance of 5,000,000 shares of Common Stock, providing
approximately $38.8 million in net proceeds to the Company, after deducting
underwriter discounts and commissions and expenses related to the Offering.
Concurrent with the closing of its initial public offering, Quanta acquired
the Founding Companies in separate transactions for consideration including
$21.0 million in cash and 7,527,000 shares of Common Stock. Also, in March
1998, the Company's underwriters exercised their over-allotment option to
acquire an additional 750,000 shares of the Company's Common Stock at the
initial public offering price of $9 per share, providing the Company with
approximately $6.3 million (net of underwriting discounts and commissions) of
additional proceeds from the Offering.
In April 1998, the Company obtained a $50.0 million revolving credit
facility (the "Credit Facility") from two commercial banks. In August 1998,
the Company amended its Credit Facility to increase the facility to $125.0
million. The Credit Facility is secured by a pledge of all of the capital
stock of the Company's material operating subsidiaries and is to provide funds
to be used for working capital, to finance acquisitions and for other general
corporate purposes. Amounts borrowed under the Credit Facility bear interest
at a rate equal to either (a) the London Interbank Offered Rate ("LIBOR") plus
0.75% to 1.75%, as determined by the ratio of the Company's total funded debt
to EBITDA (as defined in the Credit Facility) or (b) the bank's prime rate
plus up to 0.25%, as determined by the ratio of the Company's total funded
debt to EBITDA. Commitment fees of 0.175% to 0.30% (based on certain financial
ratios) are due on any unused borrowing capacity under the Credit Facility.
The Company's existing and future subsidiaries will guarantee the repayment of
all amounts due under the facility and the facility restricts pledges on all
material assets. The Credit Facility contains usual and customary covenants
for a credit facility of this nature including the prohibition of the payment
of dividends, certain financial ratio covenants and the consent of the lenders
for acquisitions exceeding a certain level of cash consideration. As of August
13, 1998 the Company had approximately $67.0 million in outstanding borrowings
under its Credit Facility.
Through August 12, 1998, the Company has utilized a combination of cash and
its Common Stock to acquire seven companies in addition to the Founding
Companies with estimated annualized 1997 revenues of $128.1 million. The cash
component of the consideration paid for these companies was funded with
existing cash and borrowings under its Credit Facility.
The Company has announced the signing of non-binding letters of intent to
acquire three additional companies having estimated combined annual revenues
of $50.0 million. The consideration related to these companies is under
negotiation.
14
<PAGE>
QUANTA SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
The Company expects to continue its aggressive acquisition program. The
Company intends to continue to use a combination of cash and Common Stock to
finance the principal part of the consideration payable in acquisitions. If
the Common Stock does not maintain a sufficient value, or potential
acquisition candidates are unwilling to accept Common Stock as part of the
consideration for the sale of their businesses, the Company could be required
to utilize more cash to complete acquisitions. If sufficient funds were not
available from operating cash flow or through borrowings under the Company's
Credit Facility, the Company may seek additional financing through the public
or private sale of equity or debt securities. There can be no assurance that
the Company could secure such financing if and when it is needed or on terms
the Company deems acceptable. If the Company is unable to secure acceptable
financing, its acquisition program could be negatively affected.
SEASONALITY; FLUCTUATIONS OF QUARTERLY RESULTS
The Company's results of operations can be subject to seasonal variations.
Generally, during the winter months, demand for new projects and maintenance
services may be lower due to reduced construction activity during such
weather, while demand for electrical service and repairs may be higher due to
damage caused by inclement weather. Additionally, the industry can be highly
cyclical. As a result, the Company's volume of business may be adversely
affected by declines in new projects in various geographic regions in the U.S.
Quarterly results may also be materially affected by the timing of
acquisitions, variations in the margins of projects performed during any
particular quarter, the timing and magnitude of acquisition assimilation costs
and regional economic conditions. Accordingly, the Company's operating results
in any particular quarter may not be indicative of the results that can be
expected for any other quarter or for the entire year.
YEAR 2000
The Company is in the process of identifying and evaluating its potential
issues (information technology and third party relationships) associated with
the date change in the year 2000 (Year 2000). The Company has not yet fully
assessed the Year 2000 compliance costs, but is in the process of developing a
work plan to correct any foreseeable issues. While it is not possible at
present to quantify the cost of corrective actions, management does not expect
that these actions will materially exceed the cost of normal software upgrades
and replacements expected to occur through the Year 2000. While the Company
believes all necessary work will be completed in a timely fashion, there can
be no guarantee that the systems of other companies on which the Company
relies will be converted within the same timeframe. The Company is
communicating with software vendors, business partners, and others with which
it conducts business to provide assurances that their systems will be Year
2000 compliant. The Company will continue to consider the likelihood of a
material business interruption due to the Year 2000 issue, and if necessary
implement an appropriate contingency plan.
15
<PAGE>
QUANTA SERVICES, INC.
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) Unregistered Sales of Securities.
Set forth below is certain information concerning all sales of securities by
the Company during the three month period ended June 30, 1998 that were not
registered under the Securities Act of 1933, as amended (the "Securities
Act").
Between April 1, 1998 and June 30, 1998, the Company issued 1,296,740 shares
of Common Stock as part of the consideration for the Purchased Companies.
These shares of Common Stock were issued without registration under the
Securities Act in reliance on the exemption provided by Section 4(2) of the
Securities Act.
(d) Use of Proceeds.
(1) On February 11, 1998 the Company's Registration Statement on Form S-
1, SEC Registration No. 333-42957 (the "IPO Registration
Statement"), was declared effective by oral order of the SEC.
(2) The offering pursuant to the IPO Registration Statement commenced on
February 13, 1998.
(3)(a) The offer terminated after the sale of all securities to be
registered under the IPO Registration Statement.
(b) The managing underwriters of the offering were BT Alex. Brown,
BancAmerica Robertson Stephens, and Sanders Morris Mundy.
(c) The Company's Common Stock was sold in the offering pursuant to
the IPO Registration Statement.
(d) The number of shares of Common Stock registered, the aggregate
price of the offering amount registered, the amount sold and the
aggregate offering price of the amount sold to date relating to
the IPO Registration Statement are indicated in the table below:
<TABLE>
<CAPTION>
AGGREGATE PRICE
OFFEROR SHARES REGISTERED AGGREGATE PRICE AMOUNT SOLD OF SHARES SOLD
- ------- ----------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Quanta Services, Inc.... 5,750,000 $51,750,000 5,750,000 $51,750,000
</TABLE>
(e) From February 11, 1998 through June 30, 1998, the Company incurred
the following expenses in connection with the issuance and
distribution of the securities registered pursuant to the IPO
Registration Statement, none of which constituted direct or indirect
payments to officers, directors or general partners of the Company
(other expenses represent a reasonable estimate of actual costs
incurred):
<TABLE>
<CAPTION>
EXPENSE PAYMENT
- ------- ----------
<S> <C>
Underwriting discounts and Commissions.............................. $3,622,500
Finders Fees........................................................ 0
Expenses paid to or for Underwriters................................ 7,106
Other expenses...................................................... 3,018,667
----------
Total Expenses.................................................... $6,648,273
==========
</TABLE>
(vi) The net proceeds to the Company of the offering pursuant to the
IPO Registration Statement, after deducting the expenses listed in (v)
above are $45,101,727.
(vii) From February 11, 1998 through June 30, 1998, the Company has
applied the following amounts of its net proceeds from the offering
pursuant to the IPO Registration Statement:
16
<PAGE>
<TABLE>
<CAPTION>
PAYMENT TO OFFICERS, DIRECTORS AND
USE OF PROCEEDS PAYMENT TO OTHERS 10% SHAREHOLDERS
- --------------- ----------------- ----------------------------------
<S> <C> <C>
Construction of plant,
building and facilities.. -- --
Purchase and installation
of machinery and
equipment................ -- --
Purchase of real estate... -- --
Acquisitions of other
businesses............... -- $21,000,331
Repayment of indebtedness. $21,830,583 --
Working capital........... $ 2,270,813 --
Temporary investments
(specified below)........ -- --
Other uses of at least
$100,000 (specified
below)................... -- --
</TABLE>
Temporary investments consist of money market accounts available on a daily
basis.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<TABLE>
<C> <S>
10.4 Acquisition Agreement and Plan of Reorganization by and among Quanta
Services, Inc., Underground Acquisition Inc., Underground Construction
Co., Inc., Five Points Construction Company and their stockholders
dated as of August 4, 1998.
10.5 Amended and Restated Credit Agreement dated as of August 3, 1998 among
Quanta Services, Inc., as Borrower and Bank One, Texas, National
Association, National City Bank and the other financial institutions
Parties thereto, as Lenders.
</TABLE>
Exhibit 27.1 Financial data schedule.
(b) Reports on Form 8-K:
None.
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Quanta Services, Inc., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
QUANTA SERVICES, INC.
Dated: August 14, 1998
By: /s/ James H. Haddox
-----------------------------------
James H. Haddox
Chief Financial Officer
18
<PAGE>
EXHIBIT 10.4
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
QUANTA SERVICES, INC.,
UNDERGROUND ACQUISITION, INC.,
UNDERGROUND CONSTRUCTION CO., INC.,
FIVE POINTS CONSTRUCTION COMPANY,
JAMES G. SILER, TRUSTEE OF THE JAMES G. SILER REVOCABLE TRUST,
DATED AUGUST 11, 1994,
LYNN E. BARR AND LINDA D. BARR, TRUSTEES UNDER THE LYNN E. BARR AND
LINDA D. BARR TRUST DATED OCTOBER 12, 1993,
THOMAS K. MCMANUS, JR.,
HARRY T. ROBINSON,
JAMES H. CURRY,
ANN-MARIE AND LEE A. TALBOT, TRUSTEES UNDER THE ANN-MARIE TALBOT AND LEE A.
TALBOT REVOCABLE LIVING TRUST, DATED NOVEMBER 23, 1994,
PATRICIA C. DARNELL,
PHILIP L. SMITH,
RICHARD R. SHONE,
GEORGE R. BRADSHAW,
ERROL C. BISUTTI,
AND
TIMOTHY H. RICHARDS
DATED AS OF AUGUST 4, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS.................................................... 2
1.2. INTERPRETATION................................................. 6
ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION; THE STOCK PURCHASE
2.1. THE MERGER..................................................... 7
2.2. EFFECTIVE TIME OF THE MERGER................................... 7
2.3. ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION.......................................... 7
2.4. STOCK PURCHASE. At the Effective Time, the Stockholders shall
sell, and Newco shall purchase, all of the shares of FPC Stock
held by the Stockholders....................................... 7
ARTICLE III
CONVERSION OF SHARES
3.1. CONVERSION OF SHARES........................................... 8
3.2. NEWCO SHARES................................................... 8
3.3. DELIVERY OF CONSIDERATION...................................... 8
3.4. CERTAIN PAYMENTS............................................... 8
ARTICLE IV
CLOSING
4.1. CLOSING........................................................ 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
5.1. DUE ORGANIZATION AND QUALIFICATION............................. 9
5.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.................... 9
5.3. CAPITALIZATION AND OWNERSHIP................................... 10
5.4. SUBSIDIARIES................................................... 10
5.5. FINANCIAL STATEMENTS........................................... 10
5.6. LIABILITIES AND OBLIGATIONS.................................... 11
5.7. ACCOUNTS AND NOTES RECEIVABLE.................................. 11
5.8. ASSETS......................................................... 12
5.9. MATERIAL CUSTOMERS AND CONTRACTS............................... 13
5.10. PERMITS....................................................... 14
5.11. ENVIRONMENTAL MATTERS......................................... 14
5.12. LABOR AND EMPLOYEE RELATIONS.................................. 14
5.13. INSURANCE..................................................... 15
5.14. COMPENSATION; EMPLOYMENT AGREEMENTS........................... 15
5.15. NONCOMPETITION, CONFIDENTIALITY AND NONSOLICITATION AGREEMENTS 15
5.16. EMPLOYEE BENEFIT PLANS........................................ 15
i
<PAGE>
5.17. LITIGATION AND COMPLIANCE WITH LAW............................ 17
5.18. TAXES......................................................... 18
5.19. ABSENCE OF CHANGES............................................ 18
5.20. ACCOUNTS WITH BANKS AND BROKERAGES; POWERS OF ATTORNEY........ 19
5.21. ABSENCE OF CERTAIN BUSINESS PRACTICES......................... 20
5.22. COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS....... 20
5.23. INTANGIBLE PROPERTY........................................... 20
5.24. TAX REORGANIZATION REPRESENTATION............................. 20
5.25. NO IMPLIED REPRESENTATIONS.................................... 20
5.26. DISCLOSURE.................................................... 20
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
6.1. ORGANIZATION.................................................. 20
6.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS................... 21
6.3. QUANTA COMMON STOCK........................................... 21
6.4. TAX REORGANIZATION REPRESENTATIONS............................ 21
6.6. NO IMPLIED REPRESENTATIONS.................................... 22
6.7. DISCLOSURE.................................................... 23
ARTICLE VII
CERTAIN COVENANTS
7.1. RELEASE FROM GUARANTEES....................................... 23
7.2. FUTURE COOPERATION; TAX MATTERS............................... 23
7.3. EXPENSES...................................................... 23
7.4. LEGAL OPINION................................................. 24
7.5. EMPLOYMENT AGREEMENTS......................................... 24
7.6. REPAYMENT OF RELATED PARTY INDEBTEDNESS....................... 24
7.7. STOCK OPTIONS................................................. 24
7.8. STOCK PURCHASE PROGRAM........................................ 24
7.9. CONTINUATION OF UCCO BENEFIT PLANS............................ 24
7.10................................................................. 25
7.11................................................................. 25
ARTICLE VIII
INDEMNIFICATION
8.1. GENERAL INDEMNIFICATION BY THE STOCKHOLDERS................... 25
8.2. INDEMNIFICATION BY QUANTA..................................... 26
8.3. THIRD PERSON CLAIMS........................................... 26
8.4. INDEMNIFICATION DEDUCTIBLE.................................... 27
8.5. INDEMNIFICATION LIMITATION.................................... 27
8.6. INDEMNIFICATION FOR NEGLIGENCE OF INDEMNIFIED PARTY........... 27
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ARTICLE IX
NONCOMPETITION COVENANTS
9.1. PROHIBITED ACTIVITIES.......................................... 27
9.2. EQUITABLE RELIEF............................................... 28
9.3. REASONABLE RESTRAINT........................................... 28
9.4. SEVERABILITY; REFORMATION...................................... 29
9.5. MATERIAL AND INDEPENDENT COVENANT.............................. 29
ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. GENERAL....................................................... 29
10.2. EQUITABLE RELIEF.............................................. 29
ARTICLE XI
INTENDED TAX TREATMENT
11.1. TAX-FREE REORGANIZATION....................................... 30
ARTICLE XII
FEDERAL SECURITIES ACT; RESTRICTIONS ON QUANTA COMMON STOCK
12.1. COMPLIANCE WITH LAW........................................... 30
12.2. ECONOMIC RISK; SOPHISTICATION................................. 30
12.3. RULE 144 REPORTING............................................ 30
ARTICLE XIII
MISCELLANEOUS
13.1. SUCCESSORS AND ASSIGNS........................................ 31
13.2. ENTIRE AGREEMENT.............................................. 31
13.3. COUNTERPARTS.................................................. 32
13.4. BROKERS AND AGENTS............................................ 32
13.5. NOTICES....................................................... 32
13.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................... 33
13.7. EXERCISE OF RIGHTS AND REMEDIES............................... 33
13.8. REFORMATION AND SEVERABILITY.................................. 33
13.9. GOVERNING LAW................................................. 33
13.10. DISPUTE RESOLUTION........................................... 33
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ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of August 4, 1998, by and among Quanta Services, Inc., a Delaware
corporation ("Quanta"), Underground Acquisition, Inc., a Delaware corporation
that is a subsidiary of Quanta ("Newco"), Underground Construction Co., Inc., a
California corporation ("UCCO"), Five Points Construction Company, a Texas
corporation ("FPC" and, together with Underground Construction, the
"Companies"), James G. Siler, Trustee of the James G. Siler Revocable Trust,
dated August 11, 1994, Lynn E. Barr and Linda D. Barr, Trustees under the Lynn
E. Barr and Linda D. Barr Trust dated October 12, 1993, Thomas K. McManus, Jr.,
Harry T. Robinson, James H. Curry, Ann-Marie Talbot and Lee A. Talbot, Trustees
under the Ann-Marie Talbot and Lee A. Talbot Revocable Living Trust dated
November 23, 1994, Patricia C. Darnell, Philip L. Smith, Richard R. Shone,
George R. Bradshaw, Errol C. Bisutti and Timothy H. Richards (such individuals
being collectively referred to herein as the "Stockholders"), with the
Stockholders being the Companies' only stockholders.
WHEREAS, the respective Boards of Directors of Newco and UCCO (collectively
referred to as "Constituent Corporations") deem it advisable and in the best
interests of the Constituent Corporations and their respective stockholders that
UCCO merge with and into Newco (the "Merger"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the stockholders of the Constituent Corporations have approved the
Merger in accordance with the GCL and the CCC;
WHEREAS, the Stockholders desire to sell their stock in FPC to Newco and
Newco desires to purchase such stock (the "Stock Purchase");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants contained
herein, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms used in this Agreement shall have the
following meanings:
"Affiliate" of, or "Affiliated" with, a specified person or entity means a
person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the specified person or entity.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
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"Balance Sheet Date" has the meaning set forth in Section 5.5.
"Broker" has the meaning set forth in Section 13.4.
"CCC" means the California Corporations Code, as amended.
"Closing" has the meaning set forth in Section 4.1.
"Closing Date" has the meaning set forth in Section 4.1.
"Code" has the meaning set forth in the third paragraph of this Agreement.
"Companies" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in Section 3.1.
"Company" means either of the Companies.
"Competitive Business" means any business that competes with the Companies,
including, without limitation, any business that provides specialty contracting
services, such as manhole and conduit installation for the power and
telecommunications industries, industrial and process piping, construction and
maintenance of aircraft fueling systems and heavy engineering projects for
passenger rail systems.
"Constituent Corporations" has the meaning set forth in the second
paragraph of this Agreement.
"Effective Time" has the meaning set forth in Section 2.2.
"Encumbrances" means all liens, encumbrances, mortgages, pledges, security
interests, conditional sales agreements, charges, options, preemptive rights,
rights of first refusal, reservations, restrictions or other encumbrances or
defects in title.
"Employee benefit plan" has the meaning set forth in Section 5.16.
"Employee pension benefit plan" has the meaning set forth in Section 5.16.
"Employment Agreements" has the meaning set forth in Section 7.5.
"Environmental Laws" means any Law or agreement with any Governmental
Authority relating to (a) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety or (b)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of any substance, in each case as amended and as in effect on the Closing Date.
The term "Environmental Law" includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal
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Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, each as
amended and as in effect on the Closing Date, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of, effects of or exposure to any substance.
"ERISA" has the meaning set forth in Section 5.16.
"ERISA Affiliate" has the meaning set forth in Section 5.16.
"Expiration Date" has the meaning set forth in Section 13.6.
"Financial Statements" has the meaning set forth in Section 5.5.
"FPC" has the meaning set forth in the first paragraph of this Agreement.
"FPC Stock" has the meaning set forth in Section 3.1.
"GAAP" means generally accepted accounting principles as currently applied
by the respective party on a basis consistent with preceding years and
throughout the periods involved.
"Governmental Authority" means any federal, state, local or foreign
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or quasi-
governmental authority.
"GCL" means General Corporation Law of the State of Delaware, as amended.
"Hazardous Substances" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law. The term "Hazardous
Substances" includes, without limitation, any substance to which exposure is
regulated by any Governmental Authority or any Environmental Law including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial substance
or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
"Indemnified Party" has the meaning set forth in Section 8.3.
"Indemnifying Party" has the meaning set forth in Section 8.3.
"Interim Balance Sheets" has the meaning set forth in Section 5.5.
"Interim Financial Statements" has the meaning set forth in Section 5.5.
"JAMS" has the meaning set forth in Section 13.10.
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"Judge List" has the meaning set forth in Section 13.10.
"Law" or "Laws" means any and all federal, state, local or foreign
statutes, laws, ordinances, proclamations, code, regulations, licenses, permits,
authorizations, approvals, consents, legal doctrine, published requirements,
orders, decrees, judgments, injunctions and rules of any Governmental Authority,
including, without limitation, those covering environmental, Tax, energy,
safety, health, transportation, bribery, recordkeeping, zoning, discrimination,
antitrust and wage and hour matters, in each case as amended and in effect from
time to time.
"Loss" or "Losses" means all liabilities, losses, claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, fees, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
costs and expenses of investigation), net of income Tax effects with respect
thereto (including, without limitation, income Tax benefits recognized in
connection therewith and income Taxes upon any indemnification recovery
thereof).
"Material Customers" has the meaning set forth in Section 5.9.
"Merger Filings" has the meaning set forth in Section 2.2.
"Merger" has the meaning set forth in the second paragraph of this
Agreement.
"Minor Shareholders" has the meaning set forth in Section 8.1.
"Newco" has the meaning set forth in the first paragraph of this Agreement.
"Noncompete Term" has the meaning set forth in Section 9.1(a).
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Option Plan" has the meaning set forth in Section 7.7.
"Quanta" has the meaning set forth in the first paragraph of this
Agreement.
"Quanta Common Stock" means Quanta's Common Stock, par value $.00001 per
share.
"Permits" has the meaning set forth in Section 5.10.
"Permitted Encumbrances" means (a) any Encumbrances reserved against in the
Interim Balance Sheets, (b) Encumbrances for property or ad valorem Taxes not
yet due and payable or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the Companies' books in accordance with GAAP, and (c) obligations under
operating and capital leases described in Schedule 59.
"Plan" has the meaning set forth in Section 5.16.
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"Qualified Plans" has the meaning set forth in Section 5.16.
"Restricted Shares" has the meaning set forth in Section 12.1.
"Rule 144" means Rule 144 as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"Stock Purchase" has the meaning set forth in the fifth paragraph of this
Agreement.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"TBCA" means the Texas Business Corporations Act, as amended.
"Taxes" has the meaning set forth in Section 5.18.
"Territory" has the meaning set forth in Section 9.1.
"Third Person" has the meaning set forth in Section 8.3.
"UCCO" has the meaning set forth in the first paragraph of this Agreement.
"UCCO Pension Plan" has the meaning set forth in Section 7.9.
"UCCO Stock" has the meaning set forth in Section 3.1.
"UCCO Year-End Financial Statements" has the meaning set forth in Section
5.5.
"Year-End Financial Statements" has the meaning set forth in Section 5.5.
1.2 INTERPRETATION. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in Section 1.1 and elsewhere in this
Agreement include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings ascribed to them in accordance with GAAP; and
(c) the words "herein," "hereof," and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
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ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION; THE STOCK PURCHASE
2.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time in accordance with the CCC and the GCL, UCCO
shall be merged with and into Newco and the separate existence of UCCO shall
thereupon cease. Newco shall be the surviving corporation in the Merger
(hereinafter sometimes referred to as the "Surviving Corporation").
2.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective at
such time (the "Effective Time") as (a) holders of a majority of the UCCO Common
Stock approve the Merger, and (b) certificates of merger or articles of merger,
as appropriate, in forms mutually acceptable to Quanta and UCCO, are filed with
the Secretaries of State of the States of Delaware and California, respectively
(the "Merger Filings"). The Merger Filings shall be made simultaneously with or
as soon as practicable after the execution of this Agreement and the Closing.
2.3 ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF SURVIVING
CORPORATION. As a result of the Merger and at the Effective Time:
(a) the Articles of Incorporation of Newco in effect immediately
prior to the Effective Time shall become the Articles of Incorporation of
the Surviving Corporation, except that such Articles of Incorporation
shall be amended as of the Effective Time to change the name of the
Surviving Corporation to "Underground Construction Co., Inc." After the
Effective Time, the Articles of Incorporation of the Surviving
Corporation may be amended in accordance with their terms and as provided
in the GCL;
(b) the Bylaws of Newco in effect immediately prior to the
Effective Time shall become the Bylaws of the Surviving Corporation, and
thereafter may be amended in accordance with their terms and as provided
by the Articles of Incorporation of the Surviving Corporation and the
GCL; and
(c) the Board of Directors of Newco as constituted immediately
prior to the Effective Time shall be the Board of Directors of the
Surviving Corporation.
2.4 STOCK PURCHASE. At the Effective Time, the Stockholders shall sell,
and Newco shall purchase, all of the shares of FPC Stock held by the
Stockholders.
ARTICLE III
CONVERSION OF SHARES
3.1 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and the Stock Purchase, and without any action on the part of any holder of any
capital stock of the Companies, (a) the issued and outstanding shares of common
stock, no par value, of UCCO as of the Effective Time (the "UCCO Stock") and (b)
the issued and outstanding shares of common stock, $10 par value per share, of
FPC as of the Effective Time (the "FPC Stock and, together with the UCCO Stock,
the "Company Stock") shall be converted into the right to receive, and become
exchangeable for, an aggregate of 944,596 shares of Quanta Common Stock and
$19,500,000, in cash, which shares of Quanta Common Stock and cash shall be
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exchangeable for all the Company Common Stock at the Effective Time and issued
to the Stockholders as set forth in Schedule 31.
3.2 NEWCO SHARES. The outstanding shares of common stock, par value $.01
per share, of Newco shall remain outstanding following the Merger.
3.3 DELIVERY OF CONSIDERATION. At the Closing, (a) each Stockholder shall
furnish to Quanta the certificates representing its Company Common Stock, duly
endorsed in blank by such Stockholder or accompanied by duly executed blank
stock powers, and (b) Quanta shall deliver to each Stockholder cash (by wire
transfer in accordance with the wiring instructions for each Stockholder set
forth on Schedule 3.1) and certificates representing the shares of Quanta Common
Stock to be delivered to such Stockholder pursuant to Section 3.1. Each
Stockholder agrees promptly to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
the Company Common Stock or with respect to the stock powers accompanying such
stock.
3.4 CERTAIN PAYMENTS. UCCO shall accrue and effect payment to each
Stockholder an amount equal to such Stockholder's actual state and federal tax
liability for all actual earnings of UCCO from January 1, 1998 to the Closing
Date, as determined from the books and records of UCCO on the accrual basis in
conformity with the normal accounting practices of UCCO, applied on a consistent
basis with prior periods.
ARTICLE IV
CLOSING
4.1 CLOSING. The consummation of the Merger and the Stock Purchase and
delivery of the consideration described in Section 3.3 hereof and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Quanta, 3555 Timmons Lane, Houston, Texas, concurrently with the
execution of this Agreement or at such other time and date as Quanta, the
Companies and the Stockholders may mutually agree, which date is herein referred
to as the "Closing Date."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally represent and warrant to Quanta as
follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. UCCO is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
California and FPC is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Texas; and each Company is duly
authorized and qualified to do business under all applicable Laws and to carry
on its business in the places and in the manner as now conducted. Each Company
has the requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as such business is currently being
conducted. Schedule 5.1 contains a list of all jurisdictions in which each
Company is authorized or qualified to do business, including each county in
California in which either of the Companies conducts business or has conducted
business within the past three years. True, complete and correct copies of the
Articles of
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Incorporation and By-laws, each as amended, of each Company are attached hereto
as Schedule 51. Correct and complete copies of all stock records and minute
books of each Company have been provided to Quanta, and correct and complete
copies of all other stock records and minute books of each Company have been
made available to Quanta and are correct and complete in all material respects.
5.2 AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.
(a) Each Company has the requisite power and authority to enter
into this Agreement and to effect the Merger or Stock Purchase, as
appropriate. Each Stockholder has the full legal right, power and
authority to enter into this Agreement. The execution, delivery and
performance of this Agreement have been approved by the board of
directors of each Company and by the Stockholders. No additional
corporate proceedings on the part of any Company is necessary to
authorize the execution and delivery of this Agreement and the
consummation by each Company of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each
Company and the Stockholders, and, assuming the due authorization,
execution and delivery hereof by Quanta and Newco, constitutes a valid
and binding agreement of each Company and each Stockholder, enforceable
against each of them in accordance with its terms.
(b) The execution and delivery of this Agreement by each Company
and the Stockholders do not, and the consummation by each Company and the
Stockholders of the transactions contemplated hereby will not, violate or
result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any
of the properties or assets of any Company under any of the terms,
conditions or provisions of, (i) the Articles of Incorporation or Bylaws
of each Company, (ii) any Laws applicable to the Stockholders or any
Company or any of its properties or assets, or (iii) except as set forth
in Schedule 5.2, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, lease or other instrument,
obligation or agreement of any kind to which any Stockholder or any
Company is now a party or by which any Company or any of its properties
or assets may be bound or affected.
(c) Except for the Merger Filings and as set forth in Schedule
5.2, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any Governmental Authority or
third party is necessary for the execution and delivery of this Agreement
by the Companies and the Stockholders or the consummation by each Company
and the Stockholders of the transactions contemplated hereby. Except as
set forth in Schedule 5.2, none of the contracts or agreements with
Material Customers or contracts providing for purchases or services
individually in excess of $100,000, or in the aggregate in excess of
$200,000, or other material agreements, licenses or permits to which any
Company is a party requires notice to, or the consent or approval of, any
third party for the execution and delivery of this Agreement by any
Company and the Stockholders and the consummation of the transactions
contemplated hereby.
5.3 CAPITALIZATION AND OWNERSHIP. The authorized capital stock of UCCO
consists solely of 100,000 shares of UCCO Stock, of which 40,923 shares are
issued and outstanding. The authorized capital stock of FPC consists solely of
100,000 shares of FPC Stock, of which 4,093 shares are issued and
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outstanding. All of the issued and outstanding shares of the Company Common
Stock are owned beneficially and of record by the Stockholders as set forth in
Schedule 5.3. All of the issued and outstanding shares of the Company Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the respective
Company in compliance with all applicable Laws, including, without limitation,
those Laws concerning the issuance of securities. None of such shares were
issued in violation of the preemptive rights of any past or present stockholder.
At the Effective Time, by virtue of the Merger Filings in California and Texas,
the Merger will become effective in California and Texas. Except as set forth in
Schedule 5.3, no subscription, option, warrant, call, convertible or
exchangeable security, other conversion right or commitment of any kind exists
which obligates any Company to issue any of its capital stock or the
Stockholders to transfer any of the capital stock of the Companies.
5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4, the Companies own,
of record or beneficially, or control, directly or indirectly, no capital stock,
securities convertible into or exchangeable for capital stock or any other
equity interest in any corporation, association or other business entity. Except
as set forth in Schedule 5.4, no Company is, directly or indirectly, a
participant in any joint venture, limited liability company, partnership or
other noncorporate entity.
5.5 FINANCIAL STATEMENTS.
(a) The Companies have delivered to Quanta complete and correct
copies of the following financial statements:
(i) the audited balance sheets of UCCO as of December
31, 1995, 1996 and 1997 and the related audited
statements of operations, stockholders' equity and
cash flows for the three-year period ended December
31, 1997, together with the related notes, schedules
and audit report of each Company's independent
accountants (such balance sheets and the related
income statements and the related notes and
schedules are referred to herein as the "UCCO Year-
End Financial Statements");
(ii) the unaudited balance sheets for FPC as of June 30,
1995, 1996 and 1997 and the related statements of
income and expense for the three-year period ended
December 31, 1997 (such balance sheets and the
related income and expense statements, together with
the UCCO Year-End Financial Statements are referred
to herein as the "Year-End Financial Statements");
and
(iii) the unaudited balance sheets (the "Interim Balance
Sheets") of each Company as of June 30, 1998 (the
"Balance Sheet Date") and the related unaudited
statements of operations for the interim period
ended on the Balance Sheet Date, together with the
related schedules (such balance sheets, the related
statements of operations and the related schedules
are referred to herein as the "Interim Financial
Statements"). The Year-End Financial Statements and
the Interim Financial Statements (collectively, the
"Financial Statements") are attached as Schedule 5.5
to this Agreement.
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(b) Except as set forth in Schedule 5.5, the Financial Statements
have been prepared from the books and records of each Company in
conformity with GAAP (except for the absence of notes in the Interim
Financial Statements) and present fairly the financial position and
results of operations of each respective Company as of the dates of such
statements and for the periods covered thereby. The books of account of
each Company have been kept accurately in all material respects in the
ordinary course of business, the transactions entered therein represent
bona fide transactions, and the revenues, expenses, assets and
liabilities of each Company have been properly recorded therein in all
material respects.
5.6 LIABILITIES AND OBLIGATIONS. Except as set forth in Schedule 5.6, as
of the Balance Sheet Date the Companies did not have, nor have they incurred
since that date, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (a) liabilities, obligations or
contingencies (i) that are accrued or reserved against in the Financial
Statements or reflected in the notes thereto or (ii) that were incurred after
the Balance Sheet Date and were incurred in the ordinary course of business,
consistent with past practices, and (b) liabilities and obligations that are of
a nature not required to be reflected in the Financial Statements prepared in
accordance with GAAP and that were incurred in the normal course of business and
are described in Schedule 5.6. Schedule 5.6 contains a reasonable estimate by
the Stockholders of the maximum amount that may be payable with respect to
liabilities which are not fixed. For each such liability for which the amount is
not fixed or is contested, each Company has provided a summary description of
the liability together with copies of all relevant documentation relating
thereto. Schedule 5.6 sets forth each Company's outstanding principal amount of
indebtedness for borrowed money (including overdrafts) as of the date hereof.
5.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.7 sets forth an accurate
list of the accounts and notes receivable of each Company as of the Balance
Sheet Date and of those invoiced between the Balance Sheet Date and the second
business day preceding the Closing Date, including any such amounts which are
not reflected in the Interim Balance Sheets. Receivables from and advances to
employees, the Stockholders and any entities or persons related to or Affiliates
of the Stockholders are separately identified in Schedule 5.7. Schedule 5.7 also
sets forth an accurate aging of all accounts and notes receivable as of the
Balance Sheet Date, showing amounts due in 30-day aging categories. The trade
and other accounts receivable of the Companies, including without limitation
those classified as current assets on the Interim Balance Sheets, are bona fide
receivables, were acquired in the ordinary course of business, are stated in
accordance with GAAP and are collectible in the amounts shown on Schedule 5.7,
net of reserves reflected in the Interim Financial Statements with respect to
the accounts receivable as of the Balance Sheet Date, and net of reserves
reflected in the books and records of the Companies (consistent with the methods
used in the Interim Financial Statements) with respect to receivables of the
Companies after the Balance Sheet Date. The preceding sentence shall not be
deemed or construed as a guarantee by the Companies or the Stockholders of the
collection of any such trade or account receivable.
5.8 ASSETS.
(a) Schedule 5.8 sets forth an accurate list of all real and
personal property included in "property and equipment" on the Interim
Balance Sheets and all other tangible assets of the Companies with a book
value in excess of $10,000 (i) owned by any Company as of the Balance
Sheet Date and (ii) acquired since the Balance Sheet Date, including in
each case true, complete and correct copies of leases for significant
equipment and for all real property leased by any Company
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and descriptions of all real property on which buildings, warehouses,
workshops, garages and other structures used in the operation of the
business of such Company are situated. Schedule 5.8 indicates which
assets used in the operation of the businesses of the Companies are
currently owned by the Stockholders or Affiliates of either of the
Companies or the Stockholders. The tangible assets, vehicles and other
significant machinery and equipment of the Companies that are in good
working order and condition, ordinary wear and tear excepted are all of
the tangible assets, vehicles and other significant machinery and
equipment that are necessary to continue the business of the Companies.
Except as specifically described in Schedule 5.8, all fixed assets used
by any Company in its business are either owned by such Company or leased
under agreements identified in Schedule 5.8. All leases set forth in
Schedule 5.8 are in full force and effect and constitute valid and
binding agreements of the Company that is a party thereto, and to the
knowledge of such Company and the Stockholders, the other parties thereto
in accordance with their respective terms. Schedule 5.8 contains true,
complete and correct copies of all title reports and title insurance
policies received or owned by the Companies. Schedule 5.8 includes a
summary description of all contractual commitments of each Company
involving the opening of new operations, expansion of existing operations
or the acquisition of any real property or existing business, to which
management of such Company has devoted any significant effort or
expenditure in the two-year period prior to the date of the Agreement,
and which (i) are currently being implemented by such Company, or (ii)
involve purchases of capital equipment in connection with existing
operations in amounts in excess of $10,000, individually, or $25,000 in
the aggregate.
(a) Each Company has good and indefeasible title to the tangible
and intangible personal property and the real property owned and used in
its business, including the properties identified in Schedule 5.8 as
owned real property, free and clear of all Encumbrances other than
Permitted Encumbrances and those set forth in Schedule 5.8.
(b) Except as specifically described in Schedule 5.8, the
tangible and intangible assets of any Company include all the assets used
in the operation of the business of such Company as conducted at the
Balance Sheet Date, except for dispositions of such assets since such
date in the ordinary course of business, consistent with past practices.
5.9 MATERIAL CUSTOMERS AND CONTRACTS.
(a) Schedule 5.9 sets forth an accurate list of (i) all customers
representing 5% of each Company's revenues for the fiscal year ended in
1997 or the interim period ended on the Balance Sheet Date (the "Material
Customers"), and (ii) all material executory contracts, warranties,
commitments and similar agreements to which any Company is currently a
party or by which it or any of its properties is bound, including, but
not limited to, (A) all customer contracts in excess of $100,000,
individually, or $250,000 in the aggregate, including, without
limitation, consignment contracts, (B) contracts with any labor
organizations, (C) leases providing for annual rental payments in excess
of $20,000, individually, or $50,000 in the aggregate, (D) loan
agreements, (E) pledge and security agreements, (F) indemnity or guaranty
agreements or obligations , (G) bonds, (H) notes, (I) mortgages, (J)
joint venture or partnership agreements, (K) options to purchase real or
personal property, and (L) agreements relating to the purchase or sale by
any Company of assets (other than oral agreements relating to sales of
inventory or services in the ordinary course of business, consistent with
past practices) or securities for more than $5,000, individually, or
$10,000 in the
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aggregate. Prior to the date hereof, each Company has made available to
Quanta complete and correct copies of all such agreements. To the extent
applicable, the contracts and agreements set forth in Schedule 5.9 are
separately identified as lump sum, unit price, cost plus or maintenance
agreements.
(b) Except to the extent set forth in Schedule 5.9, since
December 31, 1997, (i) no Material Customer has canceled or substantially
reduced or, to the knowledge of the Companies and the Stockholders, is
threatening to cancel or substantially reduce its purchases of any
Company's products or services, and (ii) each Company is in compliance
with all material commitments and obligations pertaining to it under such
agreements and is not in default under any of the agreements described in
subsection (a), no notice of default has been received by any Company,
and the Stockholders and the Companies are aware of no basis therefor.
(c) Except to the extent set forth in Schedule 5.9, no Company is
a party to any governmental contracts subject to price redetermination or
renegotiation. Except to the extent set forth in Schedule 5.9, neither of
the Companies is required to provide any bonding or other financial
security arrangements in any material amount in connection with any
transactions with any of its customers or suppliers.
(d) Schedule 5.9 sets forth a summary of each outstanding bid or
proposal by any Company that, if awarded to such Company, contemplates
payments to such Company in excess of $100,000 and that is subject to
acceptance or award by a third party.
(e) Schedule 5.9 sets forth a summary of each Company's open jobs
and a job cost schedule supporting the Interim Balance Sheets, which
Schedule 5.9 includes the respective Company's good faith estimate of
each such job's profit or loss as of the Balance Sheet Date and the
Closing Date.
5.10 PERMITS. Schedule 5.10 contains an accurate list of all material
licenses, franchises, permits, transportation authorities and other governmental
authorizations and intangible assets held by any Company, including, without
limitation, permits, licenses and operating authorizations, titles (including
motor vehicle titles and current registrations), fuel permits, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by any Company (the "Permits"). The Permits are valid,
and no Company has received any written notice that any Governmental Authority
intends to cancel, terminate or not renew any such license, operating
authorization, franchise, permit or other governmental authorization. The
Permits are all the permits that are required by Law for the operation of the
businesses of the Companies as conducted at the Balance Sheet Date and the
ownership of the assets of the Companies. Each Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in the Permits, as well as the
applicable orders, approvals and variances related thereto, and is not in
violation of any of the foregoing. Except as specifically provided in Schedule
5.10, the transactions contemplated by this Agreement will not result in a
default under or a breach or violation of, or adversely affect the rights and
benefits afforded to the Companies by, any Permits.
5.11 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 5.11, (a) each
Company has complied with and is in compliance, in all material respects, with
all Environmental Laws, including, without limitation, Environmental Laws
relating to air, water, land and the generation, storage, use,
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handling, transportation, treatment or disposal of Hazardous Substances; (b)
each Company has obtained and complied, in all material respects, with all
necessary permits and other approvals necessary to treat, transport, store,
dispose of and otherwise handle Hazardous Substances and has reported, to the
extent required by all Environmental Laws, all past and present sites owned or
operated by such Company where Hazardous Substances have been treated, stored,
disposed of or otherwise handled; (c) there have been no "releases" or threats
of "releases" (as defined in any Environmental Laws) at, from, in or on any
property owned or operated by any Company; (d) there is no on-site or off-site
location to which any Company has transported or disposed of Hazardous
Substances or arranged for the transportation or disposal Hazardous Substances
which is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the Surviving
Corporation, Quanta or Newco for any clean-up cost, remedial work, damage to
natural resources or personal injury, including, but not limited to, any claim
under (i) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, (ii) the Resource Conservation and Recovery Act, (iii)
the Hazardous Materials Transportation Act, or (iv) comparable state and local
statutes and regulations; and (e) no Company has contingent liability in
connection with any release or disposal of any Hazardous Substance into the
environment. None of the past or present sites owned or operated by any Company
is currently or has ever been designated as a treatment, storage and/or disposal
facility, nor has any such facility ever applied for a Permit designating it as
a treatment, storage and/or disposal facility, under any Environmental Law.
5.12 LABOR AND EMPLOYEE RELATIONS. Except as set forth in Schedule 5.12,
no Company is bound by or subject to any arrangement with any labor union.
Except as set forth in Schedule 5.12, no employees of the Companies are
represented by any labor union or covered by any collective bargaining agreement
nor, to the Companies' or the Stockholders' knowledge, is any campaign to
establish such representation in progress. There is no pending or, to the
Companies' or the Stockholders' knowledge, threatened labor dispute involving
any Company and any group of its employees nor has any Company experienced any
significant labor interruptions over the past five years. No Company nor any
Stockholder has any knowledge of any significant issues or problems in
connection with the relationship of such Company and its employees.
5.13 INSURANCE. Schedule 5.13 sets forth an accurate list as of the
Balance Sheet Date of all insurance policies carried by each Company and of all
insurance loss runs or workmen's compensation claims received for the past five
policy years. Except as set forth in Schedule 5.13, none of such policies are
"per occurrence" policies. The policies described in such Schedule 5.13 for the
current policy year are currently in full force and effect. As of the Closing
Date any open claims and any losses subject to insurance coverage for which a
claim has not been made are recoverable under such policies, except to the
extent of any applicable deductible or loss retention as set forth on Schedule
5.13.
5.14 COMPENSATION; EMPLOYMENT AGREEMENTS. Schedule 5.14 sets forth an
accurate schedule of all officers, directors and Stockholder employees of each
Company with annual salaries of $50,000 or more as of (a) the Balance Sheet Date
and (b) the date hereof. Attached to Schedule 5.14 are true, complete and
correct copies of each employment or consulting agreement with any employee of a
Company or any Stockholder. No Company is a party with any officer, director,
stockholder, member or employee to any employment agreement or similar
arrangement containing "golden parachute"or other similar provisions.
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5.15 NONCOMPETITION, CONFIDENTIALITY AND NONSOLICITATION AGREEMENTS.
Schedule 5.15 sets forth all agreements containing covenants not to compete or
solicit employees or to maintain the confidentiality of information to which any
Company is bound or under which any Company has any rights or obligations.
5.16. EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.16 sets forth an accurate schedule of each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all nonqualified deferred
compensation arrangements, whether formal or informal and whether legally
binding or not, under which any Company or an ERISA Affiliate has any current or
future obligation or liability or under which any present or former employee of
any Company or an ERISA Affiliate, or such present or former employee's
dependents or beneficiaries, has any current or future right to benefits (each
such plan and arrangement referred to hereinafter as a "Plan"), together with
true and complete copies of such Plans, arrangements and any trusts related
thereto, and classifications of employees covered thereby as of the Balance
Sheet Date. Except as set forth in Schedule 5.16, no Company nor any ERISA
Affiliate sponsors, maintains or contributes currently, or at any time during
the preceding five years, to any plan, program, fund or arrangement that
constitutes an employee pension benefit plan. Each Plan may be terminated by the
respective Company, or if applicable, by an ERISA Affiliate at any time without
any liability, cost or expense, other than costs and expenses that are customary
in connection with the termination of a Plan. For purposes of this Agreement,
the term "employee pension benefit plan" shall have the meaning given that term
in Section 3(2) of ERISA, and the term "ERISA Affiliate" means any corporation
or trade or business under common control with a Company as determined under
Section 414(b), (c), (m) or (o) of the Code.
(b) Each Plan listed in Schedule 5.16 is in compliance in all material
respects with the applicable provisions of ERISA, the Code, and any other
applicable Law. Except as set forth in Schedule 5.16, with respect to each Plan
of a Company and each ERISA Affiliate (other than a "multiemployer plan," as
defined in Section 4001(a)(3) of ERISA), all reports and other documents
required under ERISA or other applicable Law to be filed with any Governmental
Authority, the failure of which to file could reasonably be expected to result
in a material liability to a Company or any ERISA Affiliate, or required to be
distributed to participants or beneficiaries, have been duly filed or
distributed. True and complete copies of all such reports and other documents
with respect to the past five years for each Plan have been provided to Quanta.
No "accumulated funding deficiency" (as defined in Section 412(a) of the Code)
with respect to any Plan has been incurred (without regard to any waiver granted
under Section 412 of the Code), nor has any funding waiver from the Internal
Revenue Service been received or requested. Except as set forth in Schedule
5.16, each Plan that is intended to be "qualified" within the meaning of Section
401(a) of the Code (a "Qualified Plan") is, and has been during the period from
its adoption to the date hereof, so qualified, both as to form and operation and
all necessary approvals of Governmental Authorities, including a favorable
determination as to the qualification under the Code of each of such Qualified
Plans and each amendment thereto, have been timely obtained. Except as set forth
in Schedule 5.16, all accrued contribution obligations of each Company with
respect to any Plan have either been fulfilled in their entirety or are fully
reflected in the Financial Statements.
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(c) No Plan has incurred, and no Company nor any ERISA Affiliate has
incurred, any liability for excise tax or penalty due to the Internal Revenue
Service. There have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Plan during the preceding five
years without notice to and approval by the Internal Revenue Service and payment
of all obligations and liabilities attributable to such Qualified Plan.
(d) Except as set forth in Schedule 5.16, no Company nor any ERISA
Affiliate has made any promises of retirement or other benefits to employees,
except as set forth in the Plans, and no Company nor any ERISA Affiliate
maintains or has established any Plan that is a "welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides for continuing benefits or
coverage for any participant or any beneficiary of a participant after such
participant's termination of employment, except as may be required by Part 6 of
Subtitle B of Title I of ERISA and Section 4980B of the Code and similar state
Law provisions, and at the expense of the participant or the beneficiary of the
participant, or retiree medical liabilities. No Company nor any ERISA Affiliate
maintains, has established or has ever participated in a multiple employer
welfare benefit arrangement as described in Section 3(40)(A) of ERISA. Except as
set forth in Schedule 5.16, no Company nor any ERISA Affiliate has any current
or future obligation or liability with respect to a Plan pursuant to the
provisions of a collective bargaining agreement.
(e) No Company nor any ERISA Affiliate has incurred any material liability
to the Pension Benefit Guaranty Corporation in connection with any Plan. The
assets of each Plan that are subject to Title IV of ERISA are sufficient to
provide the benefits under such Plan, the payment of which the Pension Benefit
Guaranty Corporation would guarantee if such Plan were terminated, and such
assets are also sufficient to provide all other "benefits liabilities" (as
defined in ERISA Section 4001(a)(16)) due under such Plan upon termination.
(f) No "reportable event" (as defined in Section 4043 of ERISA) has
occurred and is continuing with respect to any Plan. There are no pending, or to
the Companies' and the Stockholders' knowledge, threatened claims, lawsuits or
actions (other than routine claims for benefits in the ordinary course) asserted
or instituted against, and no Company nor any ERISA Affiliate has knowledge of
any threatened litigation or claims against, the assets of any Plan or its
related trust or against any fiduciary of a Plan with respect to the operation
of such Plan. To the Companies' and the Stockholders' knowledge, there are no
investigations or audits of any Plan by any Governmental Authority currently
pending and there have been no such investigations or audits that have been
concluded that resulted in any liability to any Company or any ERISA Affiliate
that has not been fully discharged. No Company nor any ERISA Affiliate has
participated in any voluntary compliance or closing agreement programs
established with respect to the form or operation of a Plan.
(g) No Company nor any ERISA Affiliate has engaged in any prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, in connection with any Plan for which exemption was not available. Except
as set forth in Schedule 5.16, no Company nor any ERISA Affiliate is, or ever
has been, a participant in or is obligated to make any payment to a
multiemployer plan. No person or entity that was engaged by any Company or an
ERISA Affiliate as an independent contractor within the last five years
reasonably can or will be characterized or deemed to be an employee of such
Company or an ERISA Affiliate under applicable Laws for any
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purpose whatsoever, including, without limitation, for purposes of federal,
state and local income taxation, workers' compensation and unemployment
insurance and Plan eligibility.
5.17. LITIGATION AND COMPLIANCE WITH LAW. Except as set forth in Schedule
5.17, there are no claims, actions, suits or proceedings, pending or, to the
knowledge of the Companies and the Stockholders, threatened against or affecting
any Company, at law or in equity, or before or by any Governmental Authority
having jurisdiction over such Company. No written notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received by any
Company and, to the Stockholders' and the Companies' knowledge, there is no
basis therefor. Except to the extent set forth in Schedule 5.17, each Company
has conducted and is conducting its business in compliance with all Laws
applicable to such Company, its assets or the operation of its business.
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5.18. TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof, whether computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. Each Company has timely filed all
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing, and has duly paid in full or made adequate
provision in the Financial Statements for the payment of all Taxes for all
periods ending at or prior to the Closing Date. Each Company has duly withheld
and paid or remitted all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other person or entity that required withholding under
any applicable Law, including, without limitation, any amounts required to be
withheld or collected with respect to social security, unemployment
compensation, sales or use taxes or workers' compensation. Except as set forth
in Schedule 5.18, there are no examinations in progress or claims against any
Company relating to Taxes for any period or periods prior to and including the
Balance Sheet Date and no written notice of any claim for Taxes, whether pending
or threatened, has been received. No Company has granted or been requested to
grant any extension of the limitation period applicable to any claim for Taxes
or assessments with respect to Taxes. No Company is a party to any Tax
allocation or sharing agreement and is not otherwise liable or obligated to
indemnify any person or entity with respect to any Taxes. The amounts shown as
accruals for Taxes on the Interim Financial Statements as of the Balance Sheet
Date are sufficient for the payment of all Taxes for all fiscal periods ended on
or before that date. True and complete copies of (a) any tax examinations, (b)
extensions of statutory limitations and (c) the federal, state and local Tax
returns of the Companies for the last three fiscal years have been previously
provided to Quanta. There are no requests for ruling in respect of any Tax
pending between any Company and any Taxing authority. UCCO has been taxed under
the provisions of Subchapter S of the Code since July 1, 1988. Each Company
currently utilizes the accrual method of accounting for income tax purposes.
Such method of accounting has not changed in the past five years.
5.19. ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth in Schedule 5.19, each Company has conducted its operations in the
ordinary course and there has not been:
(a) any material adverse change in the business, operations,
properties, condition (financial or other), assets, liabilities
(contingent or otherwise), results of operations or prospects of the
Companies, taken as a whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the Companies, taken as a whole;
(c) any change in the authorized capital stock of any Company or in
their outstanding securities or any change in the respective
Stockholders' ownership interests in any Company or any grant of any
options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of any Company;
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(e) any increase in the compensation payable or to become payable by
any Company to the Stockholders or any of their officers, directors,
employees, consultants or agents, except for ordinary and customary
bonuses and salary increases for employees in accordance with past
practice, which bonuses and salary increases are set forth in Schedule
5.19;
(f) any significant work interruptions, labor grievances or claims
filed;
(g) except for the Merger and the Stock Purchase, any sale or
transfer, or any agreement to sell or transfer, any material assets,
properties or rights of any Company to any person, including, without
limitation, the Stockholders and their Affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to any Company;
(i) any increase in the indebtedness of any Company, other than
accounts payable incurred in the ordinary course of business, consistent
with past practices or incurred in connection with the transactions
contemplated by this Agreement;
(j) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of any Company or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(k) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of any Company's business;
(l) any waiver of any material rights or claims of any Company;
(m) any material breach, amendment or termination of any material
contract, agreement, Permit or other right to which any Company is a
party or any of its property is subject; or
(o) any other material transaction by any Company outside the
ordinary course of business.
5.20. ACCOUNTS WITH BANKS AND BROKERAGES; POWERS OF ATTORNEY. Schedule
5.20 sets forth an accurate schedule, as of the date of this Agreement, of (a)
the name of each financial institution or brokerage firm in which any Company
has accounts or safe deposit boxes; (b) the names in which the accounts or boxes
are held; (c) the type of account and the cash, cash equivalents and securities
held in such account as of the second business day prior to the Closing, none of
which assets have been withdrawn from such accounts since such date except for
bona fide business purposes in the ordinary course of the business of such
Company; and (d) the name of each person authorized to draw thereon or have
access thereto. Schedule 5.20 also sets forth the name of each person,
corporation, firm or other entity holding a general or special power of attorney
from any Company and a description of the terms thereof.
5.21. ABSENCE OF CERTAIN BUSINESS PRACTICES. No Company nor any of its
affiliates has given or offered to give anything of value to any governmental
official, political party or candidate for government
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office nor has it otherwise taken any action which would constitute a violation
of the Foreign Corrupt Practices Act of 1977, as amended, or any similar Law.
5.22. COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth in Schedule 5.22, neither the Stockholders nor any other Affiliate of
any Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is in a Competitive Business or is a competitor, lessor, lessee,
customer or supplier of any Company. Except as set forth in Schedule 5.22, no
officer or director of any Company nor any Stockholder has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of any Company.
5.23. INTANGIBLE PROPERTY. Schedule 5.23 sets forth an accurate list of
all patents, patent applications, trademarks, service marks, technology,
licenses, trade names, copyrights and other intellectual property or proprietary
property rights owned or used by any Company. Each Company owns or possesses,
and the assets of each Company include, sufficient legal rights to use all of
such items without conflict with or infringement of the rights of others.
5.24. TAX REORGANIZATION REPRESENTATION. The Surviving Corporation will
acquire substantially all of the properties of UCCO within the meaning of
Section 368(a)(2)(D) of the Code.
5.25. NO IMPLIED REPRESENTATIONS. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of the Stockholders
and each Company that Quanta and Newco are not making any representation or
warranty whatsoever, express or implied, other than those representations and
warranties of Quanta and Newco expressly set forth in this Agreement.
5.26. DISCLOSURE. The Stockholders and each Company have fully provided
Quanta or its representatives with all the information that Quanta has requested
in analyzing whether to consummate the Merger and the other transactions
contemplated by this Agreement. None of the information so provided nor any
representation or warranty of the Stockholders to Quanta or Newco in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein, in light of the
circumstances under which they were made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
Quanta and Newco jointly and severally represent and warrant to the
Stockholders as follows:
6.1. ORGANIZATION. Each of Quanta and Newco is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, and is duly authorized and qualified under all applicable Laws to
carry on its business in the places and in the manner now conducted. Each of
Quanta and Newco has the requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as such business is
currently being conducted.
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6.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.
(a) Each of Quanta and Newco has the full legal right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement has been approved by the boards of directors of Quanta and
Newco and Quanta, as the sole stockholder of Newco. No additional
corporate proceedings on the part of Quanta or Newco are necessary to
authorize the execution and delivery of this Agreement and the
consummation by Quanta and Newco of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Quanta
and Newco, and, assuming the due authorization, execution and delivery by
each Company and the Stockholders, constitutes valid and binding
agreements of Quanta and Newco, enforceable against Quanta and Newco in
accordance with its terms.
(b) The execution and delivery of this Agreement by Quanta and Newco
do not, and the consummation by Quanta and Newco of the transactions
contemplated hereby will not, violate or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under any of the terms,
conditions or provisions of (i) the Certificate of Incorporation or By-
Laws of Quanta or Newco, (ii) any Law applicable to either Quanta or
Newco or any of its properties or assets or (iii) any material note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement
of any kind to which Quanta or Newco is now a party or by which either
Quanta or Newco or any of its properties or assets may be bound or
affected.
(c) Except for the Merger Filings and such filings as may be
required under federal or state securities Laws, no declaration, filing
or registration with, or notice to, or authorization, consent or approval
of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by Quanta and Newco or the consummation by
Quanta and Newco of the transactions contemplated hereby.
6.3. QUANTA COMMON STOCK. The shares of Quanta Common Stock to be issued to
the Stockholders pursuant to the Merger and the Stock Purchase are duly
authorized and, when issued in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable. The issuance of Quanta Common
Stock pursuant to the Merger will transfer to the Stockholders valid title to
such shares of Quanta Common Stock, free and clear of all Encumbrances, except
for any Encumbrances created by the Stockholders.
6.4. TAX REORGANIZATION REPRESENTATIONS.
(a) Prior to the Merger, Quanta will be in control of Newco within
the meaning of Section 368(c) of the Code.
(b) Quanta has no plan or intention to cause the Surviving
Corporation to issue additional shares of its stock that would result in
Quanta losing control of the Surviving Corporation within the meaning of
Section 368(c) of the Code.
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(c) Quanta has no plan or intention to reacquire any of its stock
issued in the Merger.
(d) Quanta has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with or into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation except for transfers of stock to another corporation
controlled by Quanta; or to cause the Surviving Corporation to sell or
otherwise dispose of any of its assets, except for dispositions made in
the ordinary course of business or transfers of assets to a corporation
controlled by Quanta.
(e) Following the Closing, Quanta's intention is that the Surviving
Corporation will continue the historic business of the Companies or use a
significant portion of the historic business assets of UCCO in a
business, all as required to satisfy the "continuity of business
enterprise" requirement under Section 368 of the Code.
(f) Quanta does not own, nor has it owned during the past five
years, any shares of the stock of UCCO.
(g) Each of Quanta and Newco is undertaking the Merger for a bona
fide business purpose and not merely for the avoidance of federal income
tax.
(h) Neither Quanta nor Newco is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(i) As of the Closing Date, the fair market value of the assets of
Newco will exceed the sum of Newco's liabilities plus the amount of other
liabilities, if any, to which Newco's assets are subject.
6.5. SEC FILINGS; DISCLOSURE. Quanta has filed with the Securities and
Exchange Commission ("SEC") all material forms, statements, reports and
documents required to be filed by it prior to the date hereof under each of the
Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and the respective rules and regulations
thereunder, (a) all of which, as amended, if applicable, complied when filed in
all material respects with all applicable requirements of the appropriate Act
and the rules and regulations thereunder, and (b) none of which, as amended, if
applicable, contains any untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
6.6 NO IMPLIED REPRESENTATIONS. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of Quanta and Newco
that the Stockholders are not making any representation or warranty whatsoever,
express or implied, other than those representations and warranties of the
Stockholders expressly set forth in this Agreement.
6.7. DISCLOSURE. Quanta has fully provided the Stockholders or their
representatives with all the information that the Stockholders have requested in
analyzing whether to consummate the Merger and the Stock Purchase. None of the
information so provided nor any representation or warranty of Quanta contained
in this Agreement contains any untrue statement of a material fact or omits to
state a material fact
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necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE VII
CERTAIN COVENANTS
7.1. RELEASE FROM GUARANTEES. Quanta shall use its commercially reasonable
best efforts to have the Stockholders released from the personal guarantees of
the Companies' indebtedness identified in Schedule 7.1 within 90 days after the
Closing Date. Quanta hereby agrees to indemnify and defend each Stockholder and
hold such Stockholder harmless for any amounts that such Stockholder is required
to pay in connection with the enforcement of any obligations under such personal
guarantees after the Closing, including without limitation any reasonable
attorneys' fees and expenses incurred in connection therewith.
7.2. FUTURE COOPERATION; TAX MATTERS. The Stockholders and Quanta shall
each deliver or cause to be delivered to the other following the Closing such
additional instruments as the other may reasonably request for the purpose of
fully carrying out this Agreement. The Stockholders will cooperate and use their
commercially reasonable best efforts to have the present officers, directors and
employees of the Companies cooperate with Quanta and the Surviving Corporation
at and after the Closing in furnishing information, evidence, testimony and
other assistance in connection with any actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Closing. The Stockholders will cooperate with the Surviving Corporation
in the preparation of all tax returns covering the period from the beginning of
each Company's current Tax years through the Closing. In addition, Quanta will
provide the Stockholders with access to such of its books and records as may be
reasonably requested by the Stockholders in connection with federal, state and
local tax matters relating to periods prior to the Closing. The party requesting
cooperation, information or actions under this Section 7.2 shall reimburse the
other party for all reasonable out-of-pocket costs and expenses paid or incurred
in connection therewith, which costs and expenses shall not, however, include
per diem charges for employees or allocations of overhead charges.
7.3. EXPENSES. Quanta will pay the fees, expenses and disbursements of
Quanta and its agents, representatives, accountants and counsel incurred in
connection with the execution, delivery and performance of this Agreement and
any amendments thereto. The Surviving Corporation following the Closing will pay
the expenses of the audit or audit related procedures in connection with the
transactions contemplated hereby. The Stockholders will pay their fees, expenses
and disburse ments and those of their and the Companies' agents,
representatives, financial advisors, accountants and counsel incurred in
connection with the execution, delivery and performance of this Agreement and
any amendments hereto and the consummation of the transactions contemplated
hereby, including, without limitation, accounting fees and related expenses
attributable to the final Tax returns of the Companies and the Stockholders
through the Closing; provided, however that the Surviving Corporation will pay
up to $20,000 of such Tax returns fees and expenses.
7.4. LEGAL OPINION. At the Closing, the Companies and the Stockholders
shall cause their legal counsel, Spaulding, McCullough & Tansil, L.L.P., to
deliver to Quanta a legal opinion in form and substance acceptable to Quanta.
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7.5. EMPLOYMENT AGREEMENTS. Concurrently with the execution of this
Agreement, the Surviving Corporation shall enter into a mutually acceptable
Employment Agreement with each of the individuals identified on Schedule 7.5
(collectively, the "Employment Agreements").
7.6. REPAYMENT OF RELATED PARTY INDEBTEDNESS. Concurrently with the
execution of this Agreement, (a) the Stockholders shall repay to the Company all
amounts outstanding as advances to or receivables from the Stockholders, each of
which advances or receivables is specifically reflected in Schedule 5.7, and (b)
the Company shall repay all amounts outstanding under loans to the Company from
any Stockholder, each of which loans to the Company is specifically reflected in
Schedule 5.6.
7.7. STOCK OPTIONS. Quanta shall grant nonqualified options to purchase an
aggregate of 140,000 shares of Quanta Common Stock as of the Closing Date under
Quanta's 1997 Stock Option Plan (the "Option Plan") to employees of the UCCO
(other than Stockholders) as mutually agreed upon by Lynn Barr and Quanta, which
options, in each case, shall vest in equal annual increments for four years,
commencing one year after the Closing.
7.8. STOCK PURCHASE PROGRAM. After the Closing, Quanta will endeavor to
establish, subject to stockholder approval, an employee stock purchase program
to facilitate employee purchases of Quanta Common Stock directly from Quanta
without paying third party brokerage commissions. Notwithstanding anything to
the contrary contained herein, neither this Section 7.8, Sections 7.9, 7.10,
7.11, nor anything in this Agreement, or any other agreement of Quanta and its
Affiliates entered into in connection with the consummation of the transactions
contemplated hereby, shall be deemed or construed to make any employee of the
Companies or Quanta or its Affiliates or potential participants in any such
employee stock purchase program a third party beneficiary or create any right in
any such persons to cause Quanta or its Affiliates to establish any such
employee stock purchase program.
7.9. CONTINUATION OF UCCO BENEFIT PLANS. Quanta shall use its reasonable
best efforts to maintain (a) until January 1, 1999, the UCCO Retirement Plan
(the "UCCO Pension Plan"), (b) UCCO's long-term disability program, (c) UCCO's
published bonus program, (d) UCCO's stockholder Exec-u-Care supplemental medical
plan, (e) UCCO's group term insurance plan and (f) UCCO's vacation, sick leave
and subsistence plan; provided, however, that, notwithstanding the foregoing,
the continuation of such plans and programs, including, without limitation, the
UCCO Pension Plan, (i) shall only be required to the extent permitted by
applicable Law and shall not be required to the extent that applicable Law would
require any other employees of Quanta or its subsidiaries to become participants
in any such plan or program in order to maintain such plan or program as a
Qualified Plan, if applicable, and (ii) the Surviving Corporation may replace
any such plan or program with a Quanta or Surviving Corporation plan or program
providing substantially similar benefits. Notwithstanding anything to the
contrary contained herein, neither this Section 7.9 nor anything in this
Agreement, or any other agreement of Quanta and its Affiliates entered into in
connection with the consummation of the transactions contemplated hereby, shall
be deemed or construed to make any employee of the Companies or Quanta or its
Affiliates or participants or potential participants in any such plan or
program, including, without limitation, the UCCO Pension Plan, a third party
beneficiary or create any right in any such persons to cause Quanta or its
Affiliates to continue or maintain any such plan or program, including, without
limitation, the UCCO Pension Plan.
7.10. CONTINUATION OF CAR LEASE PROGRAM. Schedule 7.10 includes a
description of the material terms of the UCCO Stockholder car lease program
including all amounts paid by the Companies pursuant
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to the program in in the fiscal year ended December 31, 1997, and the six months
ended June 30, 1998 and all beneficiaries of the program. Quanta shall use its
reasonable best efforts to maintain the UCCO Stockholder car lease program,
provided, however, that the Surviving Corporation may replace any such plan or
program with a Quanta or Surviving Corporation plan or program providing
substantially similar benefits.
7.11. KEYMAN LIFE INSURANCE POLICIES. Within 90 days of the Closing Date,
the Stockholder's will, at their option, be able to purchase their respective
keyman life insurance policy from their respective Companies for the cash
surrender value of the policy.
7.12. AIRCRAFT PURCHASE. Upon the date that Lynn Barr ceases to be
employed in any capacity by the Surviving Corporation or any Affiliate of the
Surviving Corporation, he will, at his option, be able to purchase that certain
1983 Mooney aircraft from the Surviving Corporation at a price equal to the
wholesale market value of such aircraft at the time of purchase. Nothing in this
Agreement shall require the Surviving Corporation or its Affiliates to maintain
ownership or replace such aircraft if, in the reasonable business judgment of
the Surviving Corporation or such Affiliate, disposal of such aircraft would be
in the best interest of the Surviving Corporation, its Affiliates or their
respective Stockholders.
ARTICLE VIII
INDEMNIFICATION
The Stockholders, Quanta and Newco each make the following covenants:
8.1. GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. Subject to Sections 8.4
and 8.5, the Stockholders, other than Richard R. Shone, George R. Bradshaw,
Errol C. Bisutti and Timothy H. Richards (collectively, the "Minor
Shareholders"), covenant and agree that they will jointly and severally (without
any right of indemnification or contribution from the Companies) indemnify,
defend, protect and hold harmless Quanta, Newco and the Surviving Corporation,
and their respective officers, directors, employees, stockholders, agents,
representatives and Affiliates, at all times from and after the date of this
Agreement until the Expiration Date from and against all Losses incurred by any
of such indemnified persons as a result of or arising from (a) any breach of the
representations and warranties of the Stockholders set forth herein or in the
Schedules or certificates delivered in connection herewith, (b) any breach or
nonfulfillment of any covenant or agreement on the part of the Stockholders or
the Companies under this Agreement, (c) all income Taxes payable by any Company
for all periods prior to and including the Closing Date, or (d) all transfer and
other Taxes arising from the transactions contemplated by this Agreement.
8.2. INDEMNIFICATION BY QUANTA. Subject to Section 8.4, Quanta covenants
and agrees that it will indemnify, defend, protect and hold harmless the
Stockholders and their respective agents, representatives, Affiliates,
beneficiaries and heirs and employees at all times from and after the date of
this Agreement until the Expiration Date from and against all Losses incurred by
any of such indemnified persons as a result of or arising from (a) any breach of
the representations and warranties of Quanta or Newco set forth herein or in the
Schedules or certificates attached hereto, or (b) any breach or nonfulfillment
of any covenant or agreement on the part of Quanta or Newco under this
Agreement.
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8.3. THIRD PERSON CLAIMS. Promptly after any party providing
indemnification pursuant to Section 8.1 or 8.2 of this Agreement (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), of the commencement of
any action or proceeding by a Third Person, which the Indemnified Party believes
in good faith is an indemnifiable claim under this Agreement, the Indemnified
Party shall give to the party obligated to provide indemnification pursuant to
Section 8.1, or 8.2 hereof (hereinafter the "Indemnifying Party") written notice
of such claim or the commencement of such action or proceeding. Such notice
shall state the nature and the basis of such claim and a reasonable estimate of
the amount thereof. The Indemnifying Party shall have the right to defend and
settle, at its own expense and by its own counsel, any such matter so long as
the Indemnifying Party pursues the same diligently and in good faith. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in all commercially
reasonable respects in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records and other information reasonably
requested by the Indemnifying Party and in the Indemnified Party's possession or
control. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability; provided, however, that the Indemnified Party shall
be entitled, at its expense, to participate in the defense of such asserted
liability and the negotiations of the settlement thereof. The Indemnifying Party
shall not settle any such Third Person claim without the consent of the
Indemnified Party, unless the settlement thereof imposes no liability or
obligation on, and includes a complete release from liability of, the
Indemnified Party. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person; provided, however,
that notwithstanding the foregoing, the Indemnified Party shall be entitled to
refuse to consent to any such proposed settlement and the Indemnifying Party's
liability hereunder shall not be limited by the amount of the proposed
settlement if such settlement does not provide for the complete release of the
Indemnified Party. If, upon receiving notice, the Indemnifying Party does not
timely undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnified
Party may settle such matter, in its discretion, and the Indemnifying Party
shall reimburse the Indemnified Party for the amount paid in such settlement and
any other liabilities or expenses incurred by the Indemnified Party in
connection therewith.
8.4. INDEMNIFICATION DEDUCTIBLE. Neither the Stockholders, on the one
hand, nor Quanta, Newco and the Surviving Corporation, on the other hand, shall
be entitled to indemnification from the other under the provisions of Section
8.1(a) or Section 8.2(a), as the case may be, until such time as, and only to
the extent that, the claims subject to indemnification by such other party
exceed, in the aggregate, $325,000. Notwithstanding the foregoing, the
limitations set forth in this Section 8.4 shall not apply to fraudulent
misrepresentations.
8.5. INDEMNIFICATION LIMITATION. Subject to Section 8.4, the aggregate
indemnification obligation of the Indemnifying Stockholders under Section 8.1(a)
shall be limited to $32,500,000. Notwithstanding the foregoing, the limitations
set forth in this Section 8.5 shall not apply to fraudulent misrepresentations.
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8.6. INDEMNIFICATION FOR NEGLIGENCE OF INDEMNIFIED PARTY. THE RIGHTS TO
INDEMNIFICATION UNDER THIS INCLUDE RIGHTS TO INDEMNIFICATION FOR THE RESULTS OF
AN INDEMNIFIED PARTY'S ACTUAL OR ALLEGED NEGLIGENCE, IF SUCH INDEMNIFIED PARTY
WOULD OTHERWISE BE ENTITLED TO INDEMNIFICATION HEREUNDER.
ARTICLE IX
NONCOMPETITION COVENANTS
9.1. PROHIBITED ACTIVITIES.
(a) For no additional consideration, (i) the Stockholders, other than
the Minor Stockholders, will not for five years following the Closing
Date and, as to Stockholders (other than Minor Stockholders) who are
parties to Employment Agreements, if longer, one year following such
Stockholder's voluntary termination of his or her employment agreement
with the Surviving Corporation or its Affiliates or the termination of
such individual's employment with the Surviving Corporation or its
Affiliates "for cause," in each case as determined in accordance with
such individual's Employment Agreement, and (ii) the Minor Stockholders
will not for two years following the Closing Date, and, as to Minor
Stockholders who are parties to Employment Agreements, if longer, one
year following such Minor Stockholder's voluntary termination of his or
her employment agreement with the Surviving Corporation or its Affiliates
or the termination of such individual's employment with the Surviving
Corporation or its Affiliates "for cause," in each case as determined in
accordance with such individual's Employment Agreement (with the
applicable period being herein referred to as the "Noncompete Term"),
directly or indirectly, for himself or on behalf of or in conjunction
with any other person, company, partnership, corporation or business of
whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial or advisory
capacity, whether as an employee, independent contractor,
consultant or advisor, or as a sales representative, in a
Competitive Business (A) in the counties in California in
which either of the Companies or any subsidiaries conducts
business or has conducted business within the past three
years, all of which counties are set forth on Schedule 5.1,
(B) within 150 miles of where either of the Companies or any
of its subsidiaries conducts business, or has conducted
business within the past three years, outside of California,
including any territory outside of California that is
serviced by either of the Companies or any of such
subsidiaries (the counties and other areas included within
clause (A) and (B) being herein referred to as the
"Territory");
(ii) call upon any person who is an employee or consultant of
Quanta or the Surviving Corporation or any of their
respective subsidiaries for the purpose or with the intent
or effect of enticing such employee or consultant away from
or out of the employ or contract with Quanta or the
Surviving Corporation or any of their respective
subsidiaries; or
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(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a
customer of any Company or the Surviving Corporation or any
of the subsidiaries of such parties within the Territory
for the purpose, or with the effect, of soliciting or
selling services or products in a Competitive Business
within the Territory.
(b) Notwithstanding the above, (i) if the employment of a
Stockholder (other than a Minor Stockholder) identified in Section 9.1(a)
is terminated by the Surviving Corporation other than "for cause," as
determined under such individual's Employment Agreement, if applicable,
then the Noncompete Term shall be five years following the Closing Date,
(ii) Section 9.1(a) shall not be deemed to prohibit any such Stockholder
from acquiring, as a passive investor with no involvement in the
operations of the business, not more than one percent of the capital
stock of a Competitive Business whose stock is publicly traded on a
national securities exchange, The Nasdaq Stock Market or over-the-
counter, and (iii) if the employment of a Stockholder is terminated for
other than "good cause", as determined under such individual's Employment
Agreement, if applicable, then no non-compete provision shall be
enforceable for any period of time during which or for which such
Stockholder is not receiving or has not received severance compensation..
9.2. EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to Quanta and the Surviving Corporation as a result of a breach of the
foregoing covenant, because a breach of such covenant would diminish the value
of the assets and business of the Companies being sold pursuant to this
Agreement, and because of the immediate and irreparable damage that could be
caused to Quanta and the Surviving Corporation for which it would have no other
adequate remedy, each Stockholder agrees that the foregoing covenant may be
enforced against such individual by injunctions, restraining orders and other
equitable actions.
9.3. REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this ARTICLE IX are necessary in terms of time, activity
and territory to protect Quanta's and the Surviving Corporation's interest in
the assets and business being acquired pursuant to the terms of this Agreement
and impose a reasonable restraint on each Stockholder in light of the activities
and businesses of the Companies on the date of the execution of this Agreement
and the current plans of the Companies.
9.4. SEVERABILITY; REFORMATION. The covenants in this ARTICLE IX are
severable and separate, and the unenforceability of any specific covenant shall
not affect the continuing validity and enforceability of any other covenant. In
the event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth in this ARTICLE IX are unreasonable
and therefore unenforceable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and this Agreement shall thereby be reformed.
9.5. MATERIAL AND INDEPENDENT COVENANT. Each Stockholder acknowledges
that his, her or its agreements and the covenants set forth in this ARTICLE IX
are material conditions to Quanta's and Newco's agreements to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
and that Quanta and Newco would not have entered into this Agreement without
such covenants. All of the covenants in this ARTICLE IX shall be construed as an
agreement independent of any other provision in this Agreement.
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ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. GENERAL. Each Stockholder recognizes and acknowledges that he, she
or it had in the past, currently has, and in the future will have, access to
certain confidential information relating to the businesses of the Companies,
such as lists of customers, operational policies, and pricing and cost policies
that are, and following the Closing will be, valuable, special and unique assets
of the Surviving Corporation. Each Stockholder agrees that he, she or it will
not use or disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose whatsoever, except as
is required in the course of performing his, her or its duties, if any, to the
Surviving Corporation and/or Quanta, unless (a) such information becomes known
to the public generally through no fault of such Stockholder, or (b) disclosure
is required by Law, provided that prior to disclosing any information pursuant
to this clause (b) such Stockholder shall, if possible, give prior written
notice thereof to Quanta and the Surviving Corporation and provide Quanta with
the opportunity to contest such disclosure. In the event of a breach or
threatened breach by any Stockholder of the provisions of this Section, Quanta
shall be entitled to an injunction restraining such Stockholder from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Quanta from pursuing any other available remedy for
such breach or threatened breach, including, without limitation, the recovery of
damages.
10.2. EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, because a breach of
such covenant would diminish the value of the assets and business of the Company
being sold pursuant to this Agreement, and because of the immediate and
irreparable damage that would be caused for which the Surviving Corporation
and/or Quanta would have no other adequate remedy, each Stockholder agrees that
the foregoing covenants may be enforced against him, her or it by injunctions,
restraining orders and other equitable actions.
ARTICLE XI
INTENDED TAX TREATMENT
11.1. TAX-FREE REORGANIZATION. Quanta and the Stockholders are entering
into this Agreement with the intention that the Merger qualify as a tax-free
reorganizations for federal income tax purposes, except to the extent of any
"boot" received, and neither Quanta nor the Stockholders will take any actions
that disqualify the Merger for such treatment.
ARTICLE XII
FEDERAL SECURITIES ACT; RESTRICTIONS
ON QUANTA COMMON STOCK
12.1. COMPLIANCE WITH LAW. The Stockholders acknowledge the shares of
Quanta Common Stock issued at the Closing in accordance with the terms of this
Agreement (the "Restricted Shares") will not be registered under the 1933 Act
and therefore may not be resold without compliance with the 1933 Act. The
Restricted Shares are being or will be acquired by Stockholders solely for their
own accounts, for investment
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purposes only, and with no present intention of distributing, selling or
otherwise disposing of them in connection with a distribution. The Stockholders
covenant, warrant and represent that none of the Restricted Shares will be,
directly or indirectly, offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the 1933 Act and the rules and regulations of the
SEC. Certificates representing the Restricted Shares shall bear the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT ISSUED IN A TRANSACTION
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED HEREBY HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH
SALE OR TRANSFER IS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR, IN THE OPINION
OF COUNSEL TO THE ISSUER, IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND SUCH LAWS.
12.2. ECONOMIC RISK; SOPHISTICATION; ACCREDITED INVESTORS. Each Stockholder
is able to bear the economic risk of an investment in the Restricted Shares and
can afford to sustain a total loss of such investment. Each Stockholder has such
knowledge and experience in financial and business matters that it, she or he is
capable of evaluating the merits and risks of the proposed investment and
therefore has the capacity to protect its, her or his own interests in
connection with the acquisition of the Restricted Shares pursuant hereto. Each
Stockholder or its, her or his representatives have had an adequate opportunity
to ask questions and receive answers from the officers of Quanta concerning,
among other matters, Quanta, its management, its plans for the operation of its
business and potential additional acquisitions.
12.3 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of Quanta
Common Stock to the public without registration, for a period of one year after
the Closing, Quanta agrees to use its commercially reasonable efforts to:
(a) make and keep public information (as such terms are defined in
Rule 144) regarding Quanta available;
(b) file with the SEC in a timely manner all reports and other
documents required of Quanta under the 1933 Act and the 1934 Act; and
(c) furnish to each Stockholder upon written request a written
statement by Quanta as to its compliance with the reporting requirements
of Rule 144, the 1933 Act and the 1934 Act, a copy of the most recent
annual or quarterly report of Quanta, and such other reports and
documents so filed as such Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing such Stockholder to
sell any such shares without registration.
12.4. RESTRICTION ON SALE OR OTHER TRANSFER OF RESTRICTED SHARES. Each
Stockholder covenants, warrants and represents that none of the Restricted
Shares will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of, directly or indirectly, during the one-year period
commencing on the Closing Date (the "Lockup Period") and, thereafter, only after
full compliance with all of the applicable provisions of the 1933 Act and the
rules and regulations of the SEC; and, during the Lockup Period, the
Stockholders shall not engage in put, call, short-sale, hedge, straddle or
similar transactions
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intended to reduce the Stockholders' risk of owning the Restricted Shares.
Certificates representing the Restricted Shares shall bear the following legend
in addition to the legend under Section 12.1:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
RESTRICTION ON TRANSFER THAT EXPIRES ON AUGUST 4, 1999 AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE
DISPOSED OF DURING THE PERIOD OF SUCH CONTRACTUAL RESTRICTION WITHOUT THE
PRIOR WRITTEN CONSENT OF QUANTA SERVICES, INC.
ARTICLE XIII
MISCELLANEOUS
13.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of Law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
Quanta, Newco, the Surviving Corporation and the Companies, and the heirs and
legal representatives of the Stockholders.
13.2. ENTIRE AGREEMENT. This Agreement (including the Schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Companies, Newco and Quanta and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including, without limitation,
that certain letter of intent dated June 26, 1998 by and among Quanta and UCCO,
as amended or supplemented. This Agreement may be modified or amended only by a
written instrument executed by the Stockholders, the Companies, Newco and
Quanta, acting through their respective officers, duly authorized by their
respective Boards of Directors.
13.3. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.4. BROKERS AND AGENTS.
(a) Except for the Stockholders' engagement of Upton Financial
Group, Inc. ("Broker"), whose fees and expenses are liabilities and
obligations of the Stockholders, each party hereto represents and
warrants that it employed no broker or agent in connection with the
transactions contemplated by this Agreement. Except as specifically
provided in Section 73, each party agrees to indemnify each other party
against all loss, cost, damages or expense arising out of claims for fees
or commissions of brokers employed or alleged to have been employed by
such indemnifying party.
(b) Broker is acting as in intermediary only. Broker has not
provided legal or accounting advice to any party, since Broker is neither
an attorney or an accountant. Quanta and Newco are entering into this
Agreement and shall satisfy themselves as to the viability of the
business of the Companies on the basis of (i) their independent
assessment of each such business and the assets of the Companies, (ii)
the information provided by the Companies, and (iii) their physical
inspection of the assets of the Companies. Quanta and Newco acknowledge
that Broker shall not verify the
30
<PAGE>
accuracy of the Stockholders' representations and warranties. Quanta and
Newco specifically understand and acknowledge that marketing flyers,
brochures and packages concerning a business contain opinions,
speculations and projections as to the potential of the Companies and
other matters. Quanta and Newco acknowledge that they are not entering
into this Agreement on the basis of any representations, warranties or
guarantees of Broker. If any representations and warranties of either
Quanta, Newco or the Stockholders are untrue, Quanta, Newco, and/or the
Stockholders shall look solely to each other for relief and shall release
and hold Broker harmless from any claims arising out of any such
misrepresentation. The Merger has been structured as such to meet the
needs of the parties hereto and not as a result of the recommendation of
Broker.
13.5. NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, as follows:
(a) If to Quanta, Newco or the Surviving Corporation, addressed to
them at:
Quanta Services, Inc.
1360 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
Attn: President and General Counsel
(b) If to any Stockholder, respectively addressed as follows:
Lynn E. Barr
19495 Franquelin Place
Sonoma, California 95476
or such other address as any party hereto shall specify pursuant to this Section
13.5 from time to time.
13.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in ARTICLE V and ARTICLE VI shall survive the Closing for a
period of two years from the Closing Date (the "Expiration Date"), except that
the representations and warranties set forth in Section 5.18 hereof shall
survive until such time as the limitations period has run for all tax periods
ended prior to the Closing Date, which shall be deemed to be the Expiration Date
for Section 5.18.
13.7. EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
13.8. REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and unenforceable,
but so as to most nearly retain the intent of the parties, and if such
modification is not
31
<PAGE>
possible, such provision shall be severed from this Agreement, and in either
case, the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
13.9. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California (except for its principles governing
conflicts of laws).
13.10. DISPUTE RESOLUTION.
(a) Except with respect to injunctive relief as provided in Section
9.2 and Section 10.2 (which relief may be sought from any court or
administrative agency with jurisdiction with respect thereto), any
unresolved dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in accordance
with the commercial rules of the American Arbitration Association then in
effect. The arbitration shall be conducted by a retired judge employed by
the San Francisco Regional Office of the Judicial Arbitration and
Mediation Services, Inc. ("JAMS"). The arbitration shall be held in JAMS'
San Francisco office.
(b) The parties shall obtain from JAMS a list of the retired judges
available to conduct the arbitration. The parties shall use their
reasonable efforts to agree upon a judge to conduct the arbitration. If
the parties cannot agree upon a judge to conduct the arbitration within
10 days after receipt of the list of available judges, the parties shall
ask JAMS to provide the parties a list of three available judges (the
"Judge List"). Within five days after receipt of the Judge List, each
party shall strike one of the names of the available judges from the
Judge List and return a copy of such list to JAMS and the other party. If
two different judges are stricken from the Judge List, the remaining
judge shall conduct the arbitration. If only one judge is stricken from
the Judge List, JAMS shall select a judge from the remaining two judges
on the Judge List to conduct the arbitration.
(c) The arbitrator shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrator shall have the authority to order payment
of damages, reimbursement of costs, including those incurred to enforce
this Agreement, and interest thereon in the event the arbitrators
determine that a material breach of this Agreement has occurred. A
decision by the arbitrator shall be final and binding. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
QUANTA SERVICES, INC.
By:
_____________________________________
Its:
_____________________________________
UNDERGROUND ACQUISITION, INC.
By:
_____________________________________
Its:
_____________________________________
UNDERGROUND CONSTRUCTION CO., INC.
By:
_____________________________________
Its:
_____________________________________
FIVE POINTS CONSTRUCTION COMPANY
By:
_____________________________________
Its:
_____________________________________
JAMES G. SILER, TRUSTEE OF THE JAMES G. SILER
REVOCABLE TRUST, DATED AUGUST 11, 1994
_________________________________________
James G. Siler, Trustee
<PAGE>
LYNN E. BARR AND LINDA D. BARR, TRUSTEES
UNDER THE LYNN E. BARR AND LINDA D. BARR
TRUST DATED OCTOBER 12, 1993
_________________________________________
Lynn E. Barr, Trustee
_________________________________________
Thomas K. McManus, Jr., Individually
_________________________________________
Harry T. Robinson, Individually
_________________________________________
James H. Curry, Individually
ANN-MARIE AND LEE A. TALBOT, TRUSTEES UNDER THE
ANN-MARIE TALBOT AND LEE A. TALBOT REVOCABLE
LIVING TRUST DATED NOVEMBER 23, 1994
_________________________________________
Ann-Marie Talbot, Trustee
_________________________________________
Patricia C. Darnell, Individually
_________________________________________
Philip L. Smith, Individually
<PAGE>
_________________________________________
Richard R. Shone, Individually
_________________________________________
George R. Bradshaw, Individually
_________________________________________
Errol C. Bisutti, Individually
_________________________________________
Timothy H. Richards, Individually
<PAGE>
EXHIBIT 10.5
==========================================================================
$125,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF
AUGUST 3, 1998
AMONG
QUANTA SERVICES, INC., AS BORROWER
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION,
NATIONAL CITY BANK AND THE OTHER FINANCIAL
INSTITUTIONS PARTIES HERETO, AS LENDERS
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND
NATIONAL CITY BANK, AS CO-AGENT
==========================================================================
<PAGE>
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS; INTERPRETATION............................................................. 1
Section 1.1 Definitions.................................................................. 1
Section 1.2 Interpretation............................................................... 13
SECTION 2. THE CREDIT FACILITY..................................................................... 13
Section 2.1 Loans........................................................................ 13
Section 2.2 Letters of Credit............................................................ 14
Section 2.3 Types of Loans and Minimum Borrowing Amounts................................. 17
Section 2.4 Manner of Borrowing.......................................................... 17
Section 2.5 Interest Periods............................................................. 19
Section 2.6 Interest Payments............................................................ 20
Section 2.7 Default Rates................................................................ 20
Section 2.8 Maturity of Loans............................................................ 22
Section 2.9 Optional Prepayments......................................................... 22
Section 2.10 Mandatory Prepayments of Loans............................................... 22
Section 2.11 The Notes.................................................................... 22
Section 2.12 Breakage Fees................................................................ 23
Section 2.13 Commitment Terminations...................................................... 24
SECTION 3. FEES AND PAYMENTS....................................................................... 24
Section 3.1 Fees......................................................................... 24
Section 3.2 Place and Application of Payments............................................ 25
Section 3.3 Withholding Taxes............................................................ 25
SECTION 4. CONDITIONS PRECEDENT.................................................................... 28
Section 4.1 Conditions Precedent to Initial Borrowing.................................... 28
Section 4.2 Conditions Precedent to all Borrowings....................................... 29
SECTION 5. REPRESENTATIONS AND WARRANTIES.......................................................... 31
Section 5.1 Organization................................................................. 31
Section 5.2 Power and Authority; Validity................................................ 31
Section 5.3 No Violation................................................................. 31
Section 5.4 Litigation................................................................... 32
Section 5.5 Use of Proceeds; Margin Regulations.......................................... 32
Section 5.6 Investment Company Act....................................................... 32
Section 5.7 Public Utility Holding Company Act........................................... 32
Section 5.8 True and Complete Disclosure................................................. 32
Section 5.9 Financial Statements......................................................... 33
Section 5.10 No Material Adverse Change................................................... 33
Section 5.11 Labor Controversies.......................................................... 33
Section 5.12 Taxes........................................................................ 33
Section 5.13 ERISA........................................................................ 33
Section 5.14 Consents..................................................................... 33
Section 5.15 Capitalization............................................................... 34
Section 5.16 Ownership of Property........................................................ 34
Section 5.17 Compliance with Statutes..................................................... 34
</TABLE>
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Section 5.18 Environmental Matters........................................................ 34
Section 5.19 Year 2000 Compliance......................................................... 35
Section 5.20 Existing Indebtedness and Liens.............................................. 35
SECTION 6. COVENANTS............................................................................... 36
Section 6.1 Existence.................................................................... 36
Section 6.2 Maintenance.................................................................. 36
Section 6.3 Taxes........................................................................ 36
Section 6.4 ERISA........................................................................ 36
Section 6.5 Insurance.................................................................... 37
Section 6.6 Financial Reports and Other Information...................................... 37
Section 6.7 Lenders' Inspection Rights................................................... 39
Section 6.8 Conduct of Business.......................................................... 39
Section 6.9 New Subsidiaries............................................................. 39
Section 6.10 Dividends and Negative Pledges............................................... 39
Section 6.11 Restrictions on Fundamental Changes.......................................... 40
Section 6.12 Environmental Laws........................................................... 41
Section 6.13 Liens........................................................................ 41
Section 6.14 Indebtedness................................................................. 42
Section 6.15 Loans, Advances and Investments.............................................. 43
Section 6.16 Transfer of Assets........................................................... 44
Section 6.17 Transactions with Affiliates................................................. 44
Section 6.18 Compliance with Laws......................................................... 44
Section 6.19 Capital Expenditures......................................................... 44
Section 6.20 Minimum Consolidated Net Worth............................................... 44
Section 6.21 Fixed Charge Coverage Ratio.................................................. 45
Section 6.22 Funded Debt to EBITDA Ratio.................................................. 45
Section 6.23 Senior Debt to EBITDA........................................................ 45
Section 6.24 Tangible Assets to Senior Debt Ratio......................................... 45
SECTION 7. EVENTS OF DEFAULT AND REMEDIES.......................................................... 45
Section 7.1 Events of Default............................................................ 45
Section 7.2 Non-Bankruptcy Defaults...................................................... 47
Section 7.3 Bankruptcy Defaults.......................................................... 47
Section 7.4 Collateral for Undrawn Letters of Credit..................................... 48
Section 7.5 Notice of Default............................................................ 48
SECTION 8. CHANGE IN CIRCUMSTANCES................................................................. 49
Section 8.1 Change of Law................................................................ 49
Section 8.2 Unavailability of Deposits or Inability to Ascertain LIBOR Rate.............. 49
Section 8.3 Increased Cost and Reduced Return............................................ 49
Section 8.4 Lending Offices.............................................................. 51
Section 8.5 Discretion of Lender as to Manner of Funding................................. 51
Section 8.6 Substitution of Lender....................................................... 51
SECTION 9. THE AGENT............................................................................... 51
</TABLE>
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Section 9.1. Appointment and Authorization of Agent and Co-Agent.......................... 51
Section 9.2. Rights and Powers............................................................ 52
Section 9.3. Action by Agent and Co-Agent................................................. 52
Section 9.4. Consultation with Experts.................................................... 52
Section 9.5. Indemnification Provisions; Credit Decision.................................. 52
Section 9.6. Indemnity.................................................................... 53
Section 9.7. Resignation of Agent and Successor Agent..................................... 53
Section 9.7. Co-Agent..................................................................... 54
SECTION 10. MISCELLANEOUS........................................................................... 54
Section 10.1 No Waiver of Rights.......................................................... 54
Section 10.2 Non-Business Day............................................................. 54
Section 10.3 Documentary Taxes............................................................ 54
Section 10.4 Survival of Representations.................................................. 55
Section 10.5 Survival of Indemnities...................................................... 55
Section 10.6 Setoff....................................................................... 55
Section 10.7 Notices...................................................................... 56
Section 10.8 Counterparts................................................................. 56
Section 10.9 Successors and Assigns....................................................... 56
Section 10.10 Sales and Transfers of Borrowings and Notes; Participations in Borrowings and
Notes........................................................................ 57
Section 10.11 Amendments................................................................... 59
Section 10.12 Headings..................................................................... 59
Section 10.13 Legal Fees, Other Costs and Indemnification.................................. 60
Section 10.14 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.............. 60
Section 10.15 Confidentiality.............................................................. 62
Section 10.16 Severability................................................................. 63
Section 10.17 Change in Accounting Principles or Tax Laws.................................. 63
Section 10.18 Loans Under Prior Credit Agreement........................................... 63
Section 10.19 Effectiveness................................................................ 63
Section 10.20 Notice....................................................................... 63
</TABLE>
EXHIBITS
Exhibit 2.2A Form of Borrowing Request
Exhibit 2.2B Form of Application
Exhibit 2.11 Form of Note
Exhibit 4.1A Form of Subsidiary Guaranty
Exhibit 4.1B Form of Stock Pledge Agreement
Exhibit 4.1C Form of Financial Condition Certificate
Exhibit 6.6 Form of Compliance Certificate
Exhibit 10.10 Form of Assignment Agreement
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<PAGE>
SCHEDULES
Schedule 5.1 List of Subsidiaries
Schedule 5.4 List of Litigation
Schedule 5.12 List of Outstanding Tax Issues
Schedule 5.20 List of Existing Liens and Indebtedness
Schedule 6.13 List of Permitted Liens and Indebtedness
iv
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 3, 1998, between
Quanta Services, Inc., a Delaware corporation (the "Borrower"), Bank One, Texas,
National Association ("Bank One"), National City Bank and the other lenders from
time to time parties hereto (each a "Lender" and collectively, the "Lenders"),
Bank One as administrative agent for the Lenders (in such capacity, the "Agent")
and National City Bank as co-agent for the Lenders (in such capacity, the
"Co-Agent").
WITNESSETH:
WHEREAS, the Borrower, certain of the Lenders and the Agent have previously
entered into that certain Credit Agreement dated as of April 9, 1998 (the "Prior
Credit Agreement"); and
WHEREAS, the parties to the Prior Credit Agreement desire to amend and
restate such agreement in its entirety as provided herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION.
Section 1.1 Definitions. Unless otherwise defined herein, the following
terms shall have the following meanings:
"Acquisition" means a direct or indirect purchase by the Borrower or any of
its Subsidiaries after the Effective Date hereof for cash, stock or other
securities or other property, whether in one or more related transactions, of
all or substantially all of the assets or voting securities or other equity
interests of a Person or a business unit, division or group of a Person.
"Adjusted LIBOR Rate" means, for any Borrowing of LIBOR Loans, a rate per
annum determined in accordance with the following formula:
Adjusted LIBOR Rate = LIBOR Rate
-----------------------
1.00 - Eurodollar Reserve Percentage
"Affiliate" means, for any Person, (i) any other Person that directly or
indirectly through one or more intermediaries controls, or is under common
control with, or is controlled by, such Person, and (ii) any other Person owning
beneficially or controlling ten percent (10%) or more of the equity interests in
such Person; provided that any investor in connection with any Subordinated Debt
Investment shall not be considered an Affiliate hereunder. As used in this
definition, "control" means the power, directly or indirectly, to direct or
cause the direction of management or policies of a Person (through ownership of
voting securities or other equity interests, by contract or otherwise).
<PAGE>
"Agent" means Bank One acting in its capacity as administrative agent for
the Lenders, and any successor agent appointed hereunder pursuant to Section
9.7.
"Agent Loans" means the loans made by the Agent, in its sole discretion,
described in Section 2.1(b).
"Agent Swing Line" means the uncommitted credit facility in an amount of
$5,000,000 for making Agent Loans described in Section 2.1(b).
"Agreement" means this Credit Agreement, as amended, restated or
supplemented from time to time.
"Applicable Margin" means for Base Rate Loans or LIBOR Loans, as
applicable, for any day at such times as the relevant Funded Debt to EBITDA
Ratio is in one of the following ranges, the percentage per annum set forth
opposite such Funded Debt to EBITDA Ratio for such Loans as follows:
Funded Debt to
EBITDA Ratio LIBOR Loans Base Rate Loans
---------------- ------------ ---------------
Less than or equal to 1.5 to 1.0 0.75% 0.00%
Greater than 1.5 to 1.0 but less 1.00% 0.00%
than or equal to 1.75 to 1.0
Greater than 1.75 to 1.0 but less 1.25% 0.00%
than or equal to 2.25 to 1.0
Greater than 2.25 to 1.0 but less 1.50% 0.00%
than or equal to 2.75 to 1.0
Greater than 2.75 to 1.0 1.75% 0.25%
For the period from the Effective Date through the earlier of the date the
Borrower is to provide the Agent with the financial statements for the fiscal
quarter ended June 30, 1998, as required by Section 6.6(a)(i) or the date such
financial statements are provided to the Agent, the Applicable Margin for LIBOR
Loans shall be 0.75% and the Applicable Margin for Base Rate Loans shall be 0%,
and thereafter, the Applicable Margin shall be set according to the above grid
upon receipt by the Agent of the applicable financial statements and Compliance
Certificate as required by Section 6.6(a)(i) or (ii) and Section 6.6(b) from the
Borrower to be effective as of the date one (1) Business Day after the earlier
of the date such financial statements are required to be provided or the date
such financial
2
<PAGE>
statements are provided to the Agent. Upon the closing of Subordinated Debt
Investment(s) with proceeds aggregating at least $30,000,000, the percentages in
the LIBOR Loans column above shall each be reduced by 0.125%.
"Application" means an application for a Letter of Credit as defined in
Section 2.2(b).
"Arranger" means Bank One Capital Markets.
"Assignment Agreement" means an agreement in substantially the form of
Exhibit 10.10 whereby a Lender conveys part or all of its Commitments, Loans and
participations in Letters of Credit to another Person that thereupon becomes a
Lender, or that increases its Commitments, outstanding Loans and outstanding
participations in Letters of Credit pursuant to Section 10.10.
"Base Rate" means, for any day, the fluctuating commercial loan rate
announced by the Agent from time to time as its base rate for Dollar loans in
the United States of America in effect on such day (which base rate may not be
the lowest rate charged by the Agent on loans to any of its customers), with any
change in the Base Rate resulting from a change in such announced rate to be
effective on the date of the relevant change.
"Base Rate Loan" means (i) a Revolving Loan bearing interest prior to
maturity at the Base Rate plus the Applicable Margin, or (ii) an Agent Loan
bearing interest prior to maturity at the Base Rate minus 0.625%, as applicable.
"Borrower" means Quanta Services, Inc., a Delaware corporation.
"Borrowing" means any extension of credit made by the Lenders or the Agent,
as the case may be, by way of Loans or Letters of Credit, including any
Borrowings advanced, continued or converted. A Borrowing is "advanced" on the
day the Lenders or the Agent, as the case may be, advances funds comprising such
Borrowing to the Borrower or a Letter of Credit is issued, is "continued" (in
the case of LIBOR Loans) on the date a new Interest Period commences for such
Borrowing and is "converted" when such Borrowing is changed from one type of
Loan to the other, all as requested by the Borrower pursuant to Section 2.4(a).
"Borrowing Request" means a request for a Borrowing as defined in Section
2.2(b).
"Business Day" means any day other than a Saturday or Sunday on which banks
are not authorized or required to close in Houston, Texas, and, if the
applicable Business Day relates to the advance or continuation of, conversion
into or payment on a LIBOR Loan, on which banks are dealing in Dollar deposits
in the interbank eurocurrency market in London, England.
"Capital Expenditures" means, for any period, the sum, without duplication,
of all expenditures of the Borrower and its Subsidiaries for fixed or capital
assets made during such period which, in accordance with GAAP, are required to
be classified as capital expenditures, in each case
3
<PAGE>
excluding all such expenditures incurred by any entity or business acquired in
an Acquisition prior to the date of such Acquisition.
"Capitalized Lease Obligations" means, for any Person, the amount of such
Person's liabilities under all leases of real or personal property (or any
interest therein) which is required to be capitalized on the balance sheet of
such Person as determined in accordance with GAAP.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than twelve (12) months
from the date of acquisition; (ii) U.S. Dollar denominated time deposits and
certificates of deposit maturing within one (1) year from the date of
acquisition thereof with any Lender or any other financial institution whose
short-term senior unsecured debt rating is at least A-1 from S&P or P-1 from
Moody's; (iii) LIBOR denominated time deposits and certificates of deposit
maturing within six (6) months from the date of acquisition thereof with any
Lender or any other financial institution whose short-term senior unsecured debt
rating is at least A-1 from S&P or P-1 from Moody's; (iv) commercial paper or
Eurocommercial paper with a rating of at least A-1 from S&P or P-1 from Moody's,
with maturities of not more than twelve (12) months from the date of
acquisition; (v) repurchase obligations entered into with any Lender or any
other financial institution whose short-term senior unsecured debt rating is at
least A-1 from S&P or P-1 from Moody's, which are secured by a fully perfected
security interest in any obligation of the type described in (i) above and has a
market value of the time such repurchase is entered into of not less than 100%
of the repurchase obligation of such Lender or such other Person thereunder;
(vi) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within twelve (12) months from the date of
acquisition thereof or providing for the resetting of the interest rate
applicable thereto not less often than annually and, at the time of acquisition,
having one of the two highest ratings obtainable from either S&P or Moody's; and
(vii) money market funds which have at least $1,000,000,000 in assets and which
invest primarily in securities of the types described in clauses (i) through
(vi) above.
"Co-Agent" means National City Bank acting in its capacity as co-agent for
the Lenders, and any successor co-agent appointed hereunder pursuant to Section
9.7.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property and assets of the Borrower and its
Subsidiaries in which the Agent is granted a Lien for the benefit of the
Lenders.
"Collateral Account" means the cash collateral account for outstanding
undrawn Letters of Credit as defined in Section 7.4(b).
"Commitment" means, relative to any Lender, such Lender's obligation to
make Revolving Loans and participate in Letters of Credit issued pursuant to
Sections 2.1 and 2.2 in the percentage
4
<PAGE>
set forth opposite its signature hereto or pursuant to Section 10.10, as such
commitment may be reduced from time to time pursuant to this Agreement, provided
that the obligation of the Agent to make Revolving Loans and participate in
Letters of Credit shall be limited to $100,000,000 (subject to any reduction
thereof pursuant to Section 10.10) minus the outstanding principal amount of the
Agent Loans from time to time outstanding.
"Commitment Amount" means an amount equal to $125,000,000 minus the
outstanding amount of Agent Loans, as such amount may be reduced from time to
time pursuant to the terms of this Agreement.
"Commitment Termination Date" means the earliest of (i) the Maturity Date;
(ii) the date on which the Commitments are terminated in full or reduced to zero
pursuant to Section 2.13; or (iii) the occurrence of any Event of Default
described in Section 7.1(f) or (g) with respect to the Borrower or the
occurrence and continuance of any other Event of Default and either (x) the
declaration of the Loans to be due and payable pursuant to Section 7.2, or (y)
in the absence of such declaration, the giving of written notice by the Agent,
acting at the direction of the Majority Lenders, to the Borrower pursuant to
Section 7.2 that the Commitments have been terminated.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit 6.6.
"Consolidated Interest Expense" means, for any period, total interest
expense of the Borrower and its Subsidiaries on a consolidated basis for such
period in connection with Indebtedness, determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or loss),
after provision for taxes, of the Borrower and its Subsidiaries on a
consolidated basis for such period, determined in accordance with GAAP.
"Consolidated Net Worth" means, as of any date of determination, the
Borrower's consolidated stockholders equity determined in accordance with GAAP.
"Credit Documents" means this Agreement, the Notes, the Subsidiary
Guaranties, the Stock Pledge Agreements, the Applications, the Borrowing
Requests and any other documents or instruments executed by the Borrower or any
of the Guarantors in connection with this Agreement.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Dollar" and "U.S. Dollar" and the sign "$" means lawful money of the
United States of America.
"EBITDA" means, for any period, on a trailing four fiscal quarter basis
(using the historical financial results of the Founding Companies, to the extent
necessary, for any period prior to the
5
<PAGE>
acquisition of the Founding Companies by the Borrower on a pro forma basis,
consistent with SEC regulations), the sum of (i) Consolidated Net Income plus
each of the following to the extent actually deducted in determining
Consolidated Net Income (a) Consolidated Interest Expense, and (b) provisions
for taxes based on income or revenues, plus (ii) the amount of all depreciation,
amortization expense and other non-cash charges deducted in determining
Consolidated Net Income, all calculated on a consolidated basis for the Borrower
and its Subsidiaries and as determined in accordance with GAAP. Upon the
consummation of any Acquisition, EBITDA shall be adjusted to include the
historical financial results of the acquired business (on a trailing four fiscal
quarter pro forma basis consistent with SEC regulations).
"Effective Date" means the date this Agreement becomes effective as defined
in Section 10.19.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of non-
compliance or violations, formal investigations or proceedings relating to any
Environmental Law ("Claims") or any permit issued under any Environmental Law,
including, without limitation, (i) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (ii)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
a release or threatened release of Hazardous Materials.
"Environmental Law" means any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law now or hereafter in
effect, including any judicial or administrative order, consent, decree or
judgment relating to (i) the environment, (ii) health or safety in relation to
the environment or (iii) Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Reserve Percentage" means, with respect to each Interest Period
for a LIBOR Loan, a percentage (expressed as a decimal) equal to the daily
average during such Interest Period of the percentages in effect on each day of
such Interest Period, if any, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor thereto), for determining the maximum
reserve requirements (including, without limitation, any supplemental, marginal
and emergency reserves) applicable to "Eurocurrency Liabilities" pursuant to
Regulation D of the Board of Governors of the Federal Reserve System or any
other then applicable regulation of the Board of Governors which prescribes
reserve requirements applicable to "Eurocurrency Liabilities" as presently
defined in Regulation D.
"Event of Default" means any of the events or circumstances specified in
Section 7.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16th of 1%) equal to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the next Business Day,
provided that (A) if such day is not a Business Day, the rate on such
transactions on the immediately preceding Business Day as so published on the
next Business Day shall apply, and (B) if no such rate is
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published on such next Business Day, the rate for such day shall be the average
of the offered rates quoted to the Agent by two (2) federal funds brokers of
recognized standing on such day for such transactions as selected by the Agent.
"Fee Letter" means that certain letter agreement dated July 30, 1998, by
and between the Agent, the Arranger and the Borrower.
"Fixed Charge Coverage Ratio" means, for any period, on a trailing four
fiscal quarter basis (using the historical financial results of the Founding
Companies, to the extent necessary, for any period prior to the acquisition of
the Founding Companies by the Borrower on a pro forma basis, consistent with SEC
regulations), the ratio of (i) the sum of, without duplication, (a) EBITDA,
minus (b) cash taxes, minus (c) all cash dividends, distributions or payments
made in respect of the capital stock of the Borrower to the extent permitted
hereunder; to (ii) the sum of, without duplication, (a) the portion of Funded
Debt due and payable within one (1) year of the date of determination, plus (b)
Consolidated Interest Expense for the four fiscal quarters then ended, all
calculated on a consolidated basis for the Borrower and its Subsidiaries and as
determined in accordance with GAAP. Upon the consummation of any Acquisition,
the Fixed Charge Coverage Ratio shall be determined including the historical
financial results of the acquired business (on a trailing four fiscal quarter
pro forma basis, consistent with SEC regulations).
"Founding Companies" means PAR Electrical Contractors, Inc., a Missouri
corporation, Union Power Construction Company, a Colorado corporation, TRANS
TECH Electric, Inc., an Indiana corporation, and Potelco, Inc., a Washington
corporation.
"Funded Debt" means, as of any date of determination, the sum, without
duplication, of the following for the Borrower and its Subsidiaries: (i)
Indebtedness for borrowed money, all obligations evidenced by bonds, debentures,
notes or similar instruments, and purchase money obligations which in accordance
with GAAP would be shown on the consolidated balance sheet of the Borrower as a
liability, (ii) all reimbursement obligations relative to the face amount of all
drawn letters of credit issued for the account of the Borrower or any of its
Subsidiaries, and (iii) all Capitalized Lease Obligations.
"Funded Debt to EBITDA Ratio" means, for any period, the ratio of (i)
Funded Debt, to (ii) EBITDA.
"GAAP" means generally accepted accounting principles from time to time in
effect as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the statements and pronouncements of the Financial Accounting Standards Board or
in such other statements, opinions and pronouncements by such other entity as
may be approved by a significant segment of the U.S. accounting profession.
"Guarantor" means each Subsidiary of the Borrower listed on Schedule 5.1
and any other Subsidiary of the Borrower required to become a Guarantor pursuant
to Section 6.9.
"Guaranty" by any Person means all contractual obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection or similar transactions
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in the ordinary course of business) of such Person guarantying any Indebtedness,
dividend or other obligation (including, without limitation, obligations in
connection with sales of any property) of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation, or
to purchase any property or assets constituting security therefor, primarily for
the purpose of assuring the owner of such Indebtedness or obligations of the
ability of the primary obligor to make payment of the Indebtedness or
obligation; or (ii) to advance or supply funds (x) for the purchase or payment
of such Indebtedness or obligation, or (y) to maintain working capital or other
balance sheet condition, or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, in each case primarily
for the purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of the Indebtedness or
obligation; or (iii) to lease property or to purchase securities or other
property or services of the primary obligor primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation; or (iv)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purpose of all computations
made under this Agreement, the amount of a Guaranty in respect of any obligation
shall be deemed to be equal to the amount that would apply if such obligation
were the direct obligation of such Person rather than the primary obligor or, if
less, the maximum aggregate potential liability of such Person under the terms
of the Guaranty.
"Hazardous Material" shall have the meaning assigned to the term Hazardous
Substance in the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Acts of
1986, and shall include any substance defined as "hazardous" or "toxic" or words
used in place thereof under any Environmental Law applicable to the Borrower or
any of its Subsidiaries.
"Highest Lawful Rate" means the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Loans or the Reimbursement Obligations, or under laws
applicable to the Agent or any of the Lenders, which are presently in effect or,
to the extent allowed by applicable law, under such laws which may hereafter be
in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow. Determination of the rate of interest for the
purpose of determining whether the Loans or the Reimbursement Obligations are
usurious under all applicable laws shall be made by amortizing, prorating,
allocating, and spreading, in equal parts during the period of the full stated
term of the Loans, all interest at any time contracted for, taken, reserved,
charged or received from the Borrower in connection with the Loans or the
Reimbursement Obligations, as applicable.
"Indebtedness" means, for any Person, the following obligations of such
Person, without duplication: (i) obligations of such Person for borrowed money;
(ii) obligations of such Person representing the deferred purchase price of
property or services other than accounts payable arising in the ordinary course
of business and other than amounts which are being contested in good faith and
for which reserves in conformity with GAAP have been provided; (iii) obligations
of such Person evidenced by bonds, notes, bankers acceptances, debentures or
other similar instruments of such Person or reimbursement obligations or other
obligations with respect to letters of credit issued for such Person's account
or letters of credit issued pursuant to such Person's application therefor;
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(iv) obligations of other Persons, whether or not assumed, secured by Liens upon
property or payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person, but only to the extent of such
property's fair market value; (v) Capitalized Lease Obligations of such Person;
(vi) obligations under Interest Rate Protection Agreements and under hedge,
swap, exchange, forward, future, collar or cap arrangements, fixed price
agreements and all other agreements or arrangements designed to protect against
fluctuations in commodity prices and currency exchange rates; and (vii)
obligations of such Person pursuant to a Guaranty of any of the foregoing of
another Person. For purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture to which such
Person is a party, to the extent the holder of such Indebtedness has recourse to
such Person.
"Indemnified Taxes" shall have the meaning ascribed to such term in Section
3.3.
"Initial Borrowing Date" means the date on which all conditions precedent
set forth herein to the initial Borrowings are satisfied or waived in writing
and the initial Borrowing hereunder occurs.
"Interest Payment Date" means (i) for a Base Rate Loan, the last Business
Day of each calendar quarter such Loan is outstanding commencing September 30,
1998, and (ii) for a LIBOR Loan, the last Business Day of each Interest Period
for such Loan and, during any Interest Period of six (6) months, the next
Business Day occurring three (3) months after the commencement of such Interest
Period.
"Interest Period" means the period commencing on the date that a Borrowing
of LIBOR Loans is advanced, continued or created by conversion and, subject to
Section 2.5, ending on the date one (1), two (2), three (3) or six (6) months
thereafter as selected by the Borrower pursuant to the terms of this Agreement.
"Interest Rate Protection Agreement" means any hedge, swap, exchange,
forward, future collar or cap arrangements, fixed price agreements or other
agreements or arrangements designed to protect against fluctuations in interest
rates.
"Investments" shall have the meaning ascribed to such term in Section 6.15.
"L/C Commitments" means, relative to any Lender, such Lender's obligation
to participate in Letters of Credit pursuant to Section 2.2 in the percentage
set forth opposite its signature hereto or pursuant to Section 10.10, as such
commitments may be reduced from time to time pursuant to the terms of this
Agreement; provided that the obligation of the Agent to make Revolving Loans and
participate in Letters of Credit shall be limited to $100,000,000 (subject to
any reduction thereof pursuant to Section 10.10) minus the outstanding principal
amount of the Agent Loans from time to time outstanding.
"L/C Commitment Amount" means $10,000,000, as such amount may be reduced
from time to time pursuant to the terms of this Agreement.
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"L/C Documents" means this Agreement, the Letters of Credit and any
Borrowing Requests and Applications with respect thereto and any draft or other
document presented in connection with a drawing thereunder.
"L/C Obligations" means the undrawn face amounts of all outstanding Letters
of Credit and all unpaid Reimbursement Obligations with respect to Letters of
Credit.
"Lenders" is defined in the preamble.
"Lending Office" means the branch, office or affiliate of a Lender
specified on the appropriate signature page hereof or designated pursuant to
Sections 8.4 or 10.10.
"Letter of Credit" means any of the letters of credit issued by the Agent
on behalf of the Lenders for the account of the Borrower pursuant to Section
2.2.
"LIBOR Loan" means a Revolving Loan bearing interest prior to maturity at
the Adjusted LIBOR Rate plus the Applicable Margin.
"LIBOR Rate" means a rate of interest per annum (rounded upwards, if
necessary, to the nearest whole multiple of 1/16 of 1%), equal to the offered
rate for U.S. Dollar deposits of not less than $1,000,000 for a period of time
equal to the applicable Interest Period for such Loan as of 11:00 a.m. City of
London, England time two (2) London Business Days prior to the first date of
each such Interest Period as shown on the display designated as "British Bankers
Assoc. Interest Settlement Rates" on the Telerate System ("Telerate"), Page 3750
or Page 3740 or such other page or pages as may replace such pages on Telerate
for the purpose of displaying such rate; provided, however, that if such rate is
not available on Telerate then such offered rate shall be otherwise
independently determined by the Agent from an alternate, substantially similar
independent source available to the Agent or shall be calculated by the Agent by
a substantially similar methodology as that theretofore used to determine such
offered rate in Telerate.
"Lien" means any interest in any property or asset in favor of a Person
other than the owner of the property or asset and securing an obligation owed to
such Person, whether such interest is based on the common law, statute or
contract, including, but not limited to, the security interest lien arising from
a mortgage, encumbrance, pledge, conditional sale, security agreement or trust
receipt, or a lease, consignment or bailment for security purposes.
"Loan" means a Base Rate Loan or a LIBOR Loan, each of which is a "type" of
Loan hereunder, outstanding as a Revolving Loan or an Agent Loan, as applicable.
"London Business Day" means any day other than a Saturday, Sunday or a day
on which banking institutions are generally authorized or obligated by law or
executive order to close in the City of London, England.
"Majority Lenders" means, at any time, the Lenders then holding in the
aggregate at least sixty-six and two-thirds percent (66 2/3%) of the aggregate
of the Commitments plus the outstanding principal amount of the Agent Loans, or
if the Commitments have terminated pursuant to the terms
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hereof, the aggregate Obligations. The percentage set forth opposite each
Lender's name in the line designated "Percentage" on the signature page hereto
reflects the initial voting percentage of each Lender hereunder on the Effective
Date.
"Material Adverse Effect" means an effect that results in a material
adverse change since March 31, 1998 in (i) the business, properties, assets,
financial condition or, prior to the Initial Borrowing Date, prospects of the
Borrower and its Subsidiaries taken as a whole, or (ii) in the ability of the
Borrower or Borrower and the Guarantors, taken as a whole, to perform its
Obligations under the Credit Documents to which they are a party.
"Maturity Date" means August 2, 2003.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Notes" shall mean the revolving promissory notes of the Borrower as
defined in Section 2.11.
"Obligations" means all joint and several obligations of the Borrower and
the Guarantors to pay fees, costs and expenses hereunder, to pay principal or
interest on Loans and Reimbursement Obligations and to pay any other obligations
to the Agent or the Lenders arising under any Credit Document.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Percentage" means, for each Lender, the percentage of the Commitments
represented by such Lender's Commitment; provided that, if the Commitments are
terminated, each Lender's Percentage shall be calculated based on its Commitment
in effect immediately before such termination, subject to any assignments by
such Lender of Obligations pursuant to Section 10.10.
"Permitted Business" means any business described in Section 6.8.
"Permitted Liens" means the Liens described in Section 6.13.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or any agency or political subdivision
thereof.
"Plan" means an employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
is either (i) maintained by the Borrower or any of its Subsidiaries, or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Borrower or any of its Subsidiaries is then making or accruing an obligation
to make contributions or has within the preceding five (5) plan years made or
had an obligation to make contributions.
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"Reimbursement Obligation" means the obligations of the Borrower to
reimburse the Agent, for the benefit of the Lenders, for each drawing under a
Letter of Credit as described in Section 2.2(c).
"Revolving Loans" means the revolving loans by the Lenders described in
Section 2.1(a).
"S&P" means Standard & Poor's Rating Group or any successor thereto.
"SEC" means the Securities and Exchange Commission.
"Senior Debt" means, as of the date of any determination, the outstanding
Indebtedness under the Credit Documents.
"Senior Debt to EBITDA Ratio" means, for any period, the ratio of (i)
Senior Debt, to (ii) EBITDA.
"Stock Pledge Agreements" means each Stock Pledge Agreement of the Borrower
and any of its Subsidiaries in substantially the form of Exhibit 4.1B, as
amended, restated or supplemented from time to time.
"Subsidiary" means, for any Person, any corporation or other entity of
which more than fifty percent (50%) of the outstanding stock or comparable
equity interests having ordinary voting power for the election of the board of
directors of such corporation, any managers of such limited liability company or
similar governing body (irrespective of whether or not, at the time, stock or
other equity interests of any other class or classes of such corporation or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by such Person, as
applicable, or by one or more of its Subsidiaries.
"Subordinated Debt Investment" means any issue of subordinated debt of the
Borrower subordinated in payment to the Obligations, having a maturity after the
Maturity Date, with no scheduled principal payments until after the Maturity
Date, containing covenants no more restrictive than the covenants contained in
this Agreement and containing subordination, standstill and other provisions
reasonably acceptable to the Agent.
"Subsidiary Guaranty" means each Guaranty of each domestic direct or
indirect Subsidiary of the Borrower in substantially the form of Exhibit 4.1A.
"Tangible Assets" means all property which would be considered tangible
under GAAP, all calculated on a consolidated basis for the Borrower and its
Subsidiaries.
"Tangible Assets to Senior Debt" means, for any period, the ratio of (i)
Tangible Assets, to (ii) Senior Debt.
"Taxes" shall have the meaning ascribed to such term in Section 5.12.
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"Unfunded Vested Liabilities" means, for any Plan at any time, the amount,
if any, by which the present value of all vested nonforfeitable accrued benefits
under such Plan exceeds the fair market value of all Plan assets allocable to
such benefits, determined as of the then most recent valuation date for such
Plan, but only to the extent that such excess represents a potential liability
of the Borrower or any of its Subsidiaries to the PBGC or such Plan.
Section 1.2 Interpretation. The foregoing definitions shall be equally
applicable to the singular and plural forms of the terms defined. All
references to times of day in this Agreement shall be references to Houston,
Texas time unless otherwise specifically provided.
SECTION 2. THE CREDIT FACILITY.
Section 2.1 Loans.
(a) Revolving Loans. Subject to the terms and conditions hereof, each
Lender severally and not jointly agrees to make one or more loans (each a
"Revolving Loan") to the Borrower from time to time before the Commitment
Termination Date on a revolving basis in an aggregate amount not to exceed at
any time outstanding an amount equal to its Percentage of the Commitment Amount
(for each Lender, its "Commitment"), subject to any reductions thereof pursuant
to the terms of this Agreement. No Lender shall be permitted or required to
make any Revolving Loan if, after giving effect thereto, (i) the aggregate
principal amount of the Revolving Loans of all Lenders and L/C Obligations
outstanding of the Borrower would thereby exceed the Commitment Amount then in
effect; (ii) the aggregate principal amount of all Revolving Loans of such
Lender and its participating interest in all L/C Obligations would thereby
exceed the Percentage of such Lender of the Commitment Amount then in effect; or
(iii) with respect to the Agent, the aggregate principal amount of all Revolving
Loans, its participating interest in all L/C Obligations and the aggregate
principal amount of all its Agent Loans would thereby exceed its Commitment.
Each Borrowing of Revolving Loans shall be made ratably from the Lenders in
proportion to their respective Percentages (subject to the limitation of the
Commitment of the Agent). Revolving Loans may be repaid, in whole or in part,
and all or any portion of the principal amount thereof reborrowed, before the
Commitment Termination Date, subject to the terms and conditions hereof.
(b) Agent Loans. Subject to the terms and conditions hereof, the Agent
may, in its sole discretion, make one or more loans (each an "Agent Loan") to
the Borrower from time to time before the Commitment Termination Date in an
aggregate amount not to exceed at any time outstanding the amount of the Agent
Swing Line. Agent Loans may be repaid, in whole or in part, at any time. Upon an
Event of Default and at the request of the Agent, (i) the Lenders agree to make
Revolving Loans to the Borrower in an amount equal to the outstanding amount of
the Agent Loans, and the Borrower hereby instructs the Agent in such
circumstance to apply the proceeds of such Revolving Loans to such Agent Loans
such that the Agent Loans are repaid in full; or (ii) in the event any such
Revolving Loans are not made, each Lender severally and not jointly agrees to
purchase from the Agent, and the Agent hereby agrees to sell to each Lender, an
undivided percentage participation interest, up to the extent of its Percentage,
in each Agent Loan, in each case so long as no Default or Event of Default of
which the Agent had actual knowledge was in existence at the time the Agent Loan
was made and such that the principal amount of each Lender's Revolving
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Loans and/or participations in Agent Loans shall be an amount equal to its
Percentage times the principal amount of all Loans.
Section 2.2 Letters of Credit.
(a) Issuance of Letters of Credit. Subject to the terms and conditions
hereof, the Agent agrees to issue, from time to time prior to the Commitment
Termination Date, at the request of the Borrower and on behalf of the Lenders
and in reliance on their obligations under this Section 2.2, one or more letters
of credit (each a "Letter of Credit") for the Borrower's account; provided that
the Agent shall have no obligation to issue a Letter of Credit if, after the
issuance thereof, (i) the outstanding Loans and L/C Obligations would thereby
exceed the Commitment Amount then in effect, (ii) the outstanding L/C
Obligations would thereby exceed the L/C Commitment Amount then in effect, or
(iii) the issuance of such Letter of Credit would violate any legal or
regulatory restriction then applicable to the Agent or any Lender as notified by
such Lender to the Agent before the date of issuance of such Letter of Credit.
(b) Issuance Procedure. To request that the Agent issue a Letter of
Credit, the Borrower shall deliver to the Agent (with a duplicate copy to an
operations employee of the Agent as designated by the Agent from time to time) a
duly executed Borrowing Request in the form of Exhibit 2.2A (each a "Borrowing
Request"), together with a duly executed application for the relevant Letter of
Credit substantially in the form of Exhibit 2.2B (each an "Application"), or
such other computerized issuance or application procedure, instituted from time
to time by the Agent and agreed to by the Borrower, completed to the reasonable
satisfaction of the Agent, and such other documentation and information as the
Agent may reasonably request. In the event of any irreconcilable difference or
inconsistency between this Agreement and an Application, the provisions of this
Agreement shall govern. Upon receipt of a properly completed and executed
Borrowing Request and Application and any other reasonably requested documents
or information at least two (2) Business Days prior to any requested issuance
date, the Agent will process such Borrowing Request and Application in
accordance with its customary procedures and issue the requested Letter of
Credit on the requested issuance date. The Borrower may cancel any requested
issuance of a Letter of Credit prior to the issuance thereof without the
incurrence of any fee, charge or expense. The Agent will notify each Lender of
the amount and expiration date of each Letter of Credit it issues promptly upon
issuance thereof. Each Letter of Credit (except for up to $5,000,000 in
aggregate face amounts of Letters of Credit) shall have an expiration date no
later than one (1) year from the date of issuance thereof, provided that in no
event shall a Letter of Credit have an expiration date later than four (4)
Business Days before the Maturity Date. If the Agent issues any Letters of
Credit with expiration dates that automatically extend unless the Agent gives
notice that the expiration date will not so extend, the Agent will give such
notice of non-renewal before the time necessary to prevent such automatic
extension if before such required notice date (i) the expiration date of such
Letter of Credit if so extended would be later than four (4) Business Days
before the Maturity Date, (ii) the Commitment Termination Date shall have
occurred, (iii) an Event of Default has occurred and is continuing, or (iv) the
Agent is so directed by the Borrower. The Agent agrees to issue amendments to
any Letter of Credit increasing its amount, or extending its expiration date, at
the request of the Borrower subject to the conditions precedent for all Loans of
Section 4.2 and the other terms and conditions of this Section 2.2.
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(c) The Borrower's Reimbursement Obligations.
(i) The Borrower hereby irrevocably and unconditionally agrees to
reimburse the Agent, for the benefit of the Lenders, for each payment or
disbursement made by the Agent to settle its obligations under any draft drawn
under a Letter of Credit (each, a "Reimbursement Obligation") within two (2)
Business Days from when such draft is paid with either funds not borrowed
hereunder or with a Borrowing subject to Section 2.4 and the other terms and
conditions contained in this Agreement. The Reimbursement Obligation shall bear
interest (which the Borrower hereby promises to pay) from and after the date
such draft is paid until (but excluding the date) the Reimbursement Obligation
is paid at the lesser of the Highest Lawful Rate or the Base Rate plus the
Applicable Margin so long as the Reimbursement Obligation shall not be past due,
and thereafter at the default rate per annum as set forth in Section 2.7(c),
whether or not the Maturity Date shall have occurred. If any such payment or
disbursement is reimbursed to the Agent after 2:00 p.m. on the date such payment
or disbursement is made by the Agent, interest shall be paid on the reimbursable
amount for one (1) day. The Agent shall give the Borrower notice of any drawing
on a Letter of Credit within one (1) Business Day after such drawing is paid.
(ii) The Borrower agrees for the benefit of the Agent and each
Lender that, notwithstanding any provision of any Application, the obligations
of the Borrower under this Section 2.2(c) and each applicable Application shall
be absolute, unconditional and irrevocable (subject to Section 2.2(b)) and shall
be performed strictly in accordance with the terms of this Agreement and each
applicable Application under all circumstances whatsoever INCLUDING, BUT NOT
LIMITED TO, ANY DEFENSE BASED UPON THE AGENT'S OR ANY LENDER'S OWN SIMPLE OR
CONTRIBUTORY NEGLIGENCE (other than the defense of payment in accordance with
this Agreement or a defense based on the gross negligence or willful misconduct
of the Agent or any Lender), including, without limitation, the following
circumstances (subject in all cases to the defense of payment in accordance with
this Agreement or a defense based on the gross negligence or willful misconduct
of the Agent or any Lender):
(1) any lack of validity or enforceability of any of
the L/C Documents;
(2) any amendment or waiver of or any consent to
depart from all or any of the provisions of any of the L/C
Documents;
(3) the existence of any claim, setoff, defense or
other right the Borrower or any Subsidiary may have at any
time against a beneficiary of a Letter of Credit (or any
Person for whom a beneficiary may be acting), the Agent, any
Lender or any other Person, whether in connection with this
Agreement, another L/C Document or any unrelated
transaction;
(4) any statement or any other document presented
under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect, provided
that the Agent's determination that documents presented
under the
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Letter of Credit comply with the terms thereof did not
constitute gross negligence or willful misconduct of the
Agent;
(5) payment by the Agent under a Letter of Credit
against presentation to the Agent of a draft or certificate
that does not comply with the terms of the Letter of Credit,
provided that the Agent's determination that documents
presented under the Letter of Credit comply with the terms
thereof did not constitute gross negligence or willful
misconduct of the Agent; or
(6) any other act or omission to act or delay of any
kind by the Agent, any Lender or any other Person or any
other event or circumstance whatsoever that might, but for
the provisions of this Section 2.2(c), constitute a legal or
equitable discharge of the Borrower's obligations hereunder
or under any L/C Document, provided that such act or
omission of the Agent did not constitute gross negligence or
willful misconduct of the Agent or any Lender.
(d) The Participating Interests. Each Lender severally and not jointly
agrees to purchase from the Agent, and the Agent hereby agrees to sell to each
Lender, an undivided percentage participating interest, to the extent of its
Percentage, in each Letter of Credit issued by, and Reimbursement Obligation
owed to, the Agent in connection with a Letter of Credit. Upon any failure by
the Borrower to pay any Reimbursement Obligation in connection with a Letter of
Credit at the time required in Sections 2.2(c) and 2.4(c), or if the Agent is
required at any time to return to the Borrower or to a trustee, receiver,
liquidator, custodian or other Person any portion of any payment by the Borrower
of any Reimbursement Obligation in connection with a Letter of Credit, the Agent
shall promptly give notice of same to each Lender, and the Agent shall have the
right to require each Lender to fund its participation in such Reimbursement
Obligation. Each Lender (except the Agent to the extent it is also a Lender)
shall pay to the Agent an amount equal to each Lender's Percentage of such
unpaid or recaptured Reimbursement Obligation not later than the Business Day it
receives notice from the Agent to such effect, if such notice is received before
2:00 p.m., or not later than the following Business Day if such notice is
received after such time. If a Lender fails to pay timely such amount to the
Agent, it shall also pay to the Agent interest on such amount accrued from the
date payment of such amount was made by the Agent to the date of such payment by
the Lender at a rate per annum equal to the Federal Funds Rate in effect for
each such day, and only after such payment shall such Lender be entitled to
receive its Percentage of each payment received on the relevant Reimbursement
Obligation and of interest paid thereon. If any such Lender fails to pay such
amount to the Agent, any payments made by the Borrower with respect to the
relevant Reimbursement Obligation shall first be applied by the Agent to the
unfunded participation in such Reimbursement Obligation before any other Lenders
receive any payments or proceeds. The Agent will thereafter pay each Lender its
Percentage of each payment received by it relating to that for which such Lender
has funded its Percentage, from the date of funding. THE SEVERAL OBLIGATIONS OF
THE LENDERS TO THE AGENT UNDER THIS SECTION 2.2(D) SHALL BE ABSOLUTE,
IRREVOCABLE AND UNCONDITIONAL UNDER ANY AND ALL CIRCUMSTANCES WHATSOEVER AND
SHALL NOT BE SUBJECT TO ANY SETOFF, COUNTERCLAIM OR DEFENSE TO PAYMENT ANY
LENDER MAY HAVE OR HAVE HAD AGAINST THE BORROWER, THE AGENT, ANY OTHER LENDER OR
ANY OTHER
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PERSON WHATSOEVER INCLUDING, BUT NOT LIMITED TO, ANY DEFENSE BASED ON THE
FAILURE OF THE DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT TO CONFORM TO THE
TERMS OF SUCH LETTER OF CREDIT OR THE LEGALITY, VALIDITY, REGULARITY OR
ENFORCEABILITY OF SUCH LETTER OF CREDIT AND INCLUDING, BUT NOT LIMITED TO, THOSE
RESULTING FROM THE AGENT'S OWN SIMPLE OR CONTRIBUTORY NEGLIGENCE. Without
limiting the generality of the foregoing, such obligations shall not be affected
by any Default or Event of Default or by any subsequent reduction or termination
of any Commitment of a Lender, and each payment by a Lender under Section 2.2
shall be made without any offset, abatement, withholding or reduction
whatsoever.
Section 2.3 Types of Loans and Minimum Borrowing Amounts. Borrowings of
Revolving Loans may be outstanding as either Base Rate Loans or LIBOR Loans, as
selected by the Borrower pursuant to Section 2.4. Borrowings of Agent Loans may
be outstanding only as Base Rate Loans. All Borrowings of LIBOR Loans advanced
on the Initial Borrowing Date shall be advanced as Base Rate Loans unless the
requisite notice for a LIBOR Loan has been given pursuant to Section 2.4(a) and
indemnification has been provided to the Lenders in connection therewith. Each
Borrowing of Base Rate Loans shall be in an amount of not less than $250,000 and
each Borrowing of LIBOR Loans shall be in an amount of not less than $500,000.
Section 2.4 Manner of Borrowing.
(a) Notice to the Agent. Subject to the limitations in Section 2.3,
the Borrower shall give notice to the Agent by no later than 11:00 a.m. at least
two (2) Business Days before the date on which the Borrower requests the Lenders
or the Agent, as applicable, to advance a Borrowing of LIBOR Loans and on the
date the Borrower requests the Lenders or the Agent, as applicable, to advance a
Borrowing of Base Rate Loans pursuant to a duly executed Borrowing Request, and
the Agent shall promptly give the Lenders notice thereof.
(b) Selection of Interest Periods. The Borrower may select multiple
Interest Periods for the Revolving Loans constituting any particular Borrowing,
provided that at no time shall the number of different Interest Periods for
outstanding LIBOR Loans exceed eight (8). The Revolving Loans included in each
Borrowing shall bear interest initially at the type of rate specified in the
Borrowing Request with respect thereto. Thereafter, the Borrower may from time
to time elect to change or continue the type of interest rate borne by each
Borrowing or, subject to Section 2.3's minimum amount requirement for each
outstanding Borrowing, a portion thereof, as follows: (i) if such Borrowing is
of LIBOR Loans, the Borrower may continue part or all of such Borrowing as LIBOR
Loans for an Interest Period specified by the Borrower or convert part or all of
such Borrowing into Base Rate Loans on the last day of the Interest Period
applicable thereto, or the Borrower may earlier convert part or all of such
Borrowing into Base Rate Loans so long as it pays the breakage fees and funding
losses provided in Section 2.12 and all interest accrued on such Borrowing, and
(ii) if such Borrowing is of Base Rate Loans, the Borrower may convert all or
part of such Borrowing into LIBOR Loans for an Interest Period specified by the
Borrower on any Business Day. Notices of the continuation of a Borrowing of
LIBOR Loans for an additional Interest Period or of the conversion of part or
all of a Borrowing of LIBOR Loans into Base Rate Loans or of Base Rate Loans
into LIBOR Loans must be given by no later than 11:00 a.m. at least two (2)
Business Days before the date of the requested continuation or conversion. The
Borrower shall give
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such notices concerning the advance, continuation, or conversion of a Borrowing
by telephone or facsimile (which notice shall be irrevocable once given and, if
by telephone, shall be promptly confirmed in writing) pursuant to a Borrowing
Request which shall specify the date of the requested advance, continuation or
conversion (which shall be a Business Day), the amount of the requested
Borrowing, the type of Loans to comprise such new, continued or converted
Borrowing and, if such Borrowing is to be comprised of LIBOR Loans, the Interest
Period applicable thereto. The Borrower agrees that the Agent and each Lender
may rely on any such telephonic or facsimile notice given by any person it in
good faith believes is an authorized representative of the Borrower without the
necessity of independent investigation and that, if any such notice by telephone
conflicts with any written confirmation, such telephonic notice shall govern if
the Agent or any Lender has acted in reliance thereon.
(c) Borrower's Failure to Notify. If the Borrower fails to give notice
pursuant to Section 2.4(a) or (b) of (i) the continuation or conversion of any
outstanding principal amount of a Borrowing of LIBOR Loans or of (ii) a
Borrowing of Loans to pay outstanding Reimbursement Obligations, as applicable,
and has not notified the Agent by 11:00 a.m. at least two (2) Business Days
before the last day of the Interest Period for such Borrowing of LIBOR Loans or
by 11:00 a.m. on the day such Reimbursement Obligation becomes due that it
intends to repay such Borrowing or such Reimbursement Obligation with funds not
borrowed hereunder, the Borrower shall be deemed to have requested, (x) the
continuation of such Borrowing as a LIBOR Loan with an Interest Period of one
(1) month, or (y) the advance of a new Borrowing of Base Rate Loans on such day
in the amount of the Reimbursement Obligation then due, which Borrowing shall be
deemed to have been funded on such day to pay the Reimbursement Obligation then
due, in each case so long as no Default or Event of Default shall have occurred
and be continuing or would occur as a result of such Borrowing but otherwise
disregarding the conditions to a Borrowing set forth in Section 4.2. Upon the
occurrence and during the continuance of any Event of Default, (i) each LIBOR
Loan will automatically, on the last day of the then existing Interest Period
therefor, convert into a Base Rate Loan and (ii) the obligation of the Lenders
to make, continue or convert Loans into LIBOR Loans shall be suspended.
(d) Funding and Disbursement of Loans. Not later than 1:00 p.m. on the
date of any requested advance of a new Borrowing of Revolving Loans, each
Lender, subject to all other provisions hereof, shall make available its
Revolving Loan comprising its ratable share of such Borrowing in funds
immediately available in Houston, Texas for the benefit of the Agent and
according to the disbursement instructions of the Agent. The Agent shall make
the proceeds of each such Borrowing, and each Agent Loan which the Agent makes,
in its sole discretion, available in immediately available funds to the Borrower
on the date of any requested advance of a new Borrowing by 2:00 p.m. No Lender
shall be responsible to the Borrower for any failure by another Lender to fund
its portion of a Borrowing, and no such failure by a Lender shall relieve any
other Lender from its obligation, if any, to fund its portion of a Borrowing.
(e) Agent Reliance on Lender Funding. Unless the Agent shall have been
notified by a Lender before the date on which such Lender is scheduled to make
payment to the Agent of the proceeds of a Revolving Loan (which notice shall be
effective upon receipt) that such Lender does not intend to make such payment,
the Agent may assume that such Lender has made such payment when due and in
reliance upon such assumption may (but shall not be required to) make available
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to the Borrower the proceeds of the Revolving Loan to be made by such Lender
and, if any Lender has not in fact made such payment to the Agent, such Lender
shall, on demand, pay to the Agent the amount made available to the Borrower
attributable to such Lender together with interest thereon for each day during
the period commencing on the date such amount was made available to the Borrower
and ending on (but excluding) the date such Lender pays such amount to the Agent
at a rate per annum equal to the interest rate attributable to the relevant
Revolving Loan. If such amount is not received from such Lender by the Agent
immediately upon demand, the Borrower will, on demand, repay to the Agent the
proceeds of the Loan attributable to such Lender with interest thereon at a rate
per annum equal to the interest rate applicable to the relevant Revolving Loan.
Nothing in this Section 2.4(e) shall be deemed to relieve any Lender from its
obligations to fund its Commitments hereunder or to prejudice any rights which
the Borrower may have against any Lender as a result of any default by such
Lender hereunder.
Section 2.5 Interest Periods. As provided in Section 2.4(a) and (b), at
the time of each request for the advance or continuation of, or conversion into,
a Borrowing of LIBOR Loans, the Borrower shall select an Interest Period
applicable to such LIBOR Loans from among the available options subject to the
limitations in Section 2.4(a); provided, however, that:
(a) the Borrower may not select an Interest Period for a Borrowing of
LIBOR Loans that extends beyond the Maturity Date;
(b) whenever the last day of any Interest Period would otherwise be a
day that is not a Business Day, the last day of such Interest Period shall
either be (i) extended to the next succeeding Business Day, or (ii) reduced to
the immediately preceding Business Day if the next succeeding Business Day is in
the next calendar month; and
(c) for purposes of determining an Interest Period, a month means a
period starting on one day in a calendar month and ending on the numerically
corresponding day in the next calendar month; provided, however, that if there
is no such numerically corresponding day in the month in which an Interest
Period is to end or if such Interest Period begins on the last Business Day of a
calendar month, then such Interest Period shall end on the last Business Day of
the calendar month in which such Interest Period is to end.
Section 2.6 Interest Payments.
(a) Base Rate Loans. Each Base Rate Loan shall bear interest
(computed on the basis of a 365/366-day year and actual days elapsed, excluding
the date of repayment) on the unpaid principal amount thereof from the date such
Loan is made until maturity (whether by acceleration or otherwise) or conversion
to a LIBOR Loan in accordance with Section 2.4(b) hereof, at a rate per annum
equal to the lesser of (i) the Highest Lawful Rate, or (ii) with respect to
Revolving Loans, the sum of the Base Rate from time to time in effect plus the
Applicable Margin, or with respect to Agent Loans, the sum of the Base Rate from
time to time in effect minus 0.625%, payable in arrears on each Interest Payment
Date for such Loan and at maturity (whether by acceleration or otherwise) or
conversion to a LIBOR Loan in accordance with Section 2.4(b).
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(b) LIBOR Loans. Each LIBOR Loan shall bear interest (computed on the
basis of a 360-day year and actual days elapsed, excluding the date of
repayment) on the unpaid principal amount thereof from the date such Loan is
made until maturity (whether by acceleration or otherwise) or conversion to a
Base Rate Loan in accordance with Section 2.4(b) hereof, at a rate per annum
equal to the lesser of (i) the Highest Lawful Rate, or (ii) the sum of the
Adjusted LIBOR Rate plus the Applicable Margin, payable in arrears on each
Interest Payment Date for such Loan and at maturity (whether by acceleration or
otherwise) or conversion to a Base Rate Loan in accordance with Section 2.4(b).
(c) Rate Determinations. The Agent shall determine each interest rate
applicable to the Loans and Reimbursement Obligations hereunder (including the
Applicable Margin, determined as set forth in the definition thereof) and such
determination shall be conclusive and binding except in the case of the Agent's
manifest error or willful misconduct. The Agent shall give prompt telephonic,
telex or facsimile notice to the Borrower and each Lender (in the case of
Revolving Loans) of the interest rate applicable to each Loan or Reimbursement
Obligation (but, if such notice is given by telephone, the Agent shall confirm
such rate in writing) promptly after the Agent has made such determination.
Section 2.7 Default Rates. If any payment of principal on any Loan is not
made when due after the expiration of the grace period therefor provided in
Section 7.1 (whether by acceleration or otherwise), such Loan shall bear
interest (computed on the basis of a year of 360, 365 or 366 days, as
applicable, and actual days elapsed) from the date such payment was due until
such principal then due is paid in full, payable on demand, at a rate per annum
equal to:
(a) for any Base Rate Loan which is a Revolving Loan the lesser of (i)
the Highest Lawful Rate, or (ii) the sum of two percent (2%) per annum plus the
Base Rate from time to time in effect (but not less than the Base Rate in effect
at maturity) plus the Applicable Margin;
(b) for any LIBOR Loan the lesser of (i) the Highest Lawful Rate, or
(ii) the sum of two percent (2%) per annum plus the rate of interest in effect
thereon at the time of such default until the end of the Interest Period for
such Loan and, thereafter, at a rate per annum equal to the sum of two percent
(2%) per annum plus the Base Rate from time to time in effect (but not less than
the Base Rate in effect at maturity) plus the Applicable Margin;
(c) for any unpaid Reimbursement Obligations, the lesser of (i) the
Highest Lawful Rate, or (ii) the sum of two percent (2%) per annum plus the Base
Rate from time to time in effect (but not less than the Base Rate in effect at
maturity) plus the Applicable Margin; and
(d) for any Base Rate Loan which is an Agent Loan, the lesser of (i)
the Highest Lawful Rate, or (ii) the sum of two percent (2%) per annum plus the
Base Rate from time to time in effect (but not less than the Base Rate in effect
at maturity) minus 0.625%.
It is the intention of the Agent and each Lender to conform strictly to usury
laws applicable to it. Accordingly, if the transactions contemplated hereby or
the Loans or the Reimbursement Obligations would be usurious as to the Agent or
the Lenders under laws applicable to it (including the laws of the United States
of America and the State of Texas or any other jurisdiction whose laws may be
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mandatorily applicable to the Agent or such Lender notwithstanding the other
provisions of this Agreement, the Notes or any other Credit Document), then, in
that event, notwithstanding anything to the contrary in this Agreement, the
Notes or any other Credit Document, it is agreed as follows: (i) the aggregate
of all consideration which constitutes interest under laws applicable to the
Lenders that is contracted for, taken, reserved, charged or received by the
Lenders under this Agreement, the Notes or any other Credit Document or
otherwise shall under no circumstances exceed the Highest Lawful Rate, and any
excess shall be credited by the applicable Lender on the principal amount of the
applicable Note or to the Reimbursement Obligations (or, if the principal amount
of such Note and all Reimbursement Obligations owed to such Lender shall have
been paid in full, refunded by such Lender to the Borrower); (ii) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder or holders thereof resulting from any Event of Default hereunder or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under laws applicable to the Lenders may
never include more than the Highest Lawful Rate, and excess interest, if any,
provided for in this Agreement, the Notes, any other Credit Document or
otherwise shall be automatically canceled by the applicable Lenders as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by the applicable Lenders on the principal amount of the applicable
Notes or Reimbursement Obligations (or if the principal amounts thereof shall
have been paid in full, refunded by the applicable Lender to the Borrower); and
(iii) if at any time the interest provided hereunder, together with any other
fees payable pursuant to this Agreement, the Notes or any other Credit Document
and deemed interest under applicable law, exceeds the amount that would have
accrued at the Highest Lawful Rate, the amount of interest and any such fees to
accrue to the Lenders hereunder and thereunder shall be limited to the amount
which would have accrued at the Highest Lawful Rate, but any subsequent
reductions shall not reduce the interest to accrue to the Lenders hereunder and
thereunder below the Highest Lawful Rate until the total amount of interest
accrued pursuant hereto and thereto and such fees deemed to be interest equals
the amount of interest which would have accrued to the Lenders if a varying rate
per annum equal to the interest hereunder had at all times been in effect plus
the amount of fees which would have been received but for the effect of this
Section 2.7. The Agent and the Lenders hereby elect to determine the applicable
rate ceiling under Section 303.201 of the Texas Finance Code Ann. (Vernon 1998)
by the weekly rate ceiling from time to time in effect, subject to the Agent's
and the Lenders' right subsequently to change such method in accordance with
applicable law. In the event the Loans and all Reimbursement Obligations are
paid in full by the Borrower prior to the Maturity Date and the interest
received for the actual period of the existence of the Loans or the
Reimbursement Obligations exceeds the Highest Lawful Rate, the applicable
Lenders shall refund to the Borrower the amount of the excess or shall credit
the amount of the excess against amounts owing under the Loans and none of the
Lenders shall be subject to any of the penalties provided by law for contracting
for, taking, reserving, charging or receiving interest in excess of the Highest
Lawful Rate. The provisions of Chapter 346 of Tex. Finance Code Ann. (Vernon
1998), regulating certain revolving credit accounts shall not apply to this
Agreement or any of the Notes.
Section 2.8 Maturity of Loans. Each Revolving Loan, together with accrued
and unpaid interest thereon and all other fees then due and owing under any
Credit Document, shall mature and become due and payable on the Maturity Date.
Each Agent Loan, together with accrued and unpaid interest thereon, shall mature
and become due and payable five (5) days after the date of such Agent Loan,
provided that all such Agent Loans shall mature and become due and payable no
later than the Maturity Date.
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Section 2.9 Optional Prepayments. The Borrower shall have the privilege of
prepaying the Loans without premium or penalty in whole or in part at any time.
If the Borrower is prepaying LIBOR Loans, it shall give to the Agent notice of
such prepayment no later than 11:00 a.m. at least two (2) Business Days before
the proposed prepayment date. All prepayments of LIBOR Loans shall be
accompanied by accrued interest thereon, together with any applicable breakage
fees and funding losses pursuant to Section 2.12. The Borrower may direct the
application of any optional prepayment hereunder to the Base Rate Loans or LIBOR
Loans outstanding.
Section 2.10 Mandatory Prepayments of Loans. If the aggregate principal
amount of outstanding Loans and L/C Obligations shall at any time for any reason
exceed the Commitment Amount then in effect, the Borrower shall, immediately and
without notice or demand, pay the amount of such excess to the Agent for the
ratable benefit of the Lenders as a prepayment of the Loans and, if all Loans
have been paid, a pre-funding of Letters of Credit pursuant to the provisions of
Section 7.4. Any mandatory prepayment of Loans pursuant hereto shall not be
limited by the notice provision for prepayments set forth in Section 2.9, but
immediately upon determining the need to make any such prepayment, the Borrower
shall notify the Agent of such required prepayment. Each such prepayment shall
be accompanied by a payment of all accrued and unpaid interest on the Loans
prepaid and any applicable breakage fees and funding losses pursuant to Section
2.12.
Section 2.11 The Notes. The Revolving Loans outstanding to the Borrower
from the Lenders (and, with respect to the Agent, any Agent Loans outstanding to
the Borrower) shall be evidenced by promissory notes of the Borrower payable to
each of the Lenders and the Agent in the form of Exhibit 2.11 (such promissory
notes, together with any replacements thereof, the "Notes"). Each holder of a
Note shall record on its books and records or on a schedule to the Note the
amount of each Loan outstanding from it to the Borrower, all payments of
principal and interest and the principal balance from time to time outstanding
thereon, the type of such Loan and, if a LIBOR Loan, the Interest Period and
interest rate applicable thereto. Such record, whether shown on the books and
records of a holder of a Note or on a schedule to its Note, shall be prima facie
evidence as to all such matters; provided, however, that the failure of any
holder to record any of the foregoing or any error in any such record shall not
limit or otherwise affect the obligation of the Borrower to repay all Loans
outstanding to it hereunder, together with accrued interest thereon. At the
request of any holder of a Note and upon such holder tendering to the Borrower
the Note to be replaced, the Borrower shall furnish a new Note to such holder to
replace any outstanding Note and at such time the first notation appearing on
the schedule on the reverse side of, or attached to, such new Note shall set
forth the aggregate unpaid principal amount of all Loans, if any, then
outstanding thereon.
Section 2.12 Breakage Fees. If any Lender incurs any loss, cost or expense
(excluding any loss of anticipated profit, but including, without limitation,
any loss, cost, expense or premium reasonably incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by such Lender
to fund or maintain any LIBOR Loan or the relending or reinvesting of such
deposits or amounts paid or prepaid to the Lenders) as a result of any of the
following events other than any such occurrence as a result of a change of
circumstance described in Sections 8.1 or 8.2:
(i) any payment, prepayment or conversion of a LIBOR Loan on a date
other than the last day of its Interest Period (whether by acceleration,
prepayment or otherwise);
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(ii) any failure to make a principal payment of a LIBOR Loan on the
due date therefor; or
(iii) any failure by the Borrower to borrow, continue, prepay or
convert to a LIBOR Loan on the date specified in a notice given pursuant to
Section 2.4(a) or (b) (other than by reason of a default of a Lender),
then the Borrower shall pay to such Lender such amount as will reimburse such
Lender for such loss, cost or expense. If any Lender makes such a claim for
compensation, it shall provide to the Borrower a certificate executed by an
officer of such Lender setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the computation
of such loss, cost or expense)no later than 120 days after the event giving rise
to the claim for compensation, and the amounts shown on such certificate shall
be conclusive and binding absent manifest error. Within ten (10) days of
receipt of such certificate, the Borrower shall pay to such Lender such amount
as will compensate such Lender for such loss, cost or expense as provided
herein, unless such Lender has failed to timely give notice to the Borrower of
such claim for compensation as provided herein, in which event the Borrower
shall no longer be obligated to pay such claim.
Section 2.13 Commitment Terminations. The Borrower shall have the right at
any time and from time to time, upon five (5) Business Days' prior and
irrevocable written notice to the Agent, to terminate or reduce the Commitments
without premium or penalty, in whole or in part, any partial termination to be
(i) in an amount not less than $1,000,000 as determined by the Borrower, and
(ii) allocated ratably among the Lenders in proportion to their respective
Commitments, as applicable; provided that the Commitment Amount may not be
reduced to an amount less than the sum of the aggregate principal amount of
outstanding Loans plus the aggregate outstanding L/C Obligations, after giving
effect to payments on such proposed termination or reduction date, unless the
Borrower provides to the Lenders or the Agent, as applicable, cash collateral in
an amount sufficient to cover such shortage or back to back letters of credit
from a financial institution satisfactory to all of the Lenders in an amount
equal to the undrawn face amount of any applicable outstanding Letters of Credit
with an expiry date of at least five (5) days after the expiry date of any
applicable Letter of Credit and which provide that the Lenders may make a
drawing thereunder in the event that it pays a drawing under such Letter of
Credit. Any termination of the Commitments pursuant to this Section 2.13 is
permanent and may not be reinstated. The Agent shall give prompt notice to each
Lender of any such termination of the Commitments.
SECTION 3. FEES AND PAYMENTS.
Section 3.1 Fees.
(a) Commitment Fee. For the period from the Effective Date to and
including the Commitment Termination Date the Borrower shall pay to the Agent
for the ratable account of the Lenders, a commitment fee (computed on a basis of
a 365/366-day year and actual days elapsed) on an amount equal to the average
daily difference between (i) the sum of the Commitment Amount plus the
outstanding principal amount of the Agent Loans and (ii) the outstanding
Revolving Loans and L/C Obligations, such commitment fee to be calculated, for
any day, at such times as the relevant
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Funded Debt to EBITDA Ratio is in one of the following ranges, based upon the
percentage per annum set forth opposite such Funded Debt to EBITDA Ratio set
forth below times such amount:
Funded Debt to EBITDA Ratio Commitment Fee
------------------------------- ------------------
Less than or equal to 1.5 to 1.0 0.175%
Greater than 1.5 to 1.0 but less
than or equal to 1.75 to 1.0 0.200%
Greater than 1.75 to 1.0 but less
than or equal to 2.25 to 1.0 0.250%
Greater than 2.25 to 1.0 but less
than or equal to 2.75 to 1.0 0.250%
Greater than 2.75 to 1.0 0.300%
For the period from the Effective Date through the earlier of the date the
Borrower is to provide the Agent with the financial statements for the fiscal
quarter ended June 30, 1998, as required by Section 6.6(a)(i) or the date such
financial statements are provided to the Agent, the commitment fee percentage
shall be 0.175%, thereafter, the commitment fee percentage shall be set by the
Agent at the same time and in the same manner as the Applicable Margin is set.
Such commitment fees shall be payable in arrears commencing on September 30,
1998, and on the last Business Day of each calendar quarter thereafter and on
the Maturity Date unless the Commitments are terminated in whole on an earlier
date, in which event the commitment fee for the period to but not including the
date of such termination shall be paid in whole on the date of such termination.
Upon the closing of a Subordination Debt Investment(s) with proceeds aggregating
at least $30,000,000, the percentages in the Commitment Fee column above shall
each be reduced by 0.025%.
(b) Letter of Credit Fees. Commencing upon the date of issuance or
extension of any Letter of Credit, the Borrower shall pay to the Agent quarterly
in arrears (pro rated, if necessary for any portion of such quarter) for the
ratable account of the Lenders a non-refundable fee for any Letter of Credit
equal to the greater of (x) $125 per quarter, or (y) the face amount of such
Letter of Credit times the Applicable Margin for LIBOR Loans, calculated on the
basis of a 365/366-day year and actual days in the period and based on the then
scheduled expiry date of the Letter of Credit. Thereafter, such fees shall be
payable by the Borrower in arrears on the last Business Day of each calendar
quarter of each year commencing with the next succeeding calendar quarter, with
the last such payment on the date any such Letter of Credit expires. In
addition, the Borrower shall pay to the Agent solely for the Agent's account, in
connection with each Letter of Credit, reasonable administrative and amendment
fees and expenses for letters of credit established by the Agent from time to
time in accordance with its customary practices and as agreed between the Agent
and the Borrower and a 1/8% fronting fee of 1% of the face amount of each Letter
of Credit.
(c) Agent Fees. The Borrower shall pay to each of the Agent and the
Arranger the fees agreed to between the Agent, the Arranger and the Borrower
pursuant to the Fee Letter, and any other fees from time to time agreed to by
the Borrower and the Agent.
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Section 3.2 Place and Application of Payments. All payments of principal
of and interest on the Loans and the Reimbursement Obligations and all other
amounts payable by the Borrower under the Credit Documents shall be made by the
Borrower to the Agent by no later than 2:00 p.m. on the due date thereof at the
office of the Agent in Houston, Texas (or such other location as the Agent may
designate to the Borrower). Any payments received by the Agent from the Borrower
after 2:00 p.m. shall be deemed to have been received on the next Business Day.
Section 3.3 Withholding Taxes.
(a) Payments Free of Withholding. Except as otherwise required by law
and subject to Section 3.3(b), each payment by the Borrower to the Agent or any
Lender under this Agreement or any other Credit Document shall be made without
withholding for or on account of any present or future taxes (other than overall
net income taxes on the recipient) imposed by or within the jurisdiction in
which the Borrower is domiciled, any jurisdiction from which the Borrower makes
any payment, or (in each case) any political subdivision or taxing authority
thereof or therein, excluding, in the case of each Lender and the Agent, taxes,
assessments or other governmental charges
(i) imposed on, based upon, or measured by its income, and
branch profits, franchise and similar taxes imposed on it, by any jurisdiction
in which the Agent or such Lender, as the case may be, is incorporated or
maintains its principal place of business or Lending Office or which subjects
the Agent or such Lender to tax by reason of a connection between the taxing
jurisdiction and the Agent or such Lender (other than a connection resulting
from the transactions contemplated by this Agreement);
(ii) imposed as a result of a connection between the taxing
jurisdiction and the Agent or such Lender, as the case may be, other than a
connection resulting from the transactions contemplated by this Agreement;
(iii) imposed as a result of the transfer by such Lender of its
interest in this Agreement or any other Credit Document or a designation by such
Lender (other than pursuant to Section 3.3(d) hereof) of a new Lending Office
(other than taxes imposed as a result of any change in treaty, law or regulation
after such transfer of the Lender's interest in this Agreement or any Credit
Document or designation of a new Lending Office);
(iv) imposed by the United States of America upon a Lender
organized under the laws of a jurisdiction outside of the United States, except
to the extent that such tax is imposed or increased as a result of any change in
applicable law, regulation or treaty (other than any addition of or change in
any "anti-treaty shopping," "limitation of benefits," or similar provision
applicable to a treaty) after the Effective Date hereof, in the case of each
Lender originally a party hereto or, in the case of any Purchasing Lender (as
defined in Section 10.10), after the date on which it becomes a Lender;
(v) which would not have been imposed but for (a) the failure of
the Agent or any Lender, as the case may be, to provide (x) an Internal Revenue
Service Form 1001 or 4224,
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as the case may be, or any substitute or successor form prescribed by the
Internal Revenue Service pursuant to Section 3.3(b) below, or (y) any other
certification, documentation or proof which is reasonably requested by the
Borrower, or (b) a determination by a taxing authority or a court of competent
jurisdiction that a certification, documentation or other proof provided by such
Lender or the Agent to establish an exemption from such tax, assessment or other
governmental charge is false
(all such non-excluded taxes, assessments or other governmental charges and
liabilities being hereinafter referred to as "Indemnified Taxes"). If any such
withholding is so required, the Borrower shall make the withholding, pay the
amount withheld to the appropriate governmental authority before penalties
attach thereto or interest accrues thereon and forthwith pay such additional
amount as may be necessary to ensure that the net amount actually received by
the Agent and each Lender is free and clear of such Indemnified Taxes (including
Indemnified Taxes on such additional amount) and is equal to the amount that the
Agent or such Lender (as the case may be) would have received had such
withholding not been made. If the Agent or any Lender pays any amount in
respect of any Indemnified Taxes, penalties or interest, the Borrower shall
reimburse the Agent or that Lender for the payment on demand in the currency in
which such payment was made. If the Borrower pays any Indemnified Taxes,
penalties or interest, it shall deliver official tax receipts evidencing the
payment or certified copies thereof, or other satisfactory evidence of payment
if such tax receipts have not yet been received by the Borrower (with such tax
receipts to be promptly delivered when actually received), to the Agent or the
Lender on whose account such withholding was made (with a copy to the Agent if
not the recipient of the original) within fifteen (15) days of such payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Agent on or before the Effective Date, two duly
completed and signed copies of either Form 1001 (entitling such Lender to a
complete exemption from withholding under the Code on all amounts to be received
by such Lender, including fees, pursuant to the Credit Documents) or Form 4224
(relating to all amounts to be received by such Lender, including fees, pursuant
to the Credit Documents) of the Internal Revenue Service. Thereafter and from
time to time, each Lender shall submit to the Borrower and the Agent such
additional duly completed and signed copies of one or the other of such forms
(or such successor forms as shall be adopted from time to time by the relevant
United States taxing authorities) as may be (i) notified by the Borrower,
directly or through the Agent, to such Lender, and (ii) required under then-
current United States law or regulations to avoid United States withholding
taxes on payments in respect of all amounts to be received by such Lender,
including fees, pursuant to the Credit Documents. Upon the request of the
Borrower, each Lender that is a United States person shall submit to the
Borrower a certificate to the effect that it is such a United States person.
Each such Lender shall make written demand on the Borrower for indemnification
or compensation hereunder not later than 120 days after the earlier of (i) the
date on which such Lender or Agent makes payment of Indemnified Taxes, or (ii)
the date on which the relevant taxing authority or other governmental authority
makes written demand upon such Lender or the Agent for payment of Indemnified
Taxes; provided that any failure of a Lender or the Agent to give the Borrower
timely notice as provided herein shall not relieve the Borrower of any
obligation which it has to pay such claim for compensation for such
indemnification.
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(c) Inability of Lender to Submit Forms. If any Lender determines, as
a result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit to
the Borrower or the Agent any form or certificate that such Lender is obligated
to submit pursuant to Section 3.3(b) or that such Lender is required to withdraw
or cancel any such form or certificate previously submitted or any such form or
certificate otherwise becomes ineffective or inaccurate, such Lender shall
promptly notify the Borrower and the Agent of such fact and the Lender shall to
that extent not be obligated to provide any such form or certificate and will be
entitled to withdraw or cancel any affected form or certificate, as applicable.
(d) Refund of Taxes. If any Lender or the Agent receives a refund of
any Indemnified Tax or any tax referred to in Section 10.3 with respect to which
the Borrower has paid any amount pursuant to this Section 3.3 or Section 10.3,
such Lender or the Agent shall pay the amount of such refund (including any
interest received with respect thereto) to the Borrower.
SECTION 4. CONDITIONS PRECEDENT.
Section 4.1 Conditions Precedent to Initial Borrowing. The obligation of
each Lender to advance the initial Loans hereunder and of the Agent to issue any
Letter of Credit on the Initial Borrowing Date is subject to the following
conditions precedent, all in form and substance satisfactory to the Lenders (and
which shall be evidenced by the making of such Loan(s) and, if applicable, the
issuance of such Letter(s) of Credit) and in sufficient number of signed
counterparts, where applicable, to provide one for each Lender (except for the
Notes, of which only one original shall be signed for each Lender):
(a) The Agent shall have received:
(i) Notes. The duly executed Notes of the Borrower;
(ii) Subsidiary Guaranties. The duly executed Subsidiary
Guaranties of each of the Guarantors in substantially the form of Exhibit 4.1A;
(iii) Stock Pledge Agreements. The duly executed Stock
Pledge Agreements of each of the Borrower, NorAm Telecommunications, Inc. and
Spalj Construction Co. in substantially the form of Exhibit 4.1B, together with
the original stock certificates referenced therein and undated stock powers
executed in blank with respect to each such stock certificate;
(iv) UCC-Financing Statements. The duly executed UCC-1
Financing Statements of each of the Borrower, NorAm Telecommunications, Inc. and
Spalj Construction Co. with respect to the stock referenced in the Stock Pledge
Agreements;
(v) Certificate of Officers of Borrower and Guarantors. A
certificate of the Secretary or Assistant Secretary and the President or Vice
President of each of the Borrower and the Guarantors containing specimen
signatures of the persons authorized to execute Credit Documents on such
Person's behalf or any other documents provided for herein, together with (x)
copies of resolutions of the Board of Directors of such Person authorizing the
execution and delivery of the Credit Documents and of all other legal documents
or proceedings taken by such Person in
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connection with the execution and delivery of the Credit Documents, and (y)
copies of such Person's Certificate or Articles of Incorporation, certified by
the Secretary of State of such Person's jurisdiction of organization, and
Bylaws;
(vi) Certificates of Existence and Good Standing. Certificates of
existence and good standing from the appropriate governing agency of the
Borrower's and each Guarantor's jurisdiction of organization and of all
jurisdictions where such Person is authorized to do business;
(vii) Fees. Payment of all fees and all expenses incurred through the
Effective Date then due and owing to the Agent and the Arranger pursuant to this
Agreement and the Fee Letter;
(viii) Consents. Certified copies of all documents evidencing any
necessary consents and governmental approvals taken or obtained by the Borrower
and the Guarantors with respect to the Credit Documents;
(ix) Financial Condition Certificate. A certificate of the principal
financial officer of the Borrower in substantially the form of Exhibit 4.1C;
(x) Searches. The results of recent lien searches showing no Liens on
any of the property or assets of the Borrower or any of its Subsidiaries other
than Permitted Liens or evidence that any such Liens other than Permitted Liens
have been terminated or will be terminated concurrently with the Initial
Borrowing Date;
(xi) Opinion of Counsel. The opinion of Brad Eastman, General Counsel
to the Borrower and the Guarantors covering such matters as the Lenders may
reasonably require; and
(xii) Other Documents. Such other documents as the Lenders may
reasonably request.
(b) All legal matters incident to the execution and delivery of the Credit
Documents shall be reasonably satisfactory to the Lenders.
Section 4.2 Conditions Precedent to all Borrowings. In the case of each
advance of a Borrowing hereunder (including the issuance of, increase in the
amount of, or extension of the expiry date of, a Letter of Credit and the
initial Borrowing hereunder but excluding the Revolving Loans to be made as
required by Section 2.1(b)):
(a) Notices. In the case of a Borrowing, the Agent shall have received
the Borrowing Request required by Section 2.4, and in the case of the issuance,
extension or increase of a Letter of Credit, the Agent shall have received a
duly completed Borrowing Request and Application for such Letter of Credit
meeting the requirements of Section 2.2;
(b) Representations and Warranties True and Correct. Each of the
representations and warranties of the Borrower and its Subsidiaries set forth
herein and in the Credit Documents
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shall be true and correct in all material respects as of the time of such new
Borrowing, except as a result of the transactions expressly permitted hereunder
or thereunder and except to the extent that any such representation or warranty
relates solely to an earlier date, in which case it shall have been true and
correct in all material respects as of such earlier date;
(c) No Default. No Default or Event of Default shall have occurred and be
continuing or would occur as a result of such Borrowing;
(d) New Litigation and Changes in Pending Litigation. Since the Effective
Date, no new litigation (including, without limitation, derivative or injunctive
actions), arbitration proceedings or governmental proceedings shall be pending
or known to be threatened against the Borrower or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect; and no material
development (whether or not disclosed) shall have occurred in any litigation
(including, without limitation, derivative or injunctive actions), arbitration
proceedings or governmental proceedings previously disclosed, which could
reasonably be expected to have a Material Adverse Effect;
(e) Regulation U; Other Laws. The Borrowings to be made by the Borrower
shall not result in either the Borrower or the Agent or any Lender being in non-
compliance with or in violation of Regulation U of the Board of Governors of the
Federal Reserve System and shall not be prohibited by any other legal
requirement (including Regulations T and X of the Board of Governors of the
Federal Reserve System) imposed by the banking laws of the United States of
America, and shall not otherwise subject the Agent or any Lender to a penalty or
other onerous conditions under or pursuant to any legal requirement; and
(f) Material Adverse Change. There has occurred no event or effect that
has had or could reasonably be expected to have a Material Adverse Effect.
Each request for the advance of a Borrowing and each request for the issuance
of, increase in the amount of, or extension of the expiry date of, a Letter of
Credit shall be deemed to be a representation and warranty by the Borrower on
the date of such Borrowing, or issuance of, increase in the amount of, or
extension of the expiry date of, such Letter of Credit that all conditions
precedent to such Borrowing have been satisfied or fulfilled unless the Borrower
gives to the Agent written notice to the contrary, in which case no Lender shall
be required to fund such advances and the Agent shall not be required to issue,
increase the amount of or extend the expiry date of such Letter of Credit unless
the Majority Lenders shall have previously waived in writing such non-
compliance. In the event an Event of Default shall have occurred or be
continuing or would occur as a result of such Borrowing, the Borrower may not
convert any Base Rate Loan into a LIBOR Loan or continue any LIBOR Loan and may
only convert or continue any LIBOR Loan into or as a Base Rate Loan in
accordance with Section 2.4(b) hereof and subject to the applicability of the
provisions of Section 2.7 regarding default rates of interest, and in such
case, any LIBOR Loan which has not been accelerated pursuant to the terms hereof
shall automatically convert into a Base Rate Loan at the end of the applicable
Interest Period unless prior to such time, any such Event of Default shall have
been cured or waived pursuant to the terms hereof. In the event a Default shall
have occurred and be continuing or would occur as a result of such Borrowing,
the Borrower may only convert any
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Base Rate Loan or continue any LIBOR Loan into a LIBOR Loan with a one (1) month
Interest Period.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent and each Lender as
follows:
Section 5.1 Organization.
(a) The Borrower and each of its Subsidiaries (i) is a duly
incorporated and existing corporation (or other Person) in good standing under
the laws of the jurisdiction of its organization, (ii) has all necessary
corporate power (or comparable power, in the case of a Subsidiary that is not a
corporation) to own the property and assets it uses in its business and
otherwise to carry on its business as presently conducted, and (iii) is duly
licensed or qualified and in good standing in each jurisdiction in which the
nature of the business transacted by it or the nature of the property owned or
leased by it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified could not reasonably be expected to have
a Material Adverse Effect.
(b) As of the date hereof, the Borrower has no Subsidiaries other than
the Subsidiaries listed on Schedule 5.1, and the Borrower owns one hundred
percent (100%) of each class of capital stock or ownership interests of each of
such Subsidiary.
Section 5.2 Power and Authority; Validity. Each of the Borrower and the
Guarantors has the corporate (or comparable power, in the case of a Subsidiary
that is not a corporation) power and authority to execute, deliver and carry out
the terms and provisions of the Credit Documents to which it is a party and has
taken all necessary corporate (or comparable action, in the case of a Subsidiary
that is not a corporation) action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each of the
Borrower and the Guarantors has duly executed and delivered each such Credit
Document and each such Credit Document constitutes the legal, valid and binding
obligation of such Person enforceable in accordance with its terms, subject as
to enforcement only to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity, regardless of whether in a proceeding in equity
or at law.
Section 5.3 No Violation. Neither the execution, delivery nor performance
by the Borrower or any of the Guarantors of the Credit Documents to which it is
a party nor compliance by any of such Persons with the terms and provisions
thereof, nor the consummation by it of the transactions contemplated herein or
therein, will (i) contravene any applicable provision of any law, statute, rule
or regulation, or any applicable order, writ, injunction or decree of any court
or governmental instrumentality, except where such contravention could not
reasonably be expected to have a Material Adverse Effect, (ii) conflict with or
result in any breach of any term, covenant, condition or other provision of, or
constitute a default under (except where such conflict, breach or default could
not reasonably be expected to have a Material Adverse Effect), or result in the
creation or imposition of (or the obligation to create or impose) any Lien other
than any Permitted Lien upon any of the property or assets of the Borrower or
its Subsidiaries under the terms of any contractual obligation to which the
Borrower or any of its Subsidiaries is a party or by which it or any of its
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properties or assets are bound or to which it may be subject, or (iii) violate
or conflict with any provision of the Certificate or Articles of Incorporation
or Bylaws or other governance documents, as applicable, of such Person.
Section 5.4 Litigation. There are no lawsuits (including, without
limitation, derivative or injunctive actions), arbitration proceedings or
governmental proceedings pending or, to the best knowledge of the Borrower,
threatened, involving the Borrower or any of its Subsidiaries except for such
lawsuits or other proceedings which could not reasonably be expected to have a
Material Adverse Effect and any lawsuits and proceedings disclosed in Schedule
5.4.
Section 5.5 Use of Proceeds; Margin Regulations. The proceeds of the Loans
may only be used to repay existing Indebtedness, to provide working capital and
for general corporate purposes (including the issuance of Letters of Credit) and
for Acquisitions. Neither the Borrower nor any of its Subsidiaries are engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock. No proceeds of any Loan will be used to purchase or carry any
"margin stock" (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), to extend credit for the purpose of purchasing or
carrying any "margin stock," or for a purpose which violates Regulations T, U or
X of the Board of Governors of the Federal Reserve System.
Section 5.6 Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 5.7 Public Utility Holding Company Act. Neither the Borrower nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Section 5.8 True and Complete Disclosure. All factual information (not
including estimated, pro forma financial information and other projections)
heretofore or contemporaneously furnished by the Borrower or any of its
Subsidiaries in writing to the Agent or the Lenders in connection with any
Credit Document or any transaction contemplated therein is, disregarding any
updated, corrected, supplemented, superceded or otherwise modified information
except as so updated, corrected, supplemented, superceded or otherwise modified
and all other such factual information hereafter furnished by any such Persons
in writing to the Lenders in connection herewith, any of the other Credit
Documents or the Loans will be, true and accurate in all material respects,
taken as a whole, on the date of such information and not incomplete by omitting
to state any material fact necessary to make the information therein not
misleading at such time in light of the circumstances under which such
information, taken as a whole, was provided. All estimates, pro forma financial
information and projections furnished by the Borrower or any of its Subsidiaries
in writing to the Lenders in connection with any Credit Document or any
transaction contemplated therein, were prepared by the Borrower in good faith
based upon assumptions believed by the Borrower to be reasonable at the time
such information was prepared, it being recognized by the Agent and the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount.
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Section 5.9 Financial Statements. The financial statements heretofore
delivered to the Lenders for the fiscal quarter ending March 31, 1998, were
prepared in accordance with GAAP, and such financial statements, together with
the related notes and schedules, fairly presents the financial position of the
Borrower and its Subsidiaries as of the dates thereof and the results of
operations for the periods covered thereby, subject to normal year-end
adjustments and omission of certain footnotes as permitted by the SEC.
Section 5.10 No Material Adverse Change. From March 31, 1998, there has
occurred no event or effect that has had, or to the best knowledge of the
Borrower could reasonably be expected to have, a Material Adverse Effect.
Section 5.11 Labor Controversies. There are no labor strikes, lock-outs,
slow downs, work stoppages or similar events pending or, to the best knowledge
of the Borrower, threatened against the Borrower or any of its Subsidiaries that
could reasonably be expected to have a Material Adverse Effect.
Section 5.12 Taxes. Except as disclosed on Schedule 5.12, the Borrower and
its Subsidiaries have filed all federal tax returns and all other material tax
returns required to be filed, and have paid all governmental taxes, rates,
assessments, fees, charges and levies (collectively, "Taxes") except such Taxes,
if any, as are being contested in good faith and for which reserves have been
provided in accordance with GAAP and except where the failure to pay such Taxes
could not reasonably be expected to have a Material Adverse Effect. Except as
disclosed on Schedule 5.12, no tax liens have been filed and no claims are being
asserted for Taxes. Except as disclosed on Schedule 5.12, the charges, accruals
and reserves on the books of the Borrower and its Subsidiaries for Taxes and
other governmental charges have been determined in accordance with GAAP.
Section 5.13 ERISA. With respect to each Plan, the Borrower and its
Subsidiaries have fulfilled their obligations under the minimum funding
standards of, and are in compliance in all material respects with, ERISA and
with the Code to the extent applicable to it, and have not incurred any
liability under Title IV of ERISA to the PBGC or a Plan other than a liability
to the PBGC for premiums under Section 4007 of ERISA, except where such
liability could not reasonably be expected to have a Material Adverse Effect.
As of the Effective Date, neither the Borrower nor any of its Subsidiaries has
any contingent liability with respect to any post-retirement benefits under a
welfare plan as defined in ERISA other than liability for continuation coverage
described in Part 6 of Title I of ERISA, except where such liability could not
reasonably be expected to have a Material Adverse Effect.
Section 5.14 Consents. All consents and approvals of, and filings and
registrations with, and all other actions of, all governmental agencies,
authorities or instrumentalities required to consummate the Borrowings
hereunder, on the date of each such Borrowing, have been obtained or made and
are or will be in full force and effect.
Section 5.15 Capitalization. All outstanding shares of the Borrower and
its Subsidiaries have been duly and validly issued, are fully paid and
nonassessable. None of the Borrower's Subsidiaries has outstanding any
securities convertible into or exchangeable for its capital stock or outstanding
any rights to subscribe for or to purchase, or any options for the purchase of,
or any
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agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.
Section 5.16 Ownership of Property. The Borrower and its Subsidiaries have
good title to or a valid leasehold interest in all of its property except to the
extent, in the aggregate, no Material Adverse Effect could reasonably be
expected to result from the failure to have such title or interest, subject to
no Liens except Permitted Liens. The Borrower and its Subsidiaries own or hold
valid licenses to use all the material patents, trademarks, permits, service
marks and trade names, free of any burdensome restrictions, that are necessary
to the operation of the business of the Borrower and its Subsidiaries as
presently conducted, except where the failure to own or hold such licenses could
not reasonably be expected to have a Material Adverse Effect.
Section 5.17 Compliance with Statutes. The Borrower and its Subsidiaries
are in compliance in all material respects with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies and have all necessary permits, licenses and other necessary
authorizations with respect to the conduct of their businesses and the ownership
and operation of their properties except where the failure to so comply or hold
such permits, licenses or other authorizations could not reasonably be expected
to have a Material Adverse Effect.
Section 5.18 Environmental Matters.
(a) Borrower and its Subsidiaries have complied with, and on the date
of each Borrowing will be in compliance with, all applicable Environmental Laws
and the requirements of any permits issued under such Environmental Laws except
where failure to so comply could not reasonably be expected to have a Material
Adverse Effect. To the best knowledge of the Borrower, there are no pending,
past or threatened Environmental Claims against the Borrower or any of its
Subsidiaries or any property owned or operated by the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect. To the best knowledge of the Borrower, there are no conditions or
occurrences on or emanating from any property owned or operated by the Borrower
or any of its Subsidiaries or on any property adjoining or in the vicinity of
any such property that could reasonably be expected (i) to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries or any
property owned or operated by the Borrower or any of its Subsidiaries, or (ii)
to cause any property owned or operated by the Borrower or any of its
Subsidiaries to be subject to any material restrictions on the ownership,
occupancy, the current or intended use or transferability of such property by
the Borrower or any of its Subsidiaries under any applicable Environmental Law
except for any such condition or occurrence described in clauses (i) or (ii)
which could not reasonably be expected to have a Material Adverse Effect.
(b) To the best knowledge of the Borrower (i) Hazardous Materials have
not at any time been generated, used, treated or stored on, or transported to or
from, any property owned or operated by the Borrower or any of its Subsidiaries
in a manner that has violated or could reasonably be expected to violate any
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Environmental Law, except for such violation which could not reasonably be
expected to have a Material Adverse Effect, and (ii) Hazardous Materials have
not at any time been released on or from any property owned or operated by the
Borrower or any of its Subsidiaries in a matter that has violated or could
reasonably be expected to violate any Environmental Law, except for such
violation which could not reasonably be expected to have a Material Adverse
Effect.
Section 5.19 Year 2000 Compliance. All devices, systems, machinery,
information technology, computer software and hardware, and other date sensitive
technology (jointly and severally its "systems") necessary for the Borrower and
its Subsidiaries to carry on their business as presently contemplated to be
conducted will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of their business operations. For
purposes hereof, "Year 2000 Compliant" means that such systems are designed to
be used prior to, during and after the Gregorian calendar year 2000 A.D. and
will operate during each such time period without error relating to date data,
specifically including any error relating to, or the product of, date data which
represents or references different centuries or more than one century. The
Borrower and its Subsidiaries will (i) undertake a inventory, review, and
assessment of all areas within their businesses and operations that could be
adversely affected by the failure of the Borrower and its Subsidiaries to be
Year 2000 Compliant on a timely basis; and (ii) develop a plan and timeline for
becoming Year 2000 Compliant on a timely basis. The Borrower, when it
reasonably determines such action necessary, will make written inquiry of each
of its and its Subsidiaries' key suppliers, vendors, and customers, and will
obtain in writing confirmations from all such Persons, as to whether such
Persons have initiated programs to become Year 2000 Compliant. For purposes
hereof, "key suppliers, vendors, and customers" refers to those suppliers,
vendors, and customers of the Borrower and its Subsidiaries whose business
failure could reasonably be expected to have a Material Adverse Effect. The
fair market value of all Collateral pledged to the Lenders as collateral to
secure the Loans is not and shall not be less than currently anticipated or
subject to substantial deterioration in value because of the failure of such
Collateral to be Year 2000 Compliant."
Section 5.20 Existing Indebtedness and Liens. The Borrower and its
Subsidiaries have no Indebtedness or Liens on any of their properties or assets
on the Effective Date other than as listed on Schedule 5.20.
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SECTION 6. COVENANTS.
The Borrower covenants and agrees that, without the consent of the Majority
Lenders and so long as any Note, Letter of Credit or Reimbursement Obligation or
any other Obligation is outstanding or any Commitment is outstanding hereunder:
Section 6.1 Existence. The Borrower and its Subsidiaries will preserve and
maintain their existence except (i) for the dissolution of any Subsidiaries
whose assets are transferred to the Borrower or any of its Subsidiaries; (ii)
the Borrower shall not be required to preserve, renew or keep in full force and
effect the corporate or other existence of any Subsidiary, if the Board of
Directors of the Borrower shall determine in the exercise of its business
judgment that the preservation thereof is no longer desirable in the conduct of
business of the Borrower or any Subsidiary and that abandonment of any such
right shall not have a Material Adverse Effect on the Borrower and its
Subsidiaries, taken as a whole; and (iii) as otherwise expressly permitted
herein.
Section 6.2 Maintenance. The Borrower and its Subsidiaries will maintain,
preserve and keep their material plants, properties and equipment necessary to
the proper conduct of their businesses in reasonably good repair, working order
and condition (normal wear and tear excepted) and will from time to time make
all reasonably necessary repairs, renewals, replacements, additions and
betterments thereto consistent with usual and customary business practices so
that at all times such plants, properties and equipment are reasonably preserved
and maintained, in each case with such exceptions as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect;
provided, however, that nothing in this Section 6.2 shall prevent the Borrower
or any of its Subsidiaries from discontinuing the operation or maintenance of
any such plants, properties or equipment if such discontinuance is, in the
judgment of the Borrower or any such Subsidiary, as applicable, desirable in the
conduct of its business and not materially disadvantageous to the Lenders.
Section 6.3 Taxes. The Borrower and its Subsidiaries will duly pay and
discharge all Taxes upon or against them or their properties before penalties
accrue thereon, unless and to the extent that the same is being contested in
good faith and by appropriate proceedings and reserves have been established in
conformity with GAAP.
Section 6.4 ERISA. The Borrower and its Subsidiaries will promptly pay and
discharge all obligations and liabilities arising under ERISA or otherwise with
respect to each Plan of a character which if unpaid or unperformed might result
in the imposition of a material Lien against any properties or assets of the
Borrower or any of its Subsidiaries and will promptly notify the Agent of (i)
the occurrence of any reportable event (as defined in ERISA) relating to a Plan
other than any such event with respect to which the PBGC has waived notice by
regulation; (ii) receipt of any notice from PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor; (iii) the
Borrower's or any of its Subsidiary's intention to terminate or withdraw from
any Plan if such termination or withdrawal would result in liability under Title
IV of ERISA; and (iv) the occurrence of any event that could reasonably be
expected to result in the incurrence of any material liability, fine or penalty,
or any material increase in the contingent liability of the Borrower or any of
its Subsidiaries, in connection with any post-retirement benefit under a welfare
plan benefit (as defined in ERISA).
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Section 6.5 Insurance. The Borrower and its Subsidiaries will maintain or
cause to be maintained with responsible insurance companies, insurance against
any loss or damage to all material insurable property and assets owned by them,
such insurance to be of a character and in or in excess of such amounts as are
customarily maintained by companies similarly situated and operating like
property or assets (subject to self-insured retentions and deductibles), all of
which policies shall provide that no policy shall terminate without at least ten
(10) days' advance written notice to the Agent and be reasonably acceptable to
the Agent. The Borrower and each of its Subsidiaries will also insure employers'
and public and product liability risks with responsible insurance companies, all
as reasonably acceptable to the Agent.
Section 6.6 Financial Reports and Other Information.
(a) The Borrower and its Subsidiaries will maintain a system of
accounting in such manner as will enable preparation of financial statements in
accordance with GAAP and will furnish to the Agent and its authorized
representatives such information about the business and financial condition of
the Borrower and its Subsidiaries, including, without limitation, any corporate
documents and records, within such time period, as the Agent or any Lender may
reasonably request; and, without any request, will furnish to the Agent:
(i) within forty-five (45) days after the end of each fiscal
quarter of each fiscal year of the Borrower, the consolidated balance sheet of
the Borrower and its Subsidiaries as at the end of such fiscal quarter and the
related consolidated statements of income and retained earnings and of cash
flows for such fiscal quarter and for the portion of the fiscal year ended with
the last day of such fiscal quarter, all of which shall be in reasonable detail
and in the case of consolidated statements, in the form filed with the SEC and
within five (5) days thereafter, a certificate of an officer of the Borrower
acceptable to the Agent that such financial reports fairly present the financial
condition of the Borrower and its Subsidiaries as of the dates indicated and the
results of their operations and changes in their cash flows for the periods
indicated and that they have been prepared in accordance with GAAP, in each
case, subject to normal year-end audit adjustments and the omission of any
footnotes as permitted by the SEC; and
(ii) within one hundred twenty (120) days after the end of each
fiscal year of the Borrower, consolidated and consolidating balance sheets of
the Borrower and its Subsidiaries as at the end of such fiscal year and the
related consolidated and consolidating statements of income and consolidated
statements of retained earnings and of cash flows for such fiscal year and
setting forth consolidated comparative figures for the preceding fiscal year and
certified by an officer of the Borrower acceptable to the Agent, to the effect
that such statements fairly present the financial condition of the Borrower and
its Subsidiaries as of the dates indicated and the results of their operations
and changes in their cash flows, and in the case of the consolidated statements,
audited by an independent nationally-recognized accounting firm acceptable to
the Agent.
(b) Each financial statement furnished to the Agent pursuant to
subsections (i) and (ii) of Section 6.6(a) shall be accompanied by (i) a written
certificate signed by an officer of the Borrower acceptable to the Agent to the
effect that (x) no Default or Event of Default has occurred during the period
covered by such statements or, if any such Default or Event of Default has
occurred during such period, setting forth a description of such Default or
Event of Default and specifying the action, if any, taken by the Borrower to
remedy the same, and (y) the representations and warranties
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contained herein are true and correct in all material respects as though made on
the date of such certificate, except to the extent that any such representation
or warranty relates solely to an earlier date, in which case it was true and
correct as of such earlier date and except as otherwise described therein, as a
result of the transactions expressly permitted hereunder or as previously
disclosed to the Lenders, and (ii) a Compliance Certificate in the form of
Exhibit 6.6 showing the Borrower's compliance with the financial covenants set
forth herein.
(c) Promptly upon receipt thereof, the Borrower will provide the Agent
with a copy of each report or "management letter" submitted to the Borrower or
any of its Subsidiaries by its independent accountants or auditors in connection
with any annual, interim or special audit made by them of the books and records
of the Borrower or any of its Subsidiaries.
(d) Promptly after any officer of the Borrower obtains knowledge of
any of the following, the Borrower will provide the Agent with written notice in
reasonable detail of: (i) any pending or threatened Environmental Claim against
the Borrower or any of its Subsidiaries or any property owned or operated by the
Borrower or any of its Subsidiaries that if adversely determined could
reasonably be expected to have a Material Adverse Effect; (ii) any condition or
occurrence on any property owned or operated by the Borrower or any of its
Subsidiaries that results in noncompliance by the Borrower or any of its
Subsidiaries with any Environmental Law that could reasonably be expected to
have a Material Adverse Effect; and (iii) the taking of any material removal or
remedial action in response to the actual or alleged presence of any Hazardous
Material on any property owned or operated by the Borrower or any of its
Subsidiaries, which Hazardous Material or the removal or remediation thereof
could reasonably be expected to have a Material Adverse Effect.
(e) The Borrower will promptly and in any event, within ten (10) days
after an officer of the Borrower has knowledge thereof, give written notice to
the Agent of: (i) any pending or threatened litigation or proceeding against
the Borrower or any of its Subsidiaries asserting any uninsured claim or claims
against any of same in excess of $1,000,000 in the aggregate; (ii) the
occurrence of any Default or Event of Default; (iii) any circumstance that has
had a Material Adverse Effect; and (iv) any event which would result in a breach
of Sections 6.20, 6.21, 6.22, 6.23 or 6.24.
(f) The Agent will promptly provide to each Lender all information
provided to it by the Borrower pursuant to this Section 6.6.
(g) The Borrower will (i) furnish such additional information,
statements and other reports with respect to the Borrower's compliance (and its
approach to and progress towards achieving compliance) with Section 5.19 as the
Agent may request from time to time; (ii) in the event of any change in
circumstances that causes or will likely cause any of the Borrower's
representations and warranties set forth in Section 5.19, to no longer be true,
the Borrower shall promptly, and in any event within ten (10) days of receipt of
information regarding a change in circumstances, provide the Agent with written
notice that describes in reasonable detail the change in circumstances and any
additional information any Lender requests of the Borrower in connection
therewith; and (iii) give any representative of any Lender reasonable access to,
and permit such representative to examine, copy or make excerpts from, any and
all relevant books, records and documents in the possession of the Borrower and
its Subsidiaries and relating to their affairs, and to inspect any of the
properties and systems of the Borrower and its Subsidiaries, and to project test
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its systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of the Lenders.
Section 6.7 Lenders' Inspection Rights. Upon reasonable notice from the
Agent or any Lender, the Borrower will permit the Agent or any Lender (and such
Persons as the Agent or any Lender may reasonably designate), at the Borrower's
expense while an Event of Default has occurred and is continuing, during normal
business hours following reasonable notice to visit and inspect any of the
properties of the Borrower or any of its Subsidiaries, to examine all of their
books and records, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision, the Borrower authorizes
such accountants to discuss with the Agent or any Lender, and such Persons as
the Agent or any Lender may designate, the affairs, finances and accounts of the
Borrower and its Subsidiaries provided that the Borrower has the opportunity to
be present at such discussions), all at such reasonable times and as often as
may be reasonably requested.
Section 6.8 Conduct of Business. The Borrower and its Subsidiaries will
not engage in any line of business other than the specialty electric and
telecommunications infrastructure contracting service business, electrical
contracting services, installation of transportation, control and lighting
equipment and services or businesses reasonably related thereto (each, a
"Permitted Business").
Section 6.9 New Subsidiaries. The Borrower shall cause (i) any direct or
indirect domestic Subsidiary which is formed or acquired after the Effective
Date to become a Guarantor with respect to, and jointly and severally liable
with all other Guarantors for, all of the Obligations under this Agreement and
the Notes pursuant to a Guaranty substantially in the form of Exhibit 4.1A, and
(ii) any Subsidiary which forms or acquires a Subsidiary after the Effective
Date to execute and deliver to the Agent a Stock Pledge Agreement substantially
in the form of Exhibit 4.1B, and to deliver the original stock certificates for
any such Subsidiary as set forth therein (or other evidence of its ownership
interest therein) and undated stock powers executed in blank with respect
thereto, in each case within thirty (30) days following such formation or
acquisition. The Borrower shall provide to the Agent a list of all its
Subsidiaries with the state or country of incorporation and the location of the
principal place of business of each such Subsidiary at the same time as it
provides its quarterly financial reports to the Agent pursuant to Section
6.6(a)(i).
Section 6.10 Dividends and Negative Pledges.
(a) The Borrower shall not pay any dividends or other distributions
on its capital stock.
(b) Except as otherwise permitted herein, neither the Borrower nor
any of its Subsidiaries shall, directly or indirectly, create or otherwise
permit to exist or become effective any restriction on the ability of any
Subsidiary of the Borrower to (i) pay dividends or make any other distributions
on its capital stock or any other interest or participation in its profits owned
by the Borrower or to pay any Indebtedness owed to the Borrower, or (ii) make
loans or advances to the Borrower or any of its Subsidiaries, except in either
case for restrictions existing under or by reason of applicable law, this
Agreement and the other Credit Documents.
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(c) Neither the Borrower nor any of its Subsidiaries shall enter into
any agreement creating or assuming any Lien upon its properties, revenues or
assets, whether now owned or hereafter acquired other than as permitted
hereunder. Neither the Borrower nor any of its Subsidiaries shall enter into any
agreement other than this Agreement and the Credit Documents prohibiting the
creation or assumption of any Lien upon its properties, revenues or assets,
whether now owned or hereafter acquired or prohibiting or restricting the
ability of the Borrower or any of its Subsidiaries to amend or otherwise modify
this Agreement or any Credit Document.
Section 6.11 Restrictions on Fundamental Changes. Neither the Borrower nor
any of its Subsidiaries shall be a party to any merger into or consolidation
with, make an Acquisition or otherwise purchase or acquire all or substantially
all of the assets or stock of, any other Person, or sell all or substantially
all of its assets (other than sales of inventory or surplus or obsolete assets
in the ordinary course of business) or stock, except:
(a) the Borrower or any of its Subsidiaries may merge into or
consolidate with, make an Acquisition or otherwise purchase or acquire all or
substantially all of the assets or stock of any other Person if upon the
consummation of any such merger, consolidation, purchase or Acquisition, (i) the
Borrower or such Subsidiary is the surviving corporation to any such merger or
consolidation (or the other Person will thereby become a Subsidiary); (ii) the
nature of the business of such acquired Person is a Permitted Business; (iii)
the maximum cash purchase price paid and Indebtedness incurred to a seller by
the Borrower or any of its Subsidiaries in connection with (x) any single
Acquisition shall not exceed ten percent (10%) of the Borrower's Consolidated
Net Worth as of the end of the immediately preceding fiscal quarter, and (y) all
Acquisitions made during any rolling four (4) fiscal quarters (excluding any
Acquisition exceeding ten percent (10%) of the Borrower's Consolidated Net Worth
for which the Borrower has obtained the approval of the Majority Lenders
hereunder) shall not exceed twenty-five percent (25%) of the Borrower's
Consolidated Net Worth as of the end of the immediately preceding fiscal
quarter; (v) no Default or Event of Default shall have occurred and be
continuing or would otherwise be existing as a result of such merger,
consolidation, purchase or Acquisition; and (vi) such merger, consolidation,
purchase or Acquisition is non-hostile in nature;
(b) the Borrower may purchase or otherwise acquire all or
substantially all of the stock or assets of, or otherwise acquire by merger or
consolidation, any of its Subsidiaries, and any such Subsidiary may merge into,
or consolidate with, or purchase or otherwise acquire all or substantially all
of the assets or stock of or sell all or substantially all of its assets or
stock to, any other Subsidiary of the Borrower or the Borrower, in each case so
long as the Borrower shall be the surviving entity to any such merger or
consolidation if the transaction is with the Borrower; and
(c) the sale of non operating assets unnecessary for the continued
operation of the Borrower's business and in the normal course of the Borrower's
business.
Except as otherwise permitted in this Section 6.11, the Borrower shall not sell
or dispose of any capital stock of or its ownership interest in any of the
Guarantors or any other Subsidiaries which it may form.
Section 6.12 Environmental Laws. The Borrower and its Subsidiaries shall
comply with all Environmental Laws (including, without limitation, obtaining and
maintaining all necessary
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permits, licenses and other necessary authorizations) applicable to or affecting
the properties or business operations of the Borrower or any of its Subsidiaries
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
Section 6.13 Liens. The Borrower and its Subsidiaries shall not create,
incur, assume or suffer to exist any Lien of any kind on any of their properties
or assets of any kind except the following (collectively, the "Permitted
Liens"):
(a) Liens arising in the ordinary course of business by operation of
law in connection with workers' compensation, unemployment insurance, old age
benefits, social security obligations, taxes, assessments, statutory obligations
or other similar charges, good faith deposits, pledges or other Liens in
connection with (or to obtain letters of credit in connection with) bids,
performance bonds, contracts or leases to which the Borrower or its Subsidiaries
are a party or other deposits required to be made in the ordinary course of
business; provided that in each case the obligation secured is not for
Indebtedness and is not overdue or, if overdue, is being contested in good faith
by appropriate proceedings and reserves in conformity with GAAP have been
provided therefor;
(b) mechanics', workmen, materialmen, landlords', carriers' or other
similar Liens arising in the ordinary course of business (or deposits to obtain
the release of such Liens) related to obligations not due or, if due, that are
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(c) inchoate Liens under ERISA and Liens for Taxes not yet due or
which are being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP have been provided therefor;
(d) Liens arising out of judgments or awards against the Borrower or
any of its Subsidiaries, or in connection with surety or appeal bonds or the
like in connection with bonding such judgments or awards, the time for appeal
from which or petition for rehearing of which shall not have expired or for
which the Borrower or such Subsidiary shall be prosecuting on appeal or
proceeding for review and for which it shall have obtained a stay of execution
or the like pending such appeal or proceeding for review; provided that the
aggregate amount of uninsured or underinsured liabilities (including interest,
costs, fees and penalties, if any) of the Borrower and its Subsidiaries secured
by such Liens shall not exceed $1,000,000 at any one time outstanding and
provided further there is adequate assurance, in the sole reasonable discretion
of the Lenders, that the insurance proceeds attributable thereto shall be paid
promptly upon the expiry of such time period or resolution of such proceeding if
necessary to remove such Liens;
(e) rights of a common owner of any interest in property held by a
Person and such common owner as tenants in common or through other common
ownership;
(f) encumbrances (other than to secure the payment of Indebtedness),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any property or rights-of-way of a Person for the purpose of
roads, pipelines, transmission lines, transportation lines, distribution lines,
removal of gas, oil, coal, metals, steam, minerals, timber or other natural
resources, and other like purposes, or for the joint or common use of real
property, rights-of-way,
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facilities or equipment, or defects, irregularity and deficiencies in title of
any property or rights-of-way which do not materially diminish the value of or
the ability to use such property;
(g) financing statements filed by lessors of property (but only with
respect to the property so leased) and Liens under any conditional sale or title
retention agreements entered into in the ordinary course of business;
(h) rights of lessees of equipment owned by the Borrower or any of its
Subsidiaries;
(i) Liens securing Indebtedness permitted by Section 6.14(d) on any
assets acquired;
(j) Liens on assets acquired in an Acquisition securing Indebtedness
permitted by Section 6.14(h); provided that no such Liens shall encumber
accounts, accounts receivable, inventory (other than purchase money Liens),
cash, deposit accounts, Cash Equivalents, general intangibles, intellectual
property or any stock or other ownership interests in any Subsidiaries;
(k) existing Liens listed on Schedule 6.13 and any extension, renewal
or replacement thereof; and
(l) Liens on any assets acquired in an Acquisition, provided that all
such Liens, other than Permitted Liens listed in (a) through (k) of this
Section, shall be released on or before thirty (30) days from the date of such
Acquisition.
Section 6.14 Indebtedness. The Borrower and its Subsidiaries shall not
contract, assume or suffer to exist any Indebtedness (including, without
limitation, any Guaranties), except:
(a) Indebtedness under the Credit Documents;
(b) unsecured intercompany loans and advances from the Borrower to any
of its Subsidiaries and unsecured intercompany loans and advances from any of
such Subsidiaries to the Borrower or any other Subsidiaries of the Borrower;
(c) existing Indebtedness listed on Schedule 6.13, and any subsequent
extensions, renewals or refinancings thereof so long as such Indebtedness is not
increased in amount, the maturity date thereof is not made earlier in time, the
interest rate per annum applicable thereto is not increased, any amortization of
principal thereunder is not shortened and the payments thereunder are not
increased;
(d) Capitalized Lease Obligations and purchase money Indebtedness on
assets acquired in an aggregate amount not to exceed $2,500,000 at any one time
outstanding;
(e) unsecured Indebtedness to a seller incurred in connection with an
Acquisition, provided that such Indebtedness is subordinated in payment to the
Obligations hereunder as reasonably acceptable to the Agent, such Indebtedness
contains covenants no more restrictive than the covenants contained in this
Agreement and standstill provisions reasonably acceptable to the
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Agent and no payments may be made thereon if a Default or Event of Default shall
have occurred and be continuing or would occur as a result of any such payment;
(f) Indebtedness under any Interest Rate Protection Agreements entered
into to protect the Borrower against fluctuations in interest rates and not for
speculative purposes;
(g) Indebtedness incurred in connection with Subordinated Debt
Investments not to exceed (excluding any Indebtedness permitted by Section
6.14(e)) in the aggregate $50,000,000, all as reasonably acceptable to the
Agent; and
(h) other Indebtedness not included within subsections (a) through (g)
above, including, without limitation, Indebtedness assumed in connection with an
Acquisition, provided that such Indebtedness shall not exceed $7,500,000 at any
one time outstanding.
Section 6.15 Loans, Advances and Investments. The Borrower and its
Subsidiaries shall not lend money or make advances to any Person, or purchase or
acquire any stock, indebtedness, obligations or securities of, or any other
interest in, or make any capital contribution to, any Person (any of the
foregoing, an "Investment") other than:
(a) Investments in Cash Equivalents;
(b) receivables owing to the Borrower or its Subsidiaries created or
acquired in the ordinary course of business and payable on customary trade terms
of the Borrower or such Subsidiary and in compliance with the requirements of
Section 6.17;
(c) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business;
(d) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases;
(e) as permitted by Section 6.14(b);
(f) loans to employees of the Borrower or any of its Subsidiaries,
provided that all such loans shall not exceed $2,000,000 at any one time;
(g) the existing loan to the NorAm Telecommunications, Inc. employee
stock ownership plan; and
(h) as permitted by Section 6.11.
Section 6.16 Transfer of Assets. The Borrower and its Subsidiaries shall
not permit any sale, transfer, conveyance, assignment or other disposition of
any material asset of the Borrower or any of its Subsidiaries except:
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(a) transfers of inventory, equipment and other assets in the
ordinary course of business;
(b) the retirement or replacement of assets (with assets of equal or
greater value) in the ordinary course of business;
(c) transfers of any assets among the Borrower and any of its
Subsidiaries; and
(d) the transfer of any assets acquired in an Acquisition which are
not necessary for the operation of the business of the Borrower and its
Subsidiaries, provided that the net cash proceeds thereof are reinvested by the
Borrower and its Subsidiaries in the operation of a Permitted Business.
Section 6.17 Transactions with Affiliates. Except as otherwise
specifically permitted herein, the Borrower and its Subsidiaries shall not enter
into or be a party to any material transaction or arrangement or series of
related transactions or arrangements which in the aggregate would be material
with any Affiliate of such Person, including without limitation, the purchase
from, sale to or exchange of property with or the rendering of any service by or
for, any Affiliate, except pursuant to the reasonable requirements of such
entity's business and upon fair and reasonable terms no less favorable to such
entity than would be able to be obtained in a comparable arm's-length
transaction with a Person other than an Affiliate.
Section 6.18 Compliance with Laws. The Borrower and its Subsidiaries shall
conduct their businesses and otherwise be in compliance in all material respects
with all applicable laws, regulations, ordinances and orders of all
governmental, judicial and arbitral authorities applicable to them and shall
obtain and maintain all necessary permits, licenses and other authorizations
necessary to conduct their businesses and own and operate their properties
except where the failure to comply or have such permits, licenses or other
authorizations could not reasonably be expected to have a Material Adverse
Effect.
Section 6.19 Capital Expenditures. Neither the Borrower nor any of its
Subsidiaries shall make or commit to make Capital Expenditures in excess of
fifteen percent (15%) of Consolidated Net Worth during any rolling four (4)
fiscal quarters.
Section 6.20 Minimum Consolidated Net Worth. The Borrower will maintain a
minimum Consolidated Net Worth of not less than an amount equal to the sum of
(i) $98,000,000, plus (ii) for each fiscal quarter ended prior to (but not on)
such date of determination, commencing with the fiscal quarter ended June 30,
1998, an amount equal to 50% of Consolidated Net Income for such fiscal quarter,
if positive, plus (iii) for the fiscal quarter during which such date of
determination falls, an amount equal to 100% of the amount of any equity
issuance by the Borrower, including in a secondary offering or where equity is
used to acquire another entity in an Acquisition, plus (iv) for the fiscal
quarter during which such determination falls, an amount equal to 100% of the
stockholders equity of any entity acquired in an Acquisition for which the
Borrower uses the pooling of interest method of accounting in accordance with
GAAP, minus (v) any distributions to shareholders of any Subchapter S
corporation acquired in an Acquisition as a result of operations of the
corporation acquired prior to the closing of the Acquisition or the terms of the
Acquisition.
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Section 6.21 Fixed Charge Coverage Ratio. The Borrower will maintain a
Fixed Charge Coverage Ratio of at least 1.25 to 1.0.
Section 6.22 Funded Debt to EBITDA Ratio. The Borrower will maintain a
maximum Funded Debt to EBITDA Ratio of not greater than 3.50 to 1.0.
Section 6.23 Senior Debt to EBITDA. The Borrower will maintain a maximum
Senior Debt to EBITDA Ratio of not greater than 3.0 to 1.0.
Section 6.24 Tangible Assets to Senior Debt Ratio. The Borrower will
maintain a Tangible Assets to Senior Debt Ratio of at least 1.5 to 1.0.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES.
Section 7.1 Events of Default. Any one or more of the following shall
constitute an Event of Default:
(a) default by the Borrower in the payment of the principal amount of
any Loan, any Reimbursement Obligation or any interest thereon or any fees
payable hereunder within five (5) days following the date when due;
(b) default by the Borrower in the observance or performance of any
covenant set forth in Sections 6.6(e), 6.10(a), 6.11 or 6.16;
(c) default by the Borrower in the observance or performance of any
provision hereof or of any other Credit Document not mentioned in (a) or (b)
above (excluding any default of Section 6.21 solely as a result of distributions
or dividends made by the entity acquired in an Acquisition before the date of
such Acquisition), which is not remedied within thirty (30) days after the
earlier of (i) such default or event of default first becoming known to any
officer of the Borrower, or (ii) notice to the Borrower by the Agent of the
occurrence of such default or event of default;
(d) any representation or warranty made or deemed made herein, in any
other Credit Document or in any financial or other report or document furnished
in compliance herewith or therewith by the Borrower or any of its Subsidiaries
proves untrue in any material respect as of the date of the issuance or making,
or deemed issuance or making thereof;
(e) default occurs in the payment when due (after any applicable grace
period) of Indebtedness in an aggregate principal amount of $1,000,000 or more
of the Borrower or any of its Subsidiaries, or the occurrence of any other
default, which with the passage of time or notice would permit the holder or
beneficiary of such Indebtedness, or a trustee therefor, to cause the
acceleration of the maturity of any such Indebtedness or any mandatory
unscheduled prepayment, purchase, or other early funding thereof;
(f) the Borrower or any of its Subsidiaries (i) has entered
involuntarily against it an order for relief under the United States Bankruptcy
Code or a comparable action is taken under any bankruptcy or insolvency law of
another country or political subdivision of such country, (ii) generally does
not pay, or admits its inability generally to pay, its debts as they become due,
(iii)
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makes a general assignment for the benefit of creditors, (iv) applies for,
seeks, consents to, or acquiesces in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any substantial part
of its property, (v) institutes any proceeding seeking to have entered against
it an order for relief under the United States Bankruptcy Code or any comparable
law, to adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fails to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (vi) makes any
board of directors resolution in direct furtherance of any matter described in
clauses (i)-(v) above, or (vii) fails to contest in good faith any appointment
or proceeding described in Section 7.1(f);
(g) a custodian, receiver, trustee, examiner, liquidator or similar
official is appointed for the Borrower or any of its Subsidiaries or any
substantial part of its property, or a proceeding described in Section 7.1(f)(v)
is instituted against the Borrower or any of its Subsidiaries, and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of sixty (60) days;
(h) the Borrower or any of its Subsidiaries fails within thirty (30)
days (or such earlier date as any steps to execute on such judgment or order
take place) to pay, bond or otherwise discharge, or to obtain an indemnity
against on terms and conditions satisfactory to the Lenders in their reasonable
discretion, any one or more judgments or orders for the payment of money in
excess of $1,000,000 in the aggregate which is uninsured or underinsured by at
least such amount (provided that there is adequate assurance, in the sole
discretion of the Lenders, that the insurance proceeds attributable thereto
shall be paid promptly upon the expiration of such time period or resolution of
such proceeding), which is not stayed on appeal or otherwise being appropriately
contested in good faith in a manner that stays execution;
(i) the Borrower or any of its Subsidiaries fails to pay when due an
amount aggregating in excess of $1,000,000 that it is liable to pay to the PBGC
or to a Plan under Title IV of ERISA; or a notice of intent to terminate a Plan
having Unfunded Vested Liabilities of the Borrower or any of its Subsidiaries in
excess of $1,000,000 (a "Material Plan") is filed under Title IV of ERISA; or
the PBGC institutes proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer any Material Plan; or a proceeding is
instituted by a fiduciary of any Material Plan against the Borrower or any of
its Subsidiaries to collect any liability under Section 515 or 4219(c)(5) of
ERISA and such proceeding is not dismissed within thirty (30) days thereafter;
or a condition exists by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated;
(j) the Borrower, any Guarantor, any Person acting on behalf of the
Borrower or any Guarantor, or any governmental, judicial or arbitral authority
challenges the validity of any Credit Document or the Borrower's or any
Guarantor's obligations thereunder, or any Credit Document ceases to be in full
force and effect in all material respects or ceases to give to the Agent and the
Lenders the rights and powers purported to be granted in its favor thereby in
all material respects other than for any reason solely caused by or within the
sole control of the Agent or any Lender; or
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(k) any Person or two or more Persons acting in concert shall acquire
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934), directly or indirectly, of securities of the Borrower (or
other securities convertible into such securities) representing fifty percent
(50%) or more of the combined voting power of all outstanding securities of the
Borrower entitled to vote in the election of directors.
Section 7.2 Non-Bankruptcy Defaults. When any Event of Default other than
those described in subsections (f) or (g) of Section 7.1 has occurred and is
continuing, the Agent shall, by notice to the Borrower: (a) if so directed by
the Majority Lenders, terminate the remaining Commitments and all other
obligations of the Lenders hereunder on the date stated in such notice (which
may be the date thereof); (b) if so directed by the Majority Lenders, declare
the principal of and the accrued interest on all outstanding Notes to be
forthwith due and payable and thereupon all outstanding Notes, including both
principal and interest thereon, shall be and become immediately due and payable
together with all other amounts payable under the Credit Documents without
further demand, presentment, protest or notice of any kind, including, but not
limited to, notice of intent to accelerate and notice of acceleration, each of
which is expressly waived by the Borrower; and (c) if so directed by the
Majority Lenders, demand that the Borrower immediately pay to the Agent (to be
held by the Agent pursuant to Section 7.4) the full amount then available for
drawing under each or any outstanding Letter of Credit; and the Borrower agrees
to immediately make such payment and acknowledges and agrees that neither the
Agent nor the Lenders would have an adequate remedy at law for failure by the
Borrower to honor any such demand and that the Agent, for the benefit of the
Lenders shall have the right to require the Borrower to specifically perform
such undertaking whether or not any drawings or other demands for payment have
been made under any Letter of Credit. The Agent, after giving notice to the
Borrower pursuant to Section 7.1(c) or (d) or this Section 7.2, shall also
promptly send a copy of such notice to the other Lenders, but the failure to do
so shall not impair or annul the effect of such notice.
Section 7.3 Bankruptcy Defaults. When any Event of Default described in
subsections (f) or (g) of Section 7.1 has occurred and is continuing with
respect to the Borrower, then (i) all outstanding Notes shall immediately become
due and payable together with all other amounts payable under the Credit
Documents without presentment, demand, protest or notice of any kind, each of
which is expressly waived by the Borrower, (ii) all obligations of the Agent or
any Lender to extend further credit pursuant to any of the terms hereof shall
immediately terminate, and (iii) the Borrower shall immediately pay to the Agent
(to be held by the Agent pursuant to Section 7.4) the full amount then available
for drawing under all outstanding Letters of Credit, the Borrower acknowledging
and agreeing that neither the Agent nor the Lenders would have an adequate
remedy at law for failure by the Borrower to honor any such demand and that the
Agent and the Lenders shall have the right to require the Borrower to
specifically perform such undertaking whether or not any drawings or other
demands for payment have been made under any of the Letters of Credit.
Section 7.4 Collateral for Undrawn Letters of Credit.
(a) If the prepayment of the amount available for drawing under any or
all outstanding Letters of Credit is required under Section 7.2 or 7.3, the
Borrower shall forthwith pay the amount required to be so prepaid, to be held by
the Agent as provided in subsection (b) below.
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(b) All amounts prepaid pursuant to subsection (a) above shall be held
by the Agent in a separate collateral account (such account, and the credit
balances, properties and any investments from time to time held therein, and any
substitutions for such account, any certificate of deposit or other instrument
evidencing any of the foregoing and all proceeds of and earnings on any of the
foregoing being collectively called the "Collateral Account") as security for,
and for application by the Agent (to the extent available) to, the reimbursement
of any drawing under any Letter of Credit then or thereafter made by the Agent,
and to the payment of the unpaid balance of any Loans and all other due and
unpaid Obligations (collectively, the "Collateralized Obligations"). The
Collateral Account shall be held in the name of and subject to the exclusive
dominion and control of the Agent, for the benefit of the Lenders, as pledgee
hereunder. If and when requested by the Borrower, the Agent shall invest and
reinvest funds held in the Collateral Account from time to time in Cash
Equivalents specified from time to time by the Borrower, provided that the Agent
is irrevocably authorized to sell investments held in the Collateral Account
when and as required to make payments out of the Collateral Account for
application to Collateralized Obligations due and owing from the Borrower to the
Lenders. If such funds have been deposited pursuant to Section 7.2 or 7.3, when
and if either (i) the Borrower shall have made payment of all Collateralized
Obligations then due and payable, all relevant preference or other disgorgement
periods relating to the receipt of such payments have passed, and no Letters of
Credit, Commitments, Loans, Reimbursement Obligations or other Obligations
remain outstanding or (ii) no Default or Event of Default shall be continuing
hereunder, the Agent shall repay to the Borrower any remaining amounts held in
the Collateral Account.
Section 7.5 Notice of Default. The Agent shall give notice to the Borrower
under Section 7.1(c) and (d) and 7.2 promptly upon being requested to do so by
the Majority Lenders and shall thereupon notify all the Lenders thereof.
Section 7.6 Application of Proceeds. After the occurrence of and during
the continuance of an Event of Default, any payment to the Agent hereunder or
from the proceeds of any cash collateral shall be applied as the Agent and the
Lenders shall elect in their sole discretion.
SECTION 8. CHANGE IN CIRCUMSTANCES.
Section 8.1 Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time any change in applicable law or regulation
or in the interpretation thereof makes it unlawful for any Lender to make or
continue to maintain LIBOR Loans or to give effect to its obligations as
contemplated hereby, such Lender shall promptly give written notice thereof
(which notice shall specify in reasonable detail the basis therefor) to the
Borrower and such Lender's obligations to make, continue or convert Loans into
LIBOR Loans under this Agreement shall be suspended until it is no longer
unlawful for such Lender to make or maintain LIBOR Loans. The Borrower shall
prepay on demand the outstanding principal amount of any such affected LIBOR
Loans, together with all interest accrued thereon and all other amounts then due
and payable to such Lender under this Agreement; provided, however, subject to
all of the terms and conditions of this Agreement, the Borrower may then elect
to borrow the principal amount of the affected LIBOR Loans from such Lender by
means of Base Rate Loans from such Lender that shall not be made ratably by the
Lenders but only by such affected Lender.
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Section 8.2 Unavailability of Deposits or Inability to Ascertain LIBOR
Rate. If on or before the first day of any Interest Period for any Borrowing of
LIBOR Loans the Agent determines (after consultation with other Lenders) that,
due to changes in circumstances since the date hereof, adequate and fair means
do not exist for determining the Adjusted LIBOR Rate or such rate will not
accurately reflect the cost to the Majority Lenders of funding LIBOR Loans for
such Interest Period, the Agent shall give written notice of such determination
(which notice shall specify in reasonable detail the basis therefor) to the
Borrower and the Lenders, whereupon until the Agent notifies the Borrower and
Lenders that the circumstances giving rise to such suspension no longer exist,
the obligations of the Lenders to make, continue or convert Loans into LIBOR
Loans shall be suspended.
Section 8.3 Increased Cost and Reduced Return.
(a) If, on or after the Effective Date, the adoption of or any change
in any applicable law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its Lending Office), including the Agent in its
capacity as the issuer of Letters of Credit, with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency:
(i) subjects any Lender of that type (or its Lending Office) to
any tax, duty or other charge related to any LIBOR Loan, Letter of Credit or
Reimbursement Obligation, or its participation in any thereof, or its obligation
to advance or maintain LIBOR Loans, issue Letters of Credit or to participate
therein, or shall change the basis of taxation of payments to any Lender (or its
Lending Office) of the principal of or interest on its LIBOR Loans, Letters of
Credit or participations therein, or any other amounts due under this Agreement
related to its LIBOR Loans, Letters of Credit, Reimbursement Obligations or
participations therein, or its obligation to make LIBOR Loans, issue Letters of
Credit or acquire participations therein (except for changes in the rate of tax
on the overall net income of such Lender or its Lending Office imposed by the
jurisdiction in which such Lender's principal executive office or Lending Office
is located); or
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System)
against assets of, deposits with or for the account of, or credit extended by,
any Lender of that type (or its Lending Office) or imposes on any Lender of that
type (or its Lending Office) or on the interbank market any other condition
affecting its LIBOR Loans, its Letters of Credit, any Reimbursement Obligation
owed to it or its participation in any thereof, or its obligation to advance or
maintain LIBOR Loans, issue Letters of Credit or to participate in any thereof;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Lending Office) of advancing or maintaining any LIBOR Loan, issuing or
maintaining a Letter of Credit or participation therein, or to reduce the amount
of any sum received or receivable by such Lender (or its Lending Office) in
connection therewith under this Agreement or its Note(s), by an amount deemed by
such Lender to be material, then, within fifteen (15) days after demand in
reasonable detail by such Lender (with a copy to the Agent), the Borrower shall
be obligated to pay to such
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Lender such additional amount or amounts as will compensate such Lender for such
increased cost or reduction.
(b) If, after the Effective Date, the Agent or any Lender shall have
determined that the adoption after the Effective Date of any applicable law,
rule or regulation regarding capital adequacy, or any change therein (including,
without limitation, any revision in the Final Risk-Based Capital Guidelines of
the Board of Governors of the Federal Reserve System (12 CFR Part 208, Appendix
A; 12 CFR Part 225, Appendix A) or of the Office of the Comptroller of the
Currency (12 CFR Part 3, Appendix A), or in any other applicable capital
adequacy rules heretofore adopted and issued by any governmental authority), or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Agent or any Lender (or its Lending
Office) with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's capital, or on the capital of any corporation controlling such Lender,
as a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy) by
an amount deemed by such Lender to be material, then from time to time, within
fifteen (15) days after demand in reasonable detail by such Lender (with a copy
to the Agent), the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction.
(c) The Agent and each Lender that determines to seek compensation
under this Section 8.3 shall notify the Borrower and, in the case of a Lender
other than the Agent, the Agent of the circumstances that entitle the Agent or
Lender to such compensation and will designate a different Lending Office if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole judgment of such Lender, be otherwise
disadvantageous to it; provided that, the foregoing shall not in any way affect
the rights of any Lender or the obligations of the Borrower under this Section
8.3, and provided further that no Lender shall be obligated to make its LIBOR
Loans hereunder at any office located in the United States. A certificate of any
Lender claiming compensation under this Section 8.3 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error and shall be deemed to contain a representation by
the Lender issuing such certificate that: (i) such Lender has used, in its sole
judgment, reasonable efforts to minimize said compensation, and (ii) the
increased costs and charges are common to substantially all of the comparable or
similarly situated loan customers of such Lender and are not unique to the
Borrower. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
Section 8.4 Lending Offices. The Agent and each Lender may, at its option,
elect to make its Loans hereunder at the Lending Office for each type of Loan
available hereunder or at such other of its branches, offices or Affiliates as
it may from time to time elect and designate in a written notice to the Borrower
and the Agent subject to Section 8.3(c).
Section 8.5 Discretion of Lender as to Manner of Funding. Notwithstanding
any other provision of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes
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of this Agreement all determinations hereunder shall be made as if each Lender
had actually funded and maintained each LIBOR Loan through the purchase of
deposits in the Eurodollar interbank market having a maturity corresponding to
such Loan's Interest Period and bearing an interest rate equal to LIBOR for such
Interest Period.
Section 8.6 Substitution of Lender. If (i) any Lender has demanded
compensation or given notice of its intention to demand compensation under
Section 8.3, or (ii) the Borrower is required to pay any additional amount to
any Lender under Section 2.12, the Borrower shall have the right, with the
assistance of the Agent, to seek a substitute lender or lenders reasonably
satisfactory to the Agent (which may be one or more of the Lenders) to replace
such Lender under this Agreement. The Lender to be so replaced shall cooperate
with the Borrower and substitute lender to accomplish such substitution on the
terms of Section 10.10, as applicable; provided that all the Commitments of such
Lender are replaced and such Lender is paid any amounts which it is owed
pursuant to Sections 2.12, 3.3, 7.6, 8.3 and 10.3. Any such replaced Lender
shall retain the benefits of Sections 3.3 and 10.13.
SECTION 9. THE AGENT.
Section 9.1. Appointment and Authorization of Agent and Co-Agent. Each
Lender hereby appoints Bank One as the Agent and National City Bank as the Co-
Agent under the Credit Documents and hereby authorizes the Agent and the Co-
Agent to take such action as Agent and Co-Agent on each of its behalf and to
exercise such powers under the Credit Documents as are delegated to the Agent
and the Co-Agent, respectively, by the terms thereof, together with such powers
as are reasonably incidental thereto.
Section 9.2. Rights and Powers. The Agent and the Co-Agent shall have
the same rights and powers under the Credit Documents as any other Lender and
may exercise or refrain from exercising such rights and powers as though it were
not an Agent or a Co-Agent, and the Agent and the Co-Agent and their respective
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any of its Subsidiaries or Affiliates as
if it were not an Agent or a Co-Agent under the Credit Documents. The term
Lender as used in all Credit Documents, unless the context otherwise clearly
requires, includes the Agent or the Co-Agent in their respective individual
capacities as a Lender. References herein to the Agent Loans, or to the amount
owing to the Agent for which an interest rate is being determined, refer to the
Agent in its individual capacity.
Section 9.3. Action by Agent and Co-Agent. The obligations of the Agent
and the Co-Agent under the Credit Documents are only those expressly set forth
therein. Without limiting the generality of the foregoing, the Agent shall not
be required to take any action concerning any Default or Event of Default,
except as expressly provided in Sections 7.2 and 7.5. Unless and until the
Majority Lenders give such direction the Agent may, except as otherwise
expressly provided herein or therein, take or refrain from taking such actions
as it deems appropriate and in the best interest of all the Lenders. In no
event, however, shall the Agent or any Co-Agent be required to take any action
in violation of applicable law or of any provision of any Credit Document, and
each of the Agent and the Co-Agent shall in all cases be fully justified in
failing or refusing to act hereunder or under any other Credit Document unless
it first receives any further assurances of its indemnification from the Lenders
that it may require, including prepayment of any related expenses and any other
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protection it requires against any and all costs, expenses, and liabilities it
may incur in taking or continuing to take any such action. The Agent shall be
entitled to assume that no Default or Event of Default exists unless notified in
writing to the contrary by a Lender or the Borrower. In all cases in which the
Credit Documents do not require the Agent or any Co-Agent to take specific
action, the Agent and the Co-Agent shall be fully justified in using its
discretion in failing to take or in taking any action thereunder. Any
instructions of the Majority Lenders, or of any other group of Lenders called
for under specific provisions of the Credit Documents, shall be binding on all
the Lenders and holders of Notes.
Section 9.4. Consultation with Experts. Each of the Agent and the Co-
Agent may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 9.5. Indemnification Provisions; Credit Decision. Neither the
Agent, the Co-Agent nor any of their directors, officers, agents, or employees
shall be liable for any action taken or not taken by them in connection with the
Credit Documents (i) with the consent or at the request of the Majority Lenders
or all the Lenders where unanimity is required or (ii) in the absence of their
own gross negligence or willful misconduct. Neither the Agent, the Co-Agent nor
any of their directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement, any other
Credit Document or any Borrowing; (ii) the performance or observance of any of
the covenants or agreements of the Borrower or any Subsidiary contained herein
or in any other Credit Document; (iii) the satisfaction of any condition
specified in Section 4, except receipt of items required to be delivered to the
Agent; or (iv) the validity, effectiveness, genuineness, enforceability,
perfection, value, worth or collectability hereof or of any other Credit
Document or of any other documents or writing furnished in connection with any
Credit Document or of any Collateral; and the Agent and the Co-Agent make no
representation of any kind or character with respect to any such matters
mentioned in this sentence. The Agent and the Co-Agent may execute any of their
duties under any of the Credit Documents by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Lenders or any other Person
for the default or misconduct of any such agents or attorneys-in-fact selected
with reasonable care. The Agent and the Co-Agent shall not incur any liability
by acting in reliance upon any notice, consent, certificate, other document or
statement (whether written or oral) believed by it to be genuine or to be sent
by the proper party or parties. In particular and without limiting any of the
foregoing, the Agent and the Co-Agent shall have no responsibility for
confirming the existence or worth of any Collateral or the accuracy of any
Compliance Certificate or other document or instrument received by any of them
under the Credit Documents. The Agent and the Co-Agent may treat the payee of
any Note as the holder thereof until written notice of transfer shall have been
filed with such Agent signed by such owner in form satisfactory to such agent.
Each Lender acknowledges that it has independently and without reliance on the
Agent or the Co-Agent or any other Lender obtained such information and made
such investigations and inquiries regarding the Borrower and its Subsidiaries as
it deems appropriate, and based upon such information, investigations and
inquiries, made its own credit analysis and decision to extend credit to the
Borrower in the manner set forth in the Credit Documents. It shall be the
responsibility of each Lender to keep itself informed about the creditworthiness
and business, properties, assets, liabilities, condition (financial or
otherwise) and prospects of the Borrower and
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its Subsidiaries, the creditworthiness of all account debtors of the Borrower
and its Subsidiaries, and the Agent and the Co-Agent shall have no liability
whatsoever to any Lender for such matters. The Agent and the Co-Agent shall have
no duty to disclose to the Lenders information that is not required by any
Credit Document to be furnished by the Borrower or any Subsidiaries to such
agent at such time, but is voluntarily furnished to such agent (either in their
respective capacity as Agent or the Co-Agent or in their individual capacity).
Section 9.6. Indemnity. The Lenders shall ratably, in accordance with
their Percentages, indemnify and hold the Agent, the Co-Agent, and their
directors, officers, employees, agents and representatives harmless from and
against any liabilities, losses, costs or expenses suffered or incurred by it or
by any security trustee under any Credit Document or in connection with the
transactions contemplated thereby, regardless of when asserted or arising,
except to the extent they are promptly reimbursed for the same by the Borrower
or out of the proceeds of any Collateral and except to the extent that any event
giving rise to a claim was caused by the gross negligence or willful misconduct
of the party seeking to be indemnified. The obligations of the Lenders under
this Section 9.6 shall survive termination of this Agreement.
Section 9.7. Resignation of Agent and Successor Agent. The Agent and any
Co-Agent may resign at any time upon at least thirty (30) days' prior written
notice to the Lenders and the Borrower. Upon any such resignation of the Agent
or any Co-Agent, the Majority Lenders, with the consent of the Borrower, which
consent shall not be unreasonably withheld, shall have the right to appoint a
successor Agent or Co-Agent, as the case may be. If no successor Agent or Co-
Agent, as the case may be, shall have been so appointed by the Majority Lenders
and shall have accepted such appointment within thirty (30) days after the
retiring Agent's or Co-Agent's giving of notice of resignation, then the
retiring Agent or Co-Agent, as the case may be, may, on behalf of the Lenders,
appoint a successor Agent or Co-Agent, as the case may be, which shall be any
Lender hereunder or any commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $250,000,000. Upon the acceptance of its appointment as the
Agent or any Co-Agent hereunder, such successor Agent or Co-Agent, as the case
may be, shall thereupon succeed to and become vested with all the rights and
duties of the retiring Agent or Co-Agent, as the case may be, under the Credit
Documents, and the retiring Agent or any Co-Agent shall be discharged from its
duties and obligations thereunder. After any retiring Agent's or Co-Agent's
resignation hereunder as Agent or Co-Agent, as the case may be, the provisions
of this Section 9 and all protective provisions of the other Credit Documents
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent or Co-Agent, as the case may be.
Section 9.7. Co-Agent. The Lender identified on the facing page or
signature pages of this Agreement as Co-Agent shall have no rights, powers,
obligations, liabilities, responsibilities or duties under this Agreement other
than those applicable to all Lenders as such. Without limiting the foregoing,
such Lender shall not have and shall not be deemed to have any fiduciary
relationship with any Lender. Each Lender acknowledges that it has not relied,
and will not rely, on such Lender in deciding to enter into this Agreement or in
taking any action hereunder.
SECTION 10. MISCELLANEOUS.
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Section 10.1 No Waiver of Rights. No delay or failure on the part of the
Agent or any of the Lenders, or on the part of the holder or holders of the
Notes, in the exercise of any power, right or remedy under any Credit Document
shall operate as a waiver thereof or as an acquiescence in any default, nor
shall any single or partial exercise thereof preclude any other or further
exercise of any other power, right or remedy. To the fullest extent permitted
by applicable law, the powers, rights and remedies under the Credit Documents of
the Lenders and the holder or holders of the Notes are cumulative to, and not
exclusive of, any rights or remedies any of them would otherwise have.
Section 10.2 Non-Business Day. If any payment of principal or interest on
any Loan, Reimbursement Obligation or of any other Obligation shall fall due on
a day which is not a Business Day, interest or fees (as applicable) at the rate,
if any, for such Loan, such Reimbursement Obligation or such other Obligation or
Agent Obligation bears for the period prior to maturity shall continue to accrue
in the manner set forth herein on such Obligation from the stated due date
thereof to and including the next succeeding Business Day on which the same
shall be payable.
Section 10.3 Documentary Taxes. The Borrower agrees that it will pay any
documentary, stamp or similar taxes payable with respect to any Credit Document,
including interest and penalties, in the event any such taxes are assessed
irrespective of when such assessment is made and regardless whether any credit
is then in use or available hereunder.
Section 10.4 Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as the Borrower has any Obligation hereunder or any
Commitment hereunder is in effect.
Section 10.5 Survival of Indemnities. All indemnities and all other
provisions relative to reimbursement to the Agent and the Lenders of amounts
sufficient to protect the yield of the Lenders or the Agent with respect to the
Loans or the Agent Loans, as applicable, shall survive the termination of this
Agreement and the other Credit Documents and the payment of the Loans and all
other Obligations or Agent Obligations, as applicable, for a period of one (1)
year.
Section 10.6 Setoff. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of, and throughout the continuance of, any Default or Event of
Default, the Agent and each of the Lenders and each subsequent holder of any of
the Notes is hereby authorized by the Borrower at any time or from time to time,
without notice to the Borrower, to any Subsidiary of the Borrower or to any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts, and in whatever currency
denominated) and any other Indebtedness at any time held or owing by the Agent
or the Lenders or that subsequent holder to or for the credit or the account of
the Borrower, whether or not matured, against and on account of the obligations
and liabilities of the Borrower to the Agent or the Lenders or that subsequent
holder under the Credit Documents, including, but not limited to, all claims of
any nature or description arising out of or connected with the Credit Documents,
irrespective of whether or not (i) the Agent or any of the Lenders or that
subsequent holder shall have made any demand
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hereunder or (ii) the principal of or the interest on the Loans, the Notes and
other amounts due hereunder shall have become due and payable hereunder and
although said obligations and liabilities, or any of them, may be contingent or
unmatured. The Agent or such Lender, as applicable, shall promptly give the
Borrower notice of any such setoff, provided that any failure to give such
notice shall not impact the validity of any such setoff or give rise to any
liability of the Agent or any Lender as a result of any such failure. The Agent
and the Lenders agree, if there shall be any other Lenders pursuant to Section
10.10(b), that if a Lender receives and retains any payment, whether by setoff
or application of deposit balances or otherwise, on any of the Loans or L/C
Obligations in excess of its ratable share of payments on all such Obligations
then owed to the Lenders hereunder, then such Lender shall purchase for cash at
face value, but without recourse, ratably from each of the other Lenders such
amount of the Loans or L/C Obligations, or participations therein, held by such
Lender (or interest therein) as shall be necessary to cause such Lender to share
such excess payment ratably with all the other Lenders; provided, however, that
if any such purchase is made by any Lender, and if such excess payment or part
thereof is thereafter recovered from such purchasing Lender, the related
purchases from the other Lenders shall be rescinded ratably and the purchase
price restored as to the portion of such excess payment so recovered, with
interest pro rata, to the extent the purchasing Lender is required to pay
interest on the amount restored.
Section 10.7 Notices. Except as otherwise specified herein, all notices
under the Credit Documents shall be in writing (including cable, telecopy or
telex) and shall be given to a party hereunder at its address, telecopier number
or telex numbers set forth below or such other address, telecopier number or
telex as such party may hereafter specify by notice to the Lenders or the
Borrower, as applicable, given by courier, by United States certified or
registered mail, by telegram or by other telecommunication device capable of
creating a written record of such notice and its receipt. Notices under the
Credit Documents shall be addressed to the Agent and the Lenders as set forth on
the signature pages hereto and to the Borrower as follows:
Quanta Services, Inc.
1360 Post Oak Blvd., Suite 2100
Houston, Texas 77056
Attention: Mr. James Haddox
Telephone: (713) 629-7600
Fax No.: (713) 629-7676
with a copy to
Quanta Services, Inc.
1360 Post Oak Blvd., Suite 2100
Houston, Texas 77056
Attention: General Counsel
Telephone: (713) 629-7600
Fax No.: (713) 629-7676
Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section 10.7 and a confirmation of receipt of such telecopy
has been received by the sender, (ii) if given by telex, when such telex is
transmitted to the telex number specified in this Section 10.7 and the answer
back is
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received by sender, (iii) if given by courier, when delivered, (iv) if given by
mail, five (5) days after such communication is deposited in the mail,
registered with return receipt requested, addressed as aforesaid or (v) if given
by any other means, when delivered at the addresses specified in this Section
10.7; provided that any notice given pursuant to Section 2 shall be effective
only upon receipt and, provided further, that any notice that but for this
provision would be effective after the close of business on a Business Day or on
a day that is not a Business Day shall be effective at the opening of business
on the next Business Day.
Section 10.8 Counterparts. This Agreement may be executed in any number of
counterparts, and by the different parties on different counterpart signature
pages, each of which when executed shall be deemed an original but all such
counterparts taken together shall constitute one and the same Agreement.
Section 10.9 Successors and Assigns. This Agreement shall be binding upon
the Borrower, the Agent, the Co-Agent and the Lenders and their respective
successors and assigns, and shall inure to the benefit of the Borrower, the
Agent, the Co-Agent and the Lenders and their respective successors and assigns,
including any subsequent holder of the Notes. The Borrower may not assign any of
its rights or obligations under any Credit Document without the consent of the
Agent and all of the Lenders.
Section 10.10 Sales and Transfers of Borrowings and Notes; Participations
in Borrowings and Notes.
(a) Any Lender may at any time sell to one or more banks or other
financial institutions having a combined capital and surplus of at least
$250,000,000 ("Participants"), participating interests in any Borrowing owing to
such Lender, any Note held by such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder, provided that no Lender may sell any
participating interests in any such Borrowing, Note, Commitment or other
interest hereunder without also selling to such Participant the appropriate pro
rata share of its Borrowings, Notes, Commitments and other interests hereunder,
and provided further that no Lender shall transfer, grant or assign any
participation under which the Participant shall have rights to vote upon or
consent to any matter to be decided by the Lender or the Majority Lenders
hereunder or under any Credit Document or approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such amendment
or waiver would (i) increase the amount of such Lender's Commitment and such
increase would affect such Participant, (ii) reduce the principal of, or
interest on, any of such Lender's Borrowings, or any fees or other amounts
payable to such Lender hereunder and such reduction would affect such
Participant, (iii) postpone any date fixed for any scheduled payment of
principal of, or interest on, any of such Lender's Borrowings, or any fees or
other amounts payable to such Lender hereunder, or (iv) release any collateral
for any Obligation (including, without limitation, any Subsidiary Guaranty),
except as otherwise specifically provided in any Credit Document. In the event
of any such sale by a Lender of participating interests to a Participant, such
Lender's obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement and the Borrower and the Agent shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. The Borrower agrees that if
amounts outstanding under this Agreement and the Notes are due and unpaid, or
shall have been
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declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of setoff in respect
of its participating interest in amounts owing under this Agreement and any Note
to the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement or any Note, provided that such
right of setoff shall be subject to the obligation of such Participant to share
with the Lenders, and the Lenders agree to share with such Participant, as
provided in Section 10.6. The Borrower also agrees that each Participant shall
be entitled to the benefits of Sections 2.12 and 8.3 with respect to its
participation in the Commitments and the Borrowings outstanding from time to
time, provided that no Participant shall be entitled to receive any greater
amount pursuant to such Sections than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred.
(b) Any Lender may at any time sell to any Lender or any Affiliate
thereof, and, with the consent of the Agent and the Borrower (which shall not be
unreasonably withheld or delayed), to one or more banks or other financial
institutions having a combined capital and surplus of at least $250,000,000 (a
"Purchasing Lender"), all or any part of its rights and obligations under this
Agreement and the Notes, pursuant to an Assignment Agreement in the form
attached as Exhibit 10.10 hereto, executed by such Purchasing Lender and such
transferor Lender (and, in the case of a Purchasing Lender which is not then a
Lender or an Affiliate thereof, by the Borrower and the Agent) and delivered to
the Agent; provided that, each such sale to a Purchasing Lender shall be in an
amount of $5,000,000 or more, or if in a lesser amount, such sale shall be of
all of the Lender's rights and obligations under this Agreement and all of the
Notes payable to it to one eligible assignee. Notwithstanding the above, any
Lender may sell to one or more eligible assignees all or any part of their
rights and obligations under this Agreement and the Notes with only the consent
of the Agent (which shall not be unreasonably withheld) if an Event of Default
shall have occurred and be continuing. No Lender may sell any Loans to a
Purchasing Lender without also selling to such Purchasing Lender the appropriate
pro rata share of its Borrowings, Notes, Commitments and other interests
hereunder, including participations in Letters of Credit hereunder; provided
that, the Agent shall not be required to sell its Agent Loans at such time as it
may sell any other portion of its Borrowings, Notes, Commitments and other
interests hereunder. Upon such execution, delivery, acceptance and recording,
from and after the effective date of the transfer determined pursuant to such
Assignment Agreement (x) the Purchasing Lender thereunder shall be a party
hereto and, to the extent provided in such Assignment Agreement, have the rights
and obligations of a Lender hereunder with a Commitment as set forth therein and
(y) the transferor Lender thereunder shall, to the extent provided in such
Assignment Agreement, be released from its obligations under this Agreement
(and, in the case of an Assignment Agreement covering all or the remaining
portion of a transferor Lender's rights and obligations under this Agreement,
such transferor Lender shall cease to be a party hereto). Such Assignment
Agreement shall be deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of Commitments and Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement, the Notes and the other Credit
Documents. On or prior to the effective date of the transfer determined
pursuant to such Assignment Agreement, the Borrower, at its own expense, shall
execute and deliver to the Agent in exchange for any surrendered Notes, new
Notes as appropriate to the order of such Purchasing Lender in an amount equal
to the Commitments assumed by it pursuant to such Assignment Agreement, and, if
the transferor Lender has retained a Commitment or Borrowing hereunder, new
Notes to the order of the transferor Lender in an amount equal to the
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Commitments or Borrowings retained by it hereunder. Such new Notes shall be
dated the Initial Borrowing Date and shall otherwise be in the form of the Notes
replaced thereby. The Notes surrendered by the transferor Lender shall be
returned by the Agent to the Borrower marked "cancelled."
(c) Upon its receipt of an Assignment Agreement executed by a
transferor Lender, a Purchasing Lender and the Agent (and, in the case of a
Purchasing Lender that is not then a Lender or an Affiliate thereof, by the
Borrower), together with payment to the Agent hereunder of a registration and
processing fee of $3,500, the Agent shall (i) promptly accept such Assignment
Agreement, and (ii) on the effective date of the transfer determined pursuant
thereto give notice of such acceptance and recordation to the Lenders and the
Borrower.
(d) The provisions of the foregoing clauses (b) and (c) shall not
apply to or restrict, or require the consent of or any notice to any Person to
effectuate, the pledge or assignment by any Lender of its rights under this
Agreement and its Notes to any Federal Reserve Bank.
(e) If, pursuant to this Section 10.10 any interest in this Agreement
or any Note is transferred to any transferee which is organized under the laws
of any jurisdiction other than the United States of America or any State
thereof, the transferor Lender shall cause such transferee, concurrently with
the effectiveness of such transfer, (i) to represent to the transferor Lender
(for the benefit of the transferor Lender, the Agent and the Borrower) that
under applicable law and treaties no taxes will be required to be withheld by
the Agent, the Borrower or the transferor Lender with respect to any payments to
be made to such transferee in respect of the Loans or the L/C Obligations, (ii)
to furnish to the transferor Lender (and, in the case of any Purchasing Lender,
the Agent and the Borrower) either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 or such successor forms as shall be
adopted from time to time by the relevant United States taxing authorities
(wherein such transferee claims entitlement to complete exemption from U.S.
federal withholding tax on all interest payments hereunder), and (iii) to agree
(for the benefit of the transferor Lender, the Agent and the Borrower) to
provide the transferor Lender (and, in the case of any Purchasing Lender, the
Agent and the Borrower) a new Form 4224 or Form 1001 upon the expiration or
obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and amendments dully
executed and completed by such transferee, and to comply from time to time with
all applicable U.S. laws and regulations with regard to such withholding tax
exemption.
Section 10.11 Amendments. Any provision of the Credit Documents may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) the Borrower, (b) the Majority Lenders (in the case of a consent
or waiver, the Borrower may rely on the consent or waiver of the Agent on behalf
of the Majority Lenders, the Agent agreeing to obtain the necessary consents or
waivers from the Majority Lenders before providing such consent or waiver), and
(c) if the rights or duties of the Agent are affected thereby, the Agent;
provided that:
(i) no amendment or waiver shall (A) increase the Commitment Amount
without the consent of all Lenders or increase any Commitment of any Lender
without the consent of such Lender, (B) postpone the Maturity Date without the
consent of all Lenders (and the Agent in the case of Agent Loans) or reduce the
amount of or postpone the date for any scheduled payment of any principal of or
interest on any Loan, Reimbursement Obligation or of any fee or any other
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amounts payable hereunder without the consent of each Lender owed such
Obligation or (C) release any Subsidiary Guaranty or any Collateral without the
consent of all the Lenders and the Agent; and
(ii) no amendment or waiver shall, unless signed by each Lender,
change the provisions of this Section 10.11 or the definition of Majority
Lenders or affect the number of Lenders required to take any action under any
other provision of the Credit Documents.
Section 10.12 Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 10.13 Legal Fees, Other Costs and Indemnification. The Borrower,
upon demand by the Agent, the Co-Agent or any of the Lenders, agrees to pay the
reasonable fees and disbursements of legal counsel to the Agent, the Co-Agent or
any Lender in connection with the preparation and execution of the Credit
Documents, any amendment, waiver or consent related thereto, whether or not the
transactions contemplated therein are consummated, any Default or Event of
Default by the Borrower hereunder and any enforcement (including, without
limitation, all workout and bankruptcy proceedings) of any of the Credit
Documents or collection of any Obligations; provided that the Borrower shall
only have to pay the reasonable fees and disbursements of one law firm in
connection therewith unless the Agent, the Co-Agent, any Lender or their counsel
is of the reasonable opinion that representation by one law firm would not be
feasible or that a conflict of interest would exist. The Borrower further agrees
to indemnify the Agent, the Co-Agent and each Lender and its respective
directors, officers, shareholders, employees and attorneys (collectively, the
"Indemnified Parties"), against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all
reasonable attorneys' fees and other reasonable expenses of litigation or
preparation therefor, whether or not the Indemnified Party is a party thereto)
which any of them may pay or incur arising out of or relating to (a) any Credit
Document, the Loans, the Letters of Credit or the application or proposed
application by the Borrower of the proceeds of any Loan, REGARDLESS OF WHETHER
SUCH CLAIMS OR ACTIONS ARE FOUNDED IN WHOLE OR IN PART UPON THE ALLEGED SIMPLE
OR CONTRIBUTORY NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES AND/OR ANY OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES OR ATTORNEYS, (b) any
investigation of any third party or any governmental authority involving the
Agent, the Co-Agent or any Lender and related to any use made or proposed to be
made by the Borrower of the proceeds of the Borrowings, or any transaction
financed or to be financed in whole or in part, directly or indirectly with the
proceeds of any Borrowing, and (c) any investigation of any third party or any
governmental authority, litigation or proceeding, related to any environmental
cleanup, audit, compliance or other matter relating to any Environmental Law or
the presence of any Hazardous Material (including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law) with respect to the Borrower or any of its
Subsidiaries, regardless of whether caused by, or within the control of, the
Borrower or any of its Subsidiaries; provided, however, that the Borrower shall
not be obligated to indemnify any Indemnified Party for any of the foregoing
arising out of (i) such Indemnified Party's gross negligence or willful
misconduct, (ii) the Agent's failure to pay under any Letter of Credit after the
presentation to it of a request required to be paid under applicable law, (iii)
the Agent's, the Co-Agent's or any Lender's breach of any material provision of
any Credit Document, or any dispute solely among the Agent, the Co-Agent, the
Lenders or any of same. The Borrower, upon demand by the Indemnified Party at
any time, shall reimburse the Indemnified Party for any legal or other
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expenses incurred in connection with investigating or defending against any of
the foregoing except if the same is excluded from indemnification pursuant to
the provisions of the foregoing sentence.
Section 10.14 Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.
(a) The Credit Agreement, and the other Credit Documents, and the
rights and duties of the parties thereto, shall be construed in accordance with
and governed by the internal laws of the State of Texas.
(b) THE AGENT, THE CO-AGENT, EACH LENDER AND THE BORROWER HEREBY
WAIVES ITS RIGHT TO RESOLVE DISPUTES, CLAIMS, AND CONTROVERSIES ARISING FROM THE
CREDIT AGREEMENT, ANY OTHER CREDIT DOCUMENT OR ANY MATTER IN CONNECTION
THEREWITH, INCLUDING, WITHOUT LIMITATION, CONTRACT DISPUTES AND TORT CLAIMS,
THROUGH ANY COURT PROCEEDING OR LITIGATION AND ACKNOWLEDGES THAT ALL SUCH
DISPUTES, CLAIMS AND CONTROVERSIES SHALL BE RESOLVED PURSUANT TO THIS SECTION,
EXCEPT THAT EQUITABLE RELIEF AND CERTAIN OTHER RIGHTS AND REMEDIES SET FORTH
BELOW MAY BE SOUGHT FROM ANY COURT OF COMPETENT JURISDICTION. EACH PARTY
REPRESENTS TO THE OTHER PARTIES THAT THIS WAIVER IS MADE KNOWINGLY AND
VOLUNTARILY AFTER CONSULTATION WITH AND UPON ADVICE OF ITS COUNSEL AND IS A
MATERIAL PART OF THIS AGREEMENT. ALL SUCH DISPUTES, CLAIMS AND CONTROVERSIES
SHALL BE RESOLVED BY BINDING ARBITRATION PURSUANT TO THE COMMERCIAL RULES OF THE
AMERICAN ARBITRATION ASSOCIATION ("AAA"). Any arbitration proceeding held
pursuant to this arbitration provision shall be conducted in Houston, Texas or
at any other place selected by mutual agreement of the parties. No act to take
or dispose of any collateral shall constitute a waiver of this arbitration
agreement or be prohibited by this arbitration agreement. This arbitration
provision shall not limit the right of any party during any dispute, claim or
controversy to seek, use, and employ ancillary, or preliminary rights and/or
remedies, judicial or otherwise, for the purposes of realizing upon, preserving,
protecting, foreclosing upon or proceeding under forcible entry and detainer for
possession of, any real or personal property, and any such action shall not be
deemed an election of remedies. Such remedies include, without limitation,
obtaining injunctive relief or a temporary restraining order, invoking a power
of sale under any deed of trust or mortgage, obtaining a writ of attachment or
imposition of a receivership, or exercising any rights relating to personal
property, including exercising the right of set-off, or taking or disposing of
such property with or without judicial process pursuant to the Uniform
Commercial Code. Any disputes, claims or controversies concerning the lawfulness
or reasonableness of an act, or exercise of any right or remedy concerning any
collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the collateral, shall also be arbitrated; provided,
however that no arbitrator shall have the right or the power to enjoin or
restrain any act of either party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. The statute of
limitations, estoppel, waiver, laches and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable in
any arbitration proceeding, and the commencement of an arbitration proceeding
shall be deemed the commencement of any action for these purposes. The federal
arbitration act (Title 9 of the United States Code) shall apply to the
construction, interpretation, and enforcement of this arbitration provision.
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(c) To the fullest extent permitted by applicable law, each party
hereto agrees that any court proceeding or litigation permitted by Section
10.14(b) may be brought and maintained in the courts of the State of Texas
sitting in Harris County or the United States District Court for the Southern
District of Texas. To the fullest extent permitted by applicable law, the
Borrower hereby expressly and irrevocably submits to the jurisdiction of the
courts of the State of Texas and the United States District Court for the
Southern District of Texas for the purpose of any such litigation as set forth
above and irrevocably agrees to be bound by any judgment rendered thereby in
connection with such litigation. To the fullest extent permitted by applicable
law, the Borrower further irrevocably consents to the service of process, by
registered mail, postage prepaid, or by personal service within or without the
state of Texas. To the fullest extent permitted by applicable law, the Borrower
hereby expressly and irrevocably waives any objection which it may have or
hereafter may have to the laying of venue of any such litigation brought in any
such court referred to above and any claim that any such litigation has been
brought in an inconvenient forum. To the extent that the Borrower has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, the Borrower hereby irrevocably waives to the fullest extent permitted
by applicable law, such immunity in respect of its obligations under the Credit
Agreement and the other Credit Documents.
(d) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY (BY ITS
ACCEPTANCE HEREOF) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING PERMITTED BY SECTION 10.14(B) AND WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF THE CREDIT AGREEMENT, ANY OTHER CREDIT DOCUMENT, ANY
OTHER RELATED DOCUMENT OR ANY RELATIONSHIP BETWEEN THE AGENT, ANY LENDER, THE
BORROWER AND/OR ANY GUARANTOR, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR
DISPUTE SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE LENDERS TO PROVIDE THE LOANS AND THE LETTERS OF
CREDIT."
Section 10.15 Confidentiality. The Agent, the Co-Agent and each Lender
agrees it will not disclose without the Borrower's consent (other than to its
employees, auditors, counsel or other professional advisors or to its Affiliates
on a need to know basis and provided that such Persons agree to be bound by this
Section 10.15) any information concerning the Borrower or any of its
Subsidiaries furnished pursuant to any of the Credit Documents; provided that
the Agent, the Co-Agent and any Lender may disclose any such information (i)
that has become generally available to the public other than through the Agent,
the Co-Agent or the Lenders or that was previously known to the Agent, the Co-
Agent or such Lender or comes from a source other than the Borrower or any of
its Subsidiaries, (ii) if required or appropriate in any examination or audit or
any report, statement or testimony submitted to any federal or state regulatory
body having or claiming to have jurisdiction over the Agent, the Co-Agent or
such Lender, (iii) if required or appropriate in response to any summons or
subpoena or in connection with any litigation, (iv) in order to comply with any
law, order, regulation or ruling applicable to Agent, the Co-Agent or such
Lender, (v) to any prospective or actual permitted transferee in connection with
any contemplated or actual permitted transfer of
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any interest in the Note by such Lender (but only after the Borrower's
conditional approval has been obtained to such transfer to the extent any such
approval is required hereunder), and (vi) in connection with the exercise of any
remedies by the Agent, the Co-Agent or any Lender; provided that such actual or
prospective transferee executes an agreement with the applicable Lender
containing provisions substantially identical to those contained in this Section
10.15 prior to such transferee's receipt of any such information.
Section 10.16 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 10.17 Change in Accounting Principles or Tax Laws. If (i) any
change in accounting principles from those used in the preparation of the
financial statements of the Borrower referred to in Section 5.9 is hereafter
occasioned by the promulgation of rules, regulations, pronouncements and
opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accounts (or successors thereto or
agencies with similar functions) and such change materially affects the
calculation of any component of any financial covenant, standard or term found
in this Agreement, or (ii) there is a material change in federal or foreign tax
laws which materially affects the Borrower's ability to comply with the
financial covenants, standards or terms found in this Agreement, the Borrower,
the Agent and the Lenders agree to enter into negotiations in order to amend
such provisions so as to equitably reflect such changes with the desired result
that the criteria for evaluating the Borrower's and its Subsidiaries'
consolidated financial condition shall be the same after such changes as if such
changes had not been made. Unless and until such provisions have been so
amended, the provisions of this Agreement shall govern.
Section 10.18 Loans Under Prior Credit Agreement. On the Initial Borrowing
Date:
(a) The Borrower shall pay all accrued and unpaid commitment fees
outstanding under the Prior Credit Agreement;
(b) each Revolving Loan under the Prior Credit Agreement shall be
deemed to be repaid with the proceeds of a new LIBOR Loan(s) and each Agent Loan
under the Prior Credit Agreement shall be deemed to be repaid with the proceeds
of a new Base Rate Loan;
(c) each Letter of Credit outstanding under the Prior Credit
Agreement shall be deemed to have been issued under this Agreement without
payment of any further fronting fee (but subject to the other fees set forth in
Section 3.1(b)); and
(d) the Prior Credit Agreement and the commitments thereunder
shall be superseded by this Agreement and such commitments shall terminate.
Section 10.19 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which the Borrower, the Agent, the Co-Agent and
each Lender has signed and delivered to the Agent a counterparty signature page
hereto or, in the case of a Lender, the Agent has received telex or facsimile
notice that such a counterpart has been signed and mailed to the Agent.
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Section 10.20 Notice. The Credit Documents constitute the entire
understanding among the Borrower, the Agent, the Co-Agent and the Lenders and
supersede all earlier or contemporaneous agreements, whether written or oral,
concerning the subject matter of the Credit Documents. THIS WRITTEN AGREEMENT
TOGETHER WITH THE OTHER CREDIT DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
BORROWER:
QUANTA SERVICES, INC.
By:
----------------------------------
Name: James H. Haddox
Title: Chief Financial Officer
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LENDERS:
Percentage of Commitment: 80.0% BANK ONE, TEXAS, National Association, as
Administrative Agent and as a Lender
By:
---------------------------------
Name: John E. Elam, Jr.
Title: Vice President
Bank One, Texas, National Association
P.O. Box 2629
Houston, TX 77252-2629
Attention: Mr. John E. Elam, Jr.
Telephone No.: (713) 751-3806
Fax No.: (713) 751-6199
Telex No.: 6734165
Answerback: BONE DAL
Payment Instructions:
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Name of Credit Bank: Bank One, Texas, National Association
City, State: Houston, Texas
Method of Payment: ABA #111000614
For Credit To: Bank One, Texas, National Association
Account No.: 0749905618
Reference: Quanta Services, Inc.
Attention: Ms. Violet Nolton
Lending Office:
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Bank One, Texas, National Association
910 Travis
Houston, TX 77002
Attention: Mr. John E. Elam, Jr.
Telephone No.: (713) 751-3806
Fax No.: (713) 751-6199
63
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Percentage of Commitment: 20.0% NATIONAL CITY BANK, as Co-Agent and as a
Lender
By:
-----------------------------------
Name: Michael J. Durbin
Title: Vice President
Address for Notices:
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National City Bank
155 E. Broad Street
Columbus, Ohio 43251-0034
Attention: Mr. Michael Durbin
Telephone No.: (614) 463-8844
Fax No.: (614) 463-8572
Payment Instructions:
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Name of Credit Bank: National City Bank
City, State: Columbus, Ohio
Method of Payment: ABA #041000124
For Credit To: National City Bank
Account No.: 151804
Reference: Quanta Services, Inc.
Attention: Ms. Debbie Smithers (614) 463-7227
Lending Office:
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National City Bank
155 E. Broad Street
Columbus, Ohio 43251-0034
Telephone No.: (614) 463-8844
Fax No.: (614) 463-8572
64
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EXHIBIT 2.2A
FORM OF BORROWING REQUEST
65
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EXHIBIT 2.2B
FORM OF APPLICATION
66
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EXHIBIT 2.11
FORM OF NOTE
67
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EXHIBIT 4.1A
FORM OF SUBSIDIARY GUARANTY
68
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EXHIBIT 4.1B
FORM OF STOCK PLEDGE AGREEMENT
69
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EXHIBIT 4.1C
FORM OF FINANCIAL CONDITION CERTIFICATE
70
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EXHIBIT 6.6
FORM OF COMPLIANCE CERTIFICATE
71
<PAGE>
EXHIBIT 10.10
FORM OF ASSIGNMENT AGREEMENT
72
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SCHEDULE 5.1
LIST OF SUBSIDIARIES
A. Quanta Services, Inc.
B. PAR Electrical Contractors, Inc.
C. Potelco, Inc.
D. Trans Tech Electric, Inc.
E. Union Power Construction Co.
F. Underground Acquisition, Inc.
G. TNS Acquisition, Inc.
H. Sumter Acquisition, Inc.
I. Environmental Professional Associates Ltd.
J. Smith Acquisition DE, Inc.
K. NorAm Telecommunications Inc.
L. NPCC Acquisition, Inc.
M. Golden State Utility Co.
N. Hamlin Acquisition, Inc.
O. Spalj Construction Co.
P. Advanced Communications Technologies, Inc.
Q. RT Telecommunications, Inc.
R. Span-Con of Deerwood, Inc.
S. W.H.O.M. Corporation
T. Coast to Coast LLC
U. Quanta Delaware, Inc.
V. QSI, Inc.
W. Quanta Services Management Partnership, L.P.
X. Quanta Services of Canada, Inc.
Y. Danford Technologies, Inc.
73
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SCHEDULE 5.4
LIST OF LITIGATION
None
74
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SCHEDULE 5.12
LIST OF OUTSTANDING TAX ISSUES
Potelco, Inc., one of the Founding Companies, received a tax deficiency notice
for the year ended 4/30/94. Sole issue is the amount of deductible compensation
paid to an officer. Potelco has formally appealed the deficiency and has no
reason to believe that it will not prevail at the appeal hearing. No hearing
date has been set. The amount of tax and interest assessed is approximately
$200,000. The former owner of Potelco, has indemnified Quanta Services, Inc.
for any liability incurred by Quanta as a result of this deficiency notice.
75
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SCHEDULE 5.20
LIST OF EXISTING LIENS AND INDEBTEDNESS
76
<PAGE>
SCHEDULE 6.13
LIST OF PERMITTED LIENS AND INDEBTEDNESS
77
<PAGE>
SCHEDULE 6.14
LIST OF EXISTING INDEBTEDNESS
78
<PAGE>
[AMENDED AND RESTATED] GUARANTY
THIS [AMENDED AND RESTATED] GUARANTY (this "Guaranty") dated as of
_____________, 199__, is from _____________________________, a ___________
corporation (the "Guarantor"), to the Lenders referred to hereinafter and Bank
One, Texas, National Association, as Agent for the Lenders (in such capacity the
"Agent").
RECITALS:
[A. Quanta Services, Inc. (the "Borrower"), a Delaware corporation, the
various financial institutions as are or may from time to time become parties
thereto (collectively, the "Lenders") and the Agent have entered into that
certain Amended and Restated Credit Agreement dated as of August 3, 1998
(herein, as the same may be amended, modified, supplemented, extended,
rearranged, and/or restated from time to time, called the "Credit Agreement"),
pursuant to which, upon the terms and conditions therein set forth, (i) the
Lenders have agreed to make Loans to the Borrower, which Revolving Loans are
evidenced by Notes of the Borrower dated August 3, 1998, in the aggregate
original principal amount of $125,000,000, payable the order of the Lenders,
respectively, and the Agent may, in its sole discretion, make Agent Loans to the
Borrower, in a principal amount of up to $5,000,000 pursuant to its Note
(herein, as amended, extended, modified, rearranged and/or supplemented, from
time to time together with any promissory notes given in extension, replacement,
rearrangement, modification and/or substitution thereof or therefor,
collectively called the "Notes") and (ii) the Agent on behalf of the Lenders has
agreed to issue Letters of Credit for the account of Borrower. Capitalized
terms used herein without definition shall have the meanings assigned in the
Credit Agreement.]
[A. Quanta Services, Inc. (the "Borrower"), a Delaware corporation, the
various financial institutions as are parties thereto (collectively, the
"Lenders") and the Agent have entered into that certain Credit Agreement dated
as of April 9, 1998 (the "Prior Credit Agreement") pursuant to which, upon the
terms and conditions set forth therein, the Lenders agreed to make loans to the
Borrower, and the Agent, on behalf of the Lenders, agreed to issue letters of
credit for the account of the Borrower in the aggregate principal amount of
$50,000,000, and the Guarantor has executed and delivered that certain Guaranty
in connection therewith dated as of ____________, 1998 (the "Prior Guaranty").
B. The parties to the Prior Credit Agreement have entered into that
certain Amended and Restated Credit Agreement dated as of August 3, 1998, which
amends and restates in its entirety the Prior Credit Agreement (herein, as the
same may be amended, modified, supplemented, extended, rearranged and/or
restated from time to time, called the "Credit Agreement"), pursuant to which,
upon the terms and conditions therein set forth, (i) the Lenders have agreed to
make Loans to the Borrower, which Loans are evidenced by Notes of the Borrower
dated August 3, 1998, in the aggregate original principal amount of
$125,000,000, payable the order of the Lenders, respectively, and the Agent may,
in its sole discretion, make Agent Loans to the Borrower, in an aggregate
principal amount of up to $5,000,000 pursuant to its Note (herein, as amended,
extended, modified, rearranged and/or supplemented from time to time, together
with any promissory notes given in
<PAGE>
extension, replacement, rearrangement, modification and/or substitution thereof
or therefor, collectively called the "Notes") and (ii) the Agent on behalf of
the Lenders has agreed to issue Letters of Credit for the account of Borrower.
Capitalized terms used herein without definition shall have the meanings
assigned in the Credit Agreement.]
[B.][C.] As a condition precedent to the making of the Loans and the
issuance of the Letters of Credit under the Credit Agreement, the Guarantor is
required to execute and deliver this Guaranty [which amends and restates in its
entirety the Prior Guaranty.]
[C.][D.] The Guarantor has duly authorized the execution, delivery and
performance of this Guaranty.
[D.][E.] It is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Loans made from time to time to the Borrower and the issuance
of Letters of Credit by the Agent pursuant to the Credit Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Agent
and the Lenders to make Loans to the Borrower and to issue or participate in
Letters of Credit pursuant to the Credit Agreement, the Guarantor agrees, for
the benefit of the Agent and each Lender, as follows:
ARTICLE I
GUARANTY
1.1 Guaranty. For value received, and in consideration of any loan or
other financial accommodation, heretofore or hereafter at any time made or
granted to the Borrower by the Agent and the Lenders, the Guarantor hereby
unconditionally guarantees the full and prompt payment when due, whether by
acceleration or otherwise, and at all times thereafter, of all obligations of
the Borrower to the Agent and each Lender and their successors and assigns,
howsoever created, arising or evidenced, whether direct or indirect, primary or
secondary, absolute or contingent, joint or several, or now or hereafter
existing or due or to become due, including, without limitation, all such
amounts which would become due but for the operation of the automatic stay under
Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. (S) 362(a), and
the operation of Sections 502(b) and 506(b) of such Bankruptcy Code, 11 U.S.C.
(S) 502(b) and (S) 506(b), under and in connection with the Credit Agreement,
including, without limitation under (a) the Notes, and (b) the Letters of
Credit, including any Reimbursement Obligations with respect thereto (all such
obligations being hereinafter collectively called the "Liabilities"), and the
Guarantor further agrees to pay all reasonable expenses (including reasonable
attorneys' fees and legal expenses) paid or incurred by the Agent and any Lender
in endeavoring to collect the Liabilities, or any part thereof, and in enforcing
this Guaranty. Anything herein contained to the contrary notwithstanding, the
amount of this Guaranty, however, shall not exceed the maximum amount which the
Guarantor could pay under this Guaranty without
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<PAGE>
having such payment set aside as a fraudulent transfer or conveyance or similar
action under such Bankruptcy Code or any applicable state law.
1.2 Bankruptcy. The Guarantor hereby agrees that, in the event of the
dissolution or insolvency of the Borrower or the Guarantor, or the inability or
failure of the Borrower or the Guarantor to pay its debts as they become due, or
an assignment by the Borrower or the Guarantor for the benefit of creditors, or
the commencement of any case or proceeding in respect of the Borrower or the
Guarantor under any bankruptcy, insolvency or similar laws, and if such event
shall occur at a time when any of the Liabilities may not then be due and
payable, the Guarantor will pay to the Lender forthwith the full amount which
would be payable hereunder by the Guarantor as if all Liabilities were then due
and payable.
1.3 Setoff. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of, and throughout the continuance of, any Event of Default under the
Credit Agreement, the Agent and each Lender and each subsequent holder of any of
the Notes is hereby authorized by the Guarantor without notice to the Borrower,
the Guarantor or any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including, but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts, and in whatever currency denominated) and any other Indebtedness at
any time held or owing by the Agent, that Lender or that subsequent holder to or
for the credit or the account of the Guarantor, whether or not matured, against
and on account of the obligations and liabilities of the Guarantor to the Agent,
such Lender or such subsequent holder under the Credit Documents, irrespective
of whether or not (a) the Agent, such Lender or such subsequent holder shall
have made any demand hereunder, or (b) the principal of or the interest on the
Loans, the L/C Obligations or any other amounts due hereunder shall have become
due and payable and although said obligations and liabilities, or any of them,
may be contingent or unmatured.
1.4 Guaranty Absolute, etc. This Guaranty shall in all respects be a
continuing, absolute and unconditional Guaranty, and shall remain in full force
and effect (notwithstanding, without limitation, the dissolution of the Borrower
or the Guarantor or that at any time or from time to time all Liabilities may
have been paid in full), until all Liabilities (including any renewals,
extensions and/or rearrangements of any thereof) and all interest thereon and
all reasonable expenses (including reasonable attorneys' fees and legal
expenses) paid or incurred by the Agent and the Lenders in endeavoring to
collect the Liabilities and in enforcing this Guaranty shall have been finally
paid in full and the Commitments have been permanently terminated.
1.5 Reinstatement. The Guarantor further agrees that, if at any time all
or any part of any payment theretofore applied by the Agent or any Lender to any
of the Liabilities is or must be rescinded or returned by the Agent or any
Lender for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of the Borrower), such Liabilities shall, for the
purposes of this Guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by the Agent or any
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Lender, and this Guaranty shall continue to be effective or be reinstated, as
the case may be, as to such Liabilities, all as though such application by the
Agent or any Lender had not been made.
1.6 Rights of the Agent and Lenders. The Agent or any Lender may, from
time to time, at its sole discretion and without notice to the Guarantor, take
any or all of the following actions:
(a) retain or obtain a lien upon or a security interest in any
property to secure any of the Liabilities or any obligation hereunder;
(b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to the Guarantor, with respect to any of
the Liabilities;
(c) extend or renew for one or more periods (whether or not longer
than the original period), alter or exchange any of the Liabilities, or
release or compromise any obligation of the Guarantor hereunder or any
obligation of any nature of any other obligor with respect to any of the
Liabilities;
(d) extend or renew for one or more periods (whether or not longer
than the original period) or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such property
securing any of the Liabilities; or
(e) resort to the Guarantor for payment of any of the Liabilities,
whether or not the Agent or the Lenders shall have proceeded against any
other obligor primarily or secondarily obligated with respect to any of the
Liabilities (all of the actions referred to in this clause being hereby
expressly waived by the Guarantor).
1.7 Application of Payments. Any amounts received by the Agent or any
Lender from whatsoever source on account of the Liabilities may be applied by it
toward the payment of such of the Liabilities, and in such order of application,
as the Agent or any Lender may from time to time elect.
1.8 Waiver.
(a) The Guarantor hereby expressly waives:
(i) notice of the acceptance by the Agent or any Lender of this
Guaranty;
(ii) notice of the existence or creation or non-payment of all
or any of the Liabilities;
(iii) presentment for payment, demand, protest, notice of intent
to accelerate, notice of acceleration, notice of dishonor and all
other notices whatsoever;
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(iv) all diligence in collection or protection of or realization
upon the Liabilities or any thereof, any obligation hereunder, or any
security for or guaranty of any of the foregoing; and
(v) any rights under, or any requirements imposed by, Chapter 34
of the Texas Business and Commerce Code, as amended, and any rights or
requirements that the Agent or any Lender first enforce any rights or
remedies against the Company or any other guarantor or against any
collateral for any of Liabilities.
(b) No delay on the part of the Agent or any Lender in the exercise
of any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by the Agent or any Lender of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other
right or remedy; nor shall any modification or waiver of any of the
provisions of this Guaranty be binding upon the Agent or any Lender except
as expressly set forth in a writing duly signed and delivered on behalf of
the Agent or such Lender. No action of the Agent or any Lender permitted
hereunder shall in any way affect or impair the rights of the Agent or any
Lender and the obligations of the Guarantor under this Guaranty. The
obligations of the Guarantor under this Guaranty shall be absolute and
unconditional irrespective of any circumstance whatsoever which might
constitute a legal or equitable discharge or defense of the Guarantor. The
Guarantor hereby acknowledges that there are no conditions to the
effectiveness of this Guaranty.
1.9 Subrogation. No payment made by or for the account of the Guarantor
pursuant to this Guaranty shall entitle the Guarantor by subrogation or
otherwise to demand or receive any payments by the Borrower or from or out of
any properties of the Borrower until the Liabilities shall have been paid in
full. The Guarantor shall not exercise any right or remedy against the Borrower
or any properties of the Borrower by reason of any performance by the Guarantor
of this Guaranty until the Liabilities shall have been paid in full.
1.10 Subordination. The Guarantor hereby subordinates its right to payment
from the Company of any obligations, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing or
due or to become due (collectively, the "Guarantor Liabilities"), to the
Liabilities of the Company to the Agent and the Lenders, and no payments or
other distributions whatsoever in respect of any such Guarantor Liabilities
shall be made, nor shall any property or assets of the Company be applied to the
purchase, acquisition or retirement of any such Guarantor Liabilities; provided
that payments on such Guarantor Liabilities may be made at any time no Event of
Default shall have occurred and be continuing. Any payments received by the
Guarantor in respect of any such Guarantor Liabilities owing to it other than as
expressly provided herein shall be held in trust for the Agent and the Lenders.
1.11 Excess Liabilities. The creation or existence from time to time of
Liabilities in excess of the amount to which the right of recovery under this
Guaranty is limited, if any, is hereby
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<PAGE>
authorized, without notice to the Guarantor, and shall in no way affect or
impair the rights of the Lender and the obligation of the Guarantor under this
Guaranty.
1.12 Successors, Transferees and Assigns. The Agent and each Lender may,
from time to time, without notice to the Guarantor, assign or transfer any or
all of the Liabilities or any interest therein in accordance with the terms of
the Credit Agreement; and, notwithstanding any such assignment or transfer or
any subsequent assignment or transfer thereof, such Liabilities shall be and
remain Liabilities for the purposes of this Guaranty, and each and every
immediate and successive assignee or transferee of any of the Liabilities or of
any interest therein shall, to the extent of the interest of such assignee or
transferee in the Liabilities, be entitled to the benefits of this Guaranty to
the same extent as if such assignee or transferee were the transferring Lender;
provided, however, that, unless the transferring Lender shall otherwise consent
in writing, the transferring Lender shall have an unimpaired right, prior and
superior to that of any such assignee or transferee, to enforce this Guaranty,
for the benefit of the transferring Lender as to those of the Liabilities which
the transferring Lender has not assigned or transferred.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Independent Means of Obtaining Information. The Guarantor hereby
represents and warrants to the Agent and each Lender that it now has and will
use its best commercial efforts to continue to have independent means of
obtaining information concerning the affairs, operations, financial condition,
business and prospects of the Borrower.
2.2 Authorization; No Conflict. The Guarantor hereby further represents
and warrants to the Agent and each Lender that
(a) the execution and delivery of this Guaranty, and the performance
by the Guarantor of its obligations hereunder, are within the Guarantor's
corporate powers and have been duly authorized by all necessary corporate
action on the part of the Guarantor; and
(b) this Guaranty has been duly executed and delivered on behalf of
the Guarantor and is the legal, valid and binding obligation of the
Guarantor, enforceable in accordance with its terms subject as to
enforcement only to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally
and equitable principles relating to or limiting creditors' rights
generally, the making and performance of which do not and will not
contravene or conflict with the articles or certificate of incorporation
and by-laws or other corporate governance documents of the Guarantor or
violate or constitute a default under any law, any presently existing
requirement or restriction imposed by any judicial, arbitral or
governmental instrumentality or any agreement, instrument or indenture by
which the Guarantor is bound.
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<PAGE>
2.3 Validity and Binding Nature. This Guaranty shall be binding upon the
Guarantor, and upon the successors and assigns of the Guarantor, and shall
include any successor or successors, whether immediate or remote, to such
entity; provided, however, that the Guarantor may not assign any of its
obligations hereunder without the prior written consent of the Agent and the
Lenders except as may be provided in the Credit Agreement.
ARTICLE III
EVENTS OF DEFAULT
The Guarantor shall be in default under this Guaranty upon the occurrence
of and during the continuance of any of the events or conditions defined as
Events of Default in the Credit Agreement.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Arbitration.
(a) This Guaranty and the other Credit Documents, and the rights and
duties of the parties thereto, shall be construed in accordance with and
governed by the internal laws of the State of Texas.
(b) THE GUARANTOR HEREBY WAIVES ITS RIGHT TO RESOLVE DISPUTES,
CLAIMS, AND CONTROVERSIES ARISING FROM THIS GUARANTY, ANY OTHER CREDIT
DOCUMENT OR ANY MATTER IN CONNECTION THEREWITH, INCLUDING, WITHOUT
LIMITATION, CONTRACT DISPUTES AND TORT CLAIMS, THROUGH ANY COURT PROCEEDING
OR LITIGATION AND ACKNOWLEDGES THAT ALL SUCH DISPUTES, CLAIMS AND
CONTROVERSIES SHALL BE RESOLVED PURSUANT TO THIS SECTION, EXCEPT THAT
EQUITABLE RELIEF AND CERTAIN OTHER RIGHTS AND REMEDIES SET FORTH BELOW MAY
BE SOUGHT FROM ANY COURT OF COMPETENT JURISDICTION. The Guarantor
represents to the Lenders that this waiver is made knowingly and
voluntarily after consultation with and upon advice of its counsel and
is a material part of this Guaranty. All such disputes, claims and
controversies shall be resolved by binding arbitration pursuant to the
commercial rules of the American Arbitration Association ("AAA"). Any
arbitration proceeding held pursuant to this arbitration provision shall be
conducted in Houston, Texas or at any other place selected by mutual
agreement of the Agent and the Guarantor. No act to take or dispose of any
collateral shall constitute a waiver of this arbitration agreement or be
prohibited by this arbitration agreement. This arbitration provision shall
not limit the right of either party during any dispute, claim or
controversy to seek, use, and employ
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<PAGE>
ancillary or preliminary rights and/or remedies, judicial or otherwise, for
the purposes of realizing upon, preserving, protecting, foreclosing upon or
proceeding under forcible entry and detainer for possession of, any real or
personal property, and any such action shall not be deemed an election of
remedies. Such remedies include, without limitation, obtaining injunctive
relief or a temporary restraining order, invoking a power of sale under any
deed of trust or mortgage, obtaining a writ of attachment or imposition of
a receivership or exercising any rights relating to personal property,
including exercising the right of set-off or taking or disposing of such
property with or without judicial process pursuant to the uniform
commercial code. Any disputes, claims or controversies concerning the
lawfulness or reasonableness of an act or exercise of any right or remedy
concerning any collateral, including any claim to rescind, reform or
otherwise modify any agreement relating to the collateral, shall also be
arbitrated; provided, however that no arbitrator shall have the right or
the power to enjoin or restrain any act of either party. Judgment upon any
award rendered by any arbitrator may be entered in any court having
jurisdiction. The statute of limitations, estoppel, waiver, laches and
similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement
of any action for these purposes. The Federal Arbitration Act (Title 9 of
the United States Code) shall apply to the construction, interpretation,
and enforcement of this arbitration provision.
(c) To the fullest extent permitted by applicable law, the Guarantor
agrees that any court proceeding or litigation permitted by Section 4.1(b)
may be brought and maintained in the courts of the State of Texas sitting
in Harris County or the United States District Court for the Southern
District of Texas. To the fullest extent permitted by applicable law, the
Guarantor hereby expressly and irrevocably submits to the jurisdiction of
the courts of the State of Texas and the United States District Court for
the Southern District of Texas for the purpose of any such litigation as
set forth above and irrevocably agree to be bound by any judgment rendered
thereby in connection with such litigation. To the fullest extent permitted
by applicable law, the Guarantor further irrevocably consents to the
service of process, by registered mail, postage prepaid or by personal
service within or without the State of Texas. To the fullest extent
permitted by applicable law, the Guarantor hereby expressly and irrevocably
waives any objection which it may have or hereafter may have to the laying
of venue of any such litigation brought in any such court referred to above
and any claim that any such litigation has been brought in an inconvenient
forum. To the extent that the Guarantor has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid
of execution or otherwise) with respect to itself or its property, the
Guarantor hereby irrevocably waives to the fullest extent permitted by
applicable law, such immunity in respect of its obligations under this
Guaranty.
(d) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
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UNCONDITIONALLY (BY ITS ACCEPTANCE HEREOF) WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY COURT PROCEEDING OR LITIGATION PERMITTED BY SECTION 4.1(B) AND
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF THIS GUARANTY
OR ANY OTHER CREDIT DOCUMENT, ANY OTHER RELATED DOCUMENT OR ANY
RELATIONSHIP BETWEEN THE AGENT, LENDERS, THE BORROWER AND/OR ANY GUARANTOR,
AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR DISPUTE TO THE EXTENT
PERMITTED BY SECTION 4.1(B) SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE LENDER TO PROVIDE THE
LOAN.
4.2 Severability. Wherever possible, each provision of this Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable laws, but if any provision of this Guaranty shall be prohibited by or
invalid under such laws, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
4.3 Notices. Except as otherwise specified herein, all notices under this
Guaranty shall be in writing (including cable, telecopy or telex) and shall be
given to the Guarantor at its address, telecopier number or telex number set
forth on the signature page hereof or such other address, telecopier number or
telex number as the Guarantor may hereafter specify by notice to the Agent,
given by courier, by United States certified or registered mail, by telegram or
by other telecommunication device capable of creating a written record of such
notice and its receipt. Each such notice, request or other communication shall
be effective (i) if given by telecopier, when such telecopy is transmitted to
the telecopier number specified in this Section on the signature pages hereof
and a confirmation of receipt of such telecopy has been received by the sender,
(ii) if given by telex, when such telex is transmitted to the telex number
specified on the signature pages hereof and the answerback is received by
sender, (iii) if given by courier, when delivered, (iv) if given by mail, five
(5) days after such communication is deposited in the mail, certified or
registered with return receipt requested, or (v) if given by any other means,
when delivered at the addresses specified on the signature page hereof.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its duly authorized officer as of the date first above
written.
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Address: By:
---------------------------
Name:
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Title:
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STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") dated as of August ___,
1998, is by and between ___________________________, a ________ corporation
("Pledgor"), and Bank One, Texas, National Association, as Agent for the Lenders
("Secured Party").
RECITALS:
A. [Pledgor] [Quanta Services, Inc., a Delaware corporation (the
"Borrower")] the various financial institutions as are or may from time to time
become parties thereto (collectively, the "Lenders"), National City Bank, as Co-
Agent for the Lenders, and Secured Party have entered into that certain Amended
and Restated Credit Agreement dated as of August 3, 1998 (herein, as the same
may be amended, modified, supplemented, extended, rearranged, and/or restated
from time to time, collectively called the "Credit Agreement"), pursuant to
which, upon the terms and conditions therein set forth, the Lenders have agreed
to from time to time make Revolving Loans to [Pledgor] [the Borrower] and to
issue Letters of Credit for the account of [Pledgor] [the Borrower], which
Revolving Loans are evidenced by Revolving Notes of [Pledgor] [the Borrower]
dated August 3, 1998, in the aggregate original principal amount of
$125,000,000, payable to the order of the Lenders, and the Agent, in its sole
discretion, may make Agent Loans to [Pledgor] [the Borrower] in the aggregate
original principal amount of $5,000,000 pursuant to its Revolving Note
(together, herein, as the same may be amended, modified, supplemented, extended,
rearranged, and/or restated from time to time, together with any notes given by
Pledgor in extension, replacement, rearrangement, modification and/or
substitution thereof or therefor, collectively called the "Notes").
B. Under the terms of the Credit Agreement, Pledgor is required by
the Lenders to provide certain security in respect of the liabilities under the
Credit Agreement, and the Lenders require that this Agreement be entered into by
Pledgor as a condition precedent to the Loans to be made and the Letters of
Credit to be issued pursuant to the terms and conditions of the Credit
Agreement.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Definitions.
1.1 Unless otherwise defined herein, capitalized terms have the same
meaning assigned to such terms in the Credit Agreement.
1.2 "UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Texas; provided that if by mandatory provisions of law
the perfection or the effect of perfection or non-perfection of the security
interests granted pursuant to Section 2, as well as all other security interests
created or assigned as additional security for the Obligations (defined
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hereinafter) pursuant to the provisions of this Agreement in any Collateral
(defined hereinafter) is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than the State of Texas, "UCC" means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or non-perfection.
Section 2. Security Interest and Pledge.
2.1. Security Interest and Pledge. Subject to the terms of this
Agreement, Pledgor hereby pledges, assigns and grants to Secured Party a first
priority security interest in the following property (such property being
hereinafter called the "Collateral"):
(a) all of shares of capital stock or membership interests, as applicable,
in the Persons listed on the attached Schedule 1 and any other entities
which hereafter become Subsidiaries of [Pledgor] [the Borrower] or any
of its Subsidiaries in which Pledgor has an ownership interest
(collectively, the "Companies");
(b) any other shares of capital stock or membership interests hereafter
pledged to Secured Party pursuant to this Agreement;
(c) all "investment property" as such term is defined in (S)9.115(a)(6) of
the UCC with respect thereto;
(d) any "security entitlement" as such term is defined in (S) 8.102(a)(17)
of the UCC with respect thereto; and
(e) all products and proceeds of the foregoing, including, without
limitation, all distributions, dividends, stock dividends, securities,
and other property, rights, and interests that Pledgor is at any time
entitled to receive on account of the same (all of the foregoing
described in this clause (e), the "Collateral Proceeds");
provided that in no event shall Secured Party's security interest encumber
capital stock of any of the Companies which is a "controlled foreign
corporation" (within the meaning of the Code) representing more than sixty-five
percent (65%) of the combined voting power of all classes of stock entitled to
vote (the "Voting Stock") of any such entity.
2.2. Obligations. The Collateral shall secure the following obligations,
indebtedness and liabilities (all such obligations, indebtedness and liabilities
being hereinafter sometimes called the "Obligations"):
(a) the payment of the indebtedness evidenced by the Notes;
(b) all obligations of [Pledgor] [the Borrower] to the Lenders under the
Credit Agreement;
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(c) the performance and payment of the obligations of [Pledgor] [the
Borrower] and the Guarantors under any of the Credit Documents,
including, without limitation, the performance and payment of
Pledgor's obligations hereunder; and
(d) all extensions, renewals, rearrangements and modifications of any of
the foregoing.
Section 3. Representations and Warranties. Pledgor represents and
warrants to Secured Party that:
3.1. Title. Pledgor owns or, with respect to Collateral acquired after the
date hereof, Pledgor will own, legally and beneficially, the Collateral free and
clear of any Lien, security interest, pledge, claim, or other encumbrance or any
right or option on the part of any third person to purchase or otherwise acquire
the Collateral or any part thereof, except for the security interest granted
hereunder. Pledgor has the unrestricted right to pledge the Collateral as
contemplated hereby.
3.2. Organization and Authority. Neither the execution, delivery or
performance by Pledgor of this Agreement nor compliance by it with the terms and
provisions hereof, nor the consummation of the transactions contemplated herein,
will (i) contravene any applicable provision of any law, statute, rule or
regulation, or any order, writ, injunction or decree of any court or
governmental instrumentality; or (ii) conflict with or result in any breach of
any term, covenant, condition or other provision of, or constitute a default
under, or (other than pursuant to the Security Documents) result in the creation
or imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of Pledgor under the terms of any contractual obligation
to which Pledgor is a party or by which it or any of its properties or assets
are bound or to which it may be subject.
3.3. Location of Pledgor. As of the date hereof, the principal office (if
applicable) of Pledgor, and the place where Pledgor keeps its books and records,
is located at 1360 Post Oak Blvd., Suite 2100, Houston Texas 77056.
3.4. First Priority Perfected Security Interest. This Agreement creates in
favor of Secured Party a first priority security interest in the Collateral
currently in existence, which will be perfected upon the filing of a duly
executed and completed UCC-1 Financing Statement in the Office of the Secretary
of State of the State of Texas. There is no financing statement (or other
evidence of a Lien or security interest) now on file in any public office
covering any of the Collateral.
Section 4. Covenants. Pledgor covenants and agrees with Secured Party
that:
4.1. Encumbrances. Except as permitted by the Credit Agreement, Pledgor
shall not create, permit, or suffer to exist, and shall defend the Collateral
against, any Lien on the Collateral except the pledge and security interest of
Secured Party hereunder except for Permitted Liens, and shall defend Pledgor's
rights in the Collateral and Secured Party's security interest in the Collateral
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against the claims of all persons and entities (other than any person or entity
claiming by, through or under Secured Party or any obligee of the Obligations).
4.2. Sale of Collateral. Pledgor shall not sell, assign, or otherwise
dispose of the Collateral or any part thereof except as permitted by the Credit
Agreement.
4.3. Dividends. If Pledgor shall become entitled to receive or shall
receive any distribution (including, without limitation, any dividend or
distribution in connection with any reclassification, increase, or reduction of
capital or issued in connection with any reorganization), option or rights
constituting Collateral, whether as an addition to, in substitution of, or in
exchange for any Collateral or otherwise, Pledgor agrees to accept the same as
Secured Party's agent and to hold the same in trust for Secured Party and to
deliver the same (to the extent in form capable of delivery) promptly to Secured
Party in the exact form received, with the appropriate endorsement of Pledgor
when necessary, to be held by Secured Party, as additional Collateral for the
Obligations, subject to the terms hereof. Any sums paid upon or in respect of
the Collateral upon the liquidation or dissolution of the issuer thereof in
violation of the Credit Agreement shall be paid over to Secured Party to be held
by it as additional Collateral for the Obligations subject to the terms hereof
except as otherwise provided in the Credit Agreement; and in case any
distribution shall be made on or in respect of the Collateral while a Default or
an Event of Default shall be continuing or any property shall be distributed
while a Default or an Event of Default shall be continuing upon or with respect
to the Collateral pursuant to any recapitalization or reclassification of the
capital of the issuer thereof or pursuant to any reorganization of the issuer
thereof, the property so distributed shall be delivered to the Secured Party to
be held by it, as additional Collateral for the Obligations, subject to the
terms hereof. All sums of money and property so paid or distributed in respect
of the Collateral that are received by Pledgor shall, until paid or delivered to
Secured Party, be held by Pledgor in trust as additional security for the
Obligations, provided that except to the extent that such sums of money or
property have theretofore been applied against the Obligations in accordance
with the Credit Agreement, such sums of money or property shall forthwith be
delivered to Pledgor at such time as no Default or Event of Default shall be
continuing under the Credit Agreement.
4.4. Further Assurances. At any time and from time to time, upon the
request of Secured Party, and at the sole expense of Pledgor, Pledgor shall
promptly execute and deliver all such further instruments and documents and take
such further action as Secured Party may deem reasonably necessary or desirable
to preserve and perfect its security interest in the Collateral and carry out
the provisions and purposes of this Agreement, including, without limitation,
the execution and filing of such financing statements as Secured Party may
require. A carbon, photographic, or other reproduction of this Agreement or of
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement to
the extent provided by applicable law.
4.5. Inspection Rights. Upon reasonable notice from Secured Party, Pledgor
shall permit Secured Party and its representatives to examine, inspect, and copy
Pledgor's books and records
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concerning ownership of the Collateral at any reasonable time during normal
business hours and as often as Secured Party may desire.
4.6. Notification. Pledgor shall promptly after it has knowledge thereof,
notify Secured Party of (i) any Lien upon or claim made or threatened against
the Collateral, (ii) any change in the location of the office where records
concerning the Collateral are kept and any additional places of business of
Pledgor or the Borrower, and (iii) any change in its name, state of
incorporation or its type of entity.
4.7. Books and Records. Pledgor shall mark its books and records to
reflect the security interest of Secured Party under this Agreement.
4.8. Receipt after Default. If any Collateral is received by Pledgor
during the continuance of an Event of Default, Pledgor shall pay over to Secured
Party all such Collateral on the day received, including the cash and checks
endorsed by Pledgor evidencing the Collateral. Pledgor shall not commingle the
Collateral with any other funds, proceeds or monies of Pledgor, and shall keep
such proceeds separate and apart from any other funds, proceeds or monies of
Pledgor and shall hold the Collateral in trust for Secured Party until same
shall be paid over to Secured Party as agreed to herein.
4.9 Pledge of Shares of Controlled Foreign Corporation.
(a) In the event that the Collateral hereunder would, but for this Section
4.9(a), represent more than sixty-five percent (65%) of the Voting
Stock of a Company which is a controlled foreign corporation, then the
number of shares of Voting Stock of such Company in excess of such
sixty-five percent (65%) automatically shall be released from the Lien
of, and the terms and provisions of, this Agreement.
(b) In the event that the Collateral hereunder represents less than sixty-
five percent (65%) of the Voting Stock of any Company which is a
controlled foreign corporation (or, if less, 100% of the Voting Stock
of such Company owned by Pledgor), then Pledgor will promptly pledge
additional capital stock to increase the number of shares pledged
hereunder to such sixty-five percent (65%) (or, if less, 100% of the
Voting Stock of such Company owned by Pledgor).
Section 5. Rights of Secured Party and Pledgor.
5.1. Power of Attorney. Pledgor hereby irrevocably constitutes and
appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead and in the name of Pledgor or in its
own name, from time to time in Secured Party's discretion during the continuance
of an Event of Default and prior to the Collateral Termination Date, to take any
and all action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish
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the purposes of this Agreement and, without limiting the generality of the
foregoing, hereby gives Secured Party the power and right on behalf of Pledgor
and in its own name to do any of the following after the occurrence and during
the continuance of an Event of Default and to the extent permitted by applicable
laws, without notice to or the consent of Pledgor:
(a) to demand, sue for, collect, or receive in the name of Pledgor or in
its own name, any money or property at any time payable or receivable
on account of or in exchange for any of the Collateral and, in
connection therewith, endorse checks, notes, drafts, acceptances,
money orders, or any other instruments for the payment of money under
the Collateral;
(b) to pay or discharge taxes, liens, security interests, or other
encumbrances (other than Permitted Liens) levied or placed on or
threatened against the Collateral;
(c) (i) to direct any parties liable for any payment under any of the
Collateral to make payment of any and all monies due and to become due
thereunder directly to Secured Party or as Secured Party shall direct;
(ii) to receive payment of and receipt for any and all monies, claims,
and other amounts due and to become due at any time in respect of or
arising out of any Collateral; (iii) to sign and endorse any drafts,
assignments, proxies, stock powers, verifications, notices, and other
documents relating to the Collateral; (iv) to commence and prosecute
any suit, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (v) to
defend any suit, action, or proceeding brought against Pledgor with
respect to any Collateral; (vi) to settle, compromise, or adjust any
suit, action, or proceeding described in clause (v) above and, in
connection therewith, to give such discharges or releases as Secured
Party may deem appropriate; (vii) to exchange any of the Collateral
for other property upon any merger, consolidation, reorganization,
recapitalization, or other readjustment of the issuer thereof and, in
connection therewith, deposit any of the Collateral with any
committee, depositary, transfer agent, registrar, or other designated
agency upon such terms as Secured Party may determine; (viii) to add
or release any guarantor, endorser, surety, or other party to any of
the Collateral or the Obligations; and (ix) to sell, transfer, pledge,
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Secured Party were the
absolute owner thereof for all purposes, and to do, at Secured Party's
option and Pledgor's expense, at any time, or from time to time, all
acts and things which Secured Party deems necessary to protect,
preserve, or realize upon the Collateral and Secured Party's security
interest.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. Secured Party shall not be
liable for any act
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or omission or for any error of judgment or any mistake of fact or law in its
individual capacity or in its capacity as attorney-in-fact except acts or
omissions constituting or resulting from its willful misconduct or gross
negligence. This power of attorney is conferred on Secured Party solely to
protect, preserve, and realize upon its security interest in the Collateral.
5.2. Voting Rights. Until written notice shall be given to Pledgor in
accordance with Section 5.02(d) that Secured Party has exercised its rights
under Section 5.02(d) to vote the Collateral (provided, however, if Secured
Party is prevented from providing such notice as a result of Section 362 of the
United States Bankruptcy Code or similar law Pledgor shall be entitled to
exercise such rights so long as no Event of Default shall have occurred and be
continuing), Pledgor shall be entitled to exercise any and all voting and other
rights relating or pertaining to the Collateral or any part thereof (and the
Secured Party shall execute and deliver (or cause to be executed and delivered)
to Pledgor all such proxies and other instruments as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the voting and other
rights which it is entitled to exercise pursuant to this sentence).
5.3. Collateral Proceeds. Until written notice shall be given to Pledgor
in accordance with Section 5.02(d) that Secured Party has exercised its rights
under Section 5.02(d) to vote the Collateral, Pledgor shall be entitled to
receive and collect for its own use all Collateral Proceeds.
5.4. Performance by Secured Party of Pledgor's Obligations. If an Event of
Default has occurred and is continuing or if Pledgor fails to perform or comply
with any of its agreements contained herein and Secured Party itself shall cause
performance of or compliance with such agreement, the reasonable expenses of
Secured Party, together with interest thereon at the rate of interest provided
in the Credit Agreement, shall be payable by Pledgor to Secured Party on demand
and shall constitute Obligations secured by this Agreement.
5.5. Secured Party's Duty of Care. Other than the exercise of reasonable
care in the physical custody of the Collateral while held by Secured Party
hereunder, Secured Party shall have no responsibility for or obligation or duty
with respect to all or any part of the Collateral or any matter or proceeding
arising out of or relating thereto, including, without limitation, any
obligation or duty to collect any sums due in respect thereof or to protect or
preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that Pledgor shall be responsible for
preservation of all rights in the Collateral. Without limiting the generality
of the foregoing, Secured Party shall be conclusively deemed to have exercised
reasonable care in the custody of the Collateral if Secured Party takes such
action, for purposes of preserving rights in the Collateral, as Pledgor may
reasonably request in writing, but no failure or omission or delay by Secured
Party in complying with any such request by Pledgor, and no refusal by Secured
Party to comply with any such request by Pledgor, shall of itself be deemed to
be a failure to exercise reasonable care.
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Section 6. Events of Default and Remedies.
6.1. Events of Default. Pledgor shall be in default under this Agreement
upon the occurrence of and during the continuation of any of the events or
conditions defined as Events of Default in the Credit Agreement (an "Event of
Default").
6.2. Rights and Remedies. Prior to the Collateral Termination Date, upon
the occurrence of an Event of Default and so long as the same shall be
continuing, Secured Party shall have the following rights and remedies to the
extent not prohibited by applicable laws:
(a) In addition to all other rights and remedies granted to Secured Party
in this Agreement and in any other instrument or agreement securing,
evidencing, or relating to the Obligations, Secured Party shall have
all of the rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, Secured Party may
(i) without demand or notice to Pledgor, collect, receive, or take
possession of the Collateral or any part thereof, (ii) sell or
otherwise dispose of the Collateral, or any part thereof, in one or
more parcels at public or private sale or sales, at Secured Party's
offices or elsewhere, for cash, on credit, or for future delivery
without assumption of any credit risk, and/or (iii) bid and become a
purchaser at any such sale free of any right or equity of redemption
in Pledgor, which right or equity is hereby expressly waived and
released by Pledgor. Upon the request of Secured Party, Pledgor shall
assemble the Collateral and make it available to Secured Party at any
place designated by Secured Party that is reasonably convenient to
Pledgor and Secured Party. Pledgor agrees that Secured Party shall
not be obligated to give more than ten (10) days' prior written notice
of the time and place of any public sale or of the time after which
any private sale may take place and that such notice shall constitute
reasonable notice of such matters. Pledgor shall be liable for all
reasonable expenses of retaking, holding, preparing for sale, or the
like, and all reasonable attorneys' fees and other reasonable expenses
incurred by Secured Party in connection with the collection of the
Obligations and the enforcement of Secured Party's rights under this
Agreement, in each case during the continuance of an Event of Default,
all of which expenses and fees shall constitute additional Obligations
secured by this Agreement. Secured Party may apply the Collateral
against the Obligations then due and payable in such order and manner
as it shall elect in its sole discretion. Pledgor shall remain liable
for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay the Obligations. Pledgor waives
all rights of marshaling in respect of the Collateral.
(b) Secured Party may cause any or all of the Collateral held by it to be
transferred into the name of Secured Party or the name or names of
Secured Party's nominee or nominees (in each case as pledgee
hereunder).
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(c) Secured Party shall be entitled to receive all cash distributions
payable in respect of the Collateral. Pledgor shall execute notice
letters, in form and substance satisfactory to Secured Party (as and
when requested by Secured Party), notifying the Borrower of the fact
of this Security Agreement and directing the Borrower to make payment
directly to Secured Party of all of the distributions which are due
and owing to Pledgor by the Borrower, and directing the Borrower to
accompany each transmission of such distributions to Secured Party
with a report in such form as Secured Party may reasonably require in
order to identify (i) the type of distribution being made, and (ii)
the calculations made by the Borrower to determine the amount of the
distribution distributed to Secured Party.
(d) Secured Party shall have the right, but shall not be obligated to,
exercise or cause to be exercised all voting rights and powers in
respect of the Collateral, and Pledgor shall deliver to Secured Party,
if requested by Secured Party, irrevocable proxies with respect to the
Collateral in form satisfactory to Secured Party. Pledgor shall
execute notice letters, in form and substance satisfactory to Secured
Party (as and when requested by Secured Party), notifying the Borrower
of the fact of this Security Agreement and directing the Borrower to
make payment directly to Secured Party of all of the distributions
which are due and owing to Pledgor by the Borrower, and directing the
Borrower to accompany each transmission of such distributions to
Secured Party with a report in such form as Secured Party may
reasonably require in order to identify (a) the type of distribution
being made, and (b) the calculations made by the Borrower to determine
the amount of the distribution distributed to Secured Party.
Because of applicable securities laws, including without limitation, the
Securities Act of 1933, as amended, the securities laws of Texas and other
applicable state securities laws, there may be legal restrictions or limitations
affecting attempts of Secured Party to dispose of the Collateral in the
enforcement of its rights and remedies hereunder. Secured Party is hereby
authorized by Pledgor, but not obligated, upon the occurrence and during the
continuance of an Event of Default, to the extent permitted by applicable law,
to sell all or any part of the Collateral at private sale, subject to investment
letters or in any other manner which will not require the Collateral or any part
thereof, to be registered in accordance with the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder, or any other
applicable securities law or regulation. Pledgor specifically agrees that under
these circumstances, such a sale is a commercially reasonable method of
disposition of the Collateral. Secured Party is also hereby authorized by
Pledgor, but not obligated, to take such actions, give such notices, obtain such
rulings and consents, and do such other things as Secured Party may deem
appropriate in the event of such a sale or disposition of any of the Collateral.
Pledgor acknowledges that Secured Party may, in its reasonable discretion,
approach a restricted number of potential purchasers and that a sale under such
circumstances may yield a lower price for the Collateral or any part or parts
thereof than would otherwise be obtainable if the same were registered and sold
in the open market. Pledgor agrees that such private sale shall constitute a
commercially reasonable method of disposing of the Collateral in view of the
time, expense, and
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potential liability to the parties of such transactions of registration of the
Collateral in accordance with applicable securities laws.
6.3. PLEDGOR AGREES TO INDEMNIFY AND SAVE AND HOLD SECURED PARTY HARMLESS
FROM AND AGAINST ANY CLAIM OF ANY THIRD PERSON TO ANY COLLATERAL AND ANY CLAIM
BY ANY OTHER PARTY OR ENTITY ARISING (INCLUDING, WITHOUT LIMITATION, A
BANKRUPTCY TRUSTEE OR THE ISSUER OF THE OPTION SHARES), DIRECTLY OR INDIRECTLY,
AS A RESULT OF SECURED PARTY'S ENTERING INTO THIS AGREEMENT AND/OR PURSUING ANY
OF ITS RIGHTS AND REMEDIES HEREUNDER, PROVIDED THAT PLEDGOR SHALL HAVE NO
OBLIGATION UNDER THIS PROVISION TO SECURED PARTY WITH RESPECT TO LIABILITIES OF
OR CLAIMS AGAINST SECURED PARTY THAT ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SECURED PARTY.
Section 7. Miscellaneous.
7.1. No Waiver; Cumulative Remedies. No failure on the part of Secured
Party to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. To the fullest extent
permitted by applicable laws, the rights and remedies provided for in this
Agreement are cumulative and not exclusive of any rights and remedies provided
by law.
7.2. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Pledgor and Secured Party and their respective heirs,
successors, and assigns, except that Pledgor may not assign any of its rights or
obligations under this Agreement without the prior written consent of Secured
Party except to the extent permitted by the Credit Agreement.
7.3. Notices. Any notice, consent, or other communication required or
permitted to be given under this Agreement to Secured Party or Pledgor must be
in writing and delivered in person or by facsimile or by registered or certified
mail, return receipt requested, postage prepaid, as follows:
To Secured Party: Bank One, Texas, N.A.
Attention: Mr. John Elam, Jr.
910 Travis
Houston, Texas 77002
Telephone: (713) 751-3806
Fax No.: (713) 751-6199
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with a copy to: Gardere Wynne Sewell & Riggs, L.L.P.
Attention: Ms. Lisa J. Mellencamp
333 Clay Ave., Suite 800
Houston, Texas 77002
Telephone: (713) 308-5576
Fax No.: (713) 308-5555
To Pledgor: Quanta Services, Inc.
1360 Post Oak Blvd., Suite 2100
Houston, Texas 77056
Attention: Mr. James Haddox
Telephone: (713) 629-7600
Fax No.: (713) 629-7676
with a copy to
Quanta Services, Inc.
1360 Post Oak Blvd., Suite 2100
Houston, Texas 77056
Attention: General Counsel
Telephone: (713) 629-7600
Fax No.: (713) 629-7676
Any such notice, consent, or other communication shall be deemed given when
delivered in person, sent by confirmed fax or, if given by mail, five (5) days
after such communication is deposited in the mail, certified or registered with
return receipt requested.
7.4. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Arbitration.
(a) This Agreement and the other Credit Documents, and the rights and
duties of the parties thereto, shall be construed in accordance with and
governed by the internal laws of the State of Texas.
(b) PLEDGOR AND SECURED PARTY EACH HEREBY WAIVES ITS RIGHT TO RESOLVE
DISPUTES, CLAIMS, AND CONTROVERSIES ARISING FROM THIS AGREEMENT, ANY OTHER
CREDIT DOCUMENT OR ANY MATTER IN CONNECTION THEREWITH, INCLUDING, WITHOUT
LIMITATION, CONTRACT DISPUTES AND TORT CLAIMS, THROUGH ANY COURT PROCEEDING OR
LITIGATION AND ACKNOWLEDGES THAT ALL SUCH DISPUTES, CLAIMS AND CONTROVERSIES
SHALL BE RESOLVED PURSUANT TO THIS SECTION, EXCEPT THAT EQUITABLE RELIEF AND
CERTAIN OTHER RIGHTS AND REMEDIES SET
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FORTH BELOW MAY BE SOUGHT FROM ANY COURT OF COMPETENT JURISDICTION. PLEDGOR
REPRESENTS TO SECURED PARTY AND SECURED PARTY REPRESENTS TO PLEDGOR THAT THIS
WAIVER IS MADE KNOWINGLY AND VOLUNTARILY AFTER CONSULTATION WITH AND UPON ADVICE
OF ITS COUNSEL AND IS A MATERIAL PART OF THIS AGREEMENT. ALL SUCH DISPUTES,
CLAIMS AND CONTROVERSIES SHALL BE RESOLVED BY BINDING ARBITRATION PURSUANT TO
THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). Any
arbitration proceeding held pursuant to this arbitration provision shall be
conducted in Houston, Texas or at any other place selected by mutual agreement
of Secured Party and Pledgor. No act to take or dispose of any collateral shall
constitute a waiver of this arbitration agreement or be prohibited by this
arbitration agreement. This arbitration provision shall not limit the right of
either party during any dispute, claim or controversy to seek, use, and employ
ancillary, or preliminary rights and/or remedies, judicial or otherwise, for the
purposes of realizing upon, preserving, protecting, foreclosing upon or
proceeding under forcible entry and detainer for possession of, any real or
personal property, and any such action shall not be deemed an election of
remedies. Such remedies include, without limitation, obtaining injunctive relief
or a temporary restraining order, invoking a power of sale under any deed of
trust or mortgage, obtaining a writ of attachment or imposition of a
receivership, or exercising any rights relating to personal property, including
exercising the right of set-off, or taking or disposing of such property with or
without judicial process pursuant to the Uniform Commercial Code. Any disputes,
claims or controversies concerning the lawfulness or reasonableness of an act,
or exercise of any right or remedy concerning any collateral, including any
claim to rescind, reform, or otherwise modify any agreement relating to the
collateral, shall also be arbitrated; provided, however that no arbitrator shall
have the right or the power to enjoin or restrain any act of either party.
Judgment upon any award rendered by any arbitrator may be entered in any court
having jurisdiction. The statute of limitations, estoppel, waiver, laches and
similar doctrines which would otherwise be applicable in an action brought by a
party shall be applicable in any arbitration proceeding, and the commencement of
an arbitration proceeding shall be deemed the commencement of any action for
these purposes. The federal arbitration act (Title 9 of the United States Code)
shall apply to the construction, interpretation, and enforcement of this
arbitration provision.
(c) To the fullest extent permitted by applicable law, each party hereto
agrees that any court proceeding or litigation permitted by Section 7.4(b) may
be brought and maintained in the courts of the State of Texas sitting in Harris
County or the United States District Court for the Southern District of Texas.
To the fullest extent permitted by applicable law, the Pledgor hereby expressly
and irrevocably submits to the jurisdiction of the courts of the State of Texas
and the United States District Court for the Southern District of Texas for the
purpose of any such litigation as set forth above and irrevocably agrees to be
bound by any judgment rendered thereby in connection with such litigation. To
the fullest extent permitted by applicable law, the Pledgor further irrevocably
consents to the service of process, by registered mail, postage prepaid, or by
personal service within or without the state of Texas. To the fullest extent
permitted by applicable law, the Pledgor hereby expressly and irrevocably waives
any objection which it may have or hereafter may have to the laying of venue of
any such litigation brought in any such court referred to above and any
Stock Pledge Agreement - Page 12
<PAGE>
claim that any such litigation has been brought in an inconvenient forum. To the
extent that the Pledgor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution or
otherwise) with respect to itself or its property, the Borrower hereby
irrevocably waives to the fullest extent permitted by applicable law, such
immunity in respect of its obligations under this Agreement and the other Credit
Documents.
(D) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY (BY THEIR ACCEPTANCE
HEREOF) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
PERMITTED BY SECTION 7.4(B) AND WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT
OF THIS AGREEMENT, ANY OTHER CREDIT DOCUMENT, ANY OTHER RELATED DOCUMENT OR ANY
RELATIONSHIP BETWEEN THE LENDER, THE BORROWER AND/OR ANY GUARANTOR, AND AGREES
THAT ANY SUCH ACTION, PROCEEDING OR DISPUTE SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE LENDER TO
PROVIDE THE LOANS AND THE LETTERS OF CREDIT.
7.5. Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
7.6. Survival of Representations and Warranties. All representations and
warranties made in this Agreement or in any certificate delivered pursuant
hereto shall survive the execution and delivery of this Agreement, and no
investigation by Secured Party shall affect the representations and warranties
or the right of Secured Party to rely upon them.
7.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.8. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.9. Construction. Pledgor and Secured Party acknowledge that each of them
has had the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement with its legal counsel and that this
Agreement shall be construed as if jointly drafted by Pledgor and Secured Party.
Stock Pledge Agreement - Page 13
<PAGE>
7.10. Obligations Absolute. The obligations of Pledgor under this
Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release,
subordination, or impairment of collateral, or any waiver, consent, extension,
indulgence, compromise, settlement, or other action or inaction in respect of
this Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the Obligations, or any exercise or failure
to exercise any right, remedy, power, or privilege in respect of the
Obligations.
7.11. Termination. On the Collateral Termination Date, the Liens created
hereby shall terminate, and Secured Party, at the request and expense of
Pledgor, forthwith will execute and deliver to Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of the Liens created
hereby and will duly assign, transfer and deliver to Pledgor (without recourse
and without any representation or warranty), such of the Collateral as may be in
the possession of the Lender and as has not theretofore been sold or otherwise
applied pursuant to this Agreement or the Credit Agreement. Upon such release
and redelivery, this Agreement shall terminate. The term "Collateral
Termination Date" shall mean the first date on which no Note or Letter of Credit
is outstanding under the Credit Agreement, the Commitments have been permanently
terminated and no other Obligation is due and payable thereunder or under any
other Credit Document.
7.12. AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT, TOGETHER WITH THE
OTHER CREDIT DOCUMENTS, EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES
HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THE PROVISIONS OF THIS AGREEMENT MAY BE AMENDED OR
WAIVED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first written above.
SECURED PARTY:
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Stock Pledge Agreement - Page 14
<PAGE>
PLEDGOR:
, a corporation
--------------------- ---------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Stock Pledge Agreement - Page 15
<PAGE>
SCHEDULE 1
Stock Pledge Agreement - Page 16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,778
<SECURITIES> 0
<RECEIVABLES> 44,828
<ALLOWANCES> 972
<INVENTORY> 1,750
<CURRENT-ASSETS> 66,803
<PP&E> 81,901
<DEPRECIATION> 37,813
<TOTAL-ASSETS> 205,826
<CURRENT-LIABILITIES> 40,079
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 128,756
<TOTAL-LIABILITY-AND-EQUITY> 205,826
<SALES> 93,717
<TOTAL-REVENUES> 93,717
<CGS> 76,681
<TOTAL-COSTS> 86,550
<OTHER-EXPENSES> 191
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,049
<INCOME-PRETAX> 6,309
<INCOME-TAX> 2,900
<INCOME-CONTINUING> 3,409
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,409
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
