<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998
REGISTRATION NO. 333-57013
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NATIONWIDE ELECTRIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1731 43-1807205
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
1201 WALNUT STREET
SUITE 1300
KANSAS CITY, MISSOURI 64106
(816) 556-2582
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GREGORY J. ORMAN
CHAIRMAN OF THE BOARD
1201 WALNUT STREET
SUITE 1300
KANSAS CITY, MISSOURI 64106
(816) 556-2582
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JOHN A. GRANDA STEPHEN A. RIDDICK
STINSON, MAG & FIZZELL, P.C. PIPER & MARBURY L.L.P.
1201 WALNUT STREET 36 SOUTH CHARLES STREET
KANSAS CITY, MISSOURI 64106 BALTIMORE, MARYLAND 21201
(816) 842-8600 (410) 539-2530
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value per share...... $74,750,000 $25,651.52*
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*Previously paid.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JULY 31, 1998
5,000,000 Shares
NATIONWIDE ELECTRIC, INC.
Common Stock
---------
All of the 5,000,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"), offered hereby are being offered by Nationwide Electric, Inc.
("Nationwide"). Nationwide was founded in February 1998 to create a leading
provider of electrical contracting and maintenance services to commercial,
industrial and institutional customers. Nationwide acquired Parsons Electric
Co. ("Parsons") effective February 27, 1998 and conducted no operations prior
to that acquisition. Three additional companies (the "Acquired Companies") will
be acquired as a condition to, and simultaneously with, the offering made
hereby (the "Offering"). It is currently estimated that the initial offering
price will be between $11 and $13 per share. Prior to the Offering, there has
been no public market for the Common Stock. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. Of the net proceeds to Nationwide from the sale of the Common Stock
offered hereby, approximately $16.9 million will be paid to the stockholders of
the Acquired Companies in connection with their acquisition by Nationwide and
approximately $6.2 million will be used to redeem preferred stock owned by KLT
Energy Services, Inc. ("KLT"), an affiliate of the Company. See "Use of
Proceeds." KLT has indicated that it will purchase 500,000 of the shares of
Common Stock offered hereby at the initial public offering price. Application
has been made to list the Common Stock on the New York Stock Exchange ("NYSE")
under the trading symbol "NEL."
---------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
---------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY (1)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................ $ $ $
Total (2)........................ $ $ $
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Before deducting expenses of the Offering payable by the Company estimated
at $1,450,000.
(2) Nationwide has granted the Underwriters a 30-day option to purchase up to
an additional 750,000 shares of Common Stock solely to cover over-
allotments, if any. To the extent the option is exercised, the Underwriters
will offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters, as stated
herein, subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to their right to reject any order in whole or in
part. It is expected that delivery of the shares of Common Stock will be made
at the offices of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about
, 1998.
BT ALEXl BROWN PIPER JAFFRAY INC.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND WITH QUARTERLY REPORTS CONTAINING UNAUDITED SUMMARY FINANCIAL
INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
Effective February 27, 1998, Nationwide acquired Parsons through a merger
with an affiliated company owning all of Parsons' capital stock in exchange for
2,310,000 shares of Common Stock, 990,000 shares of Class A Non-Voting Common
Stock (which will be converted into an equal number of shares of Common Stock
concurrently with the consummation of the Offering) and 6,000 shares of its
preferred stock, par value $.01 per share ("Redeemable Preferred Stock").
Concurrently with the closing of the Offering, Nationwide plans to acquire in
separate transactions (collectively, the "Acquisitions"), in exchange for
consideration including shares of its Common Stock, the Acquired Companies,
namely: Allison-Smith Company (through its parent, The Allison Company)
("Allison-Smith"), Henderson Electric Co. Inc. ("Henderson"), and Potter
Electric Co., Inc. ("Potter"). Unless otherwise indicated, references herein to
"Nationwide" mean Nationwide Electric, Inc. and its subsidiaries (including
Parsons) and references to the "Company" mean Nationwide and the Acquired
Companies collectively.
The following summary is qualified in its entirety by the detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information and
share and per share data in this Prospectus (i) give effect to the
Acquisitions, (ii) give effect to the other Nationwide share issuances
subsequent to March 31, 1998, (iii) assume the Underwriters' over-allotment
option is not exercised and (iv) assume an initial public offering price of
$12.00 per share.
THE COMPANY
Nationwide is a leading provider of electrical contracting and maintenance
services to commercial, industrial and institutional customers. The Company
provides a wide array of electrical contracting services ranging from the
design and installation of electrical systems for new facilities, the
renovation and retrofit of existing electrical systems, specialized and value-
added services, as well as long-term and on-call maintenance and repair
services. The Company believes that its focused operating strategy, emphasis on
providing design-build, specialized and value-added services, prominence within
its markets and the experience of its executive management team will provide
the Company with significant competitive advantages as it pursues its growth
strategy. See "Business--General."
For the twelve months ended March 31, 1998, Nationwide provided specialty
electrical contracting and maintenance services primarily in Minnesota, as well
as in Alabama, Arkansas, Illinois, Iowa, North Dakota, Oregon, South Dakota,
Texas, Virginia and Wisconsin. Concurrently with the closing of the Offering,
Nationwide will expand its current business through the Acquisitions, making it
one of the largest providers of electrical contracting and maintenance services
in the U.S. The Company maintains six offices in five states and performed work
in 19 states, as well as in the United Kingdom and Canada, in the fiscal year
ended March 31, 1998. During that fiscal year, the Company generated pro forma
combined revenues, operating income and net income of $145.8, $9.0 and $5.4
million, respectively. Operating income and net income do not include a
nonrecurring, noncash compensation charge of $3.3 million ($2.0 million, net of
tax) directly attributable to the transactions contemplated by the Offering,
which will be recorded in the first reportable quarter following consummation
of the Offering. Of such pro forma combined revenues, approximately 28% were
derived from "design-build" new construction projects, 26% were derived from
"bid-to-spec" new construction projects, 26% were derived from retrofit and
renovation projects, 11% were derived from maintenance and repair services and
9% were derived from specialized and value-added services. The Company's
customers include general contractors, property managers, operators and owners
of commercial, industrial and institutional properties, real estate developers
and governmental entities. See "Business--Services" and "--Customers and
Marketing."
The Company emphasizes the marketing of its design-build expertise and
specialized and value-added services because it believes that its capabilities
and track record give it a sustainable competitive advantage
3
<PAGE>
and that such services provide higher margins than general electrical
contracting services. The Company plans to capitalize on the long-standing
customer relationships of Parsons and the Acquired Companies in these and other
service areas by leveraging its resources and technical capabilities through
sharing of expertise, staffing flexibility, improved job selection processes,
and Company-wide implementation of best practices.
The Company estimates that the annual revenues generated by the electrical
contracting industry grew from approximately $39.3 billion in 1990 to
approximately $49.1 billion in 1995. The Company believes that it will be well-
positioned to capitalize on significant trends currently affecting its
industry. The Company expects that these trends, which include increased levels
of construction and renovation, more stringent electrical codes, enhanced
safety standards, demand for uninterruptible power, increased complexity of
systems, networking of local area and wide area computer systems, increases in
predictive and preventive maintenance to minimize process downtime, more
stringent national energy standards, demand to build out and reconfigure lease
spaces in office buildings and increases in use of electrical power, will
provide significant opportunities for growth. See "Business--Industry
Overview."
Nationwide was founded in February 1998 to execute an acquisition-based
growth strategy. The Company believes that the highly fragmented nature of its
industry presents substantial consolidation and growth opportunities. According
to industry sources, there are approximately 60,000 electrical contracting
businesses in the U.S., consisting of a small number of regional or national
providers and a large number of relatively small, owner-operated businesses.
The Company believes that its disciplined acquisition strategy, financial
strength, experienced management team, decentralized operating philosophy,
performance incentive programs and opportunities for advancement within the
Company will enable it to attract and acquire electrical contractors with
leading reputations in their regional or local markets. See "Business--Industry
Overview."
Nationwide was incorporated in Delaware on February 17, 1998. Its executive
offices are located at 1201 Walnut Street, Suite 1300, Kansas City, Missouri
64106 and its telephone number at that address is (816) 556-2582.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered hereby.... 5,000,000 shares
Common Stock to be outstanding
after the Offering............ 10,048,746 shares (1)
Use of Proceeds................ To pay the cash portion of the purchase price
for the Acquired Companies, to repay all of
the debt of Nationwide and the Acquired
Companies, to redeem shares of outstanding
Redeemable Preferred Stock and pay accrued
but unpaid dividends in respect thereof, to
repay expenses incurred in connection with
the organization of Nationwide and the
Offering and for general corporate purposes,
including future acquisitions.
Proposed NYSE symbol........... NEL
</TABLE>
- --------
(1) Includes (i) 1,100,416 shares to be issued to the owners of the Acquired
Companies, (ii) 5,000,000 shares to be sold in the Offering and (iii)
3,948,330 shares issued to the existing stockholders and certain management
personnel of the Company. Excludes options to purchase approximately
220,000 shares of Common Stock that are expected to be granted upon
consummation of the Offering at an exercise price equal to the initial
public offering price. See "Management--1998 Stock Option Plans," "Certain
Transactions--Organization of the Company" and "Description of Capital
Stock--Common Stock."
4
<PAGE>
ACQUISITION CONSIDERATION
The aggregate consideration to be paid by Nationwide in the Acquisitions
consists of approximately $16.9 million in cash (approximately 31% of the net
proceeds of the Offering, 27% if the over-allotment option is exercised in
full) and 1,100,416 shares of Common Stock (collectively, the "Acquisition
Consideration"). The number of shares to be issued as part of the Acquisition
Consideration will depend upon the actual initial public offering price. The
Acquisition Consideration was determined by arms-length negotiations between
Nationwide and representatives of each of the Acquired Companies and was based
primarily on historical operating results and Nationwide's belief that
operating results will increase in the future based on the Company's strategy,
certain of the Acquired Companies' contracts in place and their respective
market outlooks. See "Business--Strategy." In addition there is an opportunity
for the shareholder of Potter to earn additional consideration based on future
financial performance of Potter as described under "Certain Transactions--
Organization of the Company."
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Nationwide will acquire the three Acquired Companies simultaneously with and
as a condition to the consummation of the Offering. For financial statement
presentation purposes, Nationwide, which includes Parsons (the "Predecessor"),
has been identified as the "accounting acquiror." Nationwide acquired Parsons
effective February 27, 1998 and conducted no operations prior to that
acquisition. The following summary unaudited pro forma combined financial data
present certain data for the Company, as adjusted for (i) the effects of the
Acquisitions, including the acquisition of Parsons (ii) the effects of certain
other pro forma adjustments to the historical financial statements and (iii)
the consummation of the Offering and the application of the net proceeds
therefrom. The unaudited pro forma combined income statement data assumes that
the Acquisitions, as well as the acquisition of Parsons and related
transactions, were closed on April 1, 1997 and are not necessarily indicative
of the results that the Company would have obtained had these events actually
occurred at that time, or of the Company's future results. During the periods
presented below, Nationwide and the Acquired Companies were not under common
control or management and, therefore, the data presented may not be comparable
to or indicative of postcombination results to be achieved by the Company. The
unaudited pro forma combined financial data should be read in conjunction with
the other financial information included elsewhere in the Prospectus. See
"Selected Financial Data," the Unaudited Pro Forma Combined Financial
Statements and notes thereto and the historical financial statements of
Nationwide, Parsons and the Acquired Companies and the notes thereto, all
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA COMBINED
TWELVE MONTHS ENDED
MARCH 31, 1998
-------------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.................................................. $145,821
Cost of services, excluding depreciation shown separately
below................................................... 120,819
--------
Gross profit............................................. 25,002
--------
Selling, general and administrative expenses (1)......... 14,528
Depreciation............................................. 862
Goodwill amortization (2)................................ 603
--------
Operating income......................................... 9,009
Interest and other income (expense), net (3)............. 312
--------
Income before income taxes............................... 9,321
Income tax (4)........................................... 3,970
--------
Income before a nonrecurring, noncash charge directly
attributable to the transaction (1)..................... $ 5,351
========
Income per share before a nonrecurring, noncash charge
directly attributable to the transaction--basic and
diluted (1)............................................. $ 0.53
========
Shares used in computing pro forma net income per share--
basic and diluted (5)................................... 10,049
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------
MARCH 31, 1998
-----------------------------
COMBINED(6) AS ADJUSTED(7)
----------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)....................... $ (1,815)(8) $45,161
Total assets.................................... 67,225 87,247
Long-term debt, net of current maturities....... 1,186 --
Redeemable Preferred Stock...................... 6,188 --
Total stockholders' equity...................... 12,235 66,585
</TABLE>
- --------
(1) The unaudited pro forma combined statement of operations data reflect an
aggregate of approximately $630,000 in pro forma reductions in salary,
bonus and benefits of the owners of the Acquired Companies to which they
have agreed prospectively. Also, reflects results of operations of one of
the Acquired Companies for which historical financial statements are not
included. Additionally, reflects adjustments to expenses associated with
certain non-operating assets that will be transferred from the Acquired
Companies prior to the Acquisitions and certain other transactions,
including the elimination of activities related to assets not purchased
from the shareholders of Parsons.
Under certain restricted stock purchase agreements, the Company has sold
315,000 shares of Common Stock to management, two outside directors and one
director nominee. As a result, the Company will record a non-recurring, non-
cash compensation charge of $3.3 million and related income tax benefit of
$1.3 million or $2.0 million ($0.20 per share) in the first reportable
quarter after the consummation of the Offering, representing the difference
between the amount paid for the shares and the estimated fair value thereof
(a fair value that is discounted ten percent from the assumed initial public
offering price). This non-recurring compensation charge is not included in
the Unaudited Pro Forma Combined Financial Statements.
(2) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions, as well as Parsons' acquisition, over a 40-year period.
(3) Reflects the reduction for interest expense of approximately $600,000
attributable to the repayment of approximately $10.8 million of historical
debt of Nationwide and the Acquired Companies with proceeds from the
Offering. Additionally, reflects reductions in expenses associated with
certain non-operating assets that will be transferred to the Acquired
Companies prior to the Acquisitions, as well as activities related to
assets not purchased from the shareholders of Parsons.
(4) Assumes all pretax income before non-deductible goodwill and other
permanent items is subject to a statutory 40% tax rate.
(5) Includes (i) 3,948,330 shares of Common Stock issued or to be issued to
certain management personnel and the existing stockholders, (ii) 1,100,416
shares of Common Stock to be issued to the owners of the Acquired
Companies, (iii) 3,331,500 of the 5,000,000 shares of Common Stock to be
sold in the Offering to pay the cash portion of the Acquisition
Consideration, to repay expenses incurred in connection with the
organization of Nationwide and the Offering and to retire debt and redeem
the Redeemable Preferred Stock and (iv) 1,668,500 of the 5,000,000 shares
sold in the Offering to provide net cash to Nationwide expected to be used
for working capital and future acquisitions of businesses. Excludes options
to purchase approximately 220,000 shares of Common Stock that are expected
to be granted upon consummation of the Offering. See "Management--1998
Stock Option Plans."
(6) Reflects the Acquisitions and related transactions as if they had occurred
on March 31, 1998 as described in the Notes to the Unaudited Pro Forma
Combined Financial Statements. The unaudited pro forma combined balance
sheet data should be read in conjunction with the other financial
information and historical financial statements and notes thereto included
elsewhere in this Prospectus.
(7) Reflects the closing of the Offering and the Company's application of the
net proceeds therefrom to fund the cash portion of the Acquisition
Consideration and to repay certain indebtedness of the Acquired Companies.
See "Use of Proceeds" and "Certain Transactions."
(8) Includes approximately $16.9 million payable to owners of the Acquired
Companies, representing the actual cash portion of the Acquisition
Consideration to be paid from a portion of the net proceeds of the
Offering.
6
<PAGE>
SUMMARY INDIVIDUAL FINANCIAL DATA OF PARSONS/NATIONWIDE AND THE
SIGNIFICANT ACQUIRED COMPANIES (IN THOUSANDS)
The following table presents certain summary historical income statement data
of Parsons/Nationwide and the significant Acquired Companies for each of their
three most recent fiscal years. The historical income statement data presented
below have not been adjusted for the pro forma adjustments reflected in the
Unaudited Pro Forma Combined Financial Statements, included elsewhere in this
Prospectus. The income statement data presented below have been audited, as
reflected in the historical financial statements of Nationwide, Parsons and the
significant Acquired Companies included elsewhere in this Prospectus. Also, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Introduction."
<TABLE>
<CAPTION>
PREDECESSOR NATIONWIDE
----------------------------------------- --------------
FISCAL YEARS ENDED
----------------------- JANUARY 1 TO JANUARY 1 TO
1995 1996 1997 FEBRUARY 27, 1998 MARCH 31, 1998
------- ------- ------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
PARSONS/NATIONWIDE(1):
Revenue............. $52,017 $58,563 $58,005 $9,700 $4,305
Gross profit........ 8,355 9,401 10,657 1,870 703
ALLISON-SMITH(2):
Revenue............. 20,278 32,392 28,000
Gross profit........ 2,820 5,068 5,199
HENDERSON(3):
Revenue............. 27,337 36,409 44,000
Gross profit........ 4,149 5,384 6,048
</TABLE>
- --------
(1) The fiscal years presented for Parsons are for the years ended December 31.
(2) The fiscal years presented for Allison-Smith are for the years ended June
30, 1995, 1996 and 1997. The nine months ended March 31, 1998 had revenues
and gross profit of $22,064 and $3,968, respectively.
(3) The fiscal years presented for Henderson are for the years ended March 31,
1996, 1997 and 1998.
7
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of Common Stock offered hereby. This
Prospectus contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in the following risk factors, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business" and elsewhere in
this Prospectus.
Limited Operating History; Integration of Acquired Companies. Nationwide was
founded in February 1998 in order to effectuate the acquisition of Parsons,
the Offering and the Acquisitions and commenced operations effective February
27, 1998. Accordingly, the Company has only a limited operating history upon
which to base an evaluation of its business and its prospects. The disclosures
regarding the Company contained in this Prospectus must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in
their early stages of development.
The Company has entered into agreements to acquire the Acquired Companies
simultaneously with, and as a condition to, the Offering. The Acquired
Companies have been operating and will continue to operate as separate
independent entities or divisions of subsidiaries of the Company, and there
can be no assurance that the Company will be able to integrate the operations
of these businesses successfully or to institute the necessary systems and
procedures, including accounting and financial reporting systems, to manage
the combined enterprise on a profitable basis or to realize significant cost
savings and increased revenues from the combined operations. In addition,
there can be no assurance that the recently assembled management group will be
able to successfully manage the combined entity and effectively implement the
Company's operating and growth strategies. The pro forma combined financial
results of the Acquired Companies cover periods during which the Acquired
Companies and Nationwide were not under common control or management and,
therefore, may not be indicative of the Company's future financial or
operating results. The success of the Company will depend on management's
ability to integrate the Acquired Companies and other companies acquired in
the future into one organization in a profitable manner. The inability of the
Company to successfully integrate the Acquired Companies and to coordinate and
integrate certain operational, administrative, banking, insurance and
accounting functions and computer systems would have a material adverse effect
on the Company's financial condition and results of operations and would make
it unlikely that the Company's acquisition program will be successful. See
"Business--Strategy" and "Management."
Exposure to Downturns in Construction. A substantial portion of the
Company's business involves installation of electrical systems in newly
constructed and renovated properties for commercial, industrial or
institutional customers. The extent to which the Company is able to maintain
or increase revenues from new installation services will depend on the levels
of new construction starts from time to time in the geographic markets in
which it operates and likely will reflect the cyclical nature of the
construction industry. The level of new installation services is affected by
fluctuations in the level of new construction of properties for commercial,
industrial and institutional customers in the markets in which the Company
operates, due to local economic conditions, changes in interest rates and
other related factors. Downturns in levels of construction starts could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Seasonality; Fluctuations of Quarterly
Results."
Risks Related to Acquisition Strategy. One of the Company's principal growth
strategies is to increase its revenues and the markets it serves through the
acquisition of additional electrical contracting and maintenance service
companies. The Company expects to face competition for acquisition candidates,
which may limit the number of acquisition opportunities and may lead to higher
acquisition prices. There
8
<PAGE>
can be no assurance that the Company will be able to identify, acquire or
profitably manage additional businesses or to integrate successfully any
acquired businesses into the Company without substantial costs, delays or
other operational or financial problems. Further, acquisitions involve a
number of special risks, including failure of the acquired business to achieve
expected results, diversion of management's attention, failure to retain key
personnel of the acquired business and risks associated with unanticipated
events or liabilities, some or all of which could have a material adverse
effect on the Company's business, financial condition and results of
operations. Customer dissatisfaction or performance problems at a single
acquired company could have an adverse effect on the reputation of the Company
generally. In addition, there can be no assurance that the Acquired Companies
or other businesses acquired in the future will achieve anticipated revenues
and earnings. See "Business--Strategy."
Risks Related to Acquisition Financing. The timing, size and success of the
Company's acquisition efforts and the associated capital commitments cannot be
readily predicted. The Company intends to use its Common Stock for all or a
portion of the consideration for future acquisitions. If the Common Stock does
not maintain a sufficient market value or potential acquisition candidates are
unwilling to accept Common Stock as part of the consideration for the sale of
their businesses, the Company may be required to utilize more of its cash
resources, if available, in order to pursue its acquisition program. If the
Company does not have sufficient cash resources, its growth could be limited
unless it is able to obtain additional capital through future debt or equity
financings. Using cash to complete acquisitions and finance internal growth
could substantially limit the Company's financial flexibility, using debt
could result in financial covenants that limit the Company's operations and
financial flexibility and using equity may result in dilution of the ownership
interests of the then-existing stockholders of the Company. The Company has
recently initiated negotiations with a group of commercial banks to provide
the Company with a credit facility to be used for acquisitions, working
capital and other general corporate purposes. Entering into a credit facility
may result in the lender's imposition of financial covenants that limit the
Company's operations and financial flexibility. There can be no assurance that
the Company will be able to obtain financing if and when it is needed or that,
if available, it will be available on terms the Company deems acceptable. As a
result, the Company may be unable to pursue its acquisition strategy
successfully. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Combined Liquidity and Capital Resources" and
"Business--Strategy."
Risks Related to Operating and Internal Growth Strategies. A key element of
the Company's strategy is to increase the profitability and revenues of the
Acquired Companies and any subsequently acquired businesses. There can be no
assurance that the Company will be able to do so. A key component of the
Company's strategy is to operate the Acquired Companies and subsequently
acquired businesses on a decentralized basis, with local management retaining
responsibility for day-to-day operations, profitability and the internal
growth of the business. If proper overall business controls are not
implemented, this decentralized operating strategy could result in
inconsistent operating and financial practices at the Acquired Companies and
subsequently acquired businesses, and the Company's overall profitability
could be adversely affected. The Company's ability to generate internal
earnings growth will be affected by, among other factors, its ability to
expand the range of services offered to customers, expand its geographic
scope, attract new customers, increase the number of projects performed for
existing customers, hire and retain employees, open additional facilities and
reduce operating and overhead expenses. There can be no assurance that the
Company's strategies will be successful or that it will be able to generate
cash flow sufficient to fund its operations and to support internal growth.
The Company's inability to achieve internal earnings growth could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Strategy."
Management of Growth. The Company expects to grow both internally and
through acquisitions. Management expects to expend significant time and effort
in evaluating, completing and integrating acquisitions and opening new
facilities. There can be no assurance that the Company's systems, procedures
and controls will be adequate to support the Company's operations as they
expand. Any future
9
<PAGE>
growth also will impose significant additional responsibilities on members of
the senior management team, including the need to identify, recruit and
integrate new senior level managers and executives. There can be no assurance
that such additional management personnel will be identified, hired and
retained by the Company. To the extent that the Company is unable to manage
its growth efficiently and effectively, or is unable to attract and retain
additional qualified management, the Company's financial condition and results
of operations could be materially adversely affected. See "Business--
Strategy."
Availability of Qualified Employees. The Company's ability to provide high-
quality services on a timely basis requires an adequate supply of skilled
electricians, project estimators and project managers. Accordingly, the
Company's ability to increase its productivity and profitability will be
limited by its ability to employ, train and retain skilled personnel necessary
to meet the Company's requirements. Many companies in the electrical
contracting and maintenance services industry, including Parsons and the
Acquired Companies, are currently experiencing or may experience shortages of
qualified personnel, and there can be no assurance that the Company will be
able to maintain an adequate skilled labor force necessary to operate
efficiently, that the Company's labor expenses will not increase as a result
of a shortage in the supply of skilled personnel or that the Company will not
have to curtail its planned internal growth as a result of labor shortages.
See "Business--Employees" and "--Training, Quality Assurance and Safety."
Unionized and Open-Shop Workforce. The Company has organized two separate
subsidiaries to conduct its operations, one of which will acquire businesses
with unionized workforces and operate as a union contractor and the other of
which will acquire businesses with open-shop workforces and operate as an
open-shop contractor. Approximately 70% of the Company's employees are covered
by collective bargaining agreements. There can be no assurance that these
employees will not engage in strikes or work slowdowns or stoppages. Such
strikes or work slowdowns or stoppages and the resultant adverse impact on the
Company's relationship with its customers could have a material adverse effect
on the Company's business, financial condition and results of operations.
There can be no assurance that relations with unions representing Company
employees will not be adversely affected by the Company's ownership of an
open-shop subsidiary, or by any operations of that subsidiary within the same
geographic market in which the unionized subsidiary operates. In addition, the
Company's acquisition strategy could be adversely affected because of its
union status for a variety of reasons, including without limitation,
incompatibility with a target's existing unions and reluctance of open-shop
targets to become affiliated with a union-based company. See "Business--
Employees."
Competition. The electrical contracting and maintenance services industry is
highly competitive and is served by numerous small, owner-operated private
companies, public companies and several large regional companies. In addition,
there are relatively few, if any, barriers to entry into the market in which
the Company operates and, as a result, any organization that has adequate
financial resources and access to technical expertise may become a competitor
to the Company, including public utilities. Competition in the industry
depends on a number of factors, including price. Certain of the Company's
competitors may have lower overhead cost structures and may, therefore, be
able to provide their services at lower rates than the Company. In addition,
some of the Company's competitors are larger and have greater resources than
the Company. There can be no assurance that the Company's competitors do not
currently possess or will not develop the expertise, experience and resources
to provide services that are equal or superior in both price and quality to
the Company's services, or that the Company will be able to maintain or
enhance its competitive position. There can be no assurance that existing or
prospective customers of the Company will continue to outsource services in
the future. In addition, the Company may face competition for acquisition
targets from entities including, but not limited to, the small number of large
companies in the electrical contracting and maintenance services industry.
These companies may have greater name recognition and greater financial
resources than the Company with which to finance acquisition and development
opportunities and the ability to pay higher prices, which could limit the
Company's acquisition program. See "Business--Competition."
10
<PAGE>
Contract Bidding Risks. A significant portion of the Company's revenues are,
and will continue to be, generated under fixed price contracts. The Company
must estimate the costs of completing a particular project, and the cost of
labor and materials may vary from the costs originally estimated by the
Company. These variations and other risks inherent in performing fixed price
contracts may result in revenue and gross profits different from those
originally estimated, which could result in reduced profitability or losses on
projects. Depending upon the size of a particular project, variations from
estimated contract costs can have a significant impact on the Company's
operating results for any fiscal quarter or year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Introduction."
Certain of the Company's contracts are maintenance contracts pursuant to
which work is assigned on a project by project basis or maintenance services
are provided for a specific facility. There is generally no obligation on the
part of the Company's customers to assign work to the Company under these
agreements and there can be no assurance that customers will continue to
assign work to the Company. A significant decline in work assigned pursuant to
these contracts could have a material adverse effect on the results of
operations of the Company.
Contract Receivables. A high percentage of the Company's current assets is
typically composed of contract receivables due to the project nature of its
business and the large size of many of those projects. On a pro forma basis,
as of March 31, 1998, the Company had $31.5 million of total contract
receivables. The Company intends to implement improved credit and collection
policies to reduce the age and amount of its contract receivables and to
improve their collectibility. However, there can be no assurance that such
policies will be successfully implemented, that the Company will not suffer
one or more defaults on outstanding contract receivables, or that its
allowance for doubtful accounts will be adequate to cover the amount of any
such defaults.
Seasonality; Fluctuations of Quarterly Results. The electrical contracting
and maintenance services industry 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 inclement
weather, while demand for electrical contracting and maintenance services may
be higher due to damage caused by such 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
of the U.S. Quarterly results may also be materially affected by the timing of
acquisitions, variations in the profit 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality; Fluctuations of Quarterly Results."
Potential Exposure to Environmental Liabilities. The Company's operations
are subject to various environmental laws and regulations, including those
dealing with handling and disposal of waste products, polychlorinated
biphenyls, fuel storage and air quality. As a result of past and future
operations at its facilities, the Company may be required to incur remediation
costs and other expenses related thereto. There can be no assurance that the
Company will be able to identify or be indemnified for any or all potential
environmental liabilities relating to any acquired business.
Control by Existing Management and Stockholders. Following consummation of
the Acquisitions and the Offering, the Company's executive officers and
directors, the Initial stockholders (i.e., KLT Energy Services, Inc. and
Reardon Capital, LLC), the former stockholders of the Acquired Companies and
entities affiliated with them will beneficially own 5,048,746 shares of Common
Stock (5,548,746 if KLT Energy Services, Inc. effects its planned purchase of
500,000 shares of Common Stock in the Offering),
11
<PAGE>
representing approximately 50.2% and 55.2% of the aggregate outstanding shares
of Common Stock, respectively (46.8% and 51.4% if the Underwriters'
overallotment option is exercised in full). If the Company's executive
officers and directors and former stockholders of the Acquired Companies act
in concert, they will be able to control the Company's affairs, elect all of
the members of the Board of Directors and control the outcome of any matter
submitted to a vote of stockholders. See "Principal Stockholders."
Dependence on Key Personnel. The Company's operations are dependent on the
continued efforts of its executive officers and on senior management of
Parsons and the Acquired Companies. Furthermore, the Company will likely be
dependent on the senior management of companies that it may acquire in the
future. The loss of key personnel, or the inability to hire and retain
qualified employees could have an adverse effect on the Company's business,
financial condition and results of operations. The Company does not intend to
carry key-person life insurance on any of its employees. Certain members of
the executive management team and other key managers have employment
agreements with the Company, each of which contain noncompete agreements. See
"Management--Employment Agreements."
Proceeds of Offering Payable to Affiliates. A portion of the net proceeds of
this Offering will be used to pay the cash portion of the Acquisition
Consideration to the owners of the Acquired Companies (some of whom will
become officers, directors or key employees of the Company). A portion of the
remaining net proceeds will be used to repay all of the indebtedness of the
Acquired Companies, although the exact amount that will be repaid has not yet
been determined. Additionally, the Company has entered into leases of real
property and equipment with owners of certain of the Acquired Companies, or
their respective affiliates, and one of these owners will become a director of
the Company following the Offering. Because of these relationships between the
parties, these leases may not have been negotiated at arm's length. See
"Certain Transactions."
Shares Eligible for Future Sale. The sale of substantial amounts of the
Company's Common Stock in the public market following the Offering (including
shares issued on the exercise of outstanding stock options), or the perception
that such sales could occur, could adversely affect prevailing market prices
of the Company's Common Stock. All of the shares offered hereby will be freely
saleable in the public market after completion of the Offering, unless
acquired by affiliates of the Company.
Simultaneously with the closing of the Offering, the stockholders of the
Acquired Companies will receive, in the aggregate, 1,100,416 shares of Common
Stock as a portion of the Acquisition Consideration for their businesses.
Additionally, the existing stockholders of the Company and certain members of
management own 3,948,330 shares of Common Stock. None of these shares was or
will be issued in a transaction registered under the Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, such shares may not be
sold except in transactions registered under the Securities Act or pursuant to
an exemption from registration, including the exemption contained in Rule 144
under the Securities Act. When these shares become eligible for sale, the
market price of the Common Stock could be adversely affected by the sale of
substantial amounts of the shares in the public market. The stockholders of
the Acquired Companies have certain registration rights with respect to their
shares to be received that may be exercised after the expiration of the one-
year lock-up period described below. If such stockholders, by exercising such
registration rights, cause a large number of shares to be registered and sold
in the public market, such sales may have an adverse effect on the market
price of the Common Stock.
Upon the closing of this Offering, the Company also expects to grant options
to purchase approximately 220,000 shares of Common Stock, pursuant to the
Company's 1998 Stock Option Plans (the "1998 Stock Option Plans"). The
aggregate number of shares issuable pursuant to the 1998 Stock Option Plans
shall be 1,000,000. The Company intends to register all of the shares subject
to these options under the Securities Act for public resale. See "Management--
1998 Stock Option Plans."
12
<PAGE>
The Company has agreed that it will not sell or offer any shares of Common
Stock or options, rights or warrants to acquire any Common Stock for a period
of 180 days after the date of this Prospectus without the prior written
consent of BT Alex. Brown Incorporated, except for the grant of employee stock
options (up to a maximum of 1,000,000 shares) under the 1998 Stock Option
Plans and for shares issued (i) in connection with acquisitions of businesses
and (ii) pursuant to the Nationwide Executive Stock Purchase Plan (up to a
maximum of 250,000 shares). Further, the Company's directors, executive
officers and certain stockholders who will beneficially own 5,048,746 shares
of Common Stock in the aggregate after the Offering have agreed not to
directly or indirectly offer for sale, sell or otherwise dispose of any Common
Stock for a period of one year after the date of this Prospectus without the
prior written consent of BT Alex. Brown Incorporated.
The Company currently intends to file a Registration Statement on Form S-1
covering up to an additional 5,000,000 shares of Common Stock under the
Securities Act for its use in connection with future acquisitions. Unless the
Company contractually restricts their resale, these shares generally will be
freely tradeable after their issuance so long as the shares are issued to
persons not affiliated with the Company or the Acquired Company. See "Shares
Eligible for Future Sale."
No Prior Market; Possible Volatility of Stock Price; Determination of
Offering Price. Prior to the Offering, there has been no public market for the
Common Stock. The initial public offering price of the Common Stock will be
determined through negotiations between the Company and the representatives of
the Underwriters and may not be indicative of the price at which the Common
Stock will trade after the Offering. See "Underwriting" for a description of
the factors to be considered in determining the initial public offering price.
The securities markets have, from time to time, experienced significant price
and volume fluctuations that may be unrelated to the operating performance of
particular companies. These fluctuations often substantially affect the market
price of a company's stock. Application has been made to list the Common Stock
on the NYSE, although there can be no assurance that an active trading market
for the Common Stock will develop or, if developed, will continue after the
Offering. The market price of the Common Stock could be subject to significant
fluctuations in response to numerous factors, including the timing of
acquisitions by the Company, variations in financial results or announcements
of material events by the Company or its competitors. Regulatory changes,
developments in the Company's industry or changes in general conditions in the
economy or the financial markets could also adversely affect the market price
of the Common Stock.
Certain Anti-Takeover Provisions. Certain provisions of the Company's
Amended and Restated Certificate of Incorporation, Amended and Restated
Bylaws, and Delaware law could, together or separately, discourage potential
acquisition proposals, delay or prevent a change in control of the Company or
limit the price that certain investors may be willing to pay in the future for
shares of the Common Stock. The Company's Board of Directors is divided into
three classes with each class consisting, as nearly as possible, of one-third
of the total number of directors and serving a staggered three-year term. The
Amended and Restated Certificate of Incorporation permits the Board of
Directors to determine the rights, preferences and restrictions of unissued
series of the Company's authorized Preferred Stock and to fix the number and
the designation of shares thereunder and to adopt amendments to the Amended
and Restated Bylaws. The Amended and Restated Bylaws contain restrictions
regarding the right of stockholders to nominate directors and to submit
proposals to be considered at stockholder meetings. Also, the Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws restrict
the right of stockholders to call a special meeting of stockholders and to act
by written consent. The Company also is subject to Section 203 of the Delaware
General Corporation Law (the "DGCL"), which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business transactions with an "interested stockholder" for a period of three
years following the time such stockholder became an interested stockholder.
See "Description of Capital Stock." In addition, the Amended and Restated
Certificate of Incorporation also requires super-majority voting requirements
for certain business combinations. The Board is also permitted by the Amended
and Restated Certificate of Incorporation to take into account the long-term
interests of stockholders and the interests of non-stockholder constituencies
with respect to business combinations.
13
<PAGE>
Immediate and Substantial Dilution. Purchasers of shares of the Common Stock
offered hereby will experience immediate and substantial dilution in the net
tangible book value of their shares in the amount of $7.23 per share from the
initial public offering price. See "Dilution." In the event the Company issues
additional Common Stock in the future, including shares that may be issued in
connection with future acquisitions of businesses or other public or private
financings, purchasers of Common Stock in the Offering may experience further
dilution in the net tangible book value per share of the Common Stock.
Absence of Dividends. The Company has never paid any cash dividends on its
Common Stock and does not anticipate paying cash dividends on its Common Stock
in the immediate future. See "Dividend Policy."
Year 2000 Compliance. The Company intends to implement a common management
information system among Parsons, the Acquired Companies and subsequently
acquired businesses. The Company anticipates that the system it adopts on a
Company-wide basis will be designed to address Year 2000 issues associated
with computer systems that use only two digits to identify a year in the date
field. The ability of third parties with whom the Company transacts business
to address adequately their Year 2000 issues is outside of the Company's
control. There can be no assurance that the failure of the Company or such
third parties to address adequately their Year 2000 issues will not have a
material adverse effect on the Company's business, financial condition, cash
flows and results of operations.
Forward-Looking Statements. There are a number of statements in this
Prospectus that address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such matters
as the Company's strategy for internal growth and improved profitability,
additional capital expenditures (including the amount and nature thereof),
acquisitions of assets and businesses, industry trends and other such matters.
These statements are based on certain assumptions and analyses made by the
Company in light of its perception of historical trends, current business and
economic conditions and expected future developments as well as other factors
it believes are reasonable or appropriate. However, whether actual results and
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, including the risk factors
discussed in this Prospectus; general economic, market or business conditions;
the business opportunities (or lack thereof) that may be presented to and
pursued by the Company; changes in laws or regulations and other factors, most
of which are beyond the control of the Company. Consequently, there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequences to or effects on the Company or its business or
operations.
14
<PAGE>
THE COMPANY
Nationwide is a leading provider of electrical contracting and maintenance
services to commercial, industrial and institutional customers. Effective
February 27, 1998, Nationwide acquired Parsons, which for the twelve months
ended March 31, 1998 provided specialty electrical contracting and maintenance
services primarily in Minnesota, as well as in Alabama, Arkansas, Illinois,
Iowa, North Dakota, Oregon, South Dakota, Texas, Virginia and Wisconsin.
Concurrently with and as a condition to the closing of the Offering,
Nationwide will acquire the three Acquired Companies making it one of the
largest providers of electrical contracting and maintenance services in the
U.S. During the fiscal year ended March 31, 1998, Parsons and the Acquired
Companies, which have been in business an average of 43 years, had pro forma
combined revenues of $146 million. A brief description of Parsons and each of
the Acquired Companies is set forth below.
PARSONS. Parsons was founded in 1927 and is headquartered in Minneapolis,
Minnesota. During the twelve months ended March 31, 1998, Parsons provided
services to customers primarily in Minnesota, as well as in Wisconsin, North
Dakota, South Dakota, Iowa, Texas, Oregon, Arkansas, Alabama, Virginia and
Illinois. Parsons had revenues of approximately $58 million for the fiscal
year ended December 31, 1997 with approximately 85% derived from repeat
customers. Parsons is a union contractor with over 300 employees providing
electrical contracting and maintenance services, including design and
installation, new construction and retrofit/renovation for commercial,
industrial and institutional customers. Don Dolan, former President of
Parsons, has entered into a one-year consulting agreement with the Company.
Joel Moryn, current President of Parsons, has entered into a three-year
employment agreement with the Company.
ALLISON-SMITH. Allison-Smith was founded in 1943 and is headquartered in
Atlanta, Georgia. During the twelve months ended March 31, 1998 Allison-Smith
has provided services to customers in Kansas, Georgia, Florida and Texas, as
well as the United Kingdom and Canada. Allison-Smith had revenues of
approximately $32 million for the twelve months ended March 31, 1998 with
approximately 80% derived from repeat customers. Allison-Smith is a union
contractor with over 200 employees providing electrical contracting and
maintenance services as well as installation of wiring or cabling for
computer, telecommunication and security systems. Allison-Smith also has
significant design-build capability, particularly an established capability to
complete these projects on a "fast track" basis. Robert Allison, President of
Allison-Smith, will become a Director of the Company upon consummation of the
Offering and has entered into a three-year employment agreement with the
Company. David Cartwright and Lanny Thomas, each Vice Presidents of Allison-
Smith, have agreed to enter into three-year employment agreements with the
Company.
HENDERSON. Henderson was founded in 1919, is headquartered in Louisville,
Kentucky and maintains an additional office in Lexington, Kentucky. During the
twelve months ended March 31, 1998, Henderson has provided services to
customers in Kentucky and Indiana. Henderson had consolidated revenues of
approximately $44 million for the fiscal year ended March 31, 1998 with
approximately 75% derived from repeat customers. Henderson is a union
contractor with over 300 employees providing electrical contracting and
maintenance services as well as installation of wiring or cabling for
computer, telecommunication and security systems. Henderson also has
significant design-build capacity. Rodney and Bruce Henderson, respectively
Chief Executive Officer and President of Henderson, have each agreed to enter
into three-year employment agreements with the Company. Mickey Masterson,
Executive Vice President, has agreed to enter into a three-year employment
agreement with the Company.
In 1986, Henderson established Eagle Electrical Systems, Inc. ("Eagle") as a
wholly-owned subsidiary which is headquartered in Cincinnati, Ohio. During the
twelve months ended March 31, 1998, Eagle provided services to customers in
Indiana, Kansas, Kentucky, Ohio and Wisconsin. Eagle is an open-shop
15
<PAGE>
contractor with over 100 employees providing electrical contracting and
maintenance services, as well as installation of wiring or cabling for
computer, telecommunication and security systems. Stephen Howell, President,
has agreed to enter into a three-year employment agreement with the Company.
POTTER. Potter was founded in 1969 and is headquartered in Las Vegas,
Nevada. During the twelve months ended March 31, 1998, Potter provided
services to customers in California and Nevada. Potter had revenues of
approximately $11.4 million for the fiscal year ended March 31, 1998 with 85%
derived from repeat customers. Potter is an open-shop contractor with
approximately 120 employees providing electrical contracting and maintenance
services including installation of wiring and cabling for computer,
telecommunication and security systems primarily for large commercial projects
such as casinos. Ralph Pangonis, President, has entered into a three-year
employment agreement with the Company.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby (after deducting underwriting discounts and commissions and
estimated Offering and Acquisition expenses) will be approximately $ million
($ million if the Underwriters' overallotment option is exercised in full).
Of the net proceeds, approximately $16.9 million will be used to pay the
cash portion of the Acquisition Consideration, all of which will be paid to
stockholders of the Acquired Companies, including a person who will become a
director of the Company upon consummation of the Offering. In addition, the
Company will use (i) $6 million to redeem the outstanding shares of Redeemable
Preferred Stock owned by KLT Energy Services, Inc., an affiliate of the
Company (see "Principal Stockholders") (ii) approximately $187,500 in payment
of accrued but unpaid dividends on the outstanding shares of Redeemable
Preferred Stock, and (iii) approximately $10.8 million to repay outstanding
indebtedness of Nationwide and the Acquired Companies as of March 31, 1998.
The remaining net proceeds (approximately $ million) will be used for
working capital and for general corporate purposes, which are expected to
include future acquisitions. Pending such uses, the Company intends to invest
the remaining net proceeds in short-term, investment grade, interest bearing
securities. While the Company is continuously considering possible acquisition
prospects as part of its growth strategy, the Company presently has no binding
agreements to effect any mergers or acquisitions other than the Acquisitions.
DIVIDEND POLICY
The Company currently intends to retain its future earnings, if any, to
finance the growth, development and expansion of its business and,
accordingly, does not currently intend to declare or pay any cash dividends on
the Common Stock in the immediate future. The declaration, payment and amount
of future cash dividends, if any, will be made at the discretion of the
Company's Board of Directors after taking into account various factors,
including, among others, the Company's financial condition, results of
operations, cash flows from operations, current and anticipated capital
requirements and expansion plans, the income tax laws then in effect and the
requirements of Delaware law. In addition, the Company intends to enter into a
credit facility immediately after the Offering that will include restrictions
on the payment of cash dividends by the Company without the consent of the
lender.
16
<PAGE>
CAPITALIZATION
The following table sets forth the current maturities of long-term
obligations and the capitalization as of March 31, 1998 of the Company (i) on
a pro forma basis after giving effect to the acquisition of Parsons and the
Acquisitions and related transactions and (ii) on a pro forma combined basis,
as adjusted to give effect to the acquisition of Parsons and the Acquisitions
and related transactions and the Offering and the application of the estimated
net proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Unaudited Pro Forma Combined Financial
Statements of the Company and the related notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
------------------------
MARCH 31, 1998
------------------------
AS
COMBINED(1) ADJUSTED(3)
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term obligations........... $17,134(2) $ --
======= =======
Long-term debt, less current maturities............... $ 1,186 $ --
------- -------
Redeemable Preferred Stock: $.01 par value, 10,000,000
shares authorized; 6,000 shares issued and
outstanding, pro forma combined; and none issued and
outstanding, pro forma as adjusted (3)(4)............ 6,188 --
------- -------
Stockholders' equity:
Common Stock: $.01 par value, 30,000,000 shares
authorized; 3,948,330 shares issued and
outstanding, pro forma combined; and 10,048,746
shares issued and outstanding, pro forma as
adjusted (4)....................................... 39 100
Class A Nonvoting Common Stock: $.01 par value,
1,200,000 shares authorized; 1,089,999 issued and
outstanding, pro forma combined; and none issued
and outstanding, pro forma as adjusted (4)(5)...... 11 --
Additional paid-in capital.......................... 12,649 66,949
Shareholder notes................................... (50) (50)
Retained earnings (deficit)......................... (414) (414)
------- -------
Total stockholders' equity........................ 12,235 66,585
------- -------
Total capitalization.............................. $19,609 $66,585
======= =======
</TABLE>
- --------
(1) Combines the respective accounts of Nationwide and the Acquired Companies
as reflected in the Unaudited Pro Forma Combined Balance Sheet as of March
31, 1998 prior to the Offering.
(2) Includes approximately $16.9 million payable to the owners of the Acquired
Companies, which represents the cash portion of the Acquisition
Consideration to be paid from the net proceeds of the Offering.
(3) Upon the consummation of the Offering, the Company will redeem all of the
issued and outstanding Redeemable Preferred Stock from the net proceeds of
the Offering.
(4) Adjusted to reflect (i) the sale of 5,000,000 shares of Common Stock
offered hereby and the application of the estimated net proceeds therefrom
and (ii) an amendment to the Company's Certificate of Incorporation,
effective as of June 4, 1998, which increased the Company's authorized
capital stock to 41,200,000 shares, 10,000,000 of which are Preferred
Stock, 30,000,000 of which are Common Stock and 1,200,000 of which are
Class A Nonvoting Common Stock. See "Use of Proceeds" and "Description of
Capital Stock." Excludes options to purchase approximately 220,000 shares
of Common Stock that are expected to be granted upon consummation of the
Offering. See Management--1998 Stock Option Plans.
(5) Upon the consummation of the Offering, all of the issued and outstanding
shares of Class A Nonvoting Common Stock shall automatically convert into
1,089,999 shares of Common Stock.
17
<PAGE>
DILUTION
The deficit in pro forma combined net tangible book value of the Company at
March 31, 1998 was approximately $(6.5) million, or $(1.29) per share of
Common Stock. The deficit in pro forma combined net tangible book value per
share is determined by dividing the pro forma net tangible book value of the
Company (pro forma combined net tangible assets less pro forma combined total
liabilities) by the number of shares of Common Stock and Class A Nonvoting
Common Stock to be outstanding after giving effect to the Acquisitions. The
number of shares includes the 5,048,746 shares outstanding after the
Acquisitions. After giving effect to the sale by the Company of 5,000,000
shares of Common Stock offered hereby, and the conversion of 1,089,999 shares
of Class A Nonvoting Common Stock to Common Stock, and after deduction of the
underwriting discounts and commissions and estimated Offering expenses, the
pro forma net tangible book value of the Company at March 31, 1998 would have
been $48.0 million or $4.77 per share. This represents an immediate increase
in pro forma net tangible book value of $6.06 per share to existing
stockholders and an immediate dilution to new investors purchasing Common
Stock in the Offering of $7.23 per share. The following table illustrates the
per share dilution to new investors purchasing Common Stock in the Offering:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $12.00
Pro forma combined deficit in net tangible book value
per share prior to the Offering........................ $(1.29)
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 6.06
------
Pro forma combined net tangible book value per share after the
Offering...................................................... 4.77
------
Dilution in net tangible book value per share to new investors... $ 7.23
======
</TABLE>
The following table sets forth, as of March 31, 1998, on a pro forma
combined basis to give effect to the Acquisitions, the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by (i) existing stockholders and stockholders of
the Acquired Companies and (ii) the new investors purchasing shares from the
Company in the Offering (before deducting underwriting discounts and
commissions and estimated Offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED AVERAGE
------------------ TOTAL PRICE
NUMBER(2) PERCENT CONSIDERATION(3) PER SHARE
---------- ------- ---------------- ---------
<S> <C> <C> <C> <C>
Existing stockholders and
stockholders of Acquired
Companies(1).................... 5,048,746 50.2% $(6,490,000) $(1.29)
New investors.................... 5,000,000 49.8% 60,000,000 12.00
---------- ------ -----------
Total........................ 10,048,746 100.0% $53,510,000
========== ====== ===========
</TABLE>
- --------
(1) See "Certain Transactions" for a discussion of the issuance of Common
Stock to the existing stockholders and certain management of Nationwide.
(2) Excludes options to purchase approximately 220,000 shares of Common Stock
that are expected to be granted upon consummation of the Offering at an
exercise price equal to the initial public offering price. See
"Management--1998 Stock Option Plans."
(3) Total consideration paid by stockholders of the Acquired Companies and
existing stockholders represents the combined stockholders' equity of the
Acquired Companies before the Offering and the consideration paid by the
Initial Stockholders and management of the Company, adjusted to reflect
the payment of approximately $16.9 million in cash to the stockholders of
the Acquired Companies as part of the Acquisition Consideration. In
addition there is an opportunity for a shareholder of Potter to earn
additional consideration based on future financial performance of Potter
as described under "Certain Transactions--Organization of the Company."
18
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Nationwide will acquire the Acquired Companies simultaneously with and as a
condition to the consummation of the Offering. For financial statement
presentation purposes, Nationwide, which includes Parsons, has been identified
as the "accounting acquiror." The following selected historical financial data
for Parsons (Predecessor) as of December 31, 1993 through 1997 and for each of
the five years in the period ended December 31, 1997 and the period January 1
to February 27, 1998 have been derived from the audited financial statements
of Parsons. The following selected historical financial data of Nationwide
(which includes Parsons from date of acquisition effective February 27, 1998)
as of March 31, 1998 and for the period January 1 to March 31, 1998 have been
derived from the audited combined financial statements of Nationwide. The
results of operations for the period January 1 to March 31, 1998 should not be
regarded as indicative of the results that may be expected for the full year.
The selected unaudited pro forma combined financial data below present
certain data for the Company, adjusted for (i) the Acquisitions, (ii) the
effects of certain other pro forma adjustments to the historical financial
statements and (iii) the consummation of the Offering and the application of
the net proceeds therefrom. The unaudited pro forma combined income statement
data assume that the Acquisitions, the Offering and related transactions were
closed on April 1, 1997, and are not necessarily indicative of the results the
Company would have obtained had these events actually then occurred or of the
Company's future results. During the periods presented below, Nationwide,
including Parsons, and the Acquired Companies were not under common control or
management and, therefore, the data presented may not be comparable to or
indicative of post-combination results to be achieved by the Company. The
unaudited pro forma combined income statement data should be read in
conjunction with the other financial information included elsewhere in this
Prospectus. See Unaudited Pro Forma Combined Financial Statements and the
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR NATIONWIDE
-------------------------------------------------------- ------------
YEAR ENDED DECEMBER 31, JANUARY 1 TO JANUARY 1 TO
------------------------------------------ FEBRUARY 27, MARCH 31,
1993 1994 1995 1996 1997 1998 1998
------- ------- ------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL INCOME
STATEMENT DATA:
Revenue................. $37,738 $42,128 $52,017 $58,563 $58,004 $9,700 $4,305
Cost of services,
excluding depreciation
shown separately below. 32,132 36,401 43,662 49,162 47,347 7,830 3,602
------- ------- ------- ------- ------- ------ ------
Gross profit............ 5,606 5,727 8,355 9,401 10,657 1,870 703
Selling, general and
administrative
expenses............... 4,741 4,874 5,776 6,234 6,985 1,310 898
Depreciation............ 272 400 395 435 447 63 33
Goodwill amortization... -- -- -- -- -- -- 8
------- ------- ------- ------- ------- ------ ------
Operating income (loss). 593 453 2,184 2,732 3,225 497 (236)
Interest and other
income (expense), net.. 168 (135) (205) (121) (191) (17) (81)
Income tax benefit...... -- -- -- -- -- -- 121
------- ------- ------- ------- ------- ------ ------
Net income (loss)....... 761 318 1,979 2,611 3,034 480 (196)
Pro forma provision for
income taxes........... 319 134 831 1,097 1,274 192 --
------- ------- ------- ------- ------- ------ ------
Pro forma net income
(loss)................. $ 442 $ 184 $ 1,148 $ 1,514 $ 1,760 $ 288 $ (196)
======= ======= ======= ======= ======= ====== ======
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
MARCH 31,
1998
-------------------
<S> <C>
PRO FORMA COMBINED:
Revenue.................................................... $145,821
Cost of services, excluding depreciation shown separately
below..................................................... 120,819
--------
Gross profit............................................... 25,002
--------
Selling, general and administrative expenses(1)............ 14,528
Depreciation............................................... 862
Goodwill amortization(2)................................... 603
--------
Operating income........................................... 9,009
Interest and other income (expense), net(3)................ 312
--------
Income before income tax................................... 9,321
Income tax(4).............................................. 3,970
--------
Income before a nonrecurring, noncash charge directly
attributable to the transaction(1)........................ $ 5,351
========
Income per share before a nonrecurring, noncash charge
directly attributable to the transaction(1)--basic and
diluted................................................... $ 0.53
========
Shares used in computing pro forma income per share(5)--
basic and diluted......................................... 10,049
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------
PREDECESSOR NATIONWIDE PRO FORMA
--------------------------------------- ---------- ----------------------------
YEAR ENDED DECEMBER 31, MARCH 31, 1998
--------------------------------------- MARCH 31, ----------------------------
1993 1994 1995 1996 1997 1998 COMBINED(6) AS ADJUSTED(7)
------- ------- ------- ------- ------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit).............. $ 2,637 $ 3,240 $ 4,618 $ 5,485 $ 5,399 $ 610 $(1,815)(8) $45,161
Total assets............ 13,104 12,373 18,017 16,096 20,959 23,368 67,225 87,247
Long-term debt, net of
current maturities..... -- 412 362 312 262 -- 1,186 --
Redeemable Preferred
Stock.................. -- -- -- -- -- 6,000 6,188 --
Total stockholders'
equity................. 4,663 4,676 6,108 6,959 6,500 837 12,235 66,585
</TABLE>
- --------
(1) The unaudited pro forma combined statement of operations data reflect an
aggregate of approximately $630,000 in pro forma reductions in salary,
bonus and benefits of the owners of the Acquired Companies to which they
have agreed prospectively. Also, reflects results of operations of one of
the Acquired Companies for which historical financial statements are not
included. Additionally, reflects adjustments to expenses associated with
certain non-operating assets that will be transferred from the Acquired
Companies prior to the Acquisitions and certain other transactions,
including the elimination of activities related to assets not purchased
from the shareholders of Parsons.
Under certain restricted stock purchase agreements, the Company has sold
315,000 shares of Common Stock to management, two outside directors and one
director nominee. As a result, the Company will record a nonrecurring,
noncash compensation charge of $3.3 million and related benefit of $1.3
million or $2.0 million ($0.20 per share) in the first reportable quarter
following consummation of the Offering, representing the difference between
the amount paid for the shares and the estimated fair value thereof (a fair
value that is discounted ten percent from the assumed initial public
offering price). This nonrecurring compensation charge is not included in
the Unaudited Pro Forma Combined Financial Statements.
(2) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions, as well as Parsons' acquisition, over a 40-year period.
(3) Reflects the reduction for interest expense of approximately $600,000
attributable to the repayment of approximately $10.8 million of historical
debt of Nationwide and the Acquired Companies, as of March 31, 1998, with
proceeds from the Offering. Additionally, reflects reductions in expenses
20
<PAGE>
associated with certain non-operating assets that will be transferred to
the Acquired Companies prior to the Acquisitions, as well as activities
related to assets not purchased from the shareholders of Parsons.
(4) Assumes all pretax income before non-deductible goodwill and other
permanent items is subject to a statutory 40% tax rate.
(5) Includes (i) 3,948,330 shares of Common Stock issued or to be issued to
certain management personnel and the existing stockholders, (ii) 1,100,416
shares of Common Stock to be issued to the owners of the Acquired
Companies, (iii) 3,331,500 of the 5,000,000 shares of Common Stock to be
sold in the Offering to pay the cash portion of the Acquisition
Consideration, to repay expenses incurred in connection with the
organization of Nationwide and the Offering and to retire debt and redeem
the Redeemable Preferred Stock and (iv) 1,668,500 of the 5,000,000 shares
sold in the Offering to provide net cash to Nationwide expected to be used
for working capital and future acquisitions of businesses. Excludes
options to purchase approximately 220,000 shares of Common Stock that are
expected to be granted upon consummation of the Offering. See
"Management--1998 Stock Option Plans."
(6) Reflects the Acquisitions and related transactions as if they had occurred
on March 31, 1998 as described in the Notes to the Unaudited Pro Forma
Combined Financial Statements. The unaudited pro forma combined balance
sheet data should be read in conjunction with the other financial
information and historical financial statements and notes thereto included
elsewhere in this Prospectus.
(7) Reflects the closing of the Offering and the Company's application of the
net proceeds therefrom to fund the cash portion of the Acquisition
Consideration and to repay certain indebtedness of the Acquired Companies.
See "Use of Proceeds" and "Certain Transactions."
(8) Includes approximately $16.9 million payable to owners of the Acquired
Companies, representing the actual cash portion of the Acquisition
Consideration to be paid from a portion of the net proceeds of the
Offering.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions and the
actual events or results may differ materially from the results discussed in
the forward looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk
Factors," as well as those discussed elsewhere in this Prospectus. The
historical results set forth in this discussion and analysis are not
indicative of trends with respect to any actual or projected future financial
performance of the Company. This discussion and analysis should be read in
conjunction with the Company's Unaudited Pro Forma Combined Financial
Statements, and Parson's and the Acquired Companies' and Nationwide's
Financial Statements and the related notes thereto included elsewhere in this
Prospectus.
INTRODUCTION
The Company's revenues are derived primarily from electrical contracting and
maintenance services provided to commercial, industrial and institutional
markets. The Company's services include installation and design for new
construction, renovation and retrofit projects as well as long-term and per
call maintenance and repair services. In addition, the Company offers design-
build expertise and specialized services that typically provide higher margins
than general electrical contracting and maintenance services as well as
enhance the value received by its customer. Specialized services include
installation of wiring or cabling for the following: data cabling for computer
networks; fiber optic cable systems; telecommunications systems; energy
management systems which control the amount of power used in facilities; fire
alarm and security systems; building management systems that integrate
computer, energy management, security, safety, comfort and telecommunication
systems; lightning protection systems; computer rooms; back-up electrical
systems and uninterruptible power supplies; and high voltage distribution.
Following the Offering, the Company also plans to offer value added services
such as energy efficiency, quality power and preventive maintenance.
The Company's customers include general contractors and builders,
architects, managers, operators and owners of commercial, industrial and
institutional properties (including manufacturers and service providers),
retail store chains, real estate developers and governmental entities. The
Company had pro forma combined revenues for the twelve months ended March 31,
1998 of $145.8 million. Of such pro forma revenues, approximately 28% were
derived from "design-build" new construction projects, 26% were derived from
"bid-to-spec" new construction projects, 26% were derived from retrofit and
renovation projects, 11% were derived from maintenance and repair services and
9% were derived from specialized and value-added services.
The Company believes that it can reduce total operating expenses of the
Acquired Companies by eliminating duplicative administrative functions in
smaller acquisitions that are integrated into the Company's operations as well
as by consolidating certain administrative functions performed separately by
each company prior to its acquisition. Additionally, the Company believes that
its scale should lead to reduced costs in many other areas, without
compromising quality, particularly in the areas of (i) procurement best
practices and volume discounts from negotiating national agreements that
reflect combined purchasing power, (ii) fleet management, (iii) equipment
maintenance, (iv) financing, (v) insurance and bonding and (vi) employee
benefits. It is possible that costs related to the Company's new corporate
management, its status as a public company and integrating the Acquisitions
could offset a portion of these savings. The Company believes that neither
these savings nor the costs associated therewith can be quantified because the
Acquisitions have not yet occurred, and there have been no combined operating
results upon which to base any assumptions. As a result, these savings and
associated costs have not been included in the pro forma financial information
included herein.
22
<PAGE>
Under certain restricted stock purchase agreements, the Company has sold
315,000 shares of Common Stock to management, two outside directors and one
director nominee. As a result, the Company will record a non-recurring, non-
cash compensation charge of $3.3 million in the first reportable quarter
following consummation of the Offering, representing the difference between
the amount paid for the shares and the estimated fair value thereof (a fair
value that is discounted ten percent from the assumed initial public offering
price). This non-recurring compensation charge is not included in the
Unaudited Pro Forma Combined Financial Statements.
The Acquisitions will be accounted for using the purchase method of
accounting. Nationwide has been designated the "accounting acquiror" in the
Acquisitions. Accordingly, the excess of the fair value of the consideration
paid for the Acquisitions of $14.0 million over the fair value of the net
assets acquired by Nationwide from the Acquired Companies will be recorded as
"goodwill." In addition, goodwill totaling $4.3 million was recorded in
connection with the cash purchase of Parsons. Together, this goodwill,
totaling $18.3 million, will be amortized over its useful life of 40 years as
a non-cash charge to operating income. The pro forma effect of this
amortization expense is expected to be approximately $432,000 per year. For
purposes of the transactions discussed above, the Company utilized a $10.20
per share value for the Common Stock. This valuation reflects a 15% discount
from the assumed initial public offering price. The difference between the
discount used and a nominal discount of 10% is immaterial. See "Certain
Transactions--Organization of the Company." In addition, $425,000 of payments
made pursuant to non-compete agreements with key managers at Parsons will be
amortized over lives ranging from 21-36 months as a non-cash charge to
operating income, or $170,000 per year.
A brief description of the accounting terms used to present the results of
operations of Parsons and the significant Acquired Companies is as follows:
Revenues. The Company enters into contracts either on a negotiated basis or
based on competitive bids (the final terms and prices of which are frequently
negotiated with the customer). Although the terms of the contracts undertaken
by the Company vary considerably, the contracts are usually based on either a
lump sum or fixed fee. Most installation projects are completed within one
year, while maintenance and repair work is frequently provided under open-
ended service agreements which are renewable annually and are based on an
hourly labor rate and an agreed mark-up on materials. Revenues from lump sum
contracts are generally recorded on a percentage-of-completion basis, using
the cost-to-cost method based on the percentage of total costs incurred to
date in proportion to total estimated costs to complete the contract. The
Company recognizes revenue when services are performed except when work is
being performed under a fixed price or cost-plus-fee contract. Such contracts
generally provide that once the customer accepts completion of progress to
date, it is obligated to compensate the Company for services which have been
rendered, measured typically in terms of units installed, hours expended or
some other measure of progress. Certain of the Company's customers require the
Company to post performance and payment bonds upon execution of the contract,
depending upon the nature of the work to be performed. The Company's fixed
price contracts often include payment provisions pursuant to which the
customer withholds a 5% to 10% retainage from each progress payment and
forwards the retainage to the Company upon final completion and approval of
the work.
Cost of services. Cost of services consists primarily of salaries and
benefits to non-management employees, materials, parts and supplies, fuel and
other vehicle expenses, equipment rentals, and subcontracted services. 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
calculated with relatively less accuracy than materials costs. Therefore, to
compensate for the potential variability of labor costs, the Company seeks to
maintain higher margins on its labor-intensive projects.
Selling, general and administrative expenses. Selling, general and
administrative expenses consist primarily of compensation and related benefits
to management, administrative salaries and benefits, marketing, office rent
and utilities, depreciation, communications and professional fees.
23
<PAGE>
The Acquired Companies have operated throughout the periods presented as
independent, privately-owned entities, and their results of operations reflect
varying tax structures (Parsons was an S corporation and the other Acquired
Companies are C corporations) which have influenced the historical level of
owners' compensation. Gross profits and selling, general and administrative
expenses as a percentage of revenues may not be comparable among the
individual Acquired Companies. In connection with the Acquisitions, certain
owners of Parsons and the Acquired Companies have agreed to reductions in
their compensation and related benefits totaling $630,000 as compared to prior
levels. Such reductions have been reflected as a pro forma adjustment in the
Pro Forma Combined Financial Statements and in the terms of the employment
agreements which such persons have agreed to enter with the Company.
REGULATORY MATTERS
The Company's operations are subject to the authority of various state and
municipal regulatory bodies concerned with the licensing of contractors. The
Company has experienced no material difficulty in complying with the
requirements imposed on it by such regulatory bodies. See "Business--
Regulation."
SEASONALITY; FLUCTUATIONS OF QUARTERLY RESULTS
The Company's results of operations can be subject to seasonal variations.
Historically, during the winter months, demand related to new projects and
maintenance services may be lower due to reduced construction activity during
inclement weather while demand for electrical contracting and maintenance
services may be higher due to damage caused by such 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. The Company believes, however, that such seasonality will
be substantially mitigated by its emphasis on acquiring businesses in growing
markets as well as the geographic diversity and significant contracts of the
Acquired Companies in place. Quarterly results may also be materially affected
by the timing of acquisitions, variations in the profit 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.
COMBINED LIQUIDITY AND CAPITAL RESOURCES
Upon consummation of the Acquisitions and after applying the net proceeds of
the Offering as discussed under "Use of Proceeds," the Company will have $26.9
million of pro forma cash and cash equivalents, $45.2 million of pro forma
working capital and no outstanding indebtedness. It is anticipated that the
Acquired Companies' indebtedness of $2.2 million, along with $8.6 million of
Nationwide indebtedness, will be repaid from the proceeds of the Offering. See
discussion of individual Acquired Companies' liquidity and capital resources
included elsewhere herein.
The Company has entered into a preliminary agreement with Harris Trust and
Savings Bank and Norwest Bank of Minnesota, N.A., acting as co-agents, under
which it expects to enter into a credit facility, subject to negotiation of a
mutually acceptable credit agreement, effective immediately following and
conditioned upon consummation of the Offering. The terms and conditions of the
facility would provide for an unsecured three year $30 million revolving
credit facility to provide funds to be used for working capital, to finance
acquisitions and for other general corporate purposes. Amounts borrowed under
the proposed credit facility will bear interest at a rate equal to the Prime
Rate or, alternatively, LIBOR plus 1.00% to 1.75%. Commitment fees of 0.25% to
0.35% (based on certain financial ratios) are due on 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 Company expects that the credit facility will require
usual and customary covenants for a credit facility of this nature including
the consent of the lenders for acquisitions utilizing the line of credit and
exceeding a certain size.
24
<PAGE>
As part of its growth strategy, the Company intends to pursue an acquisition
program. The timing, size or success of any acquisition effort and the
associated potential capital commitments cannot be predicted. The Company
expects to fund future acquisitions primarily with a portion of the net
proceeds of the Offering, working capital, issuances of additional equity,
borrowings, including any unborrowed portion of the proposed credit facility,
as well as cash flow from operations. The Company anticipates that its cash
flow from operations and proceeds from the Offering will provide sufficient
cash to enable the Company to meet its working capital needs, debt service
requirements and planned capital expenditures for property and equipment
through at least fiscal 1999. On a combined basis, the Acquired Companies made
capital expenditures of approximately $500,000 in fiscal 1998.
Parsons utilizes a purchased, integrated management information system that
management believes is Year 2000 compliant. The present intention is to
install this system at the Acquired Companies. The cost associated with the
installations has not been determined.
IMPACT OF INFLATION
Due to relatively low levels of inflation experienced during the years ended
December 31, 1995, 1996 and 1997, inflation did not have a significant effect
on the combined results of the Acquired Companies in those periods.
RESULTS OF OPERATIONS--PARSONS
Parsons was founded in 1927 and is headquartered in Minneapolis, Minnesota.
During the past twelve months, Parsons provided services to customers
primarily in Minnesota, as well as in Alabama, Arkansas, Illinois, Iowa, North
Dakota, Oregon, South Dakota, Texas, Virginia and Wisconsin. Parsons is a
union contractor with over 300 employees providing electrical contracting and
maintenance services, including design and installation, new construction and
retrofit/renovation for commercial, industrial and institutional customers.
The following table sets forth selected historical statement of operations
data and such data as a percentage of revenues for the periods indicated (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue........................... $52,017 100.0% $58,563 100.0% $58,005 100.0%
Cost of services.................. 43,662 83.9% 49,162 83.9% 47,348 81.6%
------- ----- ------- ----- ------- -----
Gross profit.................... 8,355 16.1% 9,401 16.1% 10,657 18.4%
Selling, general and
administrative expense........... 6,171 11.9% 6,669 11.4% 7,432 12.8%
------- ----- ------- ----- ------- -----
Operating income.................. $ 2,184 4.2% $ 2,732 4.7% $ 3,225 5.6%
======= ===== ======= ===== ======= =====
</TABLE>
Parsons results for the year ended December 31, 1997 compared to the year
ended December 31, 1996
Revenues. Revenues decreased $558,000, or 1.0%, from $58.6 million for the
year ended December 31, 1996 to $58.0 million for the year ended December 31,
1997, primarily as a result of a decrease in demand for services associated
with a large "bid-to-spec" contract on the new Federal Reserve building in
Minneapolis in 1996, which decrease was partially offset by increased demand
for design-build services.
Gross profit. Gross profit increased $1.3 million, or 13.4%, from $9.4
million for the year ended December 31, 1996 to $10.7 million for the year
ended December 31, 1997. As a percentage of revenues,
25
<PAGE>
gross profit increased from 16.1% to 18.4%. The increase in gross profit and
gross margin is primarily a result of Parsons replacing lower margin bid work
with higher margin design-build services.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $763,000, or 11.4%, from $6.7 million for
the year ended December 31, 1996 to $7.4 million for the year ended December
31, 1997, primarily due to increases in administrative salaries and benefits.
As a percentage of revenues, selling, general and administrative expenses
increased from 11.4% to 12.8%.
Other income (expense). Other income in 1997 and 1996 consists principally
of employee vehicle reimbursement.
Net Income. The change in net income for the year is the result of the other
changes noted above.
Parsons results for the year ended December 31, 1996 compared to the year
ended December 31, 1995.
Revenues. Revenues increased $6.6 million, or 12.6%, from $52.0 million for
the year ended December 31, 1995 to $58.6 million for the year ended December
31, 1996, primarily as a result of securing and executing a significant
portion of one large "bid-to-spec" contract for the Federal Reserve building
in Minneapolis.
Gross profit. Gross profit increased $1.0 million, or 12.5%, from $8.4
million for the year ended December 31, 1995 to $9.4 million for the year
ended December 31, 1996, primarily as a result of the increased demand for
services during the year. As a percentage of revenues, gross profit was
unchanged at 16.1%.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $498,000, or 8.1%, from $6.2 million for the
year ended December 31, 1995 to $6.7 million for the year ended December 31,
1996, primarily due to increases in administrative salaries and benefits and
costs associated with the implementation of new information systems. As a
percentage of revenues, selling, general and administrative expenses decreased
from 11.9% to 11.4%.
Other income (expense). Other income in 1996 and 1995 consists principally
of employee vehicle reimbursement.
Net Income. The change in net income for the year is the result of the other
changes noted above.
Parsons Liquidity and Capital Resources. Parsons used $541,000 of net cash
from operating activities for the year ended December 31, 1997. Net cash used
in investing activities was $428,000, primarily for the purchase of property
plant and equipment and receivables from related parties. Net cash provided by
financing activities of $560,000 resulted from net borrowings under Parsons'
line of credit for purchases of property and equipment and distributions to
shareholders.
At December 31, 1997, Parsons had working capital of $5.4 million and total
long-term debt of $262,000 outstanding.
Parsons generated $4.2 million in net cash from operating activities for the
year ended December 31, 1996. Net cash used in investing activities was
$364,000, principally for the purchase of property and equipment. Net cash
used in financing activities of $3.4 million resulted from repayments of the
line of credit and distributions to shareholders.
At December 31, 1996, Parsons had working capital of $5.5 million and total
long-term debt of $312,000 outstanding.
RESULTS OF OPERATIONS--ALLISON-SMITH
Allison-Smith was founded in 1943 and is headquartered in Atlanta, Georgia.
Allison-Smith has provided services to customers in Kansas, Georgia, Florida
and Texas, as well as the United Kingdom and Canada during the past twelve
months. Allison-Smith earned revenues of approximately $32 million for the
fiscal year ended March 31, 1998 with approximately 80% derived from repeat
customers. Allison-Smith also has significant design-build capability,
particularly, an established capability to complete these projects on a "fast
track" basis.
26
<PAGE>
The following table sets forth selected historical statement of operations
data and such data as a percentage of revenues for the periods indicated (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, NINE MONTHS ENDED MARCH 31,
---------------------------- ----------------------------
1996 1997 1997 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $32,392 100.0% $28,000 100.0% $17,992 100.0% $22,064 100.0%
Cost of services........ 27,324 84.4% 22,801 81.4% 15,126 84.1% 18,096 82.0%
------- ----- ------- ----- ------- ----- ------- -----
Gross profit........ 5,068 15.6% 5,199 18.6% 2,866 15.9% 3,968 18.0%
Selling, general and
administrative
expenses............... 2,502 7.7% 2,660 9.5% 1,981 11.0% 1,626 7.4%
------- ----- ------- ----- ------- ----- ------- -----
Operating income........ $ 2,566 7.9% $ 2,539 9.1% $ 885 4.9% $ 2,342 10.6%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Allison-Smith results for the nine months ended March 31, 1998 compared to the
nine months ended March 31, 1997 (derived from unaudited financial statements)
Revenues. Revenues increased $4.1 million, or 22.6%, from $18.0 million for
the nine months ended March 31, 1997 to $22.1 million for the nine months
ended March 31, 1998, primarily due to increased demand for specialized and
value-added services, including fast-track design-build services for
telecommunications customers.
Gross profit. Gross profit increased $1.1 million, or 38.5%, from $2.9
million for the nine months ended March 31, 1997 to $4.0 million for the nine
months ended March 31, 1998. As a percentage of revenues, gross profit
increased from 15.9% to 18.0%, primarily due to the increased proportion of
revenues attributable to specialized and value-added services which have a
higher margin than the general contracting services provided by Allison-Smith.
Selling, general and administrative expense. Selling, general and
administrative expenses decreased $355,000, or 17.9%, from $2.0 million for
the nine months ended March 31, 1997 to $1.6 million for the nine months ended
March 31, 1998, primarily due to a decrease in owner's compensation for the
nine months ended March 31, 1997. As a percentage of revenues, selling,
general and administrative expenses decreased from 11.0% to 7.4%.
Other income (expense). Other income and expense were not material for
either nine month period presented.
Net Income. The change in net income for the period is the result of the
other changes noted above.
Allison-Smith results for the year ended June 30, 1997 compared to the year
ended June 30, 1996
Revenues. Allison-Smith experienced an abnormally high demand for general
contracting services in the year ended June 30, 1996 due to the building
activity associated with the Olympics. Primarily due to the fact that the
unusual demand from the Olympics did not reoccur in 1997, revenues decreased
$4.4 million, or 13.6%, from $32.4 million for the year ended June 30, 1996 to
$28.0 million for the year ended June 30, 1997.
Gross profit. Gross profit increased $131,000, or 2.6%, from $5.1 million
for the year ended June 30, 1996 to $5.2 million for the year ended June 30,
1997. As a percentage of revenues, gross profit increased from 15.6% to 18.6%,
primarily due to a shift in business toward the higher margin renovation and
retrofit projects which replaced some of the lower margin general contracting
services provided by Allison-Smith.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $158,000, or 6.3%, from $2.5 million for the
year ended June 30, 1996 to $2.7 million for the year ended June 30, 1997,
primarily due to increased personnel costs associated with the increased
revenues achieved in 1996 and increased administrative salaries and owner
compensation. As a percentage of revenues, selling, general and administrative
expenses increased from 7.7% to 9.5%.
27
<PAGE>
Other income (expense). Other income (expense) was not significant for the
year ended June 30, 1997. Other expense for the year ended June 30, 1996
primarily consists of loss on disposals of fixed assets.
Net Income. The change in net income for the year is the result of the other
changes noted above.
Allison-Smith Liquidity and Capital Resources
Allison-Smith generated $2.9 million of net cash from operating activities
for the nine months ended March 31, 1998. Net cash used in investing
activities was $44,000 primarily for the purchase of property, plant and
equipment. Net cash used in financing activities of $1.1 million resulted from
repayments of long-term debt.
At March 31, 1998, Allison-Smith had working capital of $7.3 million and
total long-term debt of $1.0 million outstanding.
Allison-Smith generated $142,000 in net cash from operating activities for
the year ended June 30, 1997. Cash from operating activities can be
significantly impacted by the timing of billings and collections of billings.
Net cash used in investing activities was $152,000, principally for the
purchase of property and equipment. Net cash used in financing activities of
$94,000 resulted from repayments of the long-term debt.
At June 30, 1997, Allison-Smith had working capital of $6.0 million and
total long-term debt of $1.1 million outstanding.
RESULTS OF OPERATIONS--HENDERSON
Henderson and Eagle have been reported on a consolidated basis.
Henderson was founded in 1919 as a union contractor, is headquartered in
Louisville, Kentucky and maintains an additional office in Lexington,
Kentucky. During the past twelve months Henderson has provided services to
customers in Kentucky and Indiana. In 1986 Henderson established Eagle as a
wholly-owned open-shop subsidiary which is headquartered in Cincinnati, Ohio.
During the past twelve months, Eagle provided services to customers in
Indiana, Kansas, Kentucky, Ohio and Wisconsin. Henderson provides electrical
contracting and maintenance services, as well as installation of wiring or
cabling for computer, telecommunications and security systems, and has
significant design-build capability.
The following table sets forth selected historical statement of operations
data and such data as a percentage of revenues for the periods indicated (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $27,337 100.0% $36,409 100.0% $44,000 100.0%
Cost of services.................. 23,188 84.8% 31,024 85.2% 37,952 86.3%
------- ----- ------- ----- ------- -----
Gross profit.................. 4,149 15.2% 5,384 14.8% 6,048 13.7%
Selling, general and
administrative expense........... 3,230 11.8% 3,439 9.4% 4,376 9.9%
------- ----- ------- ----- ------- -----
Operating income.................. $ 919 3.4% $ 1,945 5.3% $ 1,672 3.8%
======= ===== ======= ===== ======= =====
</TABLE>
Henderson results for the year ended March 31, 1998 compared to the year ended
March 31, 1997
Revenues. Revenues increased $7.6 million, or 20.8%, from $36.4 million for
the year ended March 31, 1997 to $44.0 million for the year ended March 31,
1998, primarily as a result of increased demand for "bid-to-spec" new
construction services in the food processing and distribution, and
institutional markets.
28
<PAGE>
Gross profit. Gross profit increased $664,000, or 12.3%, from $5.4 million
for the year ended March 31, 1997 to $6.0 million, primarily as a result of
increased revenues. As a percentage of revenues, gross profit decreased from
14.8% to 13.7%, primarily due to the increased proportion of "bid-to-spec" new
construction services provided by Henderson which generally generate lower
gross margins than the "design-build" services provided by Henderson.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $937,000, or 27.2%, from $3.4 million for
the year ended March 31, 1997 to $4.3 million for the year ended March 31,
1998, primarily due to increases in administrative salaries and bonuses. As a
percentage of revenues, selling, general and administrative expenses increased
from 9.4% to 9.9%.
Other income (expense). Other income and expense primarily included joint
venture income during 1998 and 1997 of $202,233 and $139,909, respectively. In
addition, during 1997 the Company sold its interest in a partnership which
developed and leased property and recognized a gain on the sale of $120,417.
Net Income. The change in net income for the year is the result of the other
changes noted above.
Henderson results for the year ended March 31, 1997 compared to the year ended
March 31, 1996
Revenues. Revenues increased $9.1 million, or 33.2%, from $27.3 million for
the year ended March 31, 1996 to $36.4 million for the year ended March 31,
1997, primarily as a result of increased demand for "bid-to-spec" services
associated with the automotive market.
Gross profit. Gross profit increased $1.2 million, or 29.8%, from $4.2
million for the year ended March 31, 1996 to $5.4 million for the year ended
March 31, 1997, primarily as a result of the increase in revenues. As a
percentage of revenues, gross profit decreased 0.4%, from 15.2% for the year
ended March 31, 1996 to 14.8% for the year ended March 31, 1997. The decrease
in gross margin was primarily a result of an increased portion of "bid-to-
spec" new construction services during the year, which generally generate
lower gross margins than the "design-build" services provided by Henderson.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $209,000, or 6.5%, from $3.2 million for the
year ended March 31, 1996 to $3.4 million for the year ended March 31, 1997,
primarily due to increases in administrative salaries and benefits. As a
percentage of revenues, selling, general and administrative expenses decreased
from 11.8% to 9.4%.
Other income (expense). The Company recognized joint venture income during
1997 of $139,909 and there were no joint venture activities during 1996.
During 1997, the Company sold its interest in a partnership which developed
and leased property and recognized a gain on the sale of $120,417.
Net Income. The change in net income for the year is the result of the other
changes noted above.
Henderson Liquidity and Capital Resources
Henderson provided $857,000 of net cash for operating activities for the
year ended March 31, 1998. Net cash used in investing activities was $571,000,
primarily for the purchase of property, plant and equipment. Net cash used for
financing activities of $520,000 resulted from net repayment of outstanding
notes.
At March 31, 1998, Henderson had working capital of $6.2 million and total
long-term debt of $369,000 outstanding.
Henderson generated $443,000 in net cash from operating activities for the
year ended March 31, 1997. Net cash used in investing activities was $234,000,
principally for the purchase of property and equipment. Net cash generated in
financing activities of $26,000 resulted from net borrowings for the period.
At March 31, 1997, Henderson had working capital of $3.3 million and total
long-term debt of $514,000 outstanding.
29
<PAGE>
BUSINESS
GENERAL
Nationwide is a leading provider of electrical contracting and maintenance
services to commercial, industrial and institutional customers. The Company
provides a wide array of electrical contracting services ranging from the
design and installation of electrical systems for new facilities, the
renovation and retrofit of existing electrical systems, specialized and value-
added services, as well as long-term and on-call maintenance and repair
services. The Company believes that its focused operating strategy, emphasis
on providing design-build, specialized and value-added services, prominence
within its markets and the experience of its executive management team will
provide the Company with significant competitive advantages as it pursues its
growth strategy.
For the twelve months ended March 31, 1998, Nationwide provided specialty
electrical contracting and maintenance services primarily in Minnesota, as
well as in Alabama, Arkansas, Illinois, Iowa, North Dakota, Oregon, South
Dakota, Texas, Virginia and Wisconsin. Concurrently with the closing of the
Offering, Nationwide will expand its business through the Acquisitions, making
it one of the largest providers of electrical contracting and maintenance
services in the U.S. The Company maintains six offices in five states and
performed work in 19 states, as well as in the United Kingdom and Canada, in
the fiscal year ended March 31, 1998. During that fiscal year, the Company
generated pro forma combined revenues, operating income and net income of
$145.8, $9.0 and $5.4 million, respectively. Operating income and net income
do not include a nonrecurring, noncash compensation charge of $3.3 million
($2.0 million, net of tax) directly attributable to the transactions
contemplated by the Offering, which will be recorded in the first reportable
quarter following the consummation of the Offering. Of such pro forma
revenues, approximately 28% were derived from "design-build" new construction
projects, 26% were derived from "bid-to-spec" new construction projects, 26%
were derived from retrofit and renovation projects, 11% were derived from
maintenance and repair services, and 9% were derived from specialized and
value-added services. The Company's customers include general contractors,
property managers, operators and owners of commercial, industrial and
institutional properties, real estate developers and governmental entities.
See "Business--Services" and "--Customers and Marketing."
INDUSTRY OVERVIEW
According to industry estimates, annual revenues generated by the electrical
contracting industry grew from approximately $39.3 billion in 1990 to
approximately $49.1 billion in 1995. Approximately 81% of the annual revenues
in 1995 were derived from non-residential customers.
Industry sources indicate that the overall industry revenue mix has shifted
over the past 30 years as modernization, or retrofit work, and the percentage
of services provided on a negotiated rather than bid basis have increased.
According to industry sources, during the period from 1967 through 1993, the
percentage of revenues from new construction projects generated by the largest
electrical contractors (those with annual sales in excess of $1,000,000 who
traditionally are most heavily involved in new construction projects) has
declined from 83% to 56%. On an industry-weighted basis, approximately 30% of
revenues in 1993 were attributable to electric modernization, or retrofit
work, and approximately 20% of revenues were derived from maintenance and
repair services. Thirty years ago, approximately 75% of electrical
contractors' work was obtained through the traditional competitive bid
process. It is estimated that 50% of such work currently is obtained through
competitive bidding with the remainder being obtained on a negotiated basis.
The Company believes that growth in the commercial, industrial and
institutional markets reflects a number of factors, including (i) increased
levels of construction and renovation activity; (ii) the effects of more
stringent electrical codes which establish minimum power and wiring
requirements; (iii) increases in use of electrical power due to new
technologies, creating needs for increased capacity and outlets, as well as
data cabling and fiber optics; (iv) requirements for enhanced safety systems
resulting in large part from enactment of the Americans with Disabilities Act;
(v) new demands for uninterruptible power in high-tech environments; (vi)
increased complexity of systems requiring specialized technical expertise;
30
<PAGE>
(vii) networking of local area and wide area computer systems; (viii)
minimization of downtime through predictive and preventive maintenance; (ix)
revised national energy standards that dictate the use of more energy-
efficient lighting fixtures and other equipment; (x) continuing demand to
build out lease spaces in office buildings and to reconfigure space for new
tenants; and (xi) installation of electrical capacity in excess of minimum
code requirements by building owners and developers to improve the
marketability of their properties.
In addition, the Company believes that the impending deregulation of the
electric utility industry will lead to new demands for the Company's services.
As suppliers of power are generating and supplying electricity to the power
distribution system and as customers choose suppliers other than their local
utility monopoly, the Company believes a market perception will result that
power will become less reliable. The Company believes further that, as a
result of this perception, customers will take more responsibility to ensure
the quality and reliability of their power. Such customers will increase
demand for a number of the Company's specialized services including:
uninterruptible power systems, surge suppression systems, and diesel and
battery back-up systems, among others.
The Company believes that the highly fragmented nature of this industry
presents substantial consolidation and growth opportunities. According to the
industry sources, there are approximately 60,000 electrical contracting
businesses in the U.S., consisting of a small number of regional or national
providers and a large number of relatively small, owner-operated businesses
that have limited access to capital and that offer a limited range of
services. The Company believes that its disciplined acquisition strategy,
financial strength, experienced management, decentralized operating
philosophy, performance incentive programs and opportunities for advancement
within the Company will enable it to attract and acquire electrical
contractors with leading reputations in their regional or local markets.
STRATEGY
The Company plans to enhance its position as a leading provider of
electrical contracting and maintenance services to commercial, industrial and
institutional customers by implementing its operating strategy, emphasizing
continued internal growth and expanding through acquisitions.
OPERATING STRATEGY. The Company believes there are significant opportunities
to increase revenues and profitability of Parsons, the Acquired Companies and
subsequently acquired businesses. The key elements of the Company's operating
strategy are:
Operate on a Decentralized Basis. The Company intends to manage the
Acquired Companies and subsequently acquired businesses on a decentralized
basis, with local management retaining responsibility for the day-to-day
operations, profitability and internal growth of each local business.
Although the Company intends to maintain strong central operating and
financial controls, its decentralized operating structure will allow it to
capitalize on the considerable local and regional market knowledge,
specialized skills and customer relationships of Parsons and the Acquired
Companies, as well as retain the entrepreneurial spirit possessed by local
management. The Company's corporate management will have responsibility for
corporate strategy and acquisitions, centralized vendor relationships to
take advantage of volume discounts, banking arrangements, insurance,
shareholder relations and employee benefit plans and also will provide
support to local management in expanding services, operating and purchasing
expertise, marketing, recruiting and risk management. In addition, certain
Company-wide standards will be implemented pertaining to safety, training
and other matters designed to ensure integration and uniformly high quality
and reliability.
Achieve Operating Efficiencies. Certain administrative functions will be
centralized following the Offering. In addition, by eliminating redundant
operations of the Acquired Companies and subsequently acquired businesses,
the Company expects to achieve more efficient asset utilization and realize
savings in overhead and other expenses. The Company intends to use its
"best practices"
31
<PAGE>
procurement methods and increased purchasing power to negotiate national
purchasing agreements providing substantial volume discounts in areas such
as vehicles and equipment, electrical materials, marketing, bonding,
employee benefits and insurance. In addition, the Company will seek to
realize cost savings and increase efficiency and productivity through the
implementation of "best practices" for operating management, pricing,
working capital management, bidding and other business practices and
through the sharing of licenses and systems. As used in this prospectus,
the term "best practices" means those business practices designed by the
Company that are intended to optimize the efficient use of capital and
human resources and reduce costs consistent with maintaining uniformly high
quality of service and materials, in each case to the greatest extent
reasonably practicable. The Company intends to develop further and expand
the use of management information systems to facilitate financial control,
project costing and asset utilization. At some locations, the larger
combined workforce will provide additional staffing flexibility.
Focus on Commercial, Industrial and Institutional Customers and National
Accounts. The Company believes that commercial, industrial and
institutional customers and national accounts are attractive because of (i)
the potential for preferred relationships with such customers, particularly
those that are expanding nationally and regionally, (ii) the opportunity to
create recurring revenues through long-term service and maintenance
contracts, (iii) the increasing importance of such customers due to the
consolidation of real estate ownership by real estate investment trusts
("REITS") and other national real property owners, and (iv) the opportunity
to create greater profitability through more negotiated jobs, repeat
business and national pricing arrangements. The Company believes that its
expanded geographic presence and technical capabilities will position it to
meet the significant demands of such customers seeking to reduce the number
of vendors they do business with.
INTERNAL GROWTH. A principal component of the Company's strategy is to
continue its internal growth in revenues and profitability by improving job
selection and leveraging its technical expertise, increasing focus on
specialized and value-added services, increasing its market penetration and
geographic scope. The key elements of the Company's internal growth strategy
are:
Improve Job Selection and Sharing of Technical Expertise. The Company
believes that it can improve the job selection processes of the Acquired
Companies by pursuing opportunities presenting the most desirable
combination of revenue and profit potential. These processes will
facilitate access to technical expertise and referrals among the Acquired
Companies in order to leverage such expertise and existing resources.
Increase Focus on Specialized and Value-Added Services. The Company
believes that it can expand the scope of the traditional services offered
by electrical contractors by providing specialized and value-added
services. These services include: design and engineering for, and
installation of, wiring and switching systems for computers and data
transmission, uninterruptible power and surge suppression systems; energy
efficiency technologies; and preventive and predictive maintenance
programs. Such services, typically sold on a negotiated bid basis directly
to the customer, rather than through a general contractor or other
intermediary, can provide higher margins than general electrical
contracting services.
Increase Market Penetration and Geographic Scope. The Company also
intends to expand its market share and the markets it serves by (i)
increasing the volume and scope of services provided to existing customers,
(ii) broadening its customer base, and (iii) expanding its geographic
service area. The Company believes it will be able to expand the services
it offers in its markets by leveraging the specialized strengths of Parsons
and individual Acquired Companies as well as strengthen its preferred
provider relationships with its national and regional customers.
ACQUISITIONS. The Company intends to pursue an aggressive but disciplined
acquisition strategy, in conjunction with its operating strategy, to increase
revenue growth, improve profitability, capitalize on procurement and operating
efficiencies, and improve its position to serve customers with national,
regional or local scope. The Company expects that it will have significant
opportunities to pursue its
32
<PAGE>
acquisition strategy due to (i) the highly fragmented nature of the electrical
contracting industry, (ii) the desire of property managers, owners and other
existing and potential clients with locations in multiple markets to limit the
number of vendors that can serve their needs, (iii) the need for economies of
scale, access to capital to expand and operating expertise to remain
competitive, and (iv) the desire of business owners for liquidity. The Company
believes that its financial strength, experienced management, decentralized
operating philosophy, performance incentive programs and opportunities for
advancement within the Company will be attractive to acquisition candidates.
The key elements of the Company's acquisition strategy are:
Enter New Geographic Markets. The Company intends to expand into
geographic markets not currently served by the Acquired Companies. Based on
its analysis of growth rate, size and other demographic trends in regions
of the U.S., the Company has prioritized expansion in the Southeast,
Southwest and Midwest U.S. The Company may also pursue acquisitions as
opportunities arise in other regions where consistent with its financial
and strategic goals. The Company will target one or more electrical
contractors that are leaders in their respective regional markets or have
unique market positions, as well as possess the critical mass and committed
senior management necessary to operate on a decentralized basis and to
become a hub into which other, smaller operations in the geographic market,
can be consolidated. The Company also expects that increasing its
geographic diversity will (i) enable it to better serve the needs of large
national and regional customers, (ii) mitigate market-related risks such as
local and regional economic cycles as well as weather related or seasonal
variations in business, and (iii) enable it to flexibly pool and
effectively deploy its human and financial resources.
Expand Within Existing Markets. The Company will seek acquisition
opportunities in the geographic markets it already serves as well as in
geographic markets served by businesses the Company may acquire in the
future. The Company believes that these acquisitions would enable it to
expand the Company's share in that market, broaden its range of service
offerings, add customers, and amortize over a broader base the fixed costs
associated with establishing a presence in that market. The Company also
will pursue "tuck-in" acquisitions of smaller electrical contractors whose
operations can be integrated effectively into existing operations in that
market and create additional leverage of existing resources and technical
expertise.
ACQUISITION PROGRAM
The Company believes that it will be regarded by acquisition candidates as
an attractive acquiror because of (i) its operating and growth strategies that
are intended to maintain and further its status as a national, comprehensive
and professionally managed provider of traditional, specialized and value
added electrical contracting services, (ii) its emphasis on development of
long-term customer relationships at the national, regional and local levels
using enhanced and proactive marketing programs that build brand identity and
loyalty in conjunction with maintaining existing business names and identities
to retain goodwill for marketing purposes, (iii) the opportunity to leverage
existing customer relationships by cross-selling the technical expertise and
niche capabilities of Parsons and the Acquired Companies, (iv) the Company's
decentralized operating philosophy that will capitalize on local and regional
market knowledge and retain entrepreneurial spirit and initiative, (v) the
potential for owners of the acquired businesses to participate in the
Company's growth through stock ownership, attractive performance-based
bonuses, stock options and other incentives, and advancement within the
Company, (vi) the Company's increased access to financial resources as a
public company to support internal growth and fund acquisitions, (vii) the
opportunity to realize liquidity through sales of Company stock, (viii) the
potential for a reduced and more competitive cost structure due to purchasing
economies and other economies of scale, the implementation of "best
practices," enhanced management information and other system capabilities, and
centralization of certain administrative functions, and (ix) the founding
investment in the Company by Kansas City Power & Light Company ("KCP&L"), a
publicly traded electric utility which, after the Offering, will have an
ownership interest in the Company through its indirect, wholly-owned
subsidiary, KLT Energy Services, Inc.
33
<PAGE>
The Company has developed a set of financial, geographic and management
criteria to establish a disciplined approach to evaluating acquisition
candidates. These criteria contain a variety of factors, including, but not
limited to: (i) historical and projected financial performance, including
growth of revenues, profits and cash flow, (ii) internal rate of return and
return on assets, (iii) valuation of assets, balance sheet strength and
quality and adequacy of equipment, facilities and other infrastructure, (iv)
size, growth rate and other demographic trends of the relevant local and
regional market and whether that market will enhance the Company's market area
or ability to attract other candidates, (v) reputation and market share of the
candidate in the local and regional market, (vi) size, breadth, depth and
quality of the candidate's customer base, (vii) whether the candidate provides
special skills or services or access to new customer segments, (viii) quality
of management team, (ix) potential synergies obtainable from the acquisition,
and (x) liabilities of the candidate, contingent or otherwise.
The principals of the Acquired Companies have substantial experience in the
commercial, institutional and industrial electrical contracting industry, are
active in industry associations and are personally acquainted with the owners
of numerous acquisition targets. Within the past several months, the Company
has contacted the owners of a number of acquisition candidates, several of
whom have expressed interest in having their businesses acquired by the
Company. The Company currently has no binding agreements to effect any
acquisitions other than the acquisitions of the Acquired Companies.
As consideration for future acquisitions, the Company intends to use various
combinations of its Common Stock, cash and debt financing. The consideration
for each future acquisition will vary on a case-by-case basis, with the major
factors in establishing the purchase price being historical operating results,
future prospects of the candidate, return on invested capital, asset
valuation, strength of management and the ability of the candidate to
complement or leverage the services already offered by the Company. The
Company has entered into preliminary agreements with Harris Trust and Savings
Bank and Norwest Bank of Minnesota, N.A., acting as co-agents, under which it
expects to enter into an unsecured, three-year $30 million revolving credit
facility, subject to negotiation of a mutually acceptable credit agreement,
effective immediately following and conditioned upon consummation of the
Offering. The facility would be used to finance acquisitions and for working
capital and other general corporate purposes. Following completion of this
Offering, the Company intends to register up to 5,000,000 additional shares of
Common Stock under the Securities Act for its use in connection with future
acquisitions.
SERVICES
The Company provides a wide array of electrical contracting services ranging
from the design and installation of electrical systems for new facilities, the
renovation and retrofit of existing electrical systems, specialized and value
added services, as well as long-term and on-call maintenance and repair
services.
DESIGN, INSTALLATION, RENOVATION AND RETROFIT SERVICES. The Company designs
and installs electrical systems for new construction as well as renovation and
retrofit projects. New construction projects, and renovation and retrofit
projects, for commercial, industrial and institutional customers begin with
either a design request or engineer's plans from the owner or general
contractor. Initial meetings with the parties allow the contractor to prepare
preliminary and then more detailed design specifications, engineering drawings
and cost estimates. Once a project is awarded, it is conducted in scheduled
phases, and progress billings are rendered to the owner for payment,
oftentimes less a retainage of 5% to 10% of the construction cost of the
project. Actual field work (ordering of equipment and materials, fabrication
or assembly of certain components, delivery of materials and components to the
job site, scheduling of work crews and inspection and quality control) is
coordinated during these phases. The Company generally provides the materials
to be installed as a part of these contracts, which vary significantly in size
from a few hundred dollars to in excess of $10 million and vary in duration
from less than a day to approximately two years.
MAINTENANCE AND REPAIR SERVICES. The Company's maintenance services are
supplied on a long-term and on call basis. Such services generally provide
recurring revenues and high margins that are relatively independent of
construction activity levels. The Company's long-term maintenance services are
34
<PAGE>
typically provided by Company personnel who remain on-site at the customer's
premises. The Company believes that such continuous on-site presence provides
it with a preferred position to obtain opportunities for renovation or
retrofit projects from such customers.
The Company's on call maintenance services are initiated when a customer
requests repair service or the Company calls the client to schedule periodic
maintenance work. Service technicians are scheduled for the call or routed to
the customer's business by the dispatcher. Service personnel work out of the
Company's service vehicles, which carry an inventory of equipment, tools,
parts and supplies needed to complete the typical variety of jobs. The
technician assigned to a service call travels to the business, interviews the
customer, diagnoses the problem, prepares and discusses a price quotation,
performs the work and often collects payment from the customer. Most work is
warrantied for one year.
SPECIALIZED AND VALUE ADDED SERVICES. The Company also offers specialized
and value-added services that differentiate it from competitors and typically
provide higher margins than general electrical contracting and maintenance
services. Specialized services include design and engineering for, and
installation of, wiring or cabling for the following: data cabling and
switching systems for computer networks; fiber optic cable systems;
telecommunications systems; energy management systems; fire alarm and security
systems; building management systems; lightning protection systems; computer
rooms; and high voltage distribution. Value-added services include design and
engineering for, and installation of uninterruptible power and surge
suppression systems, energy efficiency technologies, and preventive and
predictive maintenance programs.
CUSTOMERS AND MARKETING
Parsons and the Acquired Companies have historically marketed their services
by building long-term relationships with their customers by seeking to provide
high quality, responsive services, and customer satisfaction as well as
developing rapport at a personal level with the decision-makers and
influencers within the customer's organization who are involved in the
selection of electrical contractors for their work. The Company plans to
capitalize on these long-standing relationships by engaging in a proactive
sales and marketing program that is focused on increasing penetration of its
design-build, specialized and value-added services. This program will
emphasize the Company's distinctive knowledge, technical capabilities, track
record, staffing flexibility, resources, geographic reach, and implementation
of best practices. These strengths will also be promoted in marketing
materials and personal visits targeted to national and regional customers to
seek to become a preferred vendor in a broader geographic service area. In
addition, the Company will attend national and regional conventions, including
those sponsored by trade associations such as the Building Owners and Managers
Association ("BOMA") and the Institute of Real Estate Managers.
The Company has a diverse customer base, including general contractors,
property managers, owners and operators of commercial, industrial and
institutional properties, real estate developers and governmental entities.
The Company's long-standing relationships with leading general contractors in
each of the regions in which it does business are particularly important
because general contractors frequently select the electrical contractor for
projects. The Company's commercial customers include managers and owners of
office buildings, apartments, condominiums, theaters, race tracks, casinos,
hotels, retail stores, shopping centers, and banks. Industrial customers
served by the Company include manufacturing plants, processing facilities and
warehouses. The Company's institutional customers include hospitals, schools,
universities, churches, airports, arenas, convention centers, governmental
agencies at the national, state and local levels, and military facilities. No
single customer accounted for more than 10% of the Company's pro forma
combined revenues for the fiscal year ended March 31, 1998.
Parsons and each of the Acquired Companies have been responsible for
developing and maintaining successful long-term relationships with key
customers by emphasizing customer satisfaction and high
35
<PAGE>
quality service which will be a continuing priority. The Company relies
heavily on repeat customers and uses both the written and oral referrals of
its satisfied customers to help generate new business. Many of the Company's
customers or prospective customers have a qualification procedure for becoming
an approved bidder or vendor based upon the satisfaction of particular
performance and safety standards set by the customer. Such customers often
maintain a list of vendors meeting such standards and award contracts for
individual jobs only to such vendors. The Company strives to maintain its
status as a preferred or qualified vendor to such customers as well as to
national and regional accounts.
EMPLOYEES
As of March 31, 1998, the Company had approximately 125 salaried employees,
including executive officers, project managers, engineers, job
superintendents, staff and clerical personnel and approximately 950 hourly
rated employees, the number of which fluctuates depending upon the number and
size of the projects undertaken by the Company at any particular time. The
Company does not anticipate any overall reductions in staff as a result of the
consolidation of the Acquired Companies, although there may be some job
realignments and new assignments in an effort to eliminate overlapping and
redundant positions.
The Company has organized two separate subsidiaries to conduct its
operations, one of which will operate as a union contractor and the other of
which will operate as an open-shop contractor. The Acquired Companies that are
union contractors will be merged into or owned by the former and the Acquired
Companies that are open-shop contractors will be merged into or owned by the
latter. While there are no legal restrictions on the Company's ability to
operate in the same geographic market on both a union and open-shop basis, the
Company does not currently intend to operate on a dual basis in any particular
geographic market.
Certain of the Acquired Companies are signatories to master collective
bargaining agreements with the International Brotherhood of Electrical Workers
(the "IBEW"). One is a signatory to various local IBEW agreements as well as
local agreements with the Laborers International Union and the Operating
Engineers Union. Under these agreements, the Acquired Companies agree to pay
specified wages to their union employees, observe certain workplace rules and
make employee benefit payments to multi-employer pension plans and employee
benefit trusts rather than administering the funds on behalf of their
employees. IBEW covered employees are represented by numerous local unions
under various agreements with varying terms and expiration dates. Such local
agreements are entered into by and between the IBEW local and the National
Electrical Contractors Association ("NECA"), of which the Company's union
subsidiary is a member. The majority of the collective bargaining agreements
contain provisions that prohibit work stoppages, slow-downs or strikes, even
during specified negotiation periods relating to agreement renewal, and
provide for binding arbitration dispute resolution in the event of prolonged
disagreement; however, there can be no assurance that work stoppages, slow-
downs or strikes will not occur at any given time.
Each of the Acquired Companies provides a variety of health, welfare and
benefit plans for its employees who are not covered by collective bargaining
agreements. Following consummation of the Acquisitions, the Company may
replace these various employee benefit plans with a single plan covering all
of the Company's non-bargaining employees.
The electrical contracting industry is currently experiencing a shortage of
skilled craftsmen. In response to the shortage, the Company seeks to take
advantage of various IBEW and NECA referral programs and hire graduates of the
joint IBEW/NECA apprenticeship program for training qualified electricians for
its union subsidiary.
None of the Acquired Companies has experienced any strikes, work stoppages
or slow-downs in the past five years. The Company believes its relationships
with its employees and union representatives is satisfactory.
36
<PAGE>
TRAINING, QUALITY ASSURANCE AND SAFETY
The Company is committed to providing the highest level of customer service
through the development of a highly trained workforce. Following completion of
the Offering, management intends to establish Company-wide training and
educational programs, as well as comprehensive safety policies and
regulations, and to share "best practices" throughout its operations. These
programs and practices will supplement the training for union technicians
through joint IBEW/NECA apprenticeship programs and for its non-union
technicians through the Bureau of Apprenticeship and Training of the
Department of Labor and similar state agencies.
Employees will be encouraged through compensation increases, course funding,
and opportunities for advancement to complete a progressive training program
to advance their technical competencies and to ensure that they understand and
follow the applicable codes, the Company's safety practices and other internal
policies. More highly trained employees serve as foremen, estimators and
project managers. The Company's master electricians are licensed in one or
more cities or states in order to obtain the permits required in the Company's
business, and certain master electricians have also obtained specialized
licenses in areas such as security systems and fire alarm installation. In
some areas, licensing boards have set continuing education requirements for
maintenance of licenses. Because of the lengthy and difficult training and
licensing process for electricians, the Company believes that the number,
skills and licenses of its employees constitute a competitive strength in the
industry.
The Company screens applicants for its technical positions and will
establish programs to recruit apprentice technicians for its non-union
subsidiary directly from high schools and vocational-technical schools. Prior
to employment, the Company will make an assessment of the technical competence
level of all potential new employees, confirm background references, conduct
random drug testing and check criminal and driving records.
Although the Company is committed to a policy of operating safely and
prudently, the Company has been and is subject to claims by employees,
customers and third parties for property damage and personal injuries
resulting from performance of the Company's services.
EQUIPMENT AND FACILITIES
The Company operates a fleet of approximately 230 owned and leased service
trucks, vans and support vehicles. The Company believes that these vehicles
generally are well-maintained and adequate for its present operations. After
the consummation of the Offering, the Company expects to locate its corporate
headquarters in Kansas City, Missouri. The Company operates six sites in
Minneapolis, Minnesota; Atlanta, Georgia; Louisville, Kentucky; Lexington,
Kentucky; Cincinnati, Ohio; and Las Vegas, Nevada. These sites are used for
offices, warehousing, storage and vehicle shops. The Company will lease all of
the facilities it occupies. The Company believes that its facilities are
sufficient for its current needs. See "Certain Transactions."
PROCUREMENT
As a result of economies of scale derived through the Acquisitions and
implementation of procurement best practices, the Company believes it will be
able to purchase electrical materials, equipment, parts and supplies at
substantial volume discounts to historical levels. Because materials, parts
and supplies generally constitute approximately 40% of revenues, the Company
believes that these procurement savings have the potential to significantly
enhance profitability of the Acquired Companies and subsequently acquired
businesses. In addition, the Company believes its size will also lower its
costs for (i) the purchase or lease and maintenance of vehicles; (ii) bonding,
casualty and liability insurance; (iii) health insurance and related benefits;
(iv) retirement benefits administration; (v) office and computer equipment;
(vi) marketing and advertising; (vii) long distance services and (viii) a
variety of accounting, financial management and legal services.
37
<PAGE>
Substantially all the equipment and component parts the Company sells or
installs are purchased from manufacturers and other outside suppliers. The
Company is not materially dependent on any of these outside sources.
REGULATION
The Company's operations are subject to various federal, state and local
laws and regulations including (i) licensing requirements applicable to
electricians and engineers, (ii) building and electrical codes, (iii)
permitting and inspection requirements applicable to construction projects,
(iv) regulations relating to worker safety and environmental protection and
(v) special bidding and procurement requirements on government projects.
Licenses in certain states cover operations throughout the state while laws in
other states and cities require separate licenses in each jurisdiction. The
Company plans to share licenses among its operations wherever possible to
reduce expense and increase its responsiveness to market opportunities.
The Company believes that it has all the required licenses to conduct its
current operations and is in substantial compliance with applicable regulatory
requirements. Failure of the Company to comply with applicable regulations
could result in substantial fines and/or revocation of the Company's operating
licenses. Many state and local regulations governing electrical construction
require permits and licenses to be held by individuals who typically have
passed an examination or met other requirements. The Company intends to
implement a policy to ensure that, where possible, any such permits or
licenses that may be material to the Company's operations are held by at least
two Company employees.
COMPETITION
The electrical contracting industry is highly fragmented and competitive.
Most of the Company's competitors are small, owner-operated companies that
typically operate in a limited geographic area. There are few public companies
focused on providing electrical contracting services. In the future,
competition may be encountered from new entrants, such as public utilities and
other companies attempting to consolidate electrical contracting service
companies. Competitive factors in the electrical contracting industry include
(i) the availability of qualified and licensed electricians, (ii) safety
record, (iii) cost structure, (iv) relationships with customers, (v)
geographic diversity, (vi) ability to reduce project costs, (vii) access to
technology, (viii) experience in specialized markets and (ix) ability to
obtain bonding.
There are relatively few, if any, barriers to entry into the markets in
which the Company operates and, as a result, any organization that has
adequate financial resources and access to technical expertise may become a
competitor to the Company. There can be no assurance that the Company's
competitors will not develop the expertise, experience and resources to
provide services that are equal or superior in both price and quality to the
Company's services, or that the Company will be able to maintain or enhance
its competitive position. The Company may also face competition from the in-
house service organizations of its existing or prospective customers, which
employ personnel who perform some of the same types of services as those
provided by the Company. Although a significant portion of these services is
currently outsourced, there can be no assurance that existing or prospective
customers of the Company will continue to outsource services in the future.
The Company may face competition for acquisition targets from entities
including, but not limited to, the small number of large companies in the
electrical contracting and maintenance services industry. These companies may
have greater name recognition and greater financial resources than the Company
with which to finance acquisition and development opportunities and the
ability to pay higher prices, which could limit the Company's acquisition
program.
RISK MANAGEMENT, INSURANCE AND PERFORMANCE BONDS
The primary risks in the Company's operations are bodily injury, property
damage and injured workers' compensation. The Company maintains automobile and
general liability insurance for third party
38
<PAGE>
bodily injury and property damage and workers' compensation coverage which it
considers sufficient to insure against these risks, subject to self-insured
amounts. After the consummation of the Offering, the Company intends to
consolidate the purchase of insurance, which management believes will result
in savings from the amounts paid by the Acquired Companies prior to the
Acquisitions.
Contracts in the electrical contracting industry may require performance
bonds or other means of financial assurance to secure contractual performance.
If the Company is unable to obtain surety bonds or letters of credit in
sufficient amounts or at acceptable rates, it may be precluded from entering
into additional contracts with certain of its customers.
LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation or administrative
proceedings that arise in the normal course of its business. The Company
believes it does not have pending any litigation that, separately or in the
aggregate, if adversely determined, would have a material adverse effect on
the Company's results of operations, financial condition or cash flows.
39
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information concerning each of the
Company's current executive officers, directors and key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gregory J. Orman........ 29 Chairman of the Board and Director
Frederick C. Green, IV*. 41 President, Chief Executive Officer and Director Nominee
Frank R. Clark.......... 53 Vice President, Chief Financial Officer,
Secretary and Treasurer
John B. Wood............ 39 Vice President, Acquisitions
David W. Smith.......... 39 Vice President, Operations
Robert B. Allison*...... 55 President, Allison-Smith Division and Director Nominee
Bruce M. Henderson...... 48 President, Henderson Division
Rodney J. Henderson..... 51 Chief Executive Officer, Henderson Division
Stephen L. Howell....... 42 President, Eagle Division
Joel T. Moryn........... 35 President, Parsons Division
Ralph L. Pangonis....... 62 President, Potter Division
Bernard J. Beaudoin..... 58 Director
Robert H. Hoffman....... 54 Director
Andrew V. Johnson....... 42 Director
Wade C. Lau*............ 37 Director Nominee
Ronald G. Wasson........ 53 Director
</TABLE>
- --------
*To be elected as a director of the Company, effective upon consummation of
the Offering.
Gregory J. Orman, Founder of the Company, also serves as its Chairman of the
Board. Mr. Orman also holds the following positions: President and Director of
KLT Energy Services, Inc., an unregulated subsidiary of Kansas City Power &
Light (since November 1996), Chief Executive Officer and President of Custom
Energy, LLC, a national energy services provider (since January 1997),
Chairman of ELC Electric, Inc., a licensed electrical contractor (since
January 1994), and Chairman of Energy Financing Corp., a captive leasing
company (since January 1994). Previously, Mr. Orman was Chairman and Chief
Executive Officer of Environmental Lighting Concepts (ELC), a company he co-
founded in 1992 and a majority of the stock of which was subsequently sold to
KLT Energy Services, Inc. From September 1991 to December 1994, Mr. Orman was
an Associate at McKinsey & Company, Inc., an international management
consulting firm. Mr. Orman holds a Bachelor's Degree in Economics from
Princeton University.
Frederick C. Green, IV, President and Chief Executive Officer, joined the
Company in April 1998. From 1996 to 1998, Mr. Green served as President and
Chief Executive Officer of Product Safety Resources, Inc., ("PROSAR") a
venture capital funded start-up company focused on electronic product safety
information consolidation and distribution. Prior to joining PROSAR, he served
as President and Chief Operating Officer of Plum Building Systems, Inc., a
wholly-owned subsidiary of Great Plains Companies, Inc. From 1988 to 1996, Mr.
Green also filled several executive roles with the Fisher-Rosemount Group of
Emerson Electric. He has also served as an Engagement Manager with McKinsey &
Company, Inc., an international management consulting company, and as a design
engineer for General Motors. Mr. Green holds a Master's of Management from the
J.L. Kellogg Graduate School of Management at Northwestern University and a
Bachelor's of Science Degree in Mechanical Engineering from Stanford
University.
Frank R. Clark, Chief Financial Officer, joined the Company at the time of
its formation. From 1994 until 1997, Mr. Clark served as Executive Vice
President, Chief Financial Officer and Treasurer of Performance Contracting,
Inc., a multi-location specialty contractor. From 1985 to 1994, Mr. Clark
served
40
<PAGE>
as Chief Financial Officer and Treasurer of Layne Christensen Company, a
publicly traded company. Mr. Clark is a CPA and holds a Bachelor's Degree in
Accounting from Drake University.
John B. Wood joined the Company as Vice President of Acquisitions at the
time of its formation. From 1996 to 1997, Mr. Wood was a Partner and Founder
of Fiscal Financial Services, LLC, a leasing/investment-banking firm, and from
1995 to 1996 was Regional Vice President of Grigsby Brandford. From 1993 to
1995 he was a Regional Vice President for Dain Bosworth, Inc. Mr. Wood holds a
Bachelor's Degree in Finance and Accounting from Missouri State University.
David W. Smith, Vice President of Operations, joined the Company at the time
of its formation. From 1994 to 1997, Mr. Smith served Great Plains Companies,
Inc. ("Great Plains") in the capacities of Executive Vice President and Chief
Financial Officer, and as President of Plum Building Systems, Inc. From 1989
to 1994, Mr. Smith was President of Griffin Real Estate Company. Mr. Smith
holds a Master's Degree in Business Administration from the Harvard Business
School, and a Bachelor's Degree in Economics from Macalester College.
Robert B. Allison, Director nominee, has been President and Chief Executive
Officer of Allison-Smith since 1990. Mr. Allison has been employed by Allison-
Smith for 30 years, including in prior positions as Project Manager (from 1968
to 1980), and Vice President and Treasurer (from 1980 to 1990). Mr. Allison
holds a Bachelor's Degree from Presbyterian College.
Bruce M. Henderson has been President of Henderson since 1989. Mr. Henderson
has been employed by Henderson for 23 years. Mr. Henderson holds a Master's
degree in Electrical Engineering from the University of Louisville. Mr.
Henderson is the brother of Rodney J. Henderson.
Rodney J. Henderson has been Chief Executive Officer of Henderson since
1989. Mr. Henderson has been employed by Henderson for 31 years. Mr. Henderson
holds a Bachelor's of Science in Commerce from the University of Louisville.
Mr. Henderson is the brother of Bruce M. Henderson.
Stephen L. Howell is President of Eagle. He has been employed by Eagle for
12 years, beginning as Purchasing Agent, subsequently appointed Vice President
before becoming President.
Joel T. Moryn has recently been named President of Parsons. He joined
Parsons in 1981, and has held several positions during his tenure, including
Vice President and General Manager; Vice President, Operations; Project
Manager; and Estimator. Mr. Moryn holds a Bachelor's of Science degree in
Electrical Engineering from the University of Minnesota, and a Master's Degree
in Business Administration from the University of St. Thomas.
Ralph L. Pangonis, Sr. has been President of Potter since October 1996, when
he acquired the Company. He joined Potter in 1986 as General Manager in charge
of operations.
Bernard J. Beaudoin, Director, has served since 1996 as Executive Vice
President and Chief Financial Officer of Kansas City Power & Light ("KCPL").
He has served in several management positions with KCPL subsidiaries since
joining KCPL in 1980, including Senior Vice President (1991-1994), Senior Vice
President--Finance and Business Development (1994-1995), and President of KLT
Inc., a wholly-owned subsidiary of KCPL (1995-1996). Mr. Beaudoin holds a
Bachelor's of Arts Degree from Bowdoin College and a Bachelor's Degree in
Electrical Engineering and a Master's Degree in Industrial Management from
Massachusetts Institute of Technology ("MIT").
Robert H. Hoffman, Director, is Group Vice President (since 1988) of Taylor
Corporation, a privately held national printing company. Mr. Hoffman is
responsible for overseeing the Commercial Printing Division of Taylor
Corporation and has had operational responsibility for completion of 15
acquisitions in the past ten years. Mr. Hoffman holds Bachelor's and Master's
Degrees in Science from Mankato State University and a Doctorate in Management
from Utah State University.
41
<PAGE>
Andrew V. Johnson, Director, is Senior Vice President of Market Development
at Fingerhut Companies Inc., a publicly-traded direct marketing company
("Fingerhut") and President of Andy's Garage Sale, a wholly-owned subsidiary
of Fingerhut. He joined Fingerhut in 1978 and has held various roles, most
recently as the Senior Vice President of Marketing. Mr. Johnson holds a degree
in Business Administration from the University of Minnesota.
Wade C. Lau, Director nominee, is Executive Managing Director (since May
1998) of CB Richard Ellis, a publicly-traded international commercial real
estate services firm, where he oversees property and asset management services
for the Central Division. From July 1997 to May 1998, Mr. Lau served as
Executive Vice President and Central Division Manager for CB Commercial/Koll
Management Services, from October 1996 to July 1997, as Regional President (of
the Minnesota Region) of Koll Management Services, Inc., and from 1993 to 1996
as Executive Vice President of Shelard, Inc. Mr. Lau holds a Bachelor's Degree
in Economics from Harvard College and a Master's Degree in Business
Administration from the Harvard Business School.
Ronald G. Wasson, Director, has served as President and Director of KLT
Inc., a wholly-owned subsidiary of Kansas City Power & Light since 1996. He
has served in several management positions with KCPL and its subsidiaries
since joining KCPL in 1966, including Vice President of Purchasing of KCPL
(1983-1986), Vice President of Administrative Services of KCPL (1986-1991),
Senior Vice President of Administrative and Technical Services of KCPL (1991-
1995) and Executive Vice President of KLT, Inc. (1995-1996). Mr. Wasson holds
Bachelor's and Master's Degrees in Electrical Engineering from the University
of Missouri at Columbia. He also holds a Master's Degree in Business
Administration from Central Missouri State University.
STAGGERED BOARD OF DIRECTORS
The Company's Board of Directors currently consists of eight directors and
is divided into three classes. The initial term of the first class expires at
the annual meeting of stockholders to be held in 1999, the initial term of the
second class expires in 2000, and the initial term of the third class expires
in 2001. Messrs. Wasson and Allison are included in the first class, Messrs.
Lau, Hoffman and Beaudoin are included in the second class, and Messrs. Orman,
Green and Johnson are included in the third class. At each succeeding annual
meeting of stockholders beginning in 2000, the stockholders will elect
directors for a term of three years who will serve until his or her successor
is elected and qualified or until earlier resignation, removal, retirement,
disqualification or death.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Bylaws establish an Audit Committee and a Compensation
Committee. The Audit Committee will examine and consider matters relating to
the financial affairs of the Company, including reviewing the Company's annual
financial statements, the scope of the independent annual audit and internal
audits and the independent auditor's letter to management concerning the
effectiveness of the Company's internal financial and accounting controls.
Messrs. Orman, Hoffman and Beaudoin will serve on the Company's Audit
Committee. The Compensation Committee will consider and make recommendations
to the Company's Board of Directors with respect to compensation matters and
policies and employee benefit and incentive plans, exercise authority granted
to it to administer such plans, and administer the Company's stock option and
equity based plans and grant stock options and other rights under such plans.
Messrs. Orman, Johnson and Wasson will serve on the Compensation Committee.
DIRECTORS' COMPENSATION
Directors who also are employees of the Company or any of its subsidiaries
or affiliates will not receive additional compensation for serving as
directors. Each director who is not an employee of the Company or any of its
subsidiaries will not receive compensation in the future for their service as
directors. Directors of the Company will be reimbursed for reasonable out-of-
pocket expenses incurred in
42
<PAGE>
attending meetings of the Board of Directors or the committees thereof, and
for other expenses reasonably incurred in their capacity as directors of the
Company. Robert Hoffman, Wade Lau and Andrew Johnson have each purchased 5,000
shares of Common Stock from the Company at $0.30 per share.
EXECUTIVE COMPENSATION
The Company was incorporated in February 1998 and until it began operations,
effective February 27, 1998, its activities were solely those related to the
Acquisitions and the Offering. The Company anticipates that during 1998, the
annualized base salaries of its most highly compensated executive officers
will be $168,000 for Mr. Green and $140,000 for each of Messrs. Clark, Wood
and Smith. As part of Mr. Green's employment arrangement with the Company, he
purchased 100,000 shares of Common Stock at $0.30 per share under an Employee
Restricted Stock Purchase Agreement between him and the Company and will
receive an option to purchase 100,000 shares of Common Stock at an exercise
price equal to the initial public offering price. As part of Mr. Clark's
employment arrangement with the Company, he purchased 60,000 shares of Common
Stock at $0.30 per share under an Employee Restricted Stock Purchase Agreement
between him and the Company. As part of Mr. Wood's employment arrangement with
the Company, he purchased 100,000 shares of Common Stock at $0.30 per share
under an Employee Restricted Stock Purchase Agreement between him and the
Company and will receive an option to purchase 10,000 shares of Common Stock
at an exercise price equal to the initial public offering price. As part of
Mr. Smith's employment arrangement with the Company, he purchased 40,000
shares of Common Stock at $0.30 per share under an Employee Restricted Stock
Purchase Agreement between him and the Company and will receive an option to
purchase 10,000 shares of Common Stock at an exercise price equal to the
initial public offering price.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with each executive
officer of the Company that prohibits such individual from disclosing the
Company's confidential information and trade secrets and generally restricts
such individual from competing with the Company for a period of three years
after the expiration or termination of the individual's employment agreement.
Each agreement has an initial term of approximately three years, provides for
an automatic annual extension at the end of its initial term and is terminable
by the Company for "cause" immediately upon written notice by the Company and
without "cause" by either party upon 90 days' written notice. In addition, Mr.
Green's employment agreement provides that if he terminates his employment for
"good reason" (including due to a change of control of the Company), or if the
Company terminates his employment without cause, then the Company is obligated
to pay him all compensation due through the remaining term of the agreement
and all of his options to purchase Common Stock will become fully vested. All
employment agreements provide that in the event of termination (with or
without cause), the noncompete and confidentiality agreements will survive
termination of employment.
1998 STOCK OPTION PLANS
The Board of Directors of the Company has adopted, and the stockholders of
the Company have approved, an Incentive Stock Option Plan ("ISO Plan") and a
Nonqualified Stock Option Plan ("NQSO Plan"; collectively, the "Option
Plans"). Options granted under the ISO Plan are intended to qualify as
incentive stock options pursuant to Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). The purpose of the Option Plans is to
encourage the key employees of the Company and its subsidiaries to participate
in the ownership of the Company, and to provide additional incentive for such
employees to promote the success of its business through sharing in the future
growth of such business. An aggregate amount of 500,000 shares of Common Stock
of the Company may be granted under options pursuant to each of the ISO Plan
and the NQSO Plan (subject to certain extraordinary changes in
capitalization).
43
<PAGE>
The Option Plans are administered by the Compensation Committee of the Board
of Directors. The Compensation Committee has, subject to the terms of the
respective Option Plans, the sole authority to grant and set the terms of the
options, to construe and interpret the Option Plans and to make all other
determinations for the administration of the Option Plans.
Only key employees of the Company or its subsidiaries, as the term
"subsidiary" is defined in Section 424(f) of the Code, are eligible to receive
options under the Option Plans. The key employees eligible to receive options
under the Option Plans will be selected by the Compensation Committee from
time to time based on performance of employees. Options shall not be granted
to key employees under the ISO Plan who, immediately prior to grant of the
option, own (either directly or indirectly under the rules of Section 424(d)
of the Code) stock possessing more than five percent voting power of all
classes of stock of the Company or any subsidiary.
The Company expects to have outstanding options to purchase approximately
220,000 shares of Common Stock issued immediately following the Offering at an
exercise price equal to the initial public offering price of which 71,500 are
expected to be granted under the Nonqualified Stock Option Plan and 148,500
are expected to be granted under the Incentive Stock Option Plan. In the
discretion of the Compensation Committee, option agreements may provide that
options will become immediately exercisable in the event of certain
extraordinary events or upon a Change of Control (as defined in the Option
Plans) of the Company. Options under the ISO Plan may not be exercised (i)
after the expiration of the later of 30 days following termination of
employment by the Company or its subsidiaries or 90 days after the employee's
death (but in any event no later than the expiration date of such option),
(ii) if the aggregate fair market value of the stock (at the time of grant of
options) with respect to which options are exercisable by an individual for
the first time during any calendar year under the ISO Plan exceeds $100,000 or
(iii) if seven years have elapsed since the date of grant of the option.
Options under the NQSO Plan may not be exercised (i) after the expiration of
the later of three months following termination of employment and one year
after the employee's death (but in any event no later than the expiration date
of such option) or (ii) if ten years have elapsed since the date of grant of
the option.
STOCK PURCHASE PLANS
The Board of Directors of the Company have adopted the Nationwide Electric,
Inc. Executive Stock Purchase Plan (the "Executive Stock Plan") and the
Nationwide Electric, Inc. Employee Stock Purchase Plan (the "Employee Stock
Plan") in order to allow eligible employees of the Company to commence or
increase their ownership of shares of the Company's Common Stock.
Under the Executive Stock Plan, selected officers and other key employees
will be given the opportunity to purchase up to a total of 250,000 shares of
the Company's Common Stock at a price equal to the fair market value of the
shares sold to such officers and employees. Company financing will be
available for up to 85 percent of the stock purchase price. Company loans will
be granted on a non-recourse basis with an interest rate equal to the then
Prime Rate. All shares of the Company's Common Stock purchased under the
Executive Stock Plan will be restricted stock for a period of one year
following the date of sale. An officer or key employee who purchases shares of
the Company's Common Stock under the Executive Stock Plan will be immediately
vested as to one-third of the Common Stock purchased. So long as such officer
or key employee remains employed by the Company, an additional one-third of
the Common Stock will vest on the first anniversary of the date of sale and
the remaining one-third will vest on the second anniversary of such sale. Upon
termination of such officer's or key employee's employment prior to the second
anniversary of the date of sale, all shares of Common Stock which have not
been vested must be resold to the Company at the original price paid for such
Common Stock.
Under the Employee Stock Plan, all employees will be given the opportunity
to purchase shares of the Company's Common Stock in the market at a price
equal to the then fair market value without having to pay any brokerage
commissions. Shares of the Company's Common Stock sold under the Employee
Stock Plan will not be restricted.
44
<PAGE>
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
Nationwide was founded in February 1998, by KLT Energy Services, Inc.
("KLT"), an unregulated subsidiary of Kansas City Power & Light Company
("KCPL") and Gregory J. Orman (through Reardon Capital, LLC). Each party
purchased 116,665.5 shares of Common Stock, KLT purchased 99,999 shares of
Class A Nonvoting Common Stock (adjusted for the 333.33-for-1 stock split on
March 24, 1998) for nominal consideration and Galt Financial, Inc. ("Galt
Inc.") purchased 950,000 shares of Common Stock (as adjusted for the aforesaid
stock split). Frederick C. Green IV, Frank R. Clark, John B. Wood and David W.
Smith also acted as co-founders of the Company and paid nominal cash
consideration for a total of 300,000 shares of Common Stock. In addition
Robert Hoffman and Andrew Johnson, each of whom are outside directors, and
Wade Lau, director nominee, paid nominal cash consideration for a total of
15,000 shares of Common Stock.
Parsons was acquired on February 27, 1998 by Galt Inc. for cash in the
amount of $11.0 million. Galt Inc. was owned by Reardon Capital, LLC and KLT;
50% of the voting stock interests were held by each, and KLT held 100% of the
non-voting stock interests. Galt Inc. merged with Galt Financial, LLC ("Galt
LLC") on March 4, 1998. Reardon Capital owned 100% of Galt LLC. On June 4,
1998, Galt Inc. was merged into Nationwide in exchange for 2,310,000 shares of
Common Stock, 990,000 shares of Class A Nonvoting Common Stock and 6,000
shares of Redeemable Preferred Stock. KLT has indicated that it will purchase
500,000 of the shares of Common Stock offered hereby at the initial public
offering price.
Simultaneously with the closing of the Offering, the Company will acquire
all of the issued and outstanding capital stock and other equity interests of
the Acquired Companies, at which time each Acquired Company will become a
direct or indirect wholly-owned subsidiary of the Company. The Acquisition
Consideration consists of (i) approximately $16.9 million in cash and (ii)
1,100,416 shares of Common Stock (assuming an initial public offering price of
$12 per share).
The following table sets forth for each Acquired Company the consideration
to be paid by the Company to the stockholders of Allison-Smith and Henderson,
and to Potter with respect to the acquisition of its assets (i) in cash and
(ii) in shares of Common Stock. The actual number of shares of Common Stock to
be issued pursuant to the Acquisitions will be based upon the quotient
determined by dividing (a) $5,454,996 for Allison--Smith, $6,249,996 for
Henderson and $1,500,000 for Potter, by (b) in each case, the actual initial
public offering price. An additional earnout payment will be made for the
acquisition of Potter's assets in an amount equal to 30% of the amount, if
any, by which pre-tax income (after deducting payment of all bonuses) of
Potter exceeds $750,000 in each of the first three fiscal years following the
consummation of the Offering. The Company plans to grant an option (the
"Performance Stock Options") to Ralph Pangonis to purchase 120,000 shares of
Common Stock, exercisable at the initial public offering price, which will
vest at a rate of 40,000 shares for each year that the net pre-tax income of
Potter, after deducting payment of all bonuses, exceeds $750,000. Any
Performance Stock Options that do not vest in accordance with the performance
test described above will expire three years after the date of grant, and all
Performance Stock Options, whether or not vested, will expire if not exercised
within five years after consummation of the Offering.
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
----------- ------------
<S> <C> <C>
Allison-Smith.................................... $10,130,005 454,583
Henderson........................................ 5,250,003 520,833
Potter........................................... 1,500,000 125,000
----------- ---------
Total........................................ $16,880,008 1,100,416
=========== =========
</TABLE>
The consummation of each Acquisition is subject to customary conditions.
These conditions include, among others, the accuracy on the closing date of
the Acquisitions of the representations and warranties
45
<PAGE>
of the Acquired Companies and, as the case may be, their stockholders and of
the Company, the performance by each of the parties of their respective
covenants and the absence of a material adverse change in the business,
results of operations or financial condition of any of the Acquired Companies.
The agreements relating to the Acquisitions may be terminated under certain
circumstances prior to the consummation of the Offering. Specifically, the
agreements may be terminated (i) by the mutual consent of the Board of
Directors of the Company and each Acquired Company or (ii) if a material
breach or default under the agreements shall exist and is not cured or waived
or the conditions to the closing of the Acquisitions are not fulfilled. There
can be no assurance that the conditions to the closing of the Acquisitions
will be satisfied or waived or that the agreements relating to the
Acquisitions will not be terminated prior to the closing of the Acquisitions.
However, if the Acquisitions are not completed, the Offering will not be
completed.
Pursuant to the agreements relating to the Acquisitions, certain
stockholders of each of the Acquired Companies have agreed not to compete with
the Company for a period of five years commencing on the date of closing of
the Acquisitions.
Robert Allison, who will be elected a director of Nationwide upon
consummation of the Offering, will receive the following consideration in
connection with the acquisition of his interest in Allison-Smith: (i)
$7,091,175 cash and (ii) 318,192 shares of Common Stock (the actual number of
shares to be issued is dependent on the actual initial public offering price).
TRANSACTIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS
Certain stockholders of certain of the Acquired Companies who will become
directors, executive officers or key employees of the Company upon
consummation of the Offering have guaranteed indebtedness, performance bonds
and other obligations of each of their respective Acquired Companies. In
particular, the following guarantees of indebtedness of the respective
Acquired Companies are expected to be terminated within 90 days of completion
of the Offering due to the repayment of the underlying indebtedness: Robert
Allison (Allison-Smith)--$1,154,000; Rodney Henderson and Bruce Henderson
(Henderson)--$1,047,000; Ralph Pangonis, Sr. (Potter)--$340,000.
Following completion of the Offering, the Company intends to repay up to
$2.2 million of the Acquired Companies' debt which is the subject of the
personal guarantees described in the immediately preceding paragraph, and $8.6
million of Nationwide's outstanding debt.
The Company plans to enter into certain real property leases with affiliates
of the Acquired Companies. The Company will assume the lease from Placid
L.L.C. (an entity owned 50% by Mr. Pangonis) the administrative office and
warehouse facilities of the Potter Division located in Las Vegas, that will
terminate in the year 2001, and covers approximately 4,000 square feet of
office space and 7,000 square feet of warehouse facilities, at a monthly
rental rate of $7,000.
The Company will lease from an affiliate of Robert Allison, the
administrative office and warehouse facilities of the Allison-Smith Division
located in Atlanta, for a ten-year term that will terminate in the year 2008,
with an option to renew the lease for an additional five-year term. The lease
covers 16,000 square feet of office space and 17,000 square feet of warehouse
facilities, at a monthly rental rate of $5,000, to increase by 8% each year.
Mr. Allison is President of Allison-Smith, and will become a director of the
Company upon consummation of the Offering.
The Company will lease from an affiliate of Bruce Henderson and Rodney
Henderson, the three separate office/warehouse facilities of Henderson located
in Louisville and Lexington, Kentucky, and Cincinnati, Ohio, covering
approximately 38,500 square feet in the aggregate. The lease provides for a
46
<PAGE>
seven year term with an option to renew the lease for an additional five year
term, at a monthly rental rate of $15,000. The lessor company is owned solely
by Bruce Henderson and Rodney Henderson, each of whom will be a key employee
of the Company.
COMPANY POLICY
In the future, any transactions with directors, officers, employees or
affiliates of the Company are anticipated to be minimal and will, in any case,
be approved by a majority of the Board of Directors, including a majority of
disinterested members of the Board of Directors.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Company's Common Stock, after giving effect to the issuance
of shares of Common Stock in connection with the acquisitions of the Acquired
Companies and after giving effect to the Offering, by (i) all persons known to
the Company to be the beneficial owner of 5% or more thereof, (ii) each
director and nominee for director, (iii) each executive officer and (iv) all
executive officers, directors and director nominees as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
-----------------------
SHARES PRIOR TO AFTER
NAME BENEFICIALLY OWNED OFFERING OFFERING
- ---- ------------------ ---------- ----------
<S> <C> <C> <C>
KLT Energy Services, Inc. (1)....... 1,271,666 32.2% 23.5%
Reardon Capital, LLC................ 1,271,666 32.2% 12.7%
Gregory J. Orman (1)(2)............. 1,271,666 32.2% 12.7%
Frederick C. Green, IV (3).......... 100,000 2.5% 1.0%
Frank R. Clark...................... 60,000 1.5% 0.6%
John B. Wood........................ 100,000 2.5% 1.0%
David W. Smith...................... 40,000 1.0% 0.4%
Wade C. Lau......................... 5,000 0.1% --
Robert H. Hoffman................... 5,000 0.1% --
Andrew V. Johnson................... 5,000 0.1% --
Ronald G. Wasson (1)................ -- -- --
Bernard J. Beaudoin (1)............. -- -- --
Robert B. Allison (4)............... 318,192 -- 3.2%
All executive officers, directors
and director nominees as a group
(11 persons) (1)................... 1,904,858 40.2% 19.0%
</TABLE>
- --------
(1) Does not include 1,089,999 shares of Class A Non-voting Common Stock of
the Company beneficially owned by KLT Energy Services, Inc., an indirect
wholly-owned subsidiary of Kansas City Power & Light, which will be
converted into Common Stock concurrently with the consummation of the
Offering. Accordingly, KLT's percentage ownership of outstanding Common
Stock will be 23.5% following such conversion, and 28.5% after giving
effect to KLT's planned purchase of 500,000 of the shares of Common Stock
offered hereby at the initial public offering price. Mr. Orman, Mr. Wasson
and Mr. Beaudoin are directors of KLT Energy Services, Inc. but disclaim
beneficial ownership of the shares of Common Stock owned by KLT Energy
Services, Inc.
(2) Reflects shares owned by Reardon Capital, LLC ("Reardon") because Mr.
Orman owns all of the voting membership interests of Reardon. Mr. Orman
owns approximately 54% of the economic interest in Reardon.
(3) Does not include 49,545 shares attributable to non-voting membership
interests in Reardon.
(4) All shares to be issued at the time of the Acquisition of Allison-Smith.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of (i) 30,000,000
shares of Common Stock, par value $.01 per share, (ii) 1,200,000 shares of
Class A Nonvoting Common Stock, par value $.01 per share, and (iii) 10,000,000
shares of Preferred Stock, par value $.01 per share ("Preferred Stock"). The
authorized but unissued shares of Preferred Stock are issuable in one or more
series, with such designations, preferences and relative participating,
optional or other special rights, if any, and the qualifications, limitations
or restrictions thereof as may be fixed and determined by resolution of the
Company's Board of Directors.
The following summaries of the terms of the Common Stock and the Preferred
Stock do not purport to be complete and are qualified in their entirety by
reference to the terms set forth in the Amended and Restated Certificate of
Incorporation of the Company. The Company's outstanding capital stock is fully
paid and nonassessable and none of the authorized capital stock is entitled to
preemptive rights or subscription rights. Prior to the date hereof, there has
been no trading market for the Common Stock. Application has been made to list
the Common Stock on the NYSE.
COMMON STOCK
Following the Offering, there will be 10,048,746 shares of Common Stock
outstanding. Subject to certain dividend restrictions of the Company's credit
facility and to the preferential rights of the Preferred Stock, if
outstanding, holders of Common Stock are entitled to dividends as declared
thereon by the Company's Board only out of net income or earned surplus. Upon
issuance of series of Preferred Stock, the Company's Board may provide for
dividend restrictions on the Common Stock as to such series. In the event of
liquidation, holders of Common Stock will be entitled to share ratably in any
assets remaining after the satisfaction in full of the prior rights of
creditors, including lenders under the Company's credit facility and the
aggregate liquidation preference of any Preferred Stock then outstanding.
Except with respect to the Class A Nonvoting Common Stock (which will
automatically convert into Common Stock upon consummation of the Offering),
holders of Common Stock exclusively possess voting power for all purposes and
are entitled at each stockholders' meeting of the Company, as to each matter
to be voted upon, to cast one vote, in person or by proxy, for each share held
of record on the books of the Company. The Company's Board is divided into
three classes, with each class consisting, as nearly as possible, of one-third
of the total number of directors and serving a staggered three-year term. Only
one class is elected each year, and it is elected for a three-year term. The
Company's stockholders are not entitled to cumulative voting rights in the
election of directors. The number of directors will be fixed and a director
may only be removed by the stockholders for cause, by the holders of a
majority of the shares of the capital stock then outstanding and entitled to
vote in the election of directors ("Voting Stock").
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock without further stockholder approval, except as may be required by
applicable stock exchange regulations. The Company's Board will be authorized
to determine, without any further action by the holders of the Common Stock,
the dividend rights, dividend rate, conversion rights, voting rights, rights
and terms of redemption, liquidation preferences and sinking fund terms of any
series of Preferred Stock, the number of shares constituting any such series
and the designation thereof. Should the Board of Directors elect to exercise
its authority, the rights, preferences and privileges of holders of Common
Stock would be subject to the rights, preferences and privileges of the
Preferred Stock.
48
<PAGE>
STATUTORY BUSINESS COMBINATION PROVISION
The Company is subject to Section 203 of the Delaware General Corporation
Law, which generally prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the time that the person became an interested
stockholder, unless (i) prior to such time the Board of Directors of the
corporation approved either the business combination or the transaction in
which the person became an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced,
excluding shares owned by directors who are also officers of the corporation
and by certain employee stock plans, or (iii) at or after such time the
business combination is approved by the Board of Directors of the corporation
and by the affirmative vote of at least 66 2/3% of the outstanding voting
stock of the corporation that is not owned by the interested stockholder. A
"business combination" generally includes mergers, asset sales and similar
transactions between the corporation and the interested stockholder, and other
transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who owns 15% or more of the corporation's
voting stock or who is an affiliate or associate of the corporation and,
together with his or her affiliates and associates, has owned 15% or more of
the corporation's voting stock within the three year period immediately prior
to the date on which it is sought to be determined whether such person is an
interested stockholder.
OTHER MATTERS
The Amended and Restated Certificate of Incorporation provides that the
number of directors shall be as determined by the Board of Directors from time
to time, but shall be at least three and not more than twelve. It also
provides that directors may be removed only for cause, and then only by the
affirmative vote of the holders of at least a majority of all outstanding
shares of stock entitled to vote in an election of directors. This provision,
in conjunction with the provision of the Amended and Restated Certificate of
Incorporation authorizing the Board of Directors to fill vacant directorships,
will prevent stockholders from removing incumbent directors without cause and
filling the resulting vacancies with their own nominees.
The Amended and Restated Certification of Incorporation provides that
stockholders may act only at an annual or special meeting of stockholders and
may not act by written consent unless such consent is unanimous. The Amended
and Restated Certificate of Incorporation provides that special meetings of
the stockholders can be called only by the Chairman of the Board, the
President, or the Board of Directors pursuant to a resolution approved by a
majority of the whole Board of Directors.
The approval by the affirmative vote of the holders of 66 2/3% of the
Company's outstanding voting stock, and 66 2/3% of the Company's outstanding
voting stock owned by disinterested stockholders, is required to approve
certain business combinations. Further, the affirmative vote of the holders of
80% of the Company's outstanding voting stock is required to approve certain
specified business combinations with "interested stockholders" (i.e.
beneficial owners of 10% or more of the combined voting power of the
outstanding shares) or their affiliates, if either (i) the business
combination is not approved by a majority of the disinterested directors at a
meeting of directors at which at least 80% of the disinterested directors then
in office are present, or (ii) conditions as to the forms of consideration,
minimum price and procedures used are not met.
The Amended and Restated Certificate of Incorporation authorizes the Board
of Directors to take into account (in addition to any other considerations
which the Board of Directors may lawfully take into account) in determining
whether to take or to refrain from taking corporate action on any possible
acquisition proposals, including proposing any related matter to the
stockholders of the Company, the long-term as well as short-term interests of
the Company and its stockholders (including the possibility that these may be
best served by the continued independence of the Company), customers,
employees
49
<PAGE>
and other constituencies of the Company and any subsidiaries, as well as the
effect upon communities in which the Company and any subsidiaries do business.
In considering the foregoing and other pertinent factors, the Board of
Directors is not required, in considering the best interests of the Company,
to regard any particular corporate interest or the interest of any particular
group affected by such action as a controlling interest.
STOCKHOLDER PROPOSALS
The Company's Amended and Restated Bylaws contain provisions (i) requiring
that advance notice be delivered to the Company of any business to be brought
by a stockholder before any meeting of stockholders and (ii) establishing
certain procedures to be followed by stockholders in nominating persons for
election to the Board of Directors. Generally, such advance notice provisions
provide that written notice must be given to the Secretary of the Company by a
stockholder, with respect to director nominations or stockholder proposals,
not less than 50 nor more than 75 days prior to the meeting (except that if
less than 65 days notice or prior public disclosure of the date of the meeting
is given or made to stockholders, then notice by the stockholder, to be
timely, must be received within 15 days of the date on which notice of the
date of the meeting was mailed or such public disclosure was made, whichever
first occurs). Such notice must set forth specific information regarding such
stockholder and such business or director nominee, as described in the
Company's Amended and Restated Bylaws. The foregoing summary is qualified in
its entirety by reference to the Company's Amended and Restated Bylaws, which
are included as an exhibit to the Registration Statement of which this
Prospectus is a part.
LIMITATIONS ON DIRECTOR/OFFICER LIABILITY
Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of a director's fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by Delaware
law, directors are accountable for monetary damages for conduct constituting
gross negligence in the exercise of their duty of care. Delaware law enables
corporations to limit available relief to equitable remedies such as
injunction or rescission. The Amended and Restated Certificate of
Incorporation limits the liability of directors of the Company to the Company
or its stockholders to the fullest extent permitted by Delaware law.
Specifically, directors of the Company will not be personally liable to the
Company or its stockholders for monetary damages for breach of a director's
fiduciary duty as a director, except for liability for breach of the duty of
loyalty, for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, for unlawful payments of dividends
or unlawful stock repurchases or redemptions as provided in Section 174 of the
Delaware General Corporation Law, or for any transaction in which a director
has derived an improper personal benefit.
The Company's Bylaws require the Company to indemnify any person who is a
party or is threatened to be made a party to any action, suit or proceeding by
reason of the fact that such person is or was a director, officer, employee or
agent of the Company, or is serving as a director, officer, employee or agent
of another enterprise at the Company's request. Indemnification is not,
however, permitted under the Bylaws unless the person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
Company's best interests and, with respect to any criminal action or
proceeding, that such person had no reasonable cause to believe such person's
conduct was unlawful. The Company's Bylaws further provide that the Company
shall not indemnify any person for any liabilities or expenses incurred by
such person in connection with an action, suit or proceeding by or in the
right of the Company in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Company, unless and only
to the extent that the court in which the action, suit or proceeding is
brought determines that the person is entitled to indemnity for such expenses.
The indemnification provided by the Bylaws is not exclusive of any other
rights to which those seeking indemnification may be otherwise entitled.
50
<PAGE>
The Company plans to enter into indemnification agreements (the
"Agreements") with each of the Company's directors and officers prior to the
Offering. The Agreements will provide that the Company will indemnify the
directors and officers against all liabilities and expenses actually and
reasonably incurred in connection with any action, suit or proceeding
(including an action by or in the right of the Company) to which any of them
is, was or at any time becomes a party, or is threatened to be made a party,
by reason of their status as a director or officer of the Company, or by
reason of their serving or having served at the request or on behalf of the
Company as a director, officer, trustee or in any other comparable position of
any other enterprise to the fullest extent allowed by law. No indemnity will
be provided under the Agreements for any amounts for which indemnity is
provided by any other indemnification obligation or insurance maintained by
the Company or another enterprise or otherwise. Nor will indemnity be provided
to any director or officer on account of conduct which is finally adjudged by
a court to have been knowingly fraudulent, deliberately dishonest or a knowing
violation of law. In addition, no indemnification will be provided if a final
court adjudication shall determine that such indemnification is not lawful, or
in respect to any suit in which judgment is rendered against any director or
officer for an accounting of profits made from a purchase or sale of
securities of the Company in violation of Section 16(b) of the Securities
Exchange Act of 1934 or of any similar law, or on account of any remuneration
paid to any director or officer which is adjudicated to have been paid in
violation of law.
The Company also intends to obtain director's and officer's liability
insurance.
The foregoing limitations on liability and indemnification obligations may
have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter stockholders or management from bringing
a lawsuit against directors for breach of their fiduciary duties, even though
such an action, if successful, might otherwise have benefitted the Company and
its stockholders.
TRANSFER AGENT AND REGISTRAR
Norwest Bank of Minnesota, N.A. is the Transfer Agent and Registrar for the
Common Stock.
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Acquisitions and completion of this Offering, the
Company will have outstanding 10,048,746 shares of Common Stock (10,798,746 if
the Underwriters' over-allotment option is exercised in full) of which the
5,000,000 shares sold in the Offering (5,750,000 if the Underwriters' over-
allotment option is exercised in full) will be freely tradable without
restriction or further registration under the Securities Act, except for those
held by "affiliates" (as defined in the Securities Act) of the Company, which
shares will be subject to the resale limitations of Rule 144 under the
Securities Act. The remaining 5,048,746 shares of Common Stock are deemed
"restricted securities" under Rule 144 in that they were originally issued and
sold by the Company in private transactions in reliance upon exemptions under
the Securities Act, and may be publicly sold only if registered under the
Securities Act or sold in accordance with an applicable exemption from
registration, such as those provided by Rule 144 promulgated under the
Securities Act as described below.
In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of restricted
securities from the issuer or from any affiliate of the issuer the acquiror or
subsequent holder would be entitled to sell within any three-month period a
number of those shares that does not exceed the greater of one percent of the
number of shares of such class of stock then outstanding or the average weekly
trading volume of the shares of such class of stock during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales
under Rule 144 are also subject to certain requirements pertaining to the
manner of such sales, notices of such sales and the availability of current
public information concerning the issuer. In addition, if a period of at least
two years has elapsed since the later of the date of acquisition of restricted
securities from the issuer or from any affiliate of the issuer, and the
acquiror or subsequent holder thereof is deemed not to have been an affiliate
of the issuer of such restricted securities at any time during the 90 days
preceding a sale, such person would be entitled to sell such restricted
securities under Rule 144(k) without regard to the requirement described
above. Rule 144 does not require the same person to have held the securities
for the applicable periods. The foregoing summary of Rule 144 is not intended
to be a complete description thereof. The Securities and Exchange Commission
(the "Commission") has proposed certain amendments to Rule 144 that would,
among other things, eliminate the manner of sale requirements and revise the
notice provisions of that rule. The Commission has also solicited comments on
other possible changes to Rule 144, including possible revisions to the one-
and two-year holding periods and the volume limitations referred to above.
The Company has agreed that it will not sell or offer any shares of Common
Stock or options, rights or warrants to acquire any Common Stock for a period
of 180 days after the date of this Prospectus without the prior written
consent of BT Alex. Brown Incorporated, except for the grant of employee stock
options (up to a maximum of 1,000,000 shares) under the 1998 Stock Option
Plans and for shares issued (i) in connection with acquisitions of businesses
and (ii) pursuant to the Nationwide Executive Stock Purchase Plan (up to a
maximum of 250,000 shares). Further, the Company's directors, officers and
certain stockholders who will beneficially own 5,048,746 shares in the
aggregate after the Offering have agreed not to directly or indirectly sell or
offer for sale or otherwise dispose of any Common Stock for a period of one
year after the date of this Prospectus without the prior written consent of BT
Alex. Brown Incorporated.
Prior to the Offering, there has been no established public market for the
Common Stock. No prediction can be made as to the effect, if any, that the
sale of shares under Rule 144, or otherwise, or the availability of shares for
sale will have on the market price for the Common Stock prevailing from time
to time after the Offering. The Company is unable to estimate the number of
shares that may be sold in the public market under Rule 144, or otherwise,
because such amount will depend on the trading volume in, and market price
for, the Common Stock of the Company and the Company's future ability to raise
equity capital and complete any additional acquisitions for Common Stock. See
"Underwriting."
52
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), through their representatives,
BT Alex. Brown Incorporated and Piper Jaffray Inc. (together, the
"Representatives"), have severally agreed to purchase from the Company the
following respective number of shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions set forth on
the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
BT Alex. Brown Incorporated.....................................
Piper Jaffray Inc...............................................
---------
Total....................................................... 5,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the shares of Common Stock offered hereby if any of such
shares are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $ per share to certain other dealers. After commencement
of the initial public offering, the offering price and other selling terms may
be changed by the Representatives.
The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 750,000
additional shares of Common Stock at the initial public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it in the above table bears to 5,000,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters.
The Underwriters may exercise such option only to cover over-allotments made
in connection with the sale of the Common Stock offered hereby. If purchased,
the Underwriters will offer such additional shares on the same terms as those
on which the 5,000,000 shares are being offered.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company regarding certain liabilities,
including liabilities under the Securities Act.
To facilitate the Offering, the Underwriters may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Specifically, the Underwriters may over-allot shares of the Common Stock in
connection with the Offering, thereby creating a short position in the
Underwriters' syndicate account. Additionally, to cover such over-allotments
or to stabilize the market
53
<PAGE>
price of the Common Stock, the Underwriters may bid for, and purchase, shares
of the Common Stock in the open market. Any of these activities may maintain
the market price of the Common Stock at a level above that which might
otherwise prevail in the open market. The Underwriters are not required to
engage in these activities, and, if commenced, any such activities may be
discontinued at any time. The Representatives, on behalf of the Underwriters,
also may reclaim selling concessions allowed to an Underwriter or dealer, if
the syndicate repurchases shares distributed by that Underwriter or dealer.
The Company has agreed that it will not sell or offer any shares of Common
Stock or options, rights or warrants to acquire any Common Stock for a period
of 180 days after the date of this Prospectus without the prior written
consent of BT Alex. Brown Incorporated, except for the grant of employee stock
options (up to a maximum of 1,000,000 shares) under the 1998 Stock Option
Plans and for shares issued (i) in connection with acquisitions of businesses
and (ii) pursuant to the Nationwide Executive Stock Purchase Plan (up to a
maximum of 250,000 shares). Further, the Company's directors, officers and
certain stockholders who will beneficially own 5,048,746 shares in the
aggregate after the Offering have agreed not to directly or indirectly sell or
offer for sale or otherwise dispose of any Common Stock for a period of one
year after the date of this Prospectus without the prior written consent of BT
Alex. Brown Incorporated.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
Prior to this Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock
has been determined by negotiations between the Company and the
Representatives. Among the factors considered in such negotiations were
prevailing market conditions, the results of operations of Parsons and the
Acquired Companies in recent periods, the market capitalization and stages of
development of other companies which the Company and the Representatives
believed to be comparable to the Company, estimates of the business potential
of the Company, the present state of the Company's development and other
factors deemed relevant by the Company and the Representatives.
The Common Stock issued in connection with the Acquisitions may not be sold
to the public and the holder of those shares are restricted from selling those
shares to the public for a period of at least one year after the consummation
of the Acquisitions.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed on for the
Company by Stinson, Mag & Fizzell, P.C., Kansas City, Missouri. Certain legal
matters in connection with the sale of the Common Stock offered hereby will be
passed upon for the Underwriters by Piper & Marbury L.L.P., Baltimore,
Maryland.
EXPERTS
The combined financial statements of Nationwide Electric, Inc. as of March
31, 1998 and for the period from September 23, 1997 through March 31, 1998
included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The financial statements of Parsons Electric Co. as of February 27, 1998 and
December 31, 1997 and 1996 and for the two-month period ended February 27,
1998 and for each of the three years in the period ended December 31, 1997
included in this Prospectus have been audited by McGladrey & Pullen LLP,
independent accountants, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
54
<PAGE>
The consolidated financial statements of The Allison Company and subsidiary
as of March 31, 1998 and June 30, 1997 and for the nine-month period ended
March 31, 1998 and for each of the two years in the period ended June 30, 1997
included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of Henderson Electric Co., Inc. and
subsidiaries as of March 31, 1998 and 1997 and for each of the three years in
the period ended March 31, 1998 included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all exhibits, schedules and amendments relating thereto,
the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, filed as part of the
Registration Statement, does not contain all the information contained in the
Registration Statement, certain portions of which have been omitted in
accordance with rules and regulations of the Commission. Statements contained
in this Prospectus as to the contents of any contract, agreement or other
document filed as an exhibit to the Registration Statement accurately
describes the material provisions of such document and are qualified in their
entirety by reference to such exhibits for complete statements of their
provisions. All of these documents may be inspected without charge at the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the following regional
offices of the Commission: Seven World Trade Center, 13th Floor, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission maintains a web site that contains reports,
proxy and information statements regarding registrants that file
electronically with the Commission. The address of this web site is
(http://www.sec.gov). Copies of all or any portion of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
upon payment of the prescribed fees.
Prior to filing the Registration Statement of which this Prospectus is a
part, the Company was not subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Upon effectiveness of the Registration Statement, the Company will
become subject to the informational and periodic reporting requirements of the
Exchange Act, and in accordance therewith, will file periodic reports, proxy
statements and other information with the Commission. Such periodic reports,
proxy statements and other information will be available for inspection and
copying at the public reference facilities and other regional offices referred
to above. The Company intends to register the securities offered by the
Registration Statement under the Exchange Act simultaneously with the
effectiveness of the Registration Statement and to furnish its stockholders
with annual reports containing audited financial statements and such other
reports as may be required from time to time by law or the NYSE.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NATIONWIDE ELECTRIC, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS
Basis of Presentation.................................................. F-2
Unaudited Pro Forma Combined Balance Sheet............................. F-3
Unaudited Pro Forma Combined Statement of Operations................... F-4
Notes to Unaudited Pro Forma Combined Financial Statements............. F-5
NATIONWIDE ELECTRIC, INC. AND AFFILIATES COMBINED FINANCIAL STATEMENTS
Independent Auditors' Report........................................... F-10
Combined Balance Sheet................................................. F-11
Combined Statement of Operations....................................... F-12
Combined Statement of Stockholders' Equity............................. F-13
Combined Statement of Cash Flows....................................... F-14
Notes to Combined Financial Statements................................. F-15
PARSONS ELECTRIC CO.
Independent Auditors' Report........................................... F-23
Balance Sheets......................................................... F-24
Statements of Income................................................... F-25
Statements of Retained Earnings........................................ F-26
Statements of Cash Flows............................................... F-27
Notes to Financial Statements.......................................... F-28
ACQUIRED COMPANIES
THE ALLISON COMPANY
Independent Auditors' Report........................................... F-33
Consolidated Balance Sheets............................................ F-34
Consolidated Statements of Operations and Retained Earnings............ F-35
Consolidated Statements of Cash Flows.................................. F-36
Notes to Consolidated Financial Statements............................. F-37
HENDERSON ELECTRIC CO. INC. AND SUBSIDIARIES
Independent Auditors' Report........................................... F-43
Consolidated Balance Sheets............................................ F-44
Consolidated Statements of Operations and Retained Earnings............ F-45
Consolidated Statements of Cash Flows.................................. F-46
Notes to Consolidated Financial Statements............................. F-47
</TABLE>
F-1
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to (i) the acquisitions by Nationwide Electric, Inc. ("Nationwide"), of the
outstanding capital stock of Henderson Electric Company ("Henderson") and The
Allison Company ("Allison-Smith") and certain assets of Potter Electric Co.,
Inc. ("Potter") (together, the Acquired Companies), and (ii) the offering. The
acquisitions (the "Acquisitions") will occur simultaneously with and are
contingent upon the closing of Nationwide's initial public offering (the
"Offering") and will be accounted for using the purchase method of accounting.
Nationwide, which purchased Parsons Electric Co. effective in February 1998
for cash, has been designated the accounting acquiror for financial statement
presentation purposes.
The unaudited pro forma combined balance sheet gives effect to the
Acquisitions and related transactions, and the Offering, as if they had
occurred on March 31, 1998. The unaudited pro forma combined statement of
operations gives effect to these transactions as if they had occurred on April
1, 1997 but does not reflect a nonrecurring, noncash compensation charge, net
of tax, directly attributable to this transaction.
Nationwide has preliminarily analyzed the savings that are expected to be
realized from reductions in salaries, bonuses and certain benefits to the
owners. To the extent the owners of the Acquired Companies and Parsons have
contractually agreed to prospective reductions in salary, bonuses, benefits
and lease payments, these reductions have been reflected in the unaudited pro
forma combined statements of operations. It is anticipated that these savings
will be offset by costs related to Nationwide's new corporate management and
by the costs associated with being a public company not reflected herein. With
respect to other potential cost savings, Nationwide cannot quantify these
savings until completion of the Acquisitions. Because these costs cannot be
accurately quantified at this time, they have not been included in the pro
forma financial information of Nationwide.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that Company management deems appropriate
and may be revised as additional information becomes available. The pro forma
financial data do not purport to represent what Nationwide's financial
position or results of operations would actually have been if such
transactions in fact had occurred on those dates and are not necessarily
representative of Nationwide's financial position or results of operations for
any future period. Since the Acquired Companies were not under common control
or management, historical combined results may not be comparable to, or
indicative of, future performance. The unaudited pro forma combined financial
statements should be read in conjunction with the other financial statements
and notes thereto included elsewhere in this Prospectus. See also "Risk
Factors" included elsewhere herein.
F-2
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA POST MERGER
ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
ASSETS NATIONWIDE ALLISON HENDERSON (NOTE 3) COMBINED (NOTE 3) TOTAL
------ ---------- ------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents........... $ 1,047 $ 2,014 $ 428 $ 3,428 $ 6,917 $ 20,022 $26,939
Contract receivables... 12,089 7,663 9,635 2,142 31,529 -- 31,529
Costs and estimated
earnings in excess of
billings.............. 3,321 1,100 1,367 120 5,908 -- 5,908
Inventories............ 479 28 147 -- 654 -- 654
Advances to
Stockholders.......... -- 212 1,956 (2,168) -- -- --
Prepaid expenses....... 46 78 1 21 146 -- 146
Deferred income tax.... 122 -- 322 -- 444 -- 444
------- ------- ------- -------- ------- -------- -------
Total current assets. 17,104 11,095 13,856 3,543 45,598 20,022 65,620
Property and equipment,
net.................... 1,597 631 1,956 (1,188) 2,996 -- 2,996
Deferred income taxes... -- -- -- -- -- -- --
Goodwill, net........... 4,254 -- -- 13,959 18,213 -- 18,213
Oher assets, net........ 413 -- 245 240 418 -- 418
------- ------- ------- -------- ------- -------- -------
Total assets......... $23,368 $11,726 $16,057 $ 16,074 $67,225 $ 20,022 $87,247
======= ======= ======= ======== ======= ======== =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Current portion long-
term debt............. $ -- $ 112 $ 279 $ (137) $ 254 $ (254) $ --
Accounts payable....... 3,237 1,163 4,009 1,143 9,552 -- 9,552
Accrued expenses....... 1,816 503 1,658 566 4,543 -- 4,543
Income taxes payable... -- 169 -- -- 169 -- 169
Other current
liabilities........... 915 -- -- -- 915 (480) 435
Billings in excess of
costs and estimated
earnings.............. 1,926 1,818 1,293 723 5,760 -- 5,760
Line of credit......... 8,600 -- 400 340 9,340 (9,340) --
Payables to Acquired
Companies
stockholders.......... -- -- -- 16,880 16,880 (16,880) --
------- ------- ------- -------- ------- -------- -------
Total current
liabilities......... 16,494 3,765 7,639 19,515 47,413 (26,954) 20,459
Long-term debt.......... -- 1,042 368 224 1,186 (1,186) --
Deferred income taxes... -- -- 53 -- 53 -- 53
Long-term commitments... -- -- 150 -- 150 -- 150
Redeemable preferred
stock.................. 6,038 -- -- 150 6,188 (6,188) --
Stockholders' Equity:
Common stock, $.01
par................... 2 406 27 (396) 39 61 100
Common stock, $1.00
par................... 1 -- -- (1) -- -- --
Class A common, $.01
par................... 1 -- -- 10 11 (11) --
Additional paid-in
capital............... 1,096 -- -- 11,553 12,649 54,300 66,949
Retained earnings
(deficit)............. (264) 6,513 8,048 (14,711) (414) -- (414)
Less treasury
stock/shareholder
notes................. -- -- (228) 178 (50) -- (50)
------- ------- ------- -------- ------- -------- -------
Total stockholders'
equity.............. 836 6,919 7,847 (3,367) 12,235 54,350 66,585
------- ------- ------- -------- ------- -------- -------
Total liabilities and
stockholders'
equity.............. $23,368 $11,726 $16,057 $ 16,074 $67,225 $ 20,022 $87,247
======= ======= ======= ======== ======= ======== =======
</TABLE>
F-3
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED MARCH 31,1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
NATIONWIDE ALLISON HENDERSON (NOTE 4) TOTAL
---------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue.................... $60,651 $32,072 $44,000 $ 9,098 $145,821
Cost of services, excluding
depreciation shown
separately below.......... 49,493 25,771 37,952 7,603 120,819
------- ------- ------- ------- --------
Gross profit........... 11,158 6,301 6,048 1,495 25,002
Operating expenses:
Selling, general and
administrative expenses. 7,613 2,208 4,104 603 14,528
Depreciation............. 443 97 272 50 862
Goodwill amortization.... -- -- -- 603 603
Operating expenses......... 8,056 2,305 4,376 1,256 15,993
------- ------- ------- ------- --------
Operating income....... 3,102 3,996 1,672 239 9,009
Interest and other income
(expense):
Interest expense......... (323) (174) (115) 612 --
Other income (expense),
net..................... 59 (72) 386 (2) 312
------- ------- ------- ------- --------
Income before tax...... 2,838 3,750 1,943 849 9,321
Income tax (benefit)....... (121) 1,426 776 1,889 3,970
------- ------- ------- ------- --------
Income before a
nonrecurring, noncash
charge directly
attributable to the
transaction(2)........ $ 2,959 $ 2,324 $ 1,167 $(1,040) $ 5,351
======= ======= ======= ======= ========
Income per share before a
nonrecurring, noncash
charge directly
attributable to the
transaction(2)--basic and
diluted................... $ 0.53
========
Shares used in computing
pro forma income per
share--basic and
diluted(1)................ 10,049
</TABLE>
- --------
(1) Includes (a) 3,948,330 shares issued to certain management personnel and
the existing stockholders of Nationwide, (b) 1,100,416 shares issued to
owners of the Acquired Companies, (c) 3,331,500 of the 5,000,000 shares
sold in the Offering to pay the cash portion of the Acquisition
consideration, expenses of the Offering and retirement of debt and (d)
1,668,500 of the 5,000,000 shares sold in the Offering to provide net cash
to Nationwide expected to be used for working capital and future
acquisitions of businesses.
(2) Income before a nonrecurring charge attributable to the transaction
excludes a nonrecurring, noncash compensation charge of $3.3 million and
related income tax benefits of $1.3 or $2.0 million--Note 3(a) or $0.20
per share.
F-4
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. GENERAL:
Nationwide Electric, Inc. ("Nationwide") was founded to create a leading
provider of electrical contracting and maintenance services to commercial,
industrial and institutional customers. Nationwide acquired Parsons effective
February 27, 1998 and conducted no operations prior to that acquisition.
Subsequent to March 31, 1998, Nationwide merged with a related company that
had common ownership and became the designated "accounting acquiror" in the
Acquisitions. Nationwide will acquire the Acquired Companies concurrently with
and as a condition of the closing of this Offering.
The historical financial statements reflect the financial position and
results of operations of the Acquired Companies and were derived from the
respective Acquired Companies' financial statements where indicated. The
periods included in these unaudited pro forma financial statements for the
individual Acquired Companies are as of and for the twelve months ended March
31, 1998. The audited historical financial statements included elsewhere
herein have been included in accordance with Securities and Exchange
Commission (SEC) Staff Accounting Bulletin No. 80, which sets forth the
requirements to provide audited financial statements of constituent businesses
involved in an initial public offering that remain substantially intact after
acquisition.
2. ACQUISITION OF ACQUIRED COMPANIES:
Concurrently with and as a condition to the closing of the Offering,
Nationwide will acquire all of the outstanding capital stock of Allison-Smith
and Henderson and the assets of Potter. The acquisitions will be accounted for
using the purchase method of accounting with Nationwide being designated as
the accounting acquiror.
Nationwide acquired Parsons Electric Co. ("Parsons") through a merger with
Galt Financial, Inc. ("Galt") the parent company of Parsons effective February
27, 1998. Galt was owned by the same shareholders who own Nationwide.
Accordingly, the merger was accounted for similar to a pooling of interests.
The merger was completed with Nationwide issuing its stock to the shareholders
of Galt in return for all of Galt's outstanding stock. Galt acquired Parsons
in an all cash transaction accounted for using the purchase method of
accounting. The goodwill which resulted in this transaction is being amortized
using a 40-year life. In addition, $425,000 of payments pursuant to a non-
compete agreements with key managers at Parsons will be amortized over lives
ranging from 21-36 months as a non-cash charge to operating income or $170,000
per year.
The following table sets forth the consideration to be paid (a) in cash and
(b) in shares of Common Stock to the common stockholders of each of the
Acquired Companies. For purposes of computing the estimated purchase price for
accounting purposes, the value of the shares was determined using an estimated
fair value of $10.20 per share (or $11.2 million), which is less than the
assumed initial public offering price of $12.00 per share. The number of
shares constituting the Acquisition Consideration will depend upon the actual
initial public offering price. This valuation reflects a 15% discount from the
assumed initial public offering price. The difference between the discount
used and a nominal discount of 10% is immaterial. The total estimated purchase
price of $28.1 million for the acquisitions is based upon preliminary
estimates and is subject to certain downward purchase price adjustments at and
following closing. The table does not reflect distributions totaling $480,000
consisting of Parsons undistributed earnings previously taxed to its
stockholders (S Corporation Distributions) prior to the Acquisitions.
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
------- ------------
(IN THOUSANDS)
<S> <C> <C>
The Allison Company.................................. $10,130 454
Henderson Electric Co. Inc. and Subsidiaries......... 5,250 521
Other Acquired Company (Potter Electric Co., Inc.)... 1,500 125
------- -----
Total............................................ $16,880 1,100
======= =====
</TABLE>
F-5
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The foregoing table does not reflect an additional earnout payment that will
be made for the acquisition of Potter in an amount equal to 30% of the amount,
if any, by which pre-tax income (after deducting payment of all bonuses) of
the Potter Division exceeds $750,000 in each of the first three fiscal years
following the consummation of the Offering. The Company also plans to grant
options (the "Performance Stock Options") to Ralph Pangonis to purchase
120,000 shares of Common Stock, exercisable at the initial public offering
price. The Performance Stock Options will vest at a rate of 40,000 shares for
each year that the pre-tax income of Potter, after certain specified
deductions, exceeds $750,000. Any Performance Stock Options that do not vest
in accordance with the performance test described above will expire three
years after the date of grant, and all Performance Stock Options, whether or
not vested, will expire if not exercised within five years after consummation
of the Offering.
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ASSETS (A) (B) (C) (D) (E) (F) ADJUSTMENTS
- ------ ---- ----- ------- ------ -------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents.......... $325 $ -- $ 338 $1,922 $ -- $ 843 $ 3,428
Contract receivables.. -- -- -- -- -- 2,142 2,142
Costs and estimated
earnings in excess of
billings............. -- -- -- -- -- 120 120
Advances to
Stockholders......... -- -- -- (2,275) -- 107 (2,168)
Prepaid expenses...... -- -- -- -- -- 21 21
---- ----- ------- ------ -------- ------ --------
Total current
assets............. 325 -- 338 (353) -- 3,233 3,543
Property and
equipment, net......... -- -- (1,393) -- -- 205 (1,282)
Goodwill, net........... -- -- -- -- 13,959 -- 13,959
Other assets, net....... -- -- (240) -- -- -- (240)
---- ----- ------- ------ -------- ------ --------
Total assets........ $325 $ -- $(1,295) $ (353) $ 13,959 $3,438 $ 16,074
==== ===== ======= ====== ======== ====== ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Current portion long-
term debt............ $-- $ -- $ (137) $ -- $ -- $ -- $ (137)
Accounts payable...... -- -- -- -- -- 1,143 1,143
Accrued expenses...... -- -- -- -- -- 566 566
Due to related
parties.............. -- -- -- (353) -- 353 --
Billings in excess of
costs and estimated
earnings............. -- -- -- -- -- 723 723
Line of credit........ -- -- -- -- -- 340 340
Payables to Acquired
Company stockholders. -- -- -- -- 16,880 -- 16,880
---- ----- ------- ------ -------- ------ --------
Total current
liabilities........ -- -- (137) (353) 16,880 3,125 19,515
Long-term debt.......... -- -- (224) -- -- -- (224)
Redeemable preferred
stock.................. -- 150 -- -- -- -- 150
Stockholders' Equity:
Common stock:
Voting, $.01 par.... 13 23 -- -- (447) 15 (396)
Voting, $1.00 par... -- -- -- -- (1) -- (1)
Nonvoting, $.01 par. -- -- -- -- 11 -- 11
Additional paid-in
capital.............. 362 (23) -- -- 11,213 -- 11,552
Retained earnings
(deficit)............ -- (150) -- -- (14,859) 298 (14,711)
Less treasury
stock/shareholder
notes................ (50) -- (934) -- 1,162 -- 178
---- ----- ------- ------ -------- ------ --------
Total stockholders'
equity............. 325 (150) (934) -- (2,921) 313 (3,367)
---- ----- ------- ------ -------- ------ --------
Total liabilities
and stockholders'
equity............. $325 $ -- $(1,295) $ (353) $ 13,959 $3,438 $ 16,074
==== ===== ======= ====== ======== ====== ========
</TABLE>
F-6
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
- --------
(a) Records the sale of 950,000 shares of Nationwide common stock to Galt
Financial, Inc., a related company for cash. Under certain restricted
stock purchase agreements, the Company has sold 315,000 shares of Common
Stock to management and outside directors. All the shares were paid for
with cash plus shareholder notes. As a result, the Company will record a
nonrecurring, noncash compensation charge of $3.3 million and related tax
benefit of $1.3 million or $2.0 million in the first reportable quarter
following consummation of the Offering representing the difference between
the amount paid for the shares ($0.30 each) and the estimated fair value
thereof ($10.80 each) (a fair value that is discounted ten percent from
the assumed initial public offering price). This non-recurring
compensation charge is not included in the Unaudited Pro Forma Combined
Financial Statements.
(b) Records the issuance of Nationwide stock to the shareholders of a related
company pursuant to a merger plan and the subsequent cancellation of
treasury stock received in the merger.
(c) Records the purchase of Henderson treasury shares in consideration of
certain assets, prior to consummation of the Offering. The Company shall
retain all remaining assets after giving effect to the related party
settlement described in 3(d) below.
(d) Records the cash settlement of all related party accounts.
(e) Records the purchase of the Acquired Companies by Nationwide consisting of
payables to Acquired Company stockholders of $16.9 million (to reflect the
cash consideration payable to the Acquired Companies) and 1.1 million
shares of Common Stock valued at $10.20 per share (or $11.2 million) for a
total estimated purchase price of $28.1 million resulting in excess
purchase price of $14.0 million over the net assets acquired of $14.1
million (see Note 2).
The following reconciles the historical net assets to the Acquired
Companies net assets acquired (in thousands):
<TABLE>
<CAPTION>
TOTAL LESS ACQUIRED
COMBINED NATIONWIDE COMPANIES
-------- ---------- ---------
<S> <C> <C> <C>
Historical net assets....................... $14,981 $836 $14,145
======= ==== =======
</TABLE>
F-7
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(f) Records the accounts of another Acquired Company for which historical
financial statements are not included.
4. UNAUDITED PRO FORMA POST MERGER ADJUSTMENTS:
(IN THOUSANDS)
<TABLE>
<CAPTION>
POST MERGER
ASSETS (A) (B) ADJUSTMENTS
- ------ ------- -------- -----------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents...................... $54,350 $(34,328) $ 20,022
------- -------- --------
Total current assets......................... 54,350 (34,328) 20,022
------- -------- --------
Total assets................................. $54,350 $(34,328) $ 20,022
======= ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C> <C>
Current Liabilities:
Current portion long term debt................. $ -- $ (254) $ (254)
Other current liabilities...................... -- (480) (480)
Line of credit................................. -- (9,340) (9,340)
Payables to Acquired Company stockholders...... -- (16,880) (16,880)
------- -------- --------
Total current liabilities.................... -- (26,954) (26,954)
Long-term debt................................. -- (1,186) (1,186)
Redeemable preferred stock....................... -- (6,188) (6,188)
Stockholders' Equity:
Common stock................................... 61 -- 61
Class A common, $.01 par....................... (11) -- (11)
Additional paid-in capital..................... 54,300 -- 54,300
------- -------- --------
Total stockholders' equity................... 54,350 -- 54,350
------- -------- --------
Total liabilities and stockholder's equity... $54,350 $(34,328) $ 20,022
======= ======== ========
</TABLE>
- --------
(a) Records the cash proceeds of $54.4 million from the issuance of 5,000,000
shares of Nationwide Common Stock, net of underwriting discount of $4.2
million and estimated offering costs of $1.45 million (at an assumed
issuance price of $12 per share). Offering costs primarily consist of
accounting fees, legal fees and printing expenses.
(b) Records payment of the cash portion of the consideration to the
stockholders of the Acquired Companies of $16.9 million in connection with
the Acquisitions, redemption of $6.2 million of Redeemable Preferred
Stock, repayment of outstanding short-term and long-term debt totaling
$10.8 million and $480,000 distributions payable.
F-8
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F) TOTAL
(IN THOUSANDS) ----- ------- ----- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue.................. $ -- $(2,315) $ -- $-- $11,413 $ -- $ 9,098
Cost of revenue.......... -- (1,905) -- -- 9,508 -- 7,603
----- ------- ----- ---- ------- ------- -------
Gross profit......... -- (410) -- -- 1,905 -- 1,495
Operating expenses:
Selling, general and
administrative
expenses.............. (472) (468) -- -- 1,543 -- 603
Depreciation........... (52) -- -- -- 102 -- 50
Goodwill amortization.. -- -- 603 -- -- -- 603
----- ------- ----- ---- ------- ------- -------
Operating expenses....... (524) (468) 603 -- 1,645 -- 1,256
----- ------- ----- ---- ------- ------- -------
Operating income..... 524 58 (603) -- 260 -- 239
Interest and other income
(expense):
Interest expense....... -- 9 -- 603 -- -- 612
Other income, net...... (10) (4) -- -- 12 -- (2)
----- ------- ----- ---- ------- ------- -------
Income before Tax.... 514 63 (603) 603 272 -- 849
Income taxes............. -- -- -- -- -- 1,889 1,889
----- ------- ----- ---- ------- ------- -------
Net income (loss).... $ 514 $ 63 $(603) $603 $ 272 $(1,889) $(1,040)
===== ======= ===== ==== ======= ======= =======
</TABLE>
- --------
(a) Reflects the $630,000 reduction in salaries, bonuses and benefits to the
owners of the Acquired Companies. These reductions in salaries, bonuses
and benefits have been agreed to prospectively in accordance with the
terms of employment agreements. Such employment agreements are primarily
for three years, contain restrictions related to competition and provide
severance for termination of employment in certain circumstances.
Additionally, reflects adjustments to expenses associated with certain
non-operating assets that will be transferred from the Acquired Companies
prior to the Acquisitions and certain other transactions.
(b) Reflects the elimination of activities related to assets not purchased
from the shareholder of Parsons. Such assets include inventory and fixed
assets of Parson's welding supplies distribution operations.
(c) Reflects the amortization of goodwill to be recorded as a result of these
Acquisitions and the amortization of goodwill to be recorded as a result
of the acquisition of Parsons over a 40-year life, as well as amortization
to be recorded as a result of non-compete agreements with key managers at
Parsons over lives ranging from 21-36 months.
(d) Reflects elimination of interest expense of $10.8 million of debt to be
repaid using proceeds from the Offering.
(e) Reflects results of operations of another acquired company (Potter
Electric Co., Inc.) for which historical financial statements are not
included.
(f) Reflects the incremental provision for federal and state income taxes at
an approximate 40.0% overall tax rate before non-deductible goodwill and
other permanent items, relating to the other statements of operations
adjustments and for income taxes on S corporation income not provided for
in the historical financial statements.
F-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
Nationwide Electric, Inc.:
We have audited the accompanying combined balance sheet of Nationwide
Electric, Inc. and affiliates (the "Company") as of March 31, 1998 and the
related combined statements of operations, stockholders' equity and cash flows
for the period September 23, 1997 to March 31, 1998. The combined financial
statements include the accounts of Nationwide Electric, Inc. and affiliated
companies, Parsons Electric Co., Galt Financial, LLC and Galt Financial, Inc.,
which are under common control. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of Nationwide Electric, Inc. and
affiliates as of March 31, 1998 and the results of their operations and their
cash flows for the period September 23, 1997 to March 31, 1998 in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
June 12, 1998
F-10
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
COMBINED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 1,046,253
Contract receivables, net of an allowance for doubtful accounts of
$40,000.......................................................... 12,088,891
Costs and estimated earnings in excess of billings on uncompleted
contracts........................................................ 3,320,678
Inventories....................................................... 479,396
Prepaid expenses.................................................. 45,833
Deferred income taxes............................................. 122,000
-----------
Total current assets.......................................... 17,103,051
-----------
Property and equipment, net....................................... 1,597,687
Goodwill, net..................................................... 4,254,090
Other assets, net................................................. 413,278
-----------
Total......................................................... $23,368,106
===========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
<S> <C>
CURRENT LIABILITIES:
Accounts payable.................................................. $ 3,236,631
Accrued expenses.................................................. 1,814,958
Other current liabilities......................................... 915,365
Billings in excess of costs and estimated earnings on uncompleted
contracts........................................................ 1,925,651
Line of credit.................................................... 8,600,000
-----------
Total current liabilities..................................... 16,492,605
Commitments and contingencies (Notes 9 and 15)
Deferred income taxes............................................. 1,500
Redeemable preferred stock; Series A nonvoting convertible; par
value $1.00; 6,000 shares authorized, issued and outstanding..... 6,037,500
Stockholders' equity:
Nationwide Electric, Inc.:
Common stock; par value $.01:
Voting, 15,000,000 shares authorized; 233,331 shares issued
and outstanding.............................................. 2,333
Class A nonvoting, 150,000 shares authorized; 99,999 shares
issued and outstanding....................................... 1,000
Galt Financial, Inc.:
Common stock; par value $1.00:
Voting, 1,000 shares authorized; 700 shares issued and
outstanding.................................................. 700
Class A nonvoting, 1,000 shares authorized; 300 shares issued
and outstanding.............................................. 300
Additional paid-in capital...................................... 1,095,667
Retained deficit................................................ (263,499)
-----------
Total stockholders' equity.................................... 836,501
-----------
Total......................................................... $23,368,106
===========
</TABLE>
See notes to combined financial statements.
F-11
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD SEPTEMBER 23, 1997 TO MARCH 31, 1998
<TABLE>
<S> <C>
Contract revenues................................................... $4,304,818
Costs of services................................................... 3,601,651
----------
Gross profit........................................................ 703,167
Selling, general and administrative expenses........................ 968,208
----------
Loss from operations................................................ (265,041)
Interest and other income (expense):
Interest expense................................................... (124,448)
Other income, net.................................................. 42,990
----------
(81,458)
----------
Loss before benefit for income taxes................................ (346,499)
Income tax benefit.................................................. 120,500
----------
Net loss............................................................ $ (225,999)
==========
Net loss per share--basic and diluted............................... $ (0.68)
==========
Shares used in computing net loss per share--basic and diluted...... 333,330
==========
</TABLE>
See notes to combined financial statements.
F-12
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 23, 1997 TO MARCH 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------
CLASS A
VOTING NONVOTING ADDITIONAL
-------------- -------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ ------- ------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 23,
1997................... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of Nationwide
common stock........... 233,331 2,333 99,999 1,000 996,667 -- 1,000,000
Issuance of Galt, Inc.
common stock........... 700 700 300 300 99,000 -- 100,000
Dividends on preferred
stock.................. -- -- -- -- -- (37,500) (37,500)
Net loss................ -- -- -- -- -- (225,999) (225,999)
------- ------ ------- ------ ---------- --------- ---------
BALANCE, MARCH 31, 1998. 234,031 $3,033 100,299 $1,300 $1,095,667 $(263,499) $ 836,501
======= ====== ======= ====== ========== ========= =========
</TABLE>
See notes to combined financial statements.
F-13
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 23, 1997 TO MARCH 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................ $ (225,999)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation................................................... 32,532
Amortization of intangible assets.............................. 21,729
Provision for deferred income taxes............................ (120,500)
Changes in operating assets and liabilities, excluding assets
acquired and liabilities assumed in acquisitions:
Contract receivables.......................................... 1,453,415
Costs and estimated earnings in excess of billings............ (462,079)
Inventory..................................................... (26,943)
Prepaid expenses.............................................. 154,667
Accounts payable.............................................. 132,283
Accrued expenses.............................................. (1,687,033)
Other current liabilities..................................... 688,693
Billings in excess of costs and estimated earnings............ (276,531)
------------
Net cash used in operating activities........................ (315,766)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................. (29,663)
Purchase of Parsons Electric Co................................. (11,000,000)
Purchase of employee non-compete agreements..................... (200,000)
------------
Net cash used in investing activities........................ (11,229,663)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of preferred stock................... 6,000,000
Proceeds from the issuance of common stock...................... 1,000,000
Net borrowings under line-of-credit............................. 5,800,000
Capital contributions........................................... 100,000
Payments on long term-debt...................................... (308,318)
------------
Net cash provided by financing activities.................... 12,591,682
------------
Net increase in cash and cash equivalents........................ 1,046,253
Cash and cash equivalents, at September 23, 1997................. --
------------
Cash and cash equivalents, at March 31, 1998..................... $ 1,046,253
============
Cash payments for interest....................................... $ 65,552
============
</TABLE>
See notes to combined financial statements.
F-14
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General--The combined financial statements presented herein represent the
combined balance sheets of Nationwide Electric, Inc. ("Nationwide") and Galt
Financial, Inc. ("Galt, Inc.") as of March 31, 1998. The combined statements
of operations, stockholders' equity and cash flows for the period from
September 23, 1997 through March 31, 1998 include Galt Financial, LLC ("Galt
LLC") from date of organization on September 23, 1997, Galt Financial, Inc.
("Galt, Inc.") from date of organization on February 25, 1998, and Nationwide
Electric, Inc. ("Nationwide") from date of organization on February 17, 1998.
Galt LLC was merged into Galt, Inc. on March 4, 1998. Such companies are under
common control and management. Nationwide acquired Galt, Inc. on June 4, 1998
and as of that date is the sole surviving entity. Parsons Electric Co.
("Parsons") was acquired on February 27, 1998 by Galt, Inc. for cash in the
amount of $11,000,000 in a transaction which has been accounted for under the
purchase method of accounting. Galt, Inc.'s operating results include the
operations of Parsons from the date of acquisition through March 31, 1998.
(Operating results for Nationwide, Galt, Inc. and Galt LLC prior to January 1,
1998 were not significant.)
Nationwide is majority owned by KLT Energy Services, Inc. (KLT), a
deregulated subsidiary of Kansas City Power & Light Company (KCPL) and Reardon
Capital, LLC (Reardon). Galt, Inc. and Galt LLC were also owned by KLT and
Reardon.
Nature of Operations--The Company's primary operations are commercial and
industrial electrical contracting with corporate offices in Kansas City,
Missouri and operating offices in Minneapolis, Minnesota. The work is
generally performed under fixed-price contracts. The length of the Company's
contracts varies, but generally are less than one year. The Company's
operations are primarily conducted within the state of Minnesota. The
Company's fiscal year ends on March 31.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the balance
sheet and the reported amount of reserves and expenses during the period.
Actual results could differ from those estimates.
Cash Equivalents--The Company considers all highly-liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Contract Receivables--The Company carries contract receivables at the
amounts it deems to be collectible. Accordingly, the Company provides
allowances for contract receivables it deems to be uncollectible based on
management's best estimates. Recoveries are recognized in the period they are
received. The ultimate amount of contract receivables that become
uncollectible could differ from those estimated.
Credit Policy--In the normal course of business, the Company provides credit
to its customers and does not generally require collateral. The Company
principally deals with recurring customers, state and local governments and
well known local companies whose reputation is known to the Company. Advance
payments and progress payments are generally required for significant
projects. Credit checks are performed for significant new customers that are
not known to the Company. The Company generally has the ability to file liens
against the property if it is not paid on a timely basis.
Collective Bargaining Agreements--The Company is a party to various
collective bargaining agreements with certain of its employees. These
agreements require the Company to pay specified wages and provide certain
benefits to its union employees. These agreements will expire at various times
through April 2000.
F-15
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Inventories--Inventories consist primarily of materials and supplies and are
valued at the lower of cost or market using the first-in, first-out method.
Property and Equipment--Property and equipment is stated at cost less
accumulated depreciation. Routine repairs and maintenance are expensed as
incurred; improvements are capitalized at cost and are amortized over the
remaining useful life of the related asset. Depreciation is recorded using
straight-line methods over the estimated useful lives of the related assets.
Depreciation is provided over the following estimated useful lives:
<TABLE>
<S> <C>
Service equipment............................................ 5 years
Leasehold improvements....................................... 10 years
Machinery and equipment...................................... 5 to 7 years
Office furniture and equipment............................... 5 to 7 years
</TABLE>
Goodwill--Goodwill is being amortized over 40 years and the amount existing
at March 31, 1998 is deductible for tax purposes. Total accumulated
amortization at March 31, 1998 was $8,880.
Other assets--Other assets at March 31, 1998 consists primarily of non-
compete agreements with two key employees that are being amortized over 21 to
36 months. Total accumulated amortization at March 31, 1998 was $12,849.
Revenue and Cost Recognition--Revenue from contracts is recognized under the
percentage of completion method measured by the ratio of contract costs
incurred to date to estimated total contract costs for each contract.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor,
supplies, and tools. Selling, general, and administrative costs are charged to
expense as incurred. Costs for materials incurred at the inception of a
project which are not reflective of effort are excluded from costs incurred
for purposes of determining revenue recognition and profits.
Estimates made with respect to uncompleted projects are subject to change as
the project progresses and better estimates of project costs become available.
Revisions in cost and profit estimates during the course of the work are
reflected in the period in which the facts requiring revision become known.
Where a loss is forecast for a contract, the full amount of the anticipated
loss is recognized in the period in which it is determined that a loss will
occur, regardless of the stage of completion. Revenues from claims are
recorded only when the amounts have been received.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenue recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
Income from time and materials and maintenance-type contracts is recognized
when billed.
Income Taxes--The Company reports income taxes pursuant to Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
Under SFAS No. 109, income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related to certain income and expenses
recognized in different periods for financial and income tax reporting
purposes. Deferred tax assets and liabilities represent the future tax
consequences of those differences. Deferred taxes are also recognized for
operating losses and tax credits that are available to offset future taxable
income and income taxes, respectively. A valuation allowance is provided if it
is more likely than not that some portion or all of the deferred tax assets
will not be realized.
F-16
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Long-Lived Assets--The Company reviews long-lived assets for impairment
whenever events or circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment is recognized to the extent that the sum
of undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through March 31, 1998.
Goodwill--Goodwill represents costs in excess of the fair value of net
assets acquired and is amortized using the straight-line method over 40 years.
The Company periodically assesses the recoverability of intangibles based on
its expectations of future profitability and undiscounted cash flow of the
related operations. These factors, along with management's plans with respect
to the operations are considered in assessing the recoverability of goodwill
and other purchased intangibles. If the Company determines, based on such
measures, that the carrying amount is impaired, the goodwill will be written
down to its recoverable value with a corresponding charge to earnings.
Recoverable value is calculated as the amount of estimated future cash flows
for the remaining amortization period. During the period presented, no such
impairment was incurred.
Loss Per Common Share--Loss to common stockholders reflecting dividends on
Redeemable Preferred Stock and loss per common share are not presented due to
the recent reorganization described herein which makes such information not
relevant.
New Accounting Pronouncements--In June 1997, SFAS No. 130, Reporting
Comprehensive Income, and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, were issued. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components. SFAS No. 131 redefines how operating segments are determined and
requires disclosures of certain financial and descriptive information about
the Company's operating segments. SFAS Nos. 130 and 131 are effective for
fiscal years beginning after December 15, 1997. Adoption of SFAS Nos. 130 and
131 did not have any significant effect on the Company's combined financial
statements.
2. PARSONS ACQUISITION
On February 27, 1998 the Company acquired for cash all of the issued and
outstanding stock of Parsons Electric Co. The total purchase price was
$11,000,000, of which $4,600,000 was financed by additional borrowings under
Parson's line of credit (Note 7). Total assets acquired and liabilities
assumed were approximately $18,400,000 and $11,900,000, respectively.
The acquisition has been accounted for using the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their respective fair values
resulting in goodwill of approximately $4.3 million, which is being amortized
to expense over 40 years using the straight-line method as discussed at Note
6.
In addition, the Company entered into non-compete agreements with two key
employees of Parsons Electric Co. Payments of $425,000 are being made under
those agreements and are being amortized on a straight-line basis over 21 to
36 months.
The accompanying statement of operations reflect the results of operations
of Parsons from the date of acquisition through March 31, 1998. The unaudited
pro forma results of operations as if Parsons was acquired on January 1, 1998
are as follows:
<TABLE>
<S> <C>
Revenues..................................................... $14,004,368
===========
Net loss..................................................... $ (39,800)
===========
</TABLE>
F-17
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. CONTRACT RECEIVABLES
Contract receivables consist of the following:
<TABLE>
<S> <C>
Current accounts............................................. $10,623,725
Retention.................................................... 1,505,166
-----------
Subtotal..................................................... 12,128,891
Less allowance for doubtful accounts......................... 40,000
-----------
Contract receivables, net.................................... $12,088,891
===========
</TABLE>
4. CONTRACTS IN PROGRESS
Costs and estimated earnings on uncompleted contracts are summarized as net
balances in process as follows:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts...................... $45,317,999
Estimated earnings........................................... 5,405,927
-----------
Total........................................................ 50,723,926
Less billings to date........................................ 49,328,899
-----------
Net under billings........................................... $ 1,395,027
===========
</TABLE>
The net balances in process are classified on the balance sheet as follows:
<TABLE>
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $ 3,320,678
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (1,925,651)
-----------
Total...................................................... $ 1,395,027
===========
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C>
Service equipment............................................. $ 39,455
Leasehold improvements........................................ 785,560
Machinery and equipment....................................... 470,534
Office furniture and equipment................................ 334,670
----------
Subtotal...................................................... 1,630,219
Less accumulated depreciation................................. 32,532
----------
Property and equipment, net................................... $1,597,687
==========
</TABLE>
6. LINE OF CREDIT
The Company has a $10,000,000 revolving line of credit with a bank, bearing
interest at the prime rate (8.5% at March 31, 1998) and is secured by
substantially all assets of the Company. The balance outstanding on the
revolving line of credit at March 31, 1998 was $8,600,000. The revolving line
of credit expires March 1, 1999, if not renewed. Under the terms of the line
of credit, the Company must maintain certain minimum net worth and financial
ratio requirements.
F-18
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<S> <C>
Accrued expenses consist of the following:
Accrued payroll and related expenses........................ $1,215,404
Accrued union dues and benefits............................. 525,959
Other accrued expenses...................................... 73,595
----------
$1,814,958
==========
Other current liabilities consist of the following:
Payable to former shareholder............................... $ 479,523
Non-compete agreements payable.............................. 225,000
Severance and bonus payable................................. 210,842
----------
$ 915,365
==========
</TABLE>
In connection with the acquisition of Parsons, the Company entered into non-
compete agreements with two employees for $425,000, of which $225,000 remains
payable at March 31, 1998. In March 1998, an employee submitted his
resignation and is eligible for $210,842 of severance and bonus pay, all of
which remains payable at March 31, 1998.
8. OPERATING LEASES
The Company leases an office building and warehouse facilities. The lease is
classified as an operating lease and expires on November 30, 2006.
Annual minimum lease payments under these noncancellable operating leases as
of March 31, 1998, are as follows:
<TABLE>
<S> <C>
1999 through 2003................................................ $148,368
Thereafter....................................................... 544,016
</TABLE>
In addition, the Company leases automobiles under agreements classified as
operating leases. Lease expense was approximately $47,000 for the three months
ended March 31, 1998.
9. INCOME TAXES
The Company's income tax benefit consists of the following:
<TABLE>
<S> <C>
Deferred:
Federal...................................................... $(102,500)
State........................................................ (18,000)
---------
$(120,500)
=========
</TABLE>
The difference between the statutory federal income tax rate and the
Company's effective tax rate is as follows:
<TABLE>
<S> <C> <C>
Statutory federal rate--loss............................. $(107,783) (34)%
State tax, net of federal benefit........................ (19,020) (6)
Permanent differences.................................... 14,760 5
Other.................................................... (8,457) (3)
--------- ---
$(120,500) (38)%
========= ===
</TABLE>
F-19
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred income tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
LONG-
CURRENT TERM TOTAL
-------- ------- --------
<S> <C> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards.................. $122,000 $ -- $122,000
-------- ------- --------
Total deferred income tax assets................ 122,000 -- 122,000
-------- ------- --------
Deferred income tax liabilities:
Goodwill.......................................... -- (1,500) (1,500)
-------- ------- --------
Total deferred income tax liabilities........... -- (1,500) (1,500)
-------- ------- --------
Net deferred income tax assets...................... $122,000 $(1,500) $120,500
======== ======= ========
</TABLE>
For income tax purposes, the Company has a net operating loss carryforward
of $305,000 which, if not utilized, expires in 2014.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts and notes receivable, accounts payable and current debt. The carrying
value of cash and cash equivalents, accounts and notes receivable and accounts
payable approximates fair value because of their short duration. The carrying
value of current debt approximates fair value based on current rates for
borrowings of similar quality and terms.
Other financial instruments, which potentially subject the Company to
significant concentrations of credit risk, consist primarily of contract
receivables. The Company's customers are concentrated in the Minnesota market.
The Company believes this concentration of credit risk is mitigated by the
diversity of industries represented by the Company's customer base.
11. SHAREHOLDERS' EQUITY
Common Stock--The Company's common stock is comprised of the combined Voting
Common Stock and Class A Nonvoting Common Stock of Nationwide and Galt, Inc.
At March 31, 1998, KLT and Reardon each owned 116,665.5 shares of Nationwide
Voting Common and 350 shares of Galt, Inc. Voting Common Stock. In addition,
KLT owned 300 shares of Class A Nonvoting Common Stock of Galt, Inc. and
99,999 shares of Nationwide Class A Nonvoting Common Stock.
Class A Nonvoting Common Stock has all of the powers, preferences and rights
of the Common Stock, except for voting rights. Each share of nonvoting
converts into voting upon the sale of shares of Common Stock or debt
securities in a public offering or in the case of any consolidation or merger
of the Company with or into another corporation or the sale of all or
substantially all of the assets of the Company. The Class A Nonvoting Common
Stock contains anti-dilution provisions.
Certain events require the approval of two-thirds of the outstanding Class A
Nonvoting Common Stock. Common share data has been restated to reflect a
333.33 for 1 common stock split on March 23, 1998.
Redeemable Preferred Stock--The Company has outstanding 6,000 shares of
Series A Redeemable Preferred Stock which is nonvoting and mandatorily
redeemable over thirty six months commencing March 1999 together with any
accrued but unpaid dividends. The Redeemable Preferred Stock is also
mandatorily redeemable upon the sale of Common Stock or debt securities in a
public offering or upon the sale or disposition of a majority of the Company's
assets.
F-20
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Annual dividends at $75 per share are cumulative and payable in arrears when
and as declared by the Board of Directors (dividends accrued through October
1998 are not payable until such shares are redeemed as discussed above).
Commencing August 1, 1998, the preferred stock may be converted into common
stock. The number of shares of common stock is determined by dividing the
redemption price by $1,000 and multiplying such amount by 3,000.
The preferred stock has a liquidation preference as to its subscription
price plus accrued but unpaid dividends and contains restrictive provisions on
the payment of dividends or merging or consolidating or selling all or
substantially all of the Company's assets.
12. MAJOR CUSTOMERS AND CONCENTRATION OF RISK
At March 31, 1998, $545,720 was due from one customer of the Company.
In addition, the Company grants credit, generally without collateral, to its
customers, which are usually general contractors. Consequently, the Company is
subject to potential credit risk related to changes in business and economic
factors. However, management believes that its contract acceptance, billing
and collection policies are adequate to minimize the potential credit risk.
13. EMPLOYEE BENEFIT PLAN
Parsons has a defined contribution pension plan and a contributory profit
sharing plan covering substantially all of its nonunion employees. An employee
becomes eligible for these plans after one year of service and must be 21
years of age. Employer contributions required for the defined contribution
pension plan are 3% of eligible wages. Annual contributions to the
contributory profit sharing plan are at the discretion of the Board of
Directors.
Parsons also contributes to union-sponsored, multi-employer defined benefit
pension plans in accordance with negotiated labor contracts. The passage of
the Multi-Employer Pension Plan Amendments Act of 1980 (the Act) may, under
certain circumstances, cause Parsons to become subject to liabilities in
excess of contributions made under collective bargaining agreements.
Generally, liabilities are contingent upon the termination, withdrawal, or
partial withdrawal from the plans. As of March 31, 1998, Parsons has not
undertaken to terminate, withdraw, or partially withdraw from any of these
plans. Under the Act, liabilities would be based upon Parsons proportionate
share of each plan's unfunded vested benefits. Parsons has not received
information from the plans' administrators to determine its share of unfunded
vested benefits, if any. During the period from the date of acquisition to
March 31, 1998, Parsons contributed $200,319 to these multi-employer union
pension plans.
14. COMMITMENTS AND CONTINGENCIES
The Company is party to various litigation matters involving routine claims
incidental to the business of the Company. Although the ultimate outcome
cannot presently be determined with certainty, the Company believes, based in
part upon advice from its legal counsel, that the ultimate liability
associated with such claims, if any, will not have a material adverse effect
on the Company's financial position, results of operations or cash flows.
F-21
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
15. SUBSEQUENT EVENTS
On April 14, 1998, Nationwide sold 300,000 shares of common stock to
management of Nationwide which was paid for with a combination of $40,000 cash
and $50,000 of shareholder notes. On June 4, 1998, Galt, Inc. was merged into
Nationwide in exchange for 3,300,000 shares of Common Stock (including 990,000
shares of Class A Non-voting) (adjusted for the stock split as described in
Note 12) and 6,000 shares of Redeemable Preferred Stock.
On May 31, 1998, the Company sold an aggregate of 15,000 shares of common
stock to two outside directors and an outside director nominee for $4,500
cash.
On June 4, 1998, an amendment to Nationwide's Certificate of Incorporation
was effected, whereby the number of authorized shares of Voting Common Stock
was increased to 30,000,000, and the number of authorized shares of Class A
Nonvoting Common Stock was increased to 1,200,000. In addition, the number of
authorized shares of Preferred Stock was increased to 10,000,000.
In June 1998, the Company entered into agreements and plans of merger to
acquire, subject to completion of an initial public offering, three companies
engaged in commercial and industrial electrical contracting. The aggregate
purchase price consists of $16.9 million cash and 1,100,416 shares of common
stock. An additional earnout payment will be made for the acquisition of
Potter in an amount equal to 30% of the amount, if any, by which pre-tax
income (after deducting payment of all bonuses) of Potter exceeds $750,000 in
each of the first three fiscal years following the consummation of the
Offering. The Company also plans to grant options (the "Performance Stock
Options") to Ralph Pangonis to purchase 120,000 shares of Common Stock,
exercisable at the initial public offering price. The Performance Stock
Options will vest at a rate of 40,000 shares for each year that the pre-tax
income of Potter, after deducting payment of all bonuses, exceeds $750,000.
Any Performance Stock Options that do not vest in accordance with the
performance test described above will expire three years after the date of
grant, and all Performance Stock Options, whether or not vested, will expire
if not exercised within five years after consummation of the Offering.
Upon the closing of the initial public offering, the Company intends to
grant options, at the initial public offering price, to purchase approximately
220,000 shares of Common Stock, pursuant to the Company's 1998 Stock Option
Plans (the "Option Plans"). The aggregate number of shares issuable pursuant
to the Option Plans shall be 1,000,000.
In June 1998, the Company adopted an Executive Stock Purchase Plan (the
"Executive Stock Plan") and an Employee Stock Purchase Plan (the "Employee
Stock Plan"). A total of up to 250,000 shares are issuable under the Executive
Stock Plan to selected officers and other key employees at a price equal to
the fair market value of the shares sold to such officers and employees.
Financing will be provided by the Company on a nonrecourse basis for up to 85
percent of the stock purchase price. Under the Employee Stock Plan, all
employees will be given the opportunity to purchase unrestricted common stock
in the market at a price equal to the fair market value without having to pay
any brokerage commissions.
* * * * * *
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Parsons Electric Co.
Minneapolis, Minnesota
We have audited the accompanying balance sheets of Parsons Electric Co. as
of February 27, 1998, and December 31, 1997 and 1996, and the related
statements of income, retained earnings, and cash flows for the period from
January 1, 1998, to February 27, 1998, and for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit incudes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also incudes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Parsons Electric Co. as of
February 27, 1998, and December 31, 1997 and 1996, and the results of its
operations and its cash flows for the period from January 1, 1998, to February
27, 1998, and for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Minneapolis, Minnesota
June 10, 1998
F-23
<PAGE>
PARSONS ELECTRIC CO.
BALANCE SHEETS
FEBRUARY 27, 1998 AND DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1998 1997 1996
------ ----------- ----------- -----------
<S> <C> <C> <C>
Current Assets (Note 4)
Cash.......................................... $ 191,818 $ 45,947 $ 455,138
Contract receivables, including retainages of
$1,435,204, $1,552,875, and $1,729,820 in
1998, 1997, and 1996, respectively, less
allowance for doubtful accounts of $40,000
(Note 2)..................................... 13,240,229 16,596,180 10,924,870
Related-party receivable (Note 7)............. 302,578 236,565 --
Inventories (Note 7).......................... 452,412 423,078 1,027,404
Costs and earnings in excess of billings on
uncompleted contracts (Note 3)............... 2,858,599 2,293,122 1,902,418
----------- ----------- -----------
Total current assets...................... 17,045,636 19,594,892 14,309,830
Cash Value of Life Insurance, net of policy
loans.......................................... -- -- 212,226
----------- ----------- -----------
Property and Equipment, at cost
Leasehold improvements........................ 1,356,638 1,356,638 1,354,758
Construction and motor shop equipment......... 1,154,266 1,156,859 1,120,543
Office furniture and equipment................ 934,596 920,242 986,812
Trucks and autos.............................. 248,402 268,892 295,996
----------- ----------- -----------
3,693,902 3,702,631 3,758,109
Less accumulated depreciation................. 2,330,921 2,338,988 2,183,997
----------- ----------- -----------
1,362,981 1,363,643 1,574,112
----------- ----------- -----------
Total..................................... $18,408,617 $20,958,535 $16,096,168
=========== =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C> <C>
Current Liabilities
Note payable to bank (Note 4)................. $ 2,800,000 $ 4,100,000 $ 1,300,000
Current maturities of long-term debt.......... 50,004 50,004 50,004
Accounts payable.............................. 2,969,982 4,675,114 2,812,452
Distributions payable......................... 479,523 450,000 --
Accrued expenses:
Compensation................................ 1,592,733 1,217,298 802,960
Pension and profit sharing.................. 541,670 467,344 445,110
Union benefits and dues..................... 560,506 541,581 396,860
Other....................................... 453,721 270,036 468,339
Billings in excess of costs and earnings on
uncompleted contracts (Note 3)............... 2,202,164 2,424,677 2,548,849
----------- ----------- -----------
Total current liabilities................. 11,650,303 14,196,054 8,824,574
----------- ----------- -----------
Long-Term Debt, less current maturities (Note
4)............................................. 258,314 262,481 312,485
----------- ----------- -----------
Commitments and Contingencies (Notes 5 and 6)
Stockholder's Equity (Note 8)
Common stock, $100 par value per share;
150,000 shares authorized; 40 shares issued.. 4,000 4,000 4,000
Retained earnings............................. 6,496,000 6,496,000 6,955,109
----------- ----------- -----------
Total stockholders' equity................ 6,500,000 6,500,000 6,959,109
----------- ----------- -----------
Total..................................... $18,408,617 $20,958,535 $16,096,168
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-24
<PAGE>
PARSONS ELECTRIC CO.
STATEMENTS OF INCOME
PERIOD FROM JANUARY 1, 1998 TO FEBRUARY 27, 1998 AND YEARS ENDED
DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1998 1997 1996 1995
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue (Notes 2 and 7).... $9,699,550 $58,004,548 $58,563,050 $52,016,734
Cost of revenue............ 7,829,501 47,347,252 49,161,606 43,661,999
---------- ----------- ----------- -----------
Gross profit........... 1,870,049 10,657,296 9,401,444 8,354,735
Operating expenses......... 1,373,417 7,432,251 6,668,838 6,170,596
---------- ----------- ----------- -----------
Operating income....... 496,632 3,225,045 2,732,606 2,184,139
Nonoperating income
(expense):
Interest expense......... (38,159) (249,398) (167,896) (238,007)
Other income, net........ 21,050 58,043 46,395 32,592
---------- ----------- ----------- -----------
Net income............. $ 479,523 $ 3,033,690 $ 2,611,105 $ 1,978,724
========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-25
<PAGE>
PARSONS ELECTRIC CO.
STATEMENTS OF RETAINED EARNINGS
PERIOD FROM JANUARY 1, 1998 TO FEBRUARY 27, 1998 AND YEARS ENDED
DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1998 1997 1996 1995
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, beginning........... $6,496,000 $ 6,955,109 $ 6,104,004 $4,672,280
Distributions to
shareholder............... (479,523) (3,492,799) (1,760,000) (547,000)
Net income................. 479,523 3,033,690 2,611,105 1,978,724
---------- ----------- ----------- ----------
Balance, ending.............. $6,496,000 $ 6,496,000 $ 6,955,109 $6,104,004
========== =========== =========== ==========
</TABLE>
See Notes to Financial Statements.
F-26
<PAGE>
PARSONS ELECTRIC CO.
STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1, 1998 TO FEBRUARY 27, 1998 AND YEARS ENDED
DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1998 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities
Net income............... $ 479,523 $ 3,033,690 $ 2,611,105 $ 1,978,724
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation........... 63,400 446,929 434,601 395,009
(Gain) loss on
disposition of
property and
equipment............. (15,555) 7,931 (4,235) 21
Changes in assets and
liabilities:
(Increase) decrease
in contract
receivables......... 3,355,951 (5,671,310) 2,569,691 (5,187,640)
(Increase) decrease
in inventories...... (29,334) (89,138) 52,008 9,122
Increase in costs and
earnings in excess
of billings on
uncompleted
contracts........... (565,477) (390,704) (318,324) (505,960)
Increase (decrease)
in accounts payable
and accrued
expenses............ (1,052,761) 2,245,652 (954,145) 1,899,949
Decrease in billings
in excess of costs
and earnings on
uncompleted
contracts........... (222,513) (124,172) (213,351) 1,358,306
----------- ----------- ----------- -----------
Net cash provided
by (used in)
operating
activities........ 2,013,234 (541,122) 4,177,350 (52,469)
----------- ----------- ----------- -----------
Cash Flows From Investing
Activities
Proceeds from sales of
equipment............... 20,000 2,000 4,947 1,500
Purchases of property and
equipment............... (67,183) (246,391) (334,638) (369,534)
Increase in cash value of
life insurance.......... -- (37,914) (34,172) (31,293)
Increase in related-party
receivable.............. (66,013) (145,760) -- --
----------- ----------- ----------- -----------
Net cash used in
investing
activities........ (113,196) (428,065) (363,863) (399,327)
----------- ----------- ----------- -----------
Cash Flows From Financing
Activities
Net borrowings (payments)
under line-of-credit
agreement............... (1,300,000) 2,800,000 (1,550,000) 1,000,000
Principal payments on
long-term borrowings.... (4,167) (50,004) (54,171) (45,837)
Cash distributions to
shareholder............. (450,000) (2,190,000) (1,760,000) (547,000)
----------- ----------- ----------- -----------
Net cash provided
by (used in)
financing
activities........ (1,754,167) 559,996 (3,364,171) 407,163
----------- ----------- ----------- -----------
Increase (decrease)
in cash........... 145,871 (409,191) 449,316 (44,633)
Cash
Beginning................ 45,947 455,138 5,822 50,455
----------- ----------- ----------- -----------
Ending................... $ 191,818 $ 45,947 $ 455,138 $ 5,822
=========== =========== =========== ===========
Supplemental Disclosures of
Cash Flow Information
Cash payments for
interest................ $ 21,263 $ 249,398 $ 185,260 $ 220,643
=========== =========== =========== ===========
Supplemental Schedule of
Noncash Investing and
Financing Activities
Accrued distributions
payable................. $ 479,523 $ 450,000 $ -- $ --
Inventory distributed to
stockholder (Note 7).... -- 693,464 -- --
Related-party receivable
distributed to
stockholder............. -- 159,335 -- --
Related-party receivable
accepted for cash value
of life insurance....... -- 250,140 -- --
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-27
<PAGE>
PARSONS ELECTRIC CO.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business: Parsons Electric Co. (the "Company") is a commercial and
industrial electrical contractor doing business primarily in Minnesota. The
Company establishes credit terms on an individual customer basis. The Company
conducts significant business with several key contractors. Due to the nature
of the business, these major customers may vary from year to year.
Cash balances: The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts.
Fair value of financial instruments: The Company's financial instruments
consist of cash and short-term trade receivables and payables for which
current carrying amounts approximate fair market value because of their short-
term nature. Other financial instruments consist of notes payable and long-
term debt, both for which the carrying value is based on current rates for
borrowings of similar quality and terms.
Revenue and cost recognition:
Construction contracts: The financial statements are prepared using the
percentage-of-completion method of accounting which recognizes income during
the periods when the related work is performed. Income is measured by the
percentage of costs incurred to date to estimated total costs for each
contract.
Contract costs include all direct material and labor costs, and those
indirect costs related to contract performance such as indirect labor,
supplies, tools, insurance, subsistence, and payroll-related benefits and
expenses. Operating expenses are charged to expense as incurred. Provisions
for estimated losses on uncompleted contracts are made in the period in which
such losses are determined. Changes in job performance, job conditions, and
estimated profitability, including those changes arising from contract penalty
provisions and final contract settlements, may result in revisions to costs
and income which are recognized in the period in which the revisions are
determined. An amount equal to contract costs attributable to claims is
included in revenues when realization is probable and the amount can be
reliably estimated.
The asset, "costs and earnings in excess of billings on uncompleted
contracts," represents revenue recognized in excess of amounts billed. The
liability, "billings in excess of costs and earnings on uncompleted
contracts," represents billings in excess of revenue recognized.
Time and materials contracts: Income from time and materials and
maintenance-type contracts is recognized when billed.
Accounts receivable: In accordance with industry practice, accounts
receivable include retentions, a portion of which may not be realized within
one year.
Inventories: The Company's materials inventories are valued at the lower of
cost (first-in, first-out basis) or market.
Property and equipment: Depreciation, including amortization of leasehold
improvements, is provided using straight-line and accelerated methods over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold improvements.............................................. 10
Construction and motor shop equipment............................... 3-7
Office furniture and equipment...................................... 5-7
Trucks and autos.................................................... 5
</TABLE>
F-28
<PAGE>
PARSONS ELECTRIC CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income taxes: The Company has elected to be taxed as a Subchapter S
Corporation under sections of the federal and state income tax laws which
provide that, in lieu of corporate income taxes, the shareholder separately
accounts for the Company's items of income, deductions, losses and credits.
Therefore, the statements of income do not include any provision for corporate
income taxes.
Distributions: Periodic cash distributions are made to the Company's
shareholder for income taxes or for other purposes.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and 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. See
revenue and cost recognition for estimates on contracts.
New Accounting Pronouncements--In June 1997, SFAS No. 130, Reporting
Comprehensive Income, and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, were issued. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components. SFAS No. 131 redefines how operating segments are determined and
requires disclosures of certain financial and descriptive information about
the Company's operating segments. SFAS Nos. 130 and 131 are effective for
fiscal years beginning after December 15, 1997. The Company believes that
adoption of SFAS Nos. 130 and 131 will not have any significant effect on its
financial statements.
NOTE 2. MAJOR CUSTOMERS AND LARGE TRADE RECEIVABLES
Revenue for the two months ended February 27, 1998, and the years ended
December 31, 1997, 1996, and 1995, includes revenue to the following major
customers, together with the receivables due from those customers:
<TABLE>
<CAPTION>
REVENUE
--------------------------------------------
CUSTOMER 1998 1997 1996 1995
-------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
A............................ $1,953,061 $11,967,264 $8,063,064 $8,859,593
B............................ * 6,275,666 9,116,009 *
C............................ * * * 5,577,293
========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE
--------------------------------
CUSTOMER 1998 1997 1996
-------- ---------- ---------- ----------
<S> <C> <C> <C>
A........................................ $2,880,881 $3,610,245 $1,466,813
B........................................ * 601,044 1,371,410
========== ========== ==========
</TABLE>
Because of the nature of the Company's business, the major customers may
vary between years.
- --------
*Customer was not considered to be a major customer in this year.
In addition to the receivables related to the major customers above, the
Company has a receivable of $1,399,687 as of February 27, 1998, from a
customer who is not listed as a major customer.
F-29
<PAGE>
PARSONS ELECTRIC CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. UNCOMPLETED CONTRACTS
Information regarding uncompleted contracts as of February 27, 1998, and
December 31, 1997 and 1996, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Total amount of contracts in
process......................... $82,152,554 $80,298,641 $59,491,467
=========== =========== ===========
Costs incurred on uncompleted
contracts....................... $49,369,222 $49,132,943 $33,887,394
Estimated earnings............... 5,044,368 5,687,641 4,155,264
----------- ----------- -----------
54,413,590 54,820,584 38,042,658
Less billings to date............ 53,757,155 54,952,139 38,689,089
----------- ----------- -----------
$ 656,435 $ (131,555) $ (646,431)
=========== =========== ===========
Included in the accompanying
balance sheets under the
following captions:
Costs and earnings in excess of
billings on uncompleted
contracts..................... $ 2,858,599 $ 2,293,122 $ 1,902,418
Billings in excess of costs and
earnings on uncompleted
contracts..................... (2,202,164) (2,424,677) (2,548,849)
----------- ----------- -----------
$ 656,435 $ (131,555) $ (646,431)
=========== =========== ===========
</TABLE>
NOTE 4. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable: The Company has a $5,000,000 line of credit with a bank which
bears interest at the prime rate plus 0.5 percent (9.0 percent at February 27,
1998) and is secured by receivables and inventories. All borrowings on this
line of credit are personally guaranteed by the Company's shareholder. The
balance outstanding on the line of credit at February 27, 1998, was $2,800,000
(a).
Long-term debt: At February 27, 1998, and December 31, 1997 and 1996, long-
term debt was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
8% bank note payable, due in monthly
installments of $4,167, plus interest,
through March 1999, when the remaining
balance is due, secured by receivables and
inventories (a).............................. $308,318 $312,485 $362,489
Less current maturities....................... 50,004 50,004 50,004
-------- -------- --------
$258,314 $262,481 $312,485
======== ======== ========
</TABLE>
- --------
(a) Subsequent to the close of business on February 27, 1998, the Company
entered into a new revolving line-of-credit agreement and used the new
line of credit to pay off the existing line of credit and bank term note.
Under the new agreement, the Company may borrow up to $10,000,000, based
upon a percent of eligible receivables plus $2,000,000. Amounts
outstanding under the new revolving credit agreement will bear interest at
the bank's base rate, payable monthly. Borrowings under the agreement are
secured by all assets of the Company. The line of credit expires March 1,
1999, if not renewed. Under the new revolving line, the Company must
maintain certain minimum net worth and financial ratio requirements.
F-30
<PAGE>
PARSONS ELECTRIC CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. OPERATING LEASES
The Company leases its office and warehouse facilities from its shareholder.
The Company is paying $12,364 monthly, plus all maintenance, insurance, and
taxes on the building. The total rent and related taxes for 1998, 1997, 1996,
and 1995 approximated $34,000, $217,000, $190,000, and $185,000, respectively.
Minimum annual rental commitments at February 27, 1998, are:
<TABLE>
<S> <C>
Years ending February 27:
1999........................................................ $ 148,368
2000........................................................ 148,368
2001........................................................ 148,368
2002........................................................ 148,368
2003........................................................ 148,368
Later Years................................................... 556,380
----------
$1,298,220
==========
</TABLE>
In addition, the Company leases automobiles under agreements classified as
operating leases the majority of which are cancelable upon 30 day notice. The
total lease expense for 1998, 1997, 1996, and 1995 was approximately $77,000,
$338,000, $315,000, and $284,000, respectively.
NOTE 6. EMPLOYEE BENEFIT PLANS
The Company has a defined contribution pension plan covering substantially
all of its nonunion employees. The total pension expense for 1998, 1997, 1996,
and 1995 was $10,000, $58,163, $59,512, and $52,308, respectively. The Company
also has a contributory profit sharing plan covering substantially all of its
nonunion employees. Contributions to this plan are at the discretion of the
Board of Directors. The total profit sharing expense for 1998, 1997, 1996, and
1995 was $64,326, $409,181, $385,598, and $344,557, respectively.
The Company also contributes to union-sponsored, multi-employer pension
plans. Contributions are made in accordance with negotiated labor contracts.
The passage of the Multi-Employer Pension Plan Amendments Act of 1980 (the
Act) may, under certain circumstances, cause the Company to become subject to
liabilities in excess of contributions made under collective bargaining
agreements. Generally, liabilities are contingent upon the termination,
withdrawal, or partial withdrawal from the plans. As of February 27, 1998, the
Company has not undertaken to terminate, withdraw, or partially withdraw from
any of these plans. Under the Act, liabilities would be based upon the
Company's proportionate share of each plan's unfunded vested benefits. The
Company has not received information from the plans' administrators to
determine its share of unfunded vested benefits, if any. The Company, during
1998, 1997, 1996, and 1995 contributed $427,042, $2,174,235, $2,320,866, and
$1,878,553, respectively, to these multi-employer union pension plans.
NOTE 7. RELATED PARTY TRANSACTIONS
During 1997, the Company distributed $693,464 of welding equipment and
supply inventory to the Company's sole stockholder. The Company, subsequent to
December 31, 1997, no longer sells welding equipment and supplies. Revenue
related to the sales of welding equipment and supplies for 1997, 1996, and
1995 was approximately $2,862,000, $2,803,000, and $3,168,000 respectively.
The related-party receivable is with a company related through common
ownership and was collected subsequent to February 27, 1998.
F-31
<PAGE>
PARSONS ELECTRIC CO.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
NOTE 8. SALE OF COMMON STOCK
Subsequent to the close of business on February 27, 1998, the Company's sole
stockholder entered into a stock purchase agreement whereby an unrelated third
party purchased all of the Company's outstanding common stock for cash of
$11,000,000. In connection with the sale and new revolving line-of-credit
agreement (Note 4), the Company made a loan to the purchaser of $4,600,000
from proceeds advanced on the new line of credit.
Related to the sale of common stock, the Company terminated its S
Corporation election and will be taxed as a C Corporation effective February
28, 1998.
F-32
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Allison Company:
We have audited the accompanying consolidated balance sheets of The Allison
Company and subsidiary (the "Company") as of March 31, 1998 and June 30, 1997,
and the related consolidated statements of operations and retained earnings
and of cash flows for the nine-month period ended March 31, 1998 and for each
of the two years in the period ended June 30, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of The Allison
Company and subsidiary as of March 31, 1998 and June 30, 1997, and the results
of their operations and their cash flows for the nine-month period ended March
31, 1998 and for each of the two years in the period ended June 30, 1997 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
June 12, 1998
F-33
<PAGE>
THE ALLISON COMPANY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................ $ 2,013,702 $ 206,153
Contract receivables, net............................ 7,662,948 8,780,172
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... 1,099,819 727,129
Advances to stockholder.............................. 212,499 30,714
Inventories.......................................... 28,122 28,122
Prepaid expenses and other current assets............ 78,353 76,125
----------- -----------
Total current assets............................... 11,095,443 9,848,415
PROPERTY AND EQUIPMENT, net............................ 631,128 667,080
----------- -----------
Total.............................................. $11,726,571 $10,515,495
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt.................... $ 112,377 $ 104,290
Accounts payable..................................... 1,163,092 1,525,857
Accrued expenses and other current liabilities....... 502,488 853,068
Billings in excess of costs and estimated earnings on
uncompleted contracts............................... 1,818,208 322,015
Notes payable........................................ -- 1,000,000
Income taxes payable................................. 169,276 52,984
----------- -----------
Total current liabilities.......................... 3,765,441 3,858,214
Long-term debt, net of current portion................. 1,042,025 1,127,348
----------- -----------
Total liabilities.................................. 4,807,466 4,985,562
----------- -----------
Commitments and contingencies (Notes 7 and 12)
Stockholders' equity:
Common stock; $10 par value; 100,000 shares
authorized; 40,624 shares issued and outstanding.... 406,240 406,240
Retained earnings.................................... 6,512,865 5,123,693
----------- -----------
Total stockholders' equity......................... 6,919,105 5,529,933
----------- -----------
Total.............................................. $11,726,571 $10,515,495
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-34
<PAGE>
THE ALLISON COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 1998 AND YEARS ENDED JUNE 30, 1997
AND 1996
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED JUNE 30,
ENDED MARCH 31, ------------------------
1998 1997 1996
--------------- ----------- -----------
<S> <C> <C> <C>
Contract revenues earned............. $22,064,154 $27,999,871 $32,391,898
Costs of services.................... 18,096,208 22,800,750 27,323,521
----------- ----------- -----------
Gross profit......................... 3,967,946 5,199,121 5,068,377
Selling, general and administrative
expenses............................ 1,626,096 2,660,126 2,501,818
----------- ----------- -----------
Operating income..................... 2,341,850 2,538,995 2,566,559
----------- ----------- -----------
Other income (expense):
Interest expense..................... (102,587) (168,127) (157,400)
Other income (expense), net.......... (161) 1,507 (32,858)
----------- ----------- -----------
(102,748) (166,620) (190,258)
----------- ----------- -----------
Income before income taxes........... 2,239,102 2,373,375 2,376,301
Income taxes......................... 849,930 903,573 907,844
----------- ----------- -----------
Net income........................... 1,389,172 1,468,802 1,468,457
Retained earnings, beginning of
period.............................. 5,123,693 3,654,891 2,186,434
----------- ----------- -----------
Retained earnings, end of period..... $ 6,512,865 $ 5,123,693 $ 3,654,891
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-35
<PAGE>
THE ALLISON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 1998 AND YEARS ENDED JUNE 30, 1997
AND 1996
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED JUNE 30,
ENDED MARCH 31, -----------------------
1998 1997 1996
--------------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 1,389,172 $1,468,802 $ 1,468,457
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization....... 79,920 113,171 82,126
Loss (gain) on disposal of assets... (137) (617) 37,297
Changes in operating assets and
liabilities:
Contract receivables, net.......... 1,117,224 (754,885) (3,681,313)
Costs and estimated earnings in
excess billings................... (372,690) 296,408 (789,618)
Due from related parties........... (181,785) (29,447) (1,267)
Inventories........................ -- 7,092 6,046
Prepaid expenses and other current
assets............................ (2,228) 1,289 (19,264)
Accounts payable and accrued
expenses.......................... (713,345) (561,767) 1,625,268
Billings in excess of costs and
estimated earnings................ 1,496,193 75,597 (42,569)
Income taxes payable............... 116,292 (473,768) 438,295
----------- ---------- -----------
Net cash provided by (used in)
operating activities............. 2,928,616 141,875 (876,542)
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.. (46,668) (153,561) (569,312)
Proceeds from sale of property and
equipment........................... 2,837 750 3,250
Other................................ -- 632 15,367
----------- ---------- -----------
Net cash used in investing
activities....................... (43,831) (152,179) (550,695)
----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of long-
term debt........................... -- -- 1,000,000
Payments of long-term debt and notes
payable............................. (1,077,236) (94,404) (91,332)
----------- ---------- -----------
Net cash (used in) provided by
financing activities............. (1,077,236) (94,404) 908,668
----------- ---------- -----------
Net increase (decrease) in cash and
cash equivalents..................... 1,807,549 (104,708) (518,569)
Cash and cash equivalents, beginning
of year.............................. 206,153 310,861 829,430
----------- ---------- -----------
Cash and cash equivalents, end of
year................................. $ 2,013,702 $ 206,153 $ 310,861
=========== ========== ===========
CASH PAYMENTS FOR:
Interest............................. $ 107,142 $ 167,237 $ 169,739
Income taxes......................... $ 733,638 $1,377,852 $ 537,107
</TABLE>
See notes to consolidated financial statements.
F-36
<PAGE>
THE ALLISON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General--The Allison Company and its subsidiary, the Allison-Smith Company,
(collectively, the "Company") is a commercial and industrial electrical
contractor with offices in Atlanta, Georgia. Additionally the Company is a
general contractor for certain customers, primarily in the telecommunications
industry. The work is generally performed under fixed-price contracts. The
length of the Company's contracts varies, but generally is less than one year.
Projects to date are primarily within the state of Georgia, however,
occasional work will be performed on out of state contracts.
Principles of Consolidation--The consolidated financial statements include
all of the accounts of the Company. All significant intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and 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.
Cash and Cash Equivalents--The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
Contract Receivables--The Company carries contract receivables at the
amounts it deems to be collectible. Accordingly, the Company provides
allowances for contract receivables it deems to be uncollectible based on
management's best estimates. Recoveries are recognized in the period they are
received. The ultimate amount of contract receivables that become
uncollectible could differ from those estimated.
Credit Policy--In the normal course of business, the Company provides credit
to its customers and does not generally require collateral. The Company
principally deals with recurring customers and well known local companies
whose reputation is known to the Company. Advance payments and progress
payments are generally required for significant projects. Credit checks may be
performed for significant new customers that are not known to the Company. The
Company generally has the ability to file liens against the property if it is
not paid on a timely basis.
Inventories--Inventories consist primarily of materials and supplies and are
valued at the lower of cost or market using the first-in, first-out method.
Property and Equipment--Property and equipment is stated at cost less
accumulated depreciation. Routine repairs and maintenance are expensed as
incurred; improvements are capitalized at cost and are amortized over the
remaining useful life of the related asset. Depreciation is recorded using
accelerated and straight-line methods over the estimated useful lives of the
related assets. Depreciation and amortization is provided over the following
estimated useful lives:
<TABLE>
<S> <C>
Construction equipment........................................... 7 years
Vehicles......................................................... 5 years
Leasehold improvements........................................... 39 years
Office furniture and fixtures.................................... 7 years
</TABLE>
Depreciation and amortization expense was $79,920, $131,171 and $82,126 for
the nine-month period ended March 31, 1998 and the years ended June 30, 1997
and 1996, respectively.
F-37
<PAGE>
THE ALLISON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue and Cost Recognition--Revenue from contracts is recognized under the
percentage of completion method measured by the ratio of contract costs
incurred to date to estimated total contract costs.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor,
supplies, and tools. Selling, general, and administrative costs are charged to
expense as incurred. Costs for materials incurred at the inception of a
project which are not reflective of effort are excluded from costs incurred
for purposes of determining revenue recognition and profits.
Estimates made with respect to uncompleted projects are subject to change as
the project progresses and better estimates of project costs become available.
Revisions in cost and profit estimates during the course of the work are
reflected in the period in which the facts requiring revision become known.
Where a loss is forecast for a contract, the full amount of the anticipated
loss is recognized in the period in which it is determined that a loss will
occur, regardless of the stage of completion. Revenues from claims are
recorded only when the amounts have been received.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenue recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
Income Taxes--The Company reports income taxes pursuant to Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
Under SFAS No. 109, income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related to certain income and expenses
recognized in different periods for financial and income tax reporting
purposes. Deferred tax assets and liabilities represent the future tax
consequences of those differences. Deferred tax assets are also recognized for
operating losses and tax credits that are available to offset future taxable
income and income taxes, respectively. A valuation allowance is provided if it
is more likely than not that some portion or all of the deferred tax assets
will not be realized. The Company does not have significant deferred tax
assets or liabilities. The Company files a consolidated Federal tax return
with its subsidiary.
Long-Lived Assets--The Company reviews long-lived assets for impairment
whenever events or circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment is recognized to the extent that the sum
of undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. At March 31, 1998, no impairment has
been recognized.
New Accounting Pronouncements--In June 1997, SFAS No. 130, Reporting
Comprehensive Income, and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, were issued. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components. SFAS No. 131 redefines how operating segments are determined and
requires disclosures of certain financial and descriptive information about
the Company's operating segments. SFAS Nos. 130 and 131 are effective for
fiscal years beginning after December 15, 1997. The Company believes that
adoption of SFAS Nos. 130 and 131 will not have any significant effect on its
financial statements.
F-38
<PAGE>
THE ALLISON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. CONTRACT RECEIVABLES
Contract receivables consist of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
---------- ----------
<S> <C> <C>
Contracts:
Current accounts................................ $7,676,441 $8,774,537
Retention....................................... 186,507 205,635
---------- ----------
Subtotal.......................................... 7,862,948 8,980,172
Less: allowance for doubtful accounts............. (200,000) (200,000)
---------- ----------
Contract receivables, net......................... $7,662,948 $8,780,172
========== ==========
</TABLE>
3. CONTRACTS IN PROGRESS
Costs and estimated earnings on uncompleted contracts are summarized as net
balances in process as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
----------- ----------
<S> <C> <C>
Costs incurred on uncompleted contracts.......... $ 9,104,832 $7,002,896
Estimated earnings............................... 1,392,972 614,932
----------- ----------
Total............................................ 10,497,804 7,617,828
Less billings to date............................ 11,216,193 7,212,714
----------- ----------
Net (over) under billings........................ $ (718,389) $ 405,114
=========== ==========
</TABLE>
The net balances in process are classified on the balance sheet as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
----------- ---------
<S> <C> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts.............. $ 1,099,819 $ 727,129
Billings in excess of costs and estimated
earnings on uncompleted contracts.............. (1,818,208) (322,015)
----------- ---------
Total....................................... $ (718,389) $ 405,114
=========== =========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
---------- ----------
<S> <C> <C>
Vehicles......................................... $ 179,265 $ 159,606
Leasehold improvements........................... 439,024 439,024
Construction equipment........................... 96,400 82,941
Computer equipment, office furniture and
fixtures........................................ 336,459 327,261
---------- ----------
Subtotal......................................... 1,051,148 1,008,832
Less accumulated depreciation.................... (420,020) (341,752)
---------- ----------
Property and equipment, net...................... $ 631,128 $ 667,080
========== ==========
</TABLE>
F-39
<PAGE>
THE ALLISON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES
A summary of accrued expenses and other liabilities is as follows:
<TABLE>
<CAPTION>
MARCH JUNE 30,
31, 1998 1997
-------- --------
<S> <C> <C>
Accrued payroll and related expenses................... $286,829 $615,467
Accrued profit sharing................................. 104,881 164,677
Other.................................................. 110,778 72,924
-------- --------
$502,488 $853,068
======== ========
</TABLE>
6. LONG-TERM DEBT AND NOTES PAYABLE
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
---------- ----------
<S> <C> <C>
Note payable to Luise S. Allison, due on June 30,
2005, bearing interest at 10%. Note is payable in
monthly installments of $12,907 of principal and
interest. Collateralized by common stock of
Allison-Smith Company............................ $ 802,627 $ 856,327
Note payable to Residual Trust of Robert W.
Allison, due on June 30, 2005, bearing interest
at 10%. Note is payable in monthly installments
of $5,657 of principal and interest.
Collateralized by common stock of Allison-Smith
Company.......................................... 351,775 375,311
---------- ----------
Total............................................. 1,154,402 1,231,638
Less current portion.............................. 112,377 104,290
---------- ----------
Total......................................... $1,042,025 $1,127,348
========== ==========
</TABLE>
Aggregate maturities of long-term debt for years ending March 31 are as
follows:
<TABLE>
<S> <C>
1999........................................................... $ 112,377
2000........................................................... 124,144
2001........................................................... 137,144
2002........................................................... 151,504
2003........................................................... 167,369
Thereafter..................................................... 461,864
----------
Total...................................................... $1,154,402
==========
</TABLE>
Notes payable at June 30, 1997 consists of a $1,000,000 bank note bearing
interest at 8.75% which was paid in fiscal 1998. The note was collateralized
by property of the Company.
7. OPERATING LEASES
The Company leases a building on a month-to-month basis, owned by Harmony
Hill, a related party. The lease is classified as an operating lease. The rent
paid under this lease for the nine months ended March 31, 1998 was $75,000,
and for the years ended June 30, 1997 and 1996, was $105,000, and $64,000,
respectively. Approximately $30,000 was due Harmony Hill at March 31, 1998.
The Company also rents certain office equipment, autos and trucks under
operating leases which vary in length and terms. Rent
F-40
<PAGE>
THE ALLISON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
expense under these leases for the nine months ended March 31, 1998 was
$115,059 and for the years ended June 30, 1997 and 1996, was $89,139, and
$150,942, respectively.
Future minimum lease payments under these noncancelable operating leases as
of March 31, 1998 are as follows:
<TABLE>
<S> <C>
1999............................................................. $ 93,456
2000............................................................. 52,425
2001............................................................. 32,436
--------
$178,317
========
</TABLE>
8. INCOME TAXES
The Company's provisions for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE
NINE MONTHS 30,
ENDED MARCH 31, -----------------
1998 1997 1996
--------------- -------- --------
<S> <C> <C> <C>
Current:
Federal............................... $715,589 $768,037 $771,717
State................................. 134,341 135,536 136,127
-------- -------- --------
$849,930 $903,573 $907,844
======== ======== ========
</TABLE>
The difference between the statutory federal income tax rate and the
Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED JUNE 30,
ENDED MARCH 31, --------------------
1998 1997 1996
--------------- --------- ---------
<S> <C> <C> <C>
Statutory federal tax rate.......... 34.0% 34.0% 34.0%
State tax, net of federal benefit... 3.5 3.8 3.8
Other............................... 0.5 0.3 0.4
---- --------- ---------
Effective rate...................... 38.0% 38.1% 38.2%
==== ========= =========
</TABLE>
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents and
long-term debt. The carrying value of cash and cash equivalents approximates
fair value because of their short duration. The carrying value of long-term
debt approximates the fair value based on current rates for borrowings of
similar quality and terms.
10. MAJOR CUSTOMERS AND CONCENTRATION OF RISK
At March 31, 1998, 20% of total contract receivables was due from one
customer of the Company and at June 30, 1997, 7% and 11% of total contract
receivables were due from two customers. For the nine months ended March 31,
1998, 20% of total sales were made to one customer of the Company. For the
year ended June 30, 1996, 15% and 13% of total sales were made to two
customers of the Company.
Other financial instruments, which potentially subject the Company to
significant concentrations of credit risk, consist primarily of contract
receivables. The Company's customers are concentrated in the Georgia market.
The Company believes this concentration of credit risk is mitigated by the
diversity of industries represented by the Company's customer base.
F-41
<PAGE>
THE ALLISON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) profit sharing plan covering substantially all
employees. Each year, participants may contribute up to 15% of pretax annual
compensation up to a maximum of $10,000. Discretionary matching amounts may be
contributed at the Company's option, but to date no contributions have been
made.
The Company sponsors a profit sharing plan for all employees providing for
benefits upon retirement. Contributions to the plan were $105,000 for the nine
months ended March 31, 1998 and $165,000 and $150,000, respectively, for the
years ended June 30, 1997 and 1996. The Company's contributions to the plan
are made at the discretion of the Board of Directors.
Union employees are covered by a retirement plan and a health and welfare
plan (collectively, the "Plans") determined through collective bargaining and
administered by the union. Contributions made by the Company to the Plans were
approximately $1,256,000 for the nine months ended March 31, 1998 and
$1,742,000 and $2,048,000 for the years ended June 30, 1997 and 1996,
respectively.
12. COMMITMENTS AND CONTINGENCIES
The Company is party to various litigation matters involving routine claims
incidental to the business of the Company. Although the ultimate outcome
cannot presently be determined with certainty, the Company believes, with
advice from its legal counsel, that the ultimate liability associated with
such claims, if any, will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.
The Company is insured with respect to workers' compensation claims for all
employees; however, a deductible of $2,500 per employee, per year applies to
the coverage. The Company is partially self-insured with respect to health
insurance claims for administrative and office personnel, supplemented by
insurance coverage which limits the liability to $10,000 per employee, per
year.
13. STOCKHOLDERS' AGREEMENT
The Company has a right of first refusal on any stock voluntarily offered
for sale by a stockholder subject to certain terms and conditions. The
redemption price is determined based on the book value of common stock. Such
redemption price is payable in not more than 60 equal installments. As of
March 31, 1998, the redemption price is approximately $170 per share.
Upon the death of any shareholder, the Company shall redeem the stock held
by such stockholder provided that the redemption is requested in writing by
the personal representative of the deceased. The redemption price is the same
as that described above. Such redemption price may be paid in full at the
closing or in installments.
14. SUBSEQUENT EVENTS
On June 12, 1998, the Company and its shareholders entered into a stock
purchase agreement with Nationwide Electric, Inc. ("Nationwide"), subject to
certain conditions, pursuant to which all outstanding shares of the Company's
common stock will be purchased for cash and shares of Nationwide common stock,
concurrent with the consummation of an initial public offering of additional
common stock by Nationwide. In addition, the key executives of the Company
will enter into employment agreements with the Company and Nationwide which
have an initial term of 3 years and generally restricts the disclosure of
confidential information as well as restricts competition with the Company and
Nationwide for a period of 5 years from the date of the employment agreement.
* * * * * *
F-42
<PAGE>
INDEPENDENT AUDITORS' REPORT
Henderson Electric Co., Inc.:
We have audited the accompanying consolidated balance sheets of Henderson
Electric Co., Inc. and subsidiaries (formerly HB Holding Company and
subsidiaries) (the "Company"), as of March 31, 1998 and 1997 and the related
consolidated statements of operations and retained earnings, and of cash flows
for each of the three years in the period ended March 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Henderson Electric Co., Inc.
and subsidiaries as of March 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1998 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
June 12, 1998
F-43
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 427,724 $ 661,684
Contract receivables, net.......................... 9,634,517 8,177,591
Costs and estimated earnings in excess of billings
on uncompleted contracts.......................... 1,366,891 1,662,353
Advances to stockholder............................ 1,956,200 9,014
Inventories........................................ 147,200 112,707
Deferred income taxes.............................. 322,400 125,133
Other current assets............................... 1,050 1,050
----------- -----------
Total current assets............................. 13,855,982 10,749,532
Property and equipment, net.......................... 1,955,916 1,806,651
Equity in contractor joint ventures.................. 5,000 47,428
Due from related parties............................. -- 1,813,219
Cash surrender value of life insurance............... 146,440 134,347
Other assets......................................... 94,025 95,153
----------- -----------
Total................................................ $16,057,363 $14,646,330
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Line-of-credit..................................... $ 400,000 $ 800,000
Accounts payable................................... 4,009,326 3,655,303
Accrued expenses and other current liabilities..... 1,657,933 1,433,982
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... 1,292,997 1,281,912
Current portion of long-term debt.................. 278,490 253,748
----------- -----------
Total current liabilities........................ 7,638,746 7,424,945
Long-term debt, net of current portion............... 368,632 513,623
Deferred income taxes................................ 53,000 27,881
Other long-term liabilities.......................... 150,000 --
----------- -----------
Total liabilities................................ 8,210,378 7,966,449
----------- -----------
Commitments and contingencies (Notes 11 and 13)......
STOCKHOLDERS' EQUITY:
Common stock; $10 par value; 5,000 shares
authorized; 2,734 shares issued................... 27,340 27,340
Retained earnings.................................. 8,047,645 6,880,541
Less treasury stock at cost, 456 shares............ (228,000) (228,000)
----------- -----------
Total stockholders' equity....................... 7,846,985 6,679,881
----------- -----------
Total............................................ $16,057,363 $14,646,330
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-44
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Contract revenues earned................ $44,000,125 $36,408,787 $27,336,986
Costs of services....................... 37,951,930 31,024,498 23,187,577
----------- ----------- -----------
Gross profit............................ 6,048,195 5,384,289 4,149,409
Selling, general and administrative
expenses............................... 4,375,844 3,439,467 3,230,624
----------- ----------- -----------
Operating income........................ 1,672,351 1,944,822 918,785
----------- ----------- -----------
Interest and other income (expense):
Interest income....................... 165,883 109,114 85,824
Interest expense...................... (114,907) (146,126) (145,141)
Income from joint ventures............ 202,233 139,909 --
Gain on disposal of partnership
interest............................. -- 120,417 --
Other income, net..................... 17,575 57,148 22,935
----------- ----------- -----------
270,784 280,462 (36,855)
----------- ----------- -----------
Income before income taxes.............. 1,943,135 2,225,284 881,930
Income taxes............................ 776,031 901,550 408,521
----------- ----------- -----------
Net income.............................. 1,167,104 1,323,734 473,409
Retained earnings, beginning of year.... 6,880,541 5,556,807 5,083,398
----------- ----------- -----------
Retained earnings, end of year.......... $ 8,047,645 $ 6,880,541 $ 5,556,807
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-45
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 1,167,104 $ 1,323,734 $ 473,409
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation............................ 272,493 250,116 238,440
Loss (gain) on disposal of assets....... 3,216 10,585 (2,264)
Earnings from partnerships.............. -- (17,340) (28,986)
Gain on sale of partnership interests... -- (120,417) --
Provision for deferred income taxes..... (172,148) (2,565) (23,823)
Changes in operating assets and
liabilities:
Contract receivables, net.............. (1,456,926) (3,294,492) 6,099
Costs and estimated earnings in excess
of billings on uncompleted contracts.. 295,462 (665,172) (52,008)
Inventories............................ (34,493) 89,118 6,773
Equity in contractor joint venture..... 42,428 (47,428) --
Accounts payable....................... 354,023 1,373,798 (49,386)
Accrued expenses and other current
liabilities........................... 223,951 655,922 23,896
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................. 11,085 882,897 (89,961)
Other assets........................... 1,128 4,560 4,651
Other long-term liabilities............ 150,000 -- --
----------- ----------- ---------
Net cash provided by operating
activities........................... 857,323 442,918 506,840
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Due from related parties, net............ (133,967) (99,203) (262,432)
Purchases of property and equipment...... (424,974) (419,943) (262,192)
Proceeds from sale of property and
equipment............................... -- 1,000 14,900
Distributions from partnerships.......... -- 22,060 96,051
Proceeds from sale of partnerships....... -- 273,505 --
Increase in cash surrender value of life
insurance............................... (12,093) (11,104) (8,231)
----------- ----------- ---------
Net cash used in investing activities. (571,034) (233,685) (421,904)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of long-term
debt.................................... 170,289 225,044 122,842
Payments of long-term debt............... (290,538) (298,931) (236,205)
Net (payments) borrowings on line-of-
credit.................................. (400,000) 100,000 (100,000)
----------- ----------- ---------
Net cash (used in) provided by
financing activities................. (520,249) 26,113 (213,363)
----------- ----------- ---------
Net (decrease) increase in cash and cash
equivalents.............................. (233,960) 235,346 (128,427)
Cash and cash equivalents, beginning of
year..................................... 661,684 426,338 554,765
----------- ----------- ---------
Cash and cash equivalents, end of year.... $ 427,724 $ 661,684 $ 426,338
=========== =========== =========
CASH PAYMENTS FOR:
Interest................................. $ 114,907 $ 146,126 $ 145,041
Income taxes............................. $ 1,402,000 $ 448,000 $ 490,000
</TABLE>
See notes to consolidated financial statements.
F-46
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation--The accompanying consolidated
financial statements include the accounts of Henderson Electric Co., Inc.
("Henderson"), its wholly-owned subsidiary, Eagle Electrical Systems, Inc.
("Eagle") and its wholly-owned subsidiary, Henderson Property, Inc.
("Property"--see Note 15) (collectively referred to as the "Company"). All
significant intercompany accounts and transactions have been eliminated.
Effective December 31, 1997, HB Holding Company ("HB") was merged with
Henderson. Prior to the merger, Henderson, Eagle and Property were wholly-
owned subsidiaries of HB. This merger between parent and subsidiary has been
accounted for similar to a pooling-of-interests and accordingly, the
consolidated financial statements for all years presented have been restated
to reflect the merger.
The Company is a commercial and industrial electrical contractor with
offices in Louisville and Lexington, Kentucky and Cincinnati, Ohio. The
Company grants credit to most of their customers. The work is generally
performed under fixed-price contracts. The length of the Company's contracts
varies, but generally are less than one year.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and 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.
Cash and Cash Equivalents--The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
Contract Receivables--The Company carries contract receivables at the
amounts it deems to be collectible. Accordingly, the Company provides
allowances for contract receivables it deems to be uncollectible based on
management's best estimates. Recoveries are recognized in the period they are
received. The ultimate amount of contract receivables that become
uncollectible could differ from those estimated.
Credit Policy--In the normal course of business, the Company provides credit
to its customers and does not generally require collateral. The Company
principally deals with recurring customers, state and local governments and
local companies whose reputation is known to the Company. Advance payments and
progress payments are generally required for significant projects. Credit
checks are performed for significant new customers that are not known to the
Company. The Company generally has the ability to file liens against the
property if amounts owed are not paid on a timely basis.
Inventories--Inventories consist primarily of materials and supplies and are
valued at the lower of cost or market using the first-in, first-out method.
Property and Equipment--Property and equipment is stated at cost less
accumulated depreciation. Routine repairs and maintenance are expensed as
incurred; improvements are capitalized at cost and are amortized over the
remaining useful life of the related asset. Depreciation is recorded under the
straight-line method over the estimated useful lives of the related assets.
Estimated useful lives are as follows:
<TABLE>
<S> <C>
Land improvements.......................................... 10 to 12 years
Buildings and improvements................................. 10 to 40 years
Furniture, fixtures and office equipment................... 3 to 10 years
Machinery and equipment.................................... 5 to 10 years
Service vehicles and trailers.............................. 3 to 10 years
</TABLE>
F-47
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation expense was $272,493, $250,116 and $238,440 for the years ended
March 31, 1998, 1997 and 1996, respectively.
Revenue and Cost Recognition--Revenue from contracts is recognized under the
percentage of completion method measured by the ratio of direct costs and
overhead incurred to management's estimated total contract costs.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor,
engineering, supplies, tools, repairs and depreciation costs. Selling,
general, and administrative costs are charged to expense as incurred. Costs
for materials incurred at the inception of a project which are not reflective
of effort are excluded from costs incurred for purposes of determining revenue
recognition and profits.
Estimates made with respect to uncompleted projects are subject to change as
the project progresses and better estimates of project costs become available.
Revisions in cost and profit estimates during the course of the work are
reflected in the period in which the facts requiring revision become known.
Where a loss is forecast for a contract, the full amount of the anticipated
loss is recognized in the period in which it is determined that a loss will
occur, regardless of the stage of completion. Revenues from claims are
recorded only when the amounts have been received.
In 1998, a final contract settlement on a large contract resulted in
revisions to costs and revenue estimates. The revisions resulted in a loss of
$428,000 recognized in 1998 on this contract.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenue recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
Income Taxes--The Company reports income taxes pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
Under SFAS No. 109, income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related to certain income and expenses
recognized in different periods for financial and income tax reporting
purposes. Deferred tax assets and liabilities represent the future tax
consequences of those differences. Deferred tax assets are also recognized for
operating losses and tax credits that are available to offset future taxable
income and income taxes, respectively. A valuation allowance is provided if it
is more likely than not that some portion or all of the deferred tax assets
will not be realized.
The Company files consolidated Federal and Kentucky income tax returns with
its subsidiary Companies.
Long-Lived Assets--The Company reviews long-lived assets for impairment
whenever events or circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment is recognized to the extent that the sum
of undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through March 31, 1998.
New Accounting Pronouncements--In June 1997, SFAS No. 130, Reporting
Comprehensive Income, and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, were issued. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components. SFAS No. 131 redefines how operating segments are determined and
requires disclosures of certain financial and descriptive information about
the Company's operating segments. SFAS Nos. 130 and 131 are effective for
fiscal years beginning after December 15, 1997. The Company believes that
adoption of SFAS Nos. 130 and 131 will not have any significant effect on its
financial statements.
F-48
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reclassification--Certain amounts in the 1996 and 1997 financial statements
have been reclassified to conform to the 1998 presentation.
2. CONTRACT RECEIVABLES
Contract receivables consist of the following as of March 31:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Current accounts.................................... $8,243,177 $7,187,962
Retention........................................... 1,594,840 1,099,129
---------- ----------
Subtotal............................................ 9,838,017 8,287,091
Less allowance for doubtful accounts................ 203,500 109,500
---------- ----------
Contract receivables net............................ $9,634,517 $8,177,591
========== ==========
</TABLE>
3. CONTRACTS IN PROGRESS
Costs and estimated earnings on uncompleted contracts are summarized as net
balances in process as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Costs incurred on uncompleted contracts....... $ 23,677,317 $ 19,676,682
Estimated earnings............................ 1,795,679 3,280,286
------------ ------------
Total......................................... 25,472,996 22,956,968
Less billings to date......................... (25,399,102) (22,576,527)
------------ ------------
Net under billings............................ $ 73,894 $ 380,441
============ ============
</TABLE>
The net balances in process are classified on the balance sheet as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts............ $ 1,366,891 $ 1,662,353
Billings in excess of costs and estimated
earnings on uncompleted contracts............ (1,292,997) (1,281,912)
----------- -----------
Total..................................... $ 73,894 $ 380,441
=========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Land and improvements........................... $ 244,601 $ 244,601
Buildings and improvements...................... 1,531,676 1,531,676
Furniture, fixtures and office equipment........ 656,801 821,583
Machinery and equipment......................... 1,121,835 1,060,745
Service vehicles and trailers................... 1,695,458 1,456,434
----------- -----------
Subtotal........................................ 5,250,371 5,115,039
Less accumulated depreciation................... (3,294,455) (3,308,388)
----------- -----------
Property and equipment, net..................... $ 1,955,916 $ 1,806,651
=========== ===========
</TABLE>
F-49
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. JOINT VENTURES AND PARTNERSHIPS
At March 31, 1998 and 1997, the Company has a minority interest (33%) in a
limited liability company joint venture formed to provide certain construction
contracting services to a large industrial customer. All of the members
participate in construction. Net assets and net earnings of the joint venture
are not material in 1998 or 1997. Contract revenues earned and gross profit
recognized by the Company related to services on contracts of the joint
venture were $1,640,000 and $111,700, respectively, in 1998 and $1,856,000 and
$168,550, respectively, in 1997. Receivables due from the joint venture at
March 31, 1998 and 1997 are $120,000 and $84,000, respectively.
At March 31, 1997, the Company had a 50% interest in a joint venture formed
to provide electrical contracting to a large industrial customer on a
contract. Contract revenue earned by the Company to the joint venture for its
contracts was $1,299,615 in 1997. Such services were provided at cost. During
1998, the contract was completed and the joint venture liquidated. The Company
recognized earnings in the joint venture of $202,233 and $139,909 in 1998 and
1997, respectively. Receivables due from the joint venture at March 31, 1997
are $15,000.
During 1997 and 1996 Property held certain partnership interests in
companies which developed and leased commercial and residential property in
Louisville, Kentucky. During 1997 Property sold its interest in these
partnerships. Property recognized a gain on sale of partnership's interests of
$120,417 in 1997 and recognized earnings from partnership interests of $17,340
and $28,986 in 1997 and 1996, respectively.
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
A summary of accrued expenses and other current liabilities is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Accrued payroll and related expenses............... $1,181,571 $ 742,822
Accrued income tax payable......................... 148,331 602,539
Other current liabilities.......................... 328,031 88,621
---------- ----------
Total.......................................... $1,657,933 $1,433,982
========== ==========
</TABLE>
7. NOTES PAYABLE AND LONG-TERM DEBT
A summary of notes payable and long-term debt is as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Notes payable--line-of-credit
Revolving line-of-credit; variable interest rate based on
prime rate (8.5% as of March 31, 1998 and 1997) plus .75%;
interest payable monthly; collateralized by contract
receivables, inventories and equipment...................... $400,000 $800,000
======== ========
Long-term debt
Installment notes payable; principal and interest from $216
to $1,041; payable over 36 to 48 months; interest rate 9.25%
to 10.0% as of March 31, 1998 and 1997; secured by vehicles. $286,207 $281,355
Mortgage note payable; interest and principal of $3,405
payable monthly; interest rate adjusts annually based on
average yield of 1-year U.S. Treasury Securities (5.25% and
5.5% as of March 31, 1998 and 1997, respectively) plus 3%;
collateralized by real estate in Cincinnati, Ohio; due April
2005........................................................ 216,915 238,416
Mortgage note payable; repaid in fiscal 1998................. -- 7,600
Mortgage note payable; principal of $8,000 payable monthly,
plus accrued interest interest rate variable based on prime
rate (8.5% as of March 31, 1998 and 1997) plus 1.0%;
collateralized by real estate in Louisville, Kentucky; due
September 1999.............................................. 144,000 240,000
-------- --------
Total........................................................ 647,122 767,371
Less current portion......................................... 278,490 253,748
-------- --------
Total.................................................... $368,632 $513,623
======== ========
</TABLE>
F-50
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The borrowing limit under the revolving line-of-credit agreement is
$1,500,000 as of March 31, 1998. The agreement expires on August 31, 1998. The
installment notes payable require the Company to maintain depository accounts
with the bank of at least 15% of the outstanding balance.
Aggregate annual maturities of long-term debt at March 31, 1998 are:
<TABLE>
<S> <C>
1999............................................................. $278,490
2000............................................................. 175,972
2001............................................................. 51,754
2002............................................................. 32,162
2003............................................................. 33,141
Thereafter....................................................... 75,603
--------
Total........................................................ $647,122
========
</TABLE>
8. INCOME TAXES
The Company's provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Current:
Federal.................................. $ 805,950 $768,500 $367,500
State.................................... 142,229 135,615 64,844
--------- -------- --------
948,179 904,115 432,344
--------- -------- --------
Deferred................................... (172,148) (2,565) (23,823)
--------- -------- --------
Total.................................. $ 776,031 $901,550 $408,521
========= ======== ========
</TABLE>
The difference between the statutory federal income tax rate and the
Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate.............................. 34.0% 34.0% 34.0%
State tax, net of federal benefit....................... 5.3 4.0 5.7
Prior year's taxes...................................... -- -- 5.4
Other................................................... 0.8 2.5 1.2
---- ---- ----
Effective rate.......................................... 40.0% 40.5% 46.3%
==== ==== ====
</TABLE>
Components of the Company's deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current deferred income tax assets:
Allowance for doubtful accounts.................... $ 79,400 $ 42,705
Vacation accrual................................... 67,800 60,708
Workers compensation............................... 97,200 21,720
Contributions...................................... 78,000 --
-------- --------
Total............................................ 322,400 125,133
-------- --------
Long-term deferred income tax liabilities--
Depreciation........................................ (53,000) (27,881)
-------- --------
Net deferred income tax asset........................ $269,400 $ 97,252
======== ========
</TABLE>
F-51
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
notes receivable from related parties, notes payable, and current and long-
term debt. The carrying value of cash and cash equivalents approximates fair
value because of their short duration. The carrying value of debt approximates
their fair value based on current rates for borrowings of similar quality and
terms.
Other financial instruments which potentially subject the Company to
significant concentrations of credit risk consist primarily of contract
receivables. The Company's customers are concentrated in the Kentucky and Ohio
markets. The Company believes this concentration of credit risk is mitigated
by the diversity of industries represented by the Company's customer base.
10. CONCENTRATION OF RISK
The Company grants credit, generally without collateral, to its customers,
which are usually general contractors located in the Louisville and Lexington,
Kentucky and Cincinnati, Ohio areas. Consequently, the Company is subject to
potential credit risk related to changes in business and economic factors
within these areas. However, management believes that its contract acceptance,
billing and collection policies are adequate to minimize the potential credit
risk.
11. EMPLOYEE RETIREMENT PLAN
Qualified executives, office employees, and qualifying non-union
electricians of the Company are included in a modified defined contribution
plan. Company contributions under the plan are determined annually by the
Board of Directors with the minimum allowable contribution being the greater
of 3% of gross eligible wages or 25 cents per active hour of service.
Contributions of $259,000, $144,682 and $132,376 were made for the years ended
March 31, 1998, 1997 and 1996, respectively. Union employees are covered by a
retirement plan determined through collective bargaining and administered by
the union. Contributions made by the Company were $1,640,500, $1,258,066 and
$750,652 in 1998, 1997 and 1996, respectively.
12. RELATED PARTY TRANSACTIONS
Amounts due from related parties consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Notes receivable and advances to shareholders... $ 1,926,465 $1,786,671
Notes receivable and advances to employees...... 29,735 35,562
----------- ----------
Total due from related parties.................. 1,956,200 1,822,233
Less current portion............................ (1,956,200) (9,014)
----------- ----------
Total....................................... $ -- $1,813,219
=========== ==========
</TABLE>
The notes and advances to shareholders consist of amounts due from the two
shareholders of the Company and amounts due from entities which they own. The
advances are unsecured and bear interest, generally at 5.85% and 5.77% in 1998
and 1997, respectively. These advances are payable on demand.
F-52
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. COMMITMENTS AND CONTINGENCIES
The Company is involved in a claim related to a fire loss incurred to a
building for which the Company performed electrical contract services. The
plaintiffs are seeking damages of approximately $2.4 million. The Company
maintains general liability and umbrella policy coverage in excess of the
claim. The Company believes the policies are sufficient to cover all damages
alleged. The Company and their insurance carrier are vigorously defending this
claim. Management does not believe the ultimate resolution of this claim will
have a material adverse effect to the Company's financial position or results
of operations.
The Company is party to various other litigation matters involving routine
claims incidental to the business of the Company. Although the ultimate
outcome cannot presently be determined with certainty, the Company believes,
with advice from its legal counsel, that the ultimate liability associated
with such claims, if any, will not have a material adverse effect on the
Company's financial position or results of operations or cash flows.
The Company is self-insured with respect to workers' compensation claims for
all Kentucky employees, supplemented by insurance coverage which limits the
Company's liability per occurrence. The excess insurance provides coverage in
excess of the limit of the Company's liability per occurrence, which is
$275,000. The financial statements include an accrual for the estimated amount
of unsettled worker's compensation claims. This estimate is based, in part, on
an evaluation of information provided by the Company's third-party
administrator, and represents management's best estimate of the Company's
future liability. As of March 31, 1998, the Company has an outstanding letter
of credit in the amount of $732,000 provided to the State of Kentucky Workers'
Compensation Board related to the self-insured workers' compensation plan.
During fiscal year 1998, the Company has pledged $250,000 to the University
of Louisville to establish a scholarship endowment. This amount is included in
the statement of operations, and is payable in annual installments of $50,000.
The first installment was made during fiscal year 1998. As of March 31, 1998,
$150,000 is included as other long-term liabilities and the remaining $50,000
is included in accrued expenses and other current liabilities.
14. STOCKHOLDER'S AGREEMENT
The Company has a right of first refusal on any stock voluntarily offered
for sale by a stockholder subject to certain terms and conditions. The
redemption price shall be as determined either through agreement of the
parties, or by a formula defined in the stockholder's agreement. Upon the
death of any stockholder, the Company shall redeem the stock held by such
stockholder provided that the redemption is requested in writing by the
personal representative of the deceased. The redemption price pursuant to the
agreement is the same as described above.
15. SUBSEQUENT EVENTS
In June 1998, the Company and its stockholders entered into an agreement and
plan of merger with Nationwide Electric, Inc. ("Nationwide"), subject to
certain conditions, pursuant to which all outstanding
F-53
<PAGE>
HENDERSON ELECTRIC CO., INC. AND SUBSIDIARIES
(FORMERLY HB HOLDING COMPANY AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
shares of the Company's common stock will be exchanged for cash and shares of
Nationwide common stock, concurrent with the consummation of an initial public
offering (the "Offering") of additional common stock by Nationwide. In
addition, the key executives of the Company will enter into employment
agreements with the Company and Nationwide which have an initial term of 3
years and generally restricts the disclosure of confidential information as
well as restricts competition with the Company and Nationwide for a period of
5 years from the date of the employment agreement.
Immediately prior to the consummation of the Offering, and as part of the
plan of merger, the Company shall redeem 244 shares of the Company stock from
the stockholders by distributing to them the life insurance policies owned by
the Company on the lives of its officers and stockholders with an aggregate
cash surrender value of $146,440 at March 31, 1998, and all of the real
property and improvements thereon owned by the Company with a net book value
of $1,149,134 at March 31, 1998, subject to any mortgages secured thereby. The
Company shall retain all furniture, fixtures and office equipment, machinery
and equipment, and service vehicles and trailers with a net book value at
March 31, 1998 of $806,782. The Company shall bear any corporate taxes due in
connection with such redemption up to a maximum amount of $180,000. Any
corporate taxes due in excess of $180,000 shall be reimbursed by the
stockholders of the Company.
Concurrent with the initial public offering, and as a part of the plan of
merger, the Company's stockholders intend to purchase Property from Nationwide
for $338,082 in cash, representing its net book value at March 31, 1998.
Therefore, Property is considered as being held for sale and is reflected in
the accompanying financial statements on the equity method of accounting.
Property's results of operations are not significant.
* * * * * *
F-54
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this Prospectus in connection with the offer made
by this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or any of the
Underwriters. Neither the delivery of this prospectus nor any sale made here-
under shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the dates as of which in-
formation is given in this Prospectus. This Prospectus does not constitute an
offer or solicitation by anyone in any jurisdiction in which such offer or so-
licitation is not authorized or in which the person making such offer or so-
licitation is not qualified to do so or to any person to whom it is unlawful
to make such solicitation.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
The Company............................................................... 15
Use of Proceeds........................................................... 16
Dividend Policy........................................................... 16
Capitalization............................................................ 17
Dilution.................................................................. 18
Selected Financial Data................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 30
Management................................................................ 40
Certain Transactions...................................................... 45
Principal Stockholders.................................................... 47
Description of Capital Stock.............................................. 47
Shares Eligible for Future Sale........................................... 52
Underwriting.............................................................. 53
Legal Matters............................................................. 54
Experts................................................................... 54
Additional Information.................................................... 55
Index to Financial Statements............................................. F-1
</TABLE>
------------
Until , 1998 (25 days after the date of this Prospectus), all deal-
ers effecting transactions in the Common Stock offered hereby, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5,000,000 Shares
[logo]
NATIONWIDE ELECTRIC, INC.
Common Stock
------------
PROSPECTUS
------------
BT ALEX. BROWN
PIPER JAFFRAY INC.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses, other than underwriting discounts
and commissions, to be borne by the Company in connection with the issuance
and distribution of the Common Stock being registered:
<TABLE>
<CAPTION>
ITEM AMOUNT
---- -------
<S> <C>
Securities and Exchange Commission Registration Fee.............. $22,652
NASD Filing fee.................................................. *
NYSE Listing Fee................................................. *
Printing Costs................................................... *
Legal Fees and Expenses.......................................... *
Accounting fees and Expenses..................................... *
Transfer Agent and Registrar Fees and Expenses................... *
Miscellaneous.................................................... *
-------
Total........................................................ *
=======
</TABLE>
- --------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware General Corporation Law
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
the corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
II-1
<PAGE>
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a present or
former director or officer of a corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
Section 145(d) of the DGCL states that any indemnification under subsections
(a) and (b) of Section 145 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee or agent
is proper in the circumstances because the person has met the applicable
standard of conduct set forth in subsections (a) and (b) of Section 145. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized in
Section 145. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon such
terms and conditions, if any, as the corporation deems appropriate.
Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to
action in another capacity while holding such office.
Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person against
such liability under the provisions of Section 145.
Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Amended and Restated Certificate of Incorporation and Bylaws, and
Indemnification Agreements
The Amended and Restated Certificate of Incorporation limits the liability
of directors of the Company to the Company or its stockholders to the fullest
extent permitted by Delaware law. Specifically, directors
II-2
<PAGE>
of the Company will not be personally liable to the Company or its
stockholders for monetary damages for breach of a director's fiduciary duty as
a director, except for liability for breach of the duty of loyalty, for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the DGCL or for any
transaction in which a director has derived an improper personal benefit.
The Company's Bylaws require the Company to indemnify any person who is a
party or is threatened to be made a party to any action, suit or proceeding by
reason of the fact that such person is or was a director, officer, employee or
agent of the Company, or is serving as a director, officer, employee or agent
of another enterprise at the Company's request. Indemnification is not,
however, permitted under the Bylaws unless the person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
Company's best interests and, with respect to any criminal action or
proceeding, that such person had no reasonable cause to believe such person's
conduct was unlawful. The Company's Bylaws further provide that the Company
shall not indemnify any person for any liabilities or expenses incurred by
such person in connection with an action, suit or proceeding by or in the
right of the Company in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Company, unless and only
to the extent that the court in which the action, suit or proceeding is
brought determines that the person is entitled to indemnity for such expenses.
The indemnification provided by the Bylaws is not exclusive of any other
rights to which those seeking indemnification may be otherwise entitled.
The Company plans to enter into indemnification agreements (the
"Agreements") with each of the Company's directors and officers prior to the
Offering. The Agreements will provide that the Company will indemnify the
directors and officers against all liabilities and expenses actually and
reasonably incurred in connection with any action, suit or proceeding
(including an action by or in the right of the Company) to which any of them
is, was or at any time becomes a party, or is threatened to be made a party,
by reason of their status as a director or officer of the Company, or by
reason of their serving or having served at the request or on behalf of the
Company as a director, officer, trustee or in any other comparable position of
any other enterprise to the fullest extent allowed by law. No indemnity will
be provided under the Agreements for any amounts for which indemnity is
provided by any other indemnification obligation or insurance maintained by
the Company or another enterprise or otherwise. Nor will indemnity be provided
to any director or officer on account of conduct which is finally adjudged by
a court to have been knowingly fraudulent, deliberately dishonest or a knowing
violation of law. In addition, no indemnification will be provided if a final
court adjudication shall determine that such indemnification is not lawful, or
in respect to any suit in which judgment is rendered against any director or
officer for an accounting of profits made from a purchase or sale of
securities of the Company in violation of Section 16(b) of the Securities
Exchange Act of 1934 or of any similar law, or on account of any remuneration
paid to any director or officer which is adjudicated to have been paid in
violation of law.
Underwriting Agreement
The Underwriting Agreement provides for the indemnification of the directors
and officers of the Company in certain circumstances.
Insurance
The Company intends to maintain liability insurance for the benefit of its
directors and officers.
II-3
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to securities issued or sold by the
Company since its inception:
On March 17, 1998, Nationwide issued and sold 350 shares of Common Stock to
KLT Energy Services, Inc. for consideration of $35,000. This sale was exempt
from registration under Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder, no public offering being involved.
On March 17, 1998, Nationwide issued and sold 300 shares of Class A
Nonvoting Common Stock to KLT Energy Services, Inc. for consideration of
$30,000. This sale was exempt from registration under Section 4(2) of the
Securities Act and Rule 506 of Regulation D thereunder, no public offering
being involved.
On March 17, 1998, Nationwide issued and sold 350 shares of Common Stock to
Reardon Capital, LLC for consideration of $35,000. This sale was exempt from
registration under Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder, no public offering being involved.
Effective March 24, 1998, Nationwide effected a 333.33-to-1 stock split of
the shares of Common Stock outstanding as of March 24, 1998.
Effective March 24, 1998, Nationwide effected 333.33-to-1 stock split of the
shares of Class A Nonvoting Common Stock outstanding as of March 24, 1998.
On April 6, Nationwide sold 950,000 shares of Common Stock to Galt
Financial, Inc. for consideration of $285,000. This sale was exempt from
registration under Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder, no public offering being involved.
On April 14, 1998, Nationwide sold 100,000 shares of Common Stock to
Frederick C. Green IV for consideration of $30,000. This sale was exempt from
registration under Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder, no public offering being involved.
On April 14, 1998, Nationwide sold 60,000 shares of Common Stock to Frank R.
Clark for consideration of $18,000. This sale was exempt from registration
under Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder, no public offering being involved.
On April 14, 1998, Nationwide sold 40,000 shares of Common Stock to David
Smith for consideration of $12,000. This sale was exempt from registration
under Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder, no public offering being involved.
On April 14, Nationwide sold 100,000 shares of Common Stock to John Wood for
consideration of $30,000. This sale was exempt from registration under Section
4(2) of the Securities Act and Rule 506 of Regulation D thereunder, no public
offering being involved.
On May 31, Nationwide sold 5,000 shares of Common Stock to Andrew V. Johnson
for consideration of $1,500. This sale was exempt from registration under
Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder, no
public offering being involved.
On May 31, Nationwide sold 5,000 shares of Common Stock to Robert H. Hoffman
for consideration of $1,500. This sales was exempt from registration under
Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder, no
public offering being involved.
On May 31, Nationwide sold 5,000 shares of Common Stock to Wade C. Lau for
consideration of $1,500. This sale was exempt from registration under Section
4(2) of the Securities Act and Rule 506 of Regulation D thereunder, no public
offering being involved.
II-4
<PAGE>
Nationwide issued 2,310,000 shares of Common Stock to KLT Energy Services,
Inc and Reardon Capital, LLC, and 990,000 shares of Class A Nonvoting Common
Stock and 6,000 shares of Redeemable Preferred Stock to KLT Energy Services,
Inc., pursuant to that certain Agreement and Plan of Merger among the Company,
Galt Financial, Inc., KLT Energy Services, Inc. and Reardon Capital, LLC dated
May 23, 1998. This issue was exempt from registration under Section 4(2) of
the Securities Act and Rule 506 of Regulation D thereunder, no public offering
being involved. Nationwide also cancelled 950,000 shares of Class A Nonvoting
Common Stock previously sold to Galt Financial, Inc. in connection with the
foregoing stock issuances.
Simultaneously with the consummation of the Offering, the Company will issue
1,100,416 shares of its Common Stock in connection with the Acquisitions. The
number of shares to be issued will depend upon the actual initial public
offering price. Each of these transactions are exempt from registration under
the Securities Act under Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder, no public offering being involved.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------
<C> <S>
1.1** Form of Underwriting Agreement
2.1* Agreement and Plan of Merger dated as of June 12, 1998 between
Nationwide Electric, Inc. and Henderson Electric Company, Inc. and
its Shareholders
2.2* Stock Purchase Agreement dated as of June 12, 1998 between
Nationwide Electric, Inc. and The Allison Company and its
Shareholders and Allison-Smith Electric Company, Inc.
2.3 Asset Purchase Agreement dated as of June 12, 1998 between
Nationwide Electric, Inc. and Potter Electric Company, Inc. and
Ralph Pangonis, Sr.
3.1* Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
3.3* Certificate of Designation, Preferences and Rights of Series A
Nonvoting Convertible Preferred Stock
4.1 Form of Common Stock Certificate
4.2** Shareholder Agreement dated as of April 14, 1998 by and among
Nationwide Electric, Inc. and KLT Energy Services Inc., Frederick
C. Green IV, Frank R. Clark, David Smith, John Wood and Reardon
Capital LLC
5.1 Form of Opinion of Stinson, Mag & Fizzell, P.C.
9.1** Contained in Exhibit 4.2
10.1 Employment Agreement dated as of April 1, 1998 between Nationwide
Electric, Inc. and John Wood
10.2 Employment Agreement dated as of April 1, 1998 between Nationwide
Electric, Inc. and Frederick C. Green IV
10.3 Employment Agreement dated as of April 1, 1998 between Nationwide
Electric, Inc. and David Smith
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------
<C> <S>
10.4 Employment Agreement dated as of April 1, 1998 between Nationwide
Electric, Inc. and Frank R. Clark
10.5 Non-Qualified Stock Option Plan
10.6 Incentive Stock Option Plan
10.7 Executive Stock Purchase Plan
10.8 Form of Indemnification Agreement (and list of parties to such
agreement)
10.9 Restricted Stock Purchase Agreement dated as of April 1, 1998
between Nationwide Electric, Inc. and John Wood
10.10 Restricted Stock Purchase Agreement dated as of April 7, 1998
between Nationwide Electric, Inc. and Frederick C. Green IV
10.11 Restricted Stock Purchase Agreement dated as of April 1, 1998
between Nationwide Electric, Inc. and David Smith
10.12 Restricted Stock Purchase Agreement dated as of April 1, 1998
between Nationwide Electric, Inc. and Frank R. Clark
21.1 Subsidiaries
23.1 Consent of Deloitte & Touche LLP, independent auditors
23.2 Consent of McGladrey & Pullen, LLP, independent auditors
23.3 Consent of Stinson, Mag & Fizzell, P.C. (contained in Exhibit 5.1)
23.4 Consent of Frederick C. Green IV
23.5 Consent of Wade C. Lau
23.6 Consent of Robert B. Allison
24.1* Power of Attorney (included on page II-8)
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes
thereto.
II-6
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 14,
or otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payments
by the registrant of expenses incurred or paid by the director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(3) That, for the purpose of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(4) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, NATIONWIDE ELECTRIC, INC.
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
KANSAS CITY, STATE OF MISSOURI, ON JULY 31, 1998.
Nationwide Electric, Inc.
/s/ Gregory J. Orman
By: _________________________________
Gregory J. Orman
Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, AS AMENDED, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON JULY 31, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board and Director
___________________________________________
Gregory J. Orman
* President, Chief Executive Officer and
___________________________________________ Director Nominee
Frederick C. Green, IV
* Vice President, Chief Financial Officer,
___________________________________________ Secretary and Treasurer
Frank R. Clark
* Director
___________________________________________
Andrew V. Johnson
* Director
___________________________________________
Robert H. Hoffman
* Director
___________________________________________
Bernard J. Beaudoin
</TABLE>
/s/ Gregory J. Orman
*By_____________________________
Gregory J. Orman
Attorney-in-fact
II-8
<PAGE>
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BETWEEN
NATIONWIDE ELECTRIC, INC.
AND
POTTER ELECTRIC COMPANY, INC.
and
RALPH PANGONIS, SR.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS...........................................................................................1
ARTICLE I DEFINITIONS..............................................................................1
ARTICLE II SALE AND PURCHASE OF ASSETS.............................................................3
2.1 Sale and Purchase..................................................................3
2.2 Purchase Price.....................................................................5
2.4 Delivery Date......................................................................6
2.5 Closing............................................................................6
2.6 The Registration Statement.........................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
AND THE COMPANY...............................................................................6
3.1 Validity...........................................................................6
3.2 The Company........................................................................7
3.3 The Assets.........................................................................7
3.4 Financial Statements...............................................................7
3.5 Absence of Certain Events..........................................................8
3.6 Title to and Condition of Assets...................................................8
3.7 Real Property......................................................................8
3.8 Lease..............................................................................8
3.9 Receivables........................................................................8
3.10 Contracts, Etc.....................................................................9
3.11 Material Customers and Suppliers...................................................9
3.12 Litigation and Workers' Compensation Liability....................................10
3.13 Insurance and Performance Bonds...................................................10
3.14 Intellectual Property.............................................................10
3.15 Compliance with Laws..............................................................11
3.16 Licenses, Permits and Authorizations..............................................11
3.17 Taxes.............................................................................11
3.18 Books and Records.................................................................11
3.19 Labor and Employment..............................................................11
3.20 Environmental.....................................................................12
3.21 ERISA.............................................................................13
3.22 Guaranteed Obligations............................................................15
3.23 Disclosure........................................................................15
3.24 Acknowledgment....................................................................15
3.25 Interest in Customers and Suppliers and Related Party Transactions...............16
3.26 Registration Statement............................................................16
3.27 Brokers and Finders...............................................................16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEI...............................................16
4.1 Corporate......................................................................17
4.2 Authorization..................................................................17
4.3 Capital Stock of NEI...........................................................17
4.4 Transactions in Capital Stock..................................................17
4.5 Financial Statements...........................................................17
4.6 Liabilities And Obligations....................................................17
4.7 Conformity With Law; Litigation................................................17
4.8 No Violations..................................................................18
4.9 NEI Stock......................................................................18
4.10 No Side Agreements.............................................................18
4.11 Disclosure.....................................................................19
4.12 Other Agreements...............................................................19
4.13 Registration Statement.........................................................19
ARTICLE V ACTIONS BY SHAREHOLDER AND THE COMPANY
PENDING CLOSING...........................................................................19
5.1 Access.........................................................................19
5.2 Carry on in Ordinary Course....................................................20
5.3 General Increases Limited......................................................20
5.4 Preservation of Organization...................................................20
5.5 No Default.....................................................................20
5.6 Dividends......................................................................20
5.7 Voting Trusts or Other Arrangements............................................20
5.8 Interim Financial and Borrowing Statements.....................................21
5.9 Bids and Contracts.............................................................21
5.10 Cash Withdrawals...............................................................21
5.11 Environmental Audits...........................................................21
5.12 No Transfer....................................................................21
5.13 No Shop........................................................................21
5.14 (Intentionally Omitted)........................................................21
5.15 Notification of Certain Matters................................................21
5.16 Cooperation in Preparation of Registration Statement...........................22
5.17 Authorized Capital.............................................................22
ARTICLE VI CONDITIONS PRECEDENT TO SHAREHOLDER'S OBLIGATIONS...................................22
6.1 Representations and Warranties True............................................22
6.2 Compliance with Agreement......................................................22
6.3 No Litigation..................................................................23
6.4 Employment Agreements..........................................................23
6.5 IPO Closing....................................................................23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII CONDITIONS PRECEDENT TO NEI'S OBLIGATIONS..........................................23
7.1 Representations and Warranties True............................................23
7.2 Compliance with Agreement......................................................23
7.3 Execution and Deliverables.....................................................23
7.4 Corporate Documents............................................................23
7.5 Due Diligence..................................................................23
7.6 Employment Agreements..........................................................24
7.7 No Material Adverse Change.....................................................24
7.8 Opinion of Counsel for Shareholder.............................................24
7.9 Approval.......................................................................24
7.10 No Litigation..................................................................24
7.11 Shareholder's Release..........................................................24
7.12 Termination of Related Party Agreements........................................25
7.13 Other Founding Companies.......................................................25
7.14 FIRPTA Certificate.............................................................25
7.15 IPO Closing....................................................................25
7.16 Minimum Net Book Value.........................................................25
ARTICLE VIII COVENANTS.........................................................................25
8.1 Release From Guarantees; Repayment of Certain Obligations......................25
8.2 Preparation And Filing of Tax Returns..........................................25
8.3 Further Assurances.............................................................26
ARTICLE IX INDEMNIFICATION.....................................................................26
9.1 Indemnification by Shareholder.................................................26
9.2 Indemnification by NEI.........................................................27
9.3 Procedure......................................................................27
9.4 Exclusive Remedy...............................................................28
9.5 Limitations on Indemnification.................................................28
ARTICLE X TERMINATION..........................................................................29
10.1 Termination....................................................................29
10.2 Liabilities in Event of Termination............................................29
ARTICLE XI NONCOMPETITION AND NONDISCLOSURE....................................................30
11.1 Noncompete Covenant............................................................30
11.2 Confidential Information.......................................................30
11.3 Enforcement....................................................................30
ARTICLE XII TRANSFER RESTRICTIONS..............................................................31
ARTICLE XIII FEDERAL SECURITIES ACT REPRESENTATIONS............................................31
13.1 Compliance with Law............................................................31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
13.2 Economic Risk; Sophistication..............................32
ARTICLE XIV REGISTRATION RIGHTS............................................32
14.1 Piggyback Registration Rights..............................32
14.2 Registration Procedures....................................33
14.3 Indemnification............................................35
14.4 Underwriting Agreement.....................................36
14.5 Transfer of Rights.........................................36
14.6 Rule 144 Reporting.........................................36
ARTICLE XV MISCELLANEOUS...................................................36
15.1 Assignment.................................................36
15.2 Governing Law..............................................37
15.3 Notices....................................................37
15.4 Entire Agreement...........................................37
15.5 Successors.................................................37
15.6 Counterparts...............................................37
15.7 Headings...................................................38
15.8 Expenses...................................................38
15.9 Survival...................................................38
15.10 Costs......................................................38
15.11 Publicity..................................................38
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of June 15, 1998, by NATIONWIDE
ELECTRIC, INC., a Delaware corporation ("NEI"), POTTER ELECTRIC COMPANY, INC., a
Nevada corporation (the "Company"), and RALPH PANGONIS, SR. ("Shareholder").
RECITALS
A. The Company is engaged in the electrical contracting business.
Shareholder is the sole shareholder of the Company.
B. NEI and its subsidiaries are entering into separate merger or
acquisition agreements (the "Other Agreements") with other companies engaged in
the electrical contracting business (the "Other Founding Companies") and NEI
intends to conduct an initial public offering of its common stock. This
Agreement, the Other Agreements and the initial public offering constitute the
"NEI Plan of Organization."
C. NEI desires to acquire the Company's assets and business as a
going concern, and the Company desires to sell such assets and business to NEI,
for the purchase price and in accordance with the terms and conditions contained
herein.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
promises contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
In addition to other terms defined in this Agreement, the following
terms shall have the following meanings:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Affiliate" with respect to any Person, means any Person controlling,
controlled by or under common control with such Person.
"Assets" shall mean the tangible and intangible assets and business as
a going concern of the Company to be acquired by NEI in accordance with this
Agreement.
<PAGE>
"Assumed Liabilities" shall mean and be limited to the current
liabilities of the Company to be assumed by NEI and described in Section 2.3.
"Balance Sheet" shall mean the audited balance sheet of the Company
and notes thereto dated as of the Balance Sheet Date.
"Balance Sheet Date" shall mean March 31, 1998.
"Closing Date" shall mean the date as of which the exchange of the
Assets for NEI Stock and cash is consummated in accordance with Article II.
"Company" shall mean the Company and its subsidiaries, if any.
"Company Stock" shall mean all of the issued and outstanding capital
stock of the Company owned by Shareholder.
"Delivery Date" shall mean the date specified by NEI on which the
Deliverables (as defined in Section 2.4) shall be delivered in trust pending the
Closing Date, as contemplated in Article II.
"Founding Companies" shall mean, collectively, the Company and the
Other Founding Companies.
"GAAP" means generally accepted accounting principles, consistently
applied from period to period.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
"IPO" shall mean NEI's initial public offering of NEI Stock pursuant
to the Registration Statement.
"Material Adverse Change" means a material adverse change in the
business, operations, financial condition or prospects of the Company or the
value of the Assets.
"Material Adverse Effect" means a material adverse effect on the
business, operations, financial condition or prospects of the Company or the
value of the Assets.
"NEI" shall mean Nationwide Electric, Inc. and its subsidiaries.
"NEI Charter Documents"shall mean the Certificate of Incorporation and
Bylaws of NEI, as amended or restated from time to time.
2
<PAGE>
"NEI Plan of Organization" shall mean the IPO and the acquisition or
merger of the Founding Companies by or into NEI or its subsidiaries.
"NEI Stock" shall mean the voting common stock, par value $.01 per
share, of NEI.
"Other Founding Companies" shall mean the Founding Companies other
than the Company.
"Person" shall mean any individual, corporation, trust, limited
liability company, partnership or other entity.
"Pricing" means the date on which the public offering price per share
of the NEI Stock to be offered in the IPO is determined by NEI and the
Underwriters.
"Prospectus" shall mean the prospectus contained in the Registration
Statement, as amended or supplemented from time to time.
"Registration Statement" means the registration statement on Form S-1
to be filed with the SEC covering the shares of NEI Stock to be issued in the
IPO, as amended or supplemented from time to time.
"Return" means any return, report or statement (including information
returns) required to be filed in connection with any Tax.
"SEC" means the United States Securities and Exchange Commission.
"Shareholder" shall mean Ralph Pangonis, Sr.
"State of Incorporation" means the State of Nevada.
"Tax" or "Taxes" means any and all federal, state, local and foreign
income, gross receipts, sales, use, ad valorem, value added, franchise,
withholding, employment, excise, property and other taxes or assessments, plus
any interest or penalties payable with respect to the same.
"Underwriters" means the underwriters of the IPO.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Sale and Purchase. In accordance with and subject to the terms and
conditions of this Agreement and in reliance upon the mutual representations and
warranties contained herein, on the Closing Date, the Company agrees to sell and
deliver to NEI, and NEI agrees to purchase from
3
<PAGE>
the Company, all of the tangible and intangible assets of the Company (the
"Assets"), including but not limited to the following:
2.1.1 The Company's business as a going concern (the "Business") and
all goodwill of the Company in connection therewith.
2.1.2 All cash and cash equivalents of the Company on hand or in
accounts of the Company as of the Closing Date.
2.1.3 All vehicles and trailers, tools, machinery and equipment owned
by the Company and used or useful in connection with the Business (the
"Equipment"). A list of Equipment is attached as SCHEDULE 2.1.3.
2.1.4 All inventories of materials and supplies on hand as of the
Closing Date.
2.1.5 All accounts receivable (including receivables from related
parties), costs and estimated earnings in excess of billings on uncompleted
contracts, prepaid expenses and other current assets of the Company in
existence as of the Closing Date and arising from the conduct of the
Business.
2.1.6 All contracts, agreements and arrangements, written or oral,
express or implied, to which the Company is a party as of the Closing Date
in connection with the Business, including but not limited to employment
agreements, collective bargaining agreements, contracts for the provision
of electrical services, joint venture agreements, equipment and vehicle
leases, licenses, commitments and other agreements listed in SCHEDULE
3.10.1 and SCHEDULE 3.10.2 (the "Contracts").
2.1.7 All work in-process of the Company as of the Closing Date.
2.1.8 The Company's rights as lessee under that related-party lease
agreement (the "Lease") for the Company's headquarters facility in Las
Vegas, Nevada (the "Facility").
2.1.9 All bids and proposals of the Company for the provision of
electrical contracting services which have been submitted as of the Closing
Date and as to which contracts have not been awarded as of the Closing
Date.
2.1.10 All furniture, fixtures, files, computers, office equipment
and leasehold improvements owned by the Company as of the Closing Date.
2.1.11 All customer lists, supplier lists, marketing materials,
literature, maintenance records and other business records of the Company
in connection with the Business.
4
<PAGE>
2.1.12 To the extent assignable, all licenses, permits and
authorizations issued to the Company by federal, state and local
governmental authorities in connection with the Business (the "Permits").
A list of the Permits and a description of their assignability by the
Company is attached as SCHEDULE 2.1.12.
2.1.13 All trademarks, trade names, service marks, logos, copyrights,
trade secrets, know-how, confidential or proprietary information and other
intellectual property of the Company used or useful in connection with the
Business, all federal and state registrations and applications for
registration thereof, all rights therein and thereunder in and for all
countries, and all goodwill of the Business arising thereunder (the
"Intellectual Property"). A list and description of the Intellectual
Property is attached as SCHEDULE 2.1.11.
2.1.14 All other tangible and intangible assets or property of the
Company used or useful in connection with the Business.
2.2 Purchase Price. The aggregate Purchase Price for the Assets shall
consist of cash and NEI Stock determined in accordance with SCHEDULE 2.2
attached hereto (and including the Earnout described in SCHEDULE 2.2), plus
assumption of the Assumed Liabilities described in Section 2.3. The cash
portion of the Purchase Price shall be payable by certified check or wire
transfer on the Closing Date. Notwithstanding the foregoing, NEI may reserve up
to 5% of the cash portion of the Purchase Price as a basket (the "Basket") to
compensate NEI for any accounts receivable (net of bad debt reserves) and/or
retainages of the Company as stated on the Balance Sheet but not collected
within one year after the Closing Date and any loss, damage or expense incurred
by NEI as a result of a breach of any of the representations and warranties in
Article III. The Basket funds shall be deposited in an interest-bearing
account. Any amount remaining in the Basket at the expiration of one year
following the Closing Date and not withheld by NEI as compensation as set forth
above, together with all interest earned on the investment of the Basket funds,
shall be remitted to the Company or to Shareholder at his request. Any accounts
receivable stated on the Balance Sheet but not collected within one year after
the Closing Date shall be assigned to the Company or Shareholder following
expiration of such one year period.
2.3 Liabilities. Subject to the terms and conditions of this Agreement,
NEI will assume and agree to discharge only the Assumed Liabilities, which shall
consist of and be limited to: (a) the "Current Liabilities" listed on the
Balance Sheet (consisting of notes payable, accounts payable, accrued expenses
and other current liabilities, due to related parties, and billings in excess of
costs and estimated earnings on uncompleted contracts, but excluding deferred
income tax liabilities and commitments and contingencies); and (b) any "Current
Liabilities" of the nature described in Section 2.3(a) and incurred by the
Company in the ordinary course of business between the date of this Agreement
and the Closing Date. All other debts, obligations, liabilities and
contingencies of the Company, whether for Taxes, in connection with contract
claims or disputes, for negligence or otherwise and whether existing, payable or
accruing prior to or after the Closing Date, shall remain obligations of the
Company and shall not be assumed by NEI. With the exception of the Assumed
5
<PAGE>
Liabilities, the Assets shall be transferred to NEI free and clear of any and
all liens, claims, mortgages, security interests, restrictions and encumbrances.
2.4 Delivery Date. On the date specified by NEI by written notice to
Shareholder (the "Delivery Date"), which may be prior or subsequent to the
Pricing, Shareholder shall deliver in trust to NEI's counsel: (a) all bills of
sale with warranty of title, assignments of Contracts and consents thereto,
assignments of Permits (to the extent assignable) and consents thereto,
assignments of Intellectual Property and other instruments deemed necessary or
desirable by NEI to vest title to the Assets in NEI; (b) resolutions duly
adopted by the Shareholder and the Board of Directors of the Company approving
this transaction; and (c) such other documents, certificates, instruments,
opinions, schedules, financial statements and assurances as NEI shall request
(collectively, the "Deliverables"). The Deliverables shall be held in trust by
NEI's counsel pending the Closing Date.
2.5 Closing. On the date specified by NEI by written notice to
Shareholder (the "Closing Date"), which shall be not later than 15 days after
the closing of the IPO, the Deliverables shall be delivered to NEI and the
exchange of the Assets for the Purchase Price in cash and NEI Stock shall be
consummated.
2.6 The Registration Statement. NEI shall use its best efforts to file
the Registration Statement with the SEC and to cause the Registration Statement
to become effective by September 30, 1998. If the Registration Statement has
not been declared effective by the SEC by December 31, 1998 or this transaction
has not Closed by January 22, 1999 for any reason other than failure of any of
the conditions in Article VII, then Shareholder and the Company may terminate
this Agreement by giving written notice to NEI not later than 15 days after such
date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER AND THE COMPANY
Shareholder and the Company jointly and severally make the following
representations and warranties and acknowledge that NEI has relied thereon in
entering into this Agreement. Each such representation and warranty is true and
correct on the date hereof and shall be true and correct on the Delivery Date
and the Closing Date, shall not be effected by any investigation conducted by
NEI, and shall survive for a period of eighteen months following the Closing
Date.
3.1 Validity.
3.1.1 This Agreement is, and any documents and instruments to be
executed and delivered by Shareholder or the Company pursuant hereto shall
be, legal, valid and binding obligations of Shareholder and/or the Company,
enforceable in accordance with their terms.
3.1.2 Neither the execution and delivery by Shareholder and the
Company of this Agreement nor the consummation of the transaction
contemplated hereby requires the consent
6
<PAGE>
or approval of, or the giving of notice by Shareholder or the Company to,
or the registration by Shareholder or the Company with, or the taking of
any other action by Shareholder or the Company in respect of, any federal,
state or local governmental authority or any third party.
3.1.3 The execution and delivery of this Agreement and the other
instruments contemplated hereby and the consummation of the transaction
contemplated hereby and thereby will not: (a) conflict with or violate any
provision of, or constitute a breach or default under, the Articles of
Incorporation or Bylaws of the Company, any law, regulation, order,
judgment or decree to which Shareholder or the Company is subject, or any
agreement, instrument or restriction of any kind to which Shareholder or
the Company is a party or by which either of them is bound; or (b) result
in the creation or imposition of any lien, claim, charge or encumbrance of
any nature whatsoever upon the Assets.
3.2 The Company. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has all requisite corporate power and authority to own its property and operate
its business as currently conducted. The Company is duly qualified and in good
standing in all states where the conduct of its business so requires. Except as
disclosed in SCHEDULE 3.2, the Company has no subsidiaries and does not directly
or indirectly control or own any interest in any corporation, partnership,
limited liability company, joint venture, proprietorship or other business
entity.
3.3 The Assets. All right, title and interest in the Assets is owned
solely by the Company and the Assets are and shall on the Closing Date be
transferred to NEI free and clear of all liens, claims, mortgages, security
interests, restrictions and encumbrances of any nature, other than liens in
connection with the Assumed Liabilities and acceptable to NEI. Neither the
Company nor Shareholder has entered into any agreement, commitment or
arrangement to transfer any of the Assets or any interest therein or in the
Company to any Person other than NEI (with the exception of the sale of
materials in the ordinary course of business) or to merge the Company with or
into any Person other than NEI.
3.4 Financial Statements. Attached as SCHEDULE 3.4 is the audited Balance
Sheet of the Company as of March 31, 1998 and the audited income statement for
the fiscal year then ended, together with all notes thereto and the report
thereon of the Company's independent auditors (the "Financial Statements"). The
Financial Statements present fairly the financial condition of the Company as of
the date of the Balance Sheet (the "Balance Sheet Date") and the results of its
operations for the fiscal year then ended and have been prepared in conformity
with GAAP. The Company has no material liabilities, obligations or financial
exposure of any nature, absolute or contingent, accrued or otherwise (including
but not limited to contract claims or penalties or settlements thereof,
liquidated damages, fines, assessments, union dues, unfunded pension
contributions, trade payables, indebtedness for borrowed money, Taxes, accrued
compensation or withholdings, negligence or contractor's liability to the extent
not covered by insurance, doubtful accounts receivable or doubtful retainages,
but excluding obligations incurred in the ordinary course of business between
the Balance Sheet Date and the Closing Date), which are not disclosed or
7
<PAGE>
adequately provided for in the Balance Sheet. Any business backlogs in
existence on the date hereof and disclosed to NEI are bona fide and were created
in the ordinary course of business. The percentages of completion of contracts
in progress as of the Balance Sheet Date and disclosed in the Balance Sheet are
accurate in all material respects in accordance with GAAP.
3.5 Absence of Certain Events. Since the Balance Sheet Date, except as
disclosed in SCHEDULE 3.5: (a) the business of the Company has been conducted
in the ordinary course; and (b) there has not been any Material Adverse Change,
nor any occurrence, circumstance or combination thereof which might be expected
to have a Material Adverse Effect before or after the Closing Date.
3.6 Title to and Condition of Assets.
3.6.1 The Company has good and marketable title to the Assets, free
and clear of any and all liens, claims, mortgages, security interests,
restrictions and encumbrances (except as disclosed in SCHEDULE 3.6.1). All
of the Assets are in the Company's possession and control.
3.6.2 The Equipment is and has been maintained in good operating
condition, ordinary wear and tear excepted. The Equipment includes all of
the equipment, vehicles (other than leased equipment and vehicles), tools
and machinery required for the conduct of the Company's operations as
currently conducted.
3.6.3 The Company has not entered into any agreement or commitment to
sell any of the Assets other than the sale of materials and supplies in the
ordinary course of business, nor (except as disclosed in SCHEDULE 3.6.1)
has the Company made any commitment or taken or failed to take any action
which would cause any lien to attach to any of the Assets.
3.7 Real Property. Except as disclosed in SCHEDULE 3.7, the Company owns
no real property.
3.8 Lease. The Company is a party to the Lease described in the notes to
the Financial Statements. With the exception of the Lease, the Company is not a
party to any real estate leases. The Lease is in full force and effect and
neither the Company nor the lessors have committed any default thereunder. The
Company is not subject to any increase in rentals or other costs in connection
with the Facility which is not provided for in the Lease.
3.9 Receivables. The accounts receivable of the Company as recorded on
the Balance Sheet have been created in the ordinary course of business,
represent valid and enforceable obligations owed to the Company (subject to any
bad debt reserve but not subject to any penalties, claims or retainages not
disclosed in the Balance Sheet) and have been recorded in accordance with GAAP
consistently applied.
8
<PAGE>
3.10 Contracts, Etc.
3.10.1 Attached as SCHEDULE 3.10.1 is a complete list of all written
or oral collective bargaining agreements, employment agreements and
agreements that impose severance or termination pay liabilities on the
Company (collectively, "Employment Agreements").
3.10.2 Attached as SCHEDULE 3.10.2 is a complete list of all written
or oral contracts and subcontracts for the performance of electrical
services, joint venture agreements, equipment and vehicle leases, licenses,
commitments and other agreements (other than Employment Agreements) to
which the Company is a party (the "Contracts"). Each Contract is in full
force and effect and constitutes the legal, valid and binding obligations
of all parties thereto. The Company is not in default and has not received
or given any notice of default, and to the best knowledge of Shareholder no
other party thereto is in default, under any Contract.
3.10.3 Attached as SCHEDULE 3.10.3 is a list of all bids submitted by
the Company and requests for proposal received by the Company as of the
date hereof.
3.10.4 Attached as SCHEDULE 3.10.4 is a list of all financial
institutions where the Company maintains accounts and the names of the
signatories on those accounts. Shareholder shall cooperate with NEI in
making any changes in signatories desired by NEI following the Closing
Date.
3.10.5 Attached as SCHEDULE 3.10.5 is a complete list of all
mechanics' liens filed by or against the Company which have not been
discharged as of the date hereof.
3.10.6 Attached as SCHEDULE 3.10.6 is a list of all existing disputes
under any of the Contracts. Except as disclosed in SCHEDULE 3.10.6, the
relationships of the Company with its customers, contractors and suppliers
are good commercial working relationships.
3.11 Material Customers and Suppliers.
3.11.1 Attached as SCHEDULE 3.11.1 is a list of the ten largest
customers of the Company (the "Material Customers") during the latest
fiscal year of the Company and the estimated volume of business conducted
by the Company with the Material Customers during such year.
3.11.2 Attached as SCHEDULE 3.11.2 is a list of the ten largest
suppliers to the Company's business (the "Material Suppliers") during the
twelve month period prior to the date hereof and the estimated volume of
business conducted by the Company with the Material Suppliers during such
period.
9
<PAGE>
3.11.3 The Company's relationships with the Material Customers and
Material Suppliers are good commercial working relationships, and
Shareholder has no reason to believe that any Material Customer or Material
Supplier intends to terminate its relationship with the Company before or
after the Closing Date.
3.12 Litigation and Workers' Compensation Liability.
3.12.1 Except as disclosed in SCHEDULE 3.12.1: (a) there are no
outstanding orders, judgments, injunctions, fines, penalties, citations,
awards or decrees of any court, arbitrator or governmental or regulatory
body involving the Company; and (b) there are no claims, suits, arbitration
proceedings, complaints or actions by any third party or legal,
administrative, arbitration or other proceedings or investigations by any
governmental agency, pending or threatened against the Company or
Shareholder. Copies of all letters provided to the Company's accountants
by counsel for the Company with respect to litigation or claims involving
the Company in the last five fiscal years have previously been delivered to
NEI.
3.12.2 Attached as SCHEDULE 3.12.2 is an accurate statement of all
workers' compensation claims and liabilities and the amount thereof
accrued, pending or threatened against the Company as of the date hereof.
3.13 Insurance and Performance Bonds.
3.13.1 Attached as SCHEDULE 3.13.1 is a complete list of all
insurance policies maintained by the Company, including the name of the
insurer, the amount and nature of the coverage, the amount of the premium
and the term of the policy. All such policies are in full force and effect
and the premiums therefor are currently paid.
3.13.2 Attached as SCHEDULE 3.13.2 is a complete list of all
performance bonds given by the Company, including the name of the issuer
and beneficiary and the amount of each bond. Except as disclosed in
SCHEDULE 3.13.2, no party has collected under or made any claim against any
performance bond of the Company or assessed any liquidated damage against
the Company during the last five years.
3.14 Intellectual Property.
3.14.1 Attached as SCHEDULE 3.14 is a list of all patents, patent
applications, trademarks, trademark registrations, trade names, service
marks, copyrights and other intellectual property owned or licensed by the
Company. Except as disclosed in SCHEDULE 3.14, the Company owns all right,
title and interest in all such intellectual property.
3.14.2 The Company has the right to use all data and information
(including confi dential information, trade secrets and know-how) used in
the conduct of the Business.
10
<PAGE>
3.14.3 To the best knowledge of Shareholder, the Company has not
infringed any patent, copyright, trademark, trade name, trade secret or
other proprietary or intellectual property right of any third party and has
not received notice of any such infringement.
3.14.4 All software license agreements to which the Company is a
party are in full force and effect, and the Company has the right to use
all computer software used in the Business.
3.15 Compliance with Laws. The Company is in compliance with all federal,
state and local laws, regulations and ordinances applicable to the conduct of
the Business. The Company has not solicited or accepted any improper payments
from contractors, developers or others, made or solicited any improper payments
to government officials or agencies, or improperly collaborated with other
contractors in connection with the bidding process.
3.16 Licenses, Permits and Authorizations. Attached as SCHEDULE 3.16 is a
complete list of all licenses, permits, franchises and other governmental or
trade authorizations and approvals (collectively, "Permits") necessary for the
Company to conduct the Business. All required Permits have been obtained by
the Company and are in full force and effect.
3.17 Taxes. With the exception of any Taxes subject to good faith dispute
and disclosed in SCHEDULE 3.17 attached hereto, all Taxes owed by the Company
have been fully paid or provided for and all Returns in connection therewith
have been timely filed.
3.18 Books and Records. The books and records of the Company: (a) are
accurate and complete in all respects; (b) have been maintained in accordance
with good business and industry practices on a basis consistent with prior
years; (c) state in reasonable detail and accurately and fairly reflect the
transactions and business of the Company; and (d) accurately and fairly reflect
the basis for the Financial Statements. The Company's minute book is complete
and reflects all corporate actions taken by the board of directors and
Shareholder of the Company.
3.19 Labor and Employment.
3.19.1 A complete list of all employees of the Company as of the most
recently available date has been delivered to NEI. Except as disclosed in
SCHEDULE 3.19: (a) the Company has not had during the last five years, nor
to the best knowledge of Shareholder is there currently threatened, any
walkout, strike, picketing, work stoppage, work slowdown, union grievance
or other similar occurrence relating to union activity or labor practices;
(b) the Company has not committed any unfair labor practices; (c) there is
no pending or, to the best knowledge of Shareholder, threatened charge or
complaint against the Company by the National Labor Relations Board or
comparable state or local agency; (d) the Company has fully complied with
all applicable laws, rules and regulations relating to the employment of
labor, including those relating to wages, hours, conditions of employment,
employee safety and health, collective bargaining and the payment and
withholding of taxes; (e) the Company
11
<PAGE>
has withheld all amounts required by law or agreement to be withheld from
the wages or salaries of its employees, and is not liable for any
arrearages of wages or employment taxes or penalties for failure to comply
with any of the foregoing; (f) there are no material controversies pending
or threatened between the Company and any of its employees or former
employees; and (g) the Company has not experienced a "plant closing" or
"mass layoff" within the meaning of the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. (S)(S)2101 et seq. ("WARN") within the last
five years.
3.19.2 The Company is an open-shop contractor. No union has sought
to organize the Company's workers or to hold union elections during the
last three years.
3.20 Environmental. Except as otherwise provided in SCHEDULE 3.20:
3.20.1 There has not been any "release" (as defined in 42 U.S.C. (S)
9601(22)) or threat of "release" in or about the Facility of any: (a)
"hazardous substances" (as defined in 42 U.S.C. (S) 9601(14)); (b)
"chemicals" subject to regulation under Title III of the Superfund
Amendments and Reauthorization Act (SARA) of 1986; (c) natural gas liquids,
liquefied natural gas or synthetic gas; (d) petroleum, petroleum-based
products, crude oil or any fraction; or (e) other hazardous or toxic
substances or wastes or materials, pollutants, contaminants or other
substances included under or regulated by any Environmental Laws (as
defined in Section 3.20.8) (collectively, "Hazardous Substances").
3.20.2 No part of the Facility is or has been used at any time prior
to the Closing Date as the site of any handling, treatment, storage,
refining or disposal of any Hazardous Substances and there are no Hazardous
Substances on or in the Facility, whether contained in barrels, tanks,
equipment (moveable or fixed) or other containers.
3.20.3 No part of the Facility is or has been at any time during the
Company's operation of the same, a "facility" as defined in 42 U.S.C. (S)
9601(9)(B).
3.20.4 There are not now, nor has there been at any time during the
Company's operation thereof, any underground storage tanks located in or
about the Facility.
3.20.5 No asbestos or asbestos-containing materials have been
installed, used, incorporated into or disposed of in or about the Facility.
3.20.6 No polychlorinated biphenyls are located in or about the
Facility.
3.20.7 Accurate and complete copies of any and all environmental
investigations, studies, audits, tests, reviews and analyses in the
possession of Shareholder or the Company and relating to the Facility have
been delivered to NEI.
12
<PAGE>
3.20.8 There are no conditions in or about the Facility which violate
any federal, state or local law, ordinance, rule, regulation or agreement
pertaining to: (a) environmental protection, regulation, contamination or
clean-up; (b) underground storage tanks; (c) asbestos or asbestos-
containing materials; or (d) the handling, treatment, storage, use or
disposal of Hazardous Substances, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the Solid
Waste Disposal Act, Department of Transportation regulations regarding the
transportation of Hazardous Substances or other applicable materials, state
lien or superlien or environmental protection, regulation, contamination or
clean-up statutes, or any statute or rule of law providing common law
remedies relating to Hazardous Substances (collectively, "Environmental
Laws"). The Facility and the Company's use of the same and all business
and electrical contracting practices of the Company comply with all
Environmental Laws.
3.20.9 No litigation, claims or demands have been brought or
threatened against the Company by any governmental authority or private
claimant in connection with any Hazardous Substances or alleging any
violation of Environmental Laws or any injuries suffered or incurred by
reason of any matter referred to in this Section 3.20.
3.20.10 There are no liens under Environmental Laws on the Facility,
and no governmental actions have been taken or are in process which could
subject the Facility to such liens.
3.20.11 All disposal practices relating to Hazardous Substances have
been accomplished in accordance with all applicable laws, rules,
regulations and ordinances.
3.21 ERISA.
3.21.1 Attached as SCHEDULE 3.21.1 is a list of all "employee benefit
plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and all other employee benefit
arrangements, policies or payroll practices, including retirement, savings,
disability, medical, dental, health and life insurance plans, death benefit
plans, group insurance, profit sharing, deferred compensation, bonus, stock
option, stock bonus or other stock incentive plans, vacation pay, severance
or termination pay policies, "cafeteria" or "flexible benefit" plans under
Section 125 of the Internal Revenue Code of 1986, as amended (the "Code"),
or other employee benefit plans, arrangements, contracts, agreements,
policies or commitments, whether formal or informal, written or oral, that
provide benefits for employees or former employees of the Company or for
which the Company could have any actual or contingent liability
(collectively, "Benefit Plans"). The Company has made available to NEI a
copy of each Benefit Plan and any related funding agreements, all of which
are legally valid and binding and in full force and effect, and there are
no defaults thereunder. The Company has also made available to NEI copies
of the summary plan description for each Benefit Plan, the most recent
annual report and actuarial
13
<PAGE>
report for each Benefit Plan, if any, and the Internal Revenue Service
determination letter, if any, for each Benefit Plan and each amendment
thereto.
3.21.2 The Benefit Plans have been operated and administered by the
Company in compliance with all applicable laws, including ERISA and the
Code, and all reports required by any government agency with respect to
each Benefit Plan have been timely filed. With respect to the Benefit
Plans, no event has occurred which would subject the Company to liability
(except for benefits, claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other applicable statute,
order or governmental rule or regulation. With respect to the Benefit
Plans, there has been no prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code, and there has been no
action, suit, grievance, arbitration or other claim with respect to the
administration or investment of assets of the Benefit Plans (other than
routine claims for benefits made in the ordinary course) pending, or to the
best knowledge of Shareholder, threatened against the Company. All
contributions required to be made to each Benefit Plan under its terms,
ERISA or other applicable law have been timely made. The Company has no
material unfunded liabilities or obligations under any of the Benefit
Plans.
3.21.3 Except as disclosed in SCHEDULE 3.21.3, neither the Company
nor any member of its "controlled group" under Section 414 of the Code
contributes to a "multiemployer plan," as defined in Section 414(f) of the
Code or Section 3(37) of ERISA. With respect to each multiemployer plan in
which the Company or any member of its controlled group participates or has
participated, neither the Company nor any member of the controlled group:
(a) has withdrawn, partially withdrawn, or received notice of any claim or
demand for withdrawal liability or partial withdrawal liability; (b) has
received notice that any such plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, or that any such plan is or may become
insolvent; (c) has failed to make any required contributions; or (d) has
incurred any withdrawal liability by reason of a sale of assets pursuant to
Section 4204 of ERISA.
3.21.4 With respect to each Benefit Plan which is subject to Title IV
of ERISA: (a) no such Benefit Plan has terminated, or has filed a notice of
intent to terminate in the last six years; (b) there is no outstanding
liability under Section 4062 of ERISA; (c) neither the Company nor any
member of its controlled group that is a substantial employer has made a
withdrawal (or has been deemed to do so under Section 4062(e) of ERISA)
that could result in liability under Section 4063 of ERISA or otherwise;
(d) the Pension Benefit Guaranty Corporation has not instituted proceedings
to terminate such Benefit Plan; and (e) no reportable event, as described
in Section 4043 of ERISA, has occurred.
3.21.5 Except as disclosed in SCHEDULE 3.21.3 no Benefit Plan is a
"multiple employer plan" within the meaning of Section 4063 or 4064 of
ERISA.
14
<PAGE>
3.21.6 No current or former employee of the Company is or may become
entitled to post-employment benefits of any kind other than coverage
mandated by Section 4980B of the Code.
3.21.7 Each Benefit Plan of the Company or member of its controlled
group has been operated at all times in substantial compliance with the
provisions of COBRA and any applicable similar state law.
3.22 Guaranteed Obligations. SCHEDULE 3.22 contains a complete description
of all liabilities and obligations of the Company which have been guaranteed by
Shareholder as of the Closing Date (the "Guaranteed Obligations").
3.23 Disclosure.
3.23.1 No representation or warranty of Shareholder or the Company in
this Agreement or any other document delivered pursuant hereto or any
statement, document, certificate or exhibit furnished or to be furnished by
Shareholder or the Company pursuant to this Agreement or in connection with
the transactions contemplated hereby (including but not limited to the
Financial Statements and the Director and Officer Questionnaire and any
other questionnaires or representation certificates furnished by the
Company or Shareholder) contains or will contain any untrue statement of
material fact or omits or will omit a material fact necessary to make the
statements contained herein or therein not misleading. To the best
knowledge of Shareholder, there is no fact which Shareholder has not
disclosed in writing to NEI which has or may have a Material Adverse
Effect; provided, the foregoing does not apply to statements contained in
or omitted from any such documents made or omitted in reliance upon
information furnished in writing by NEI.
3.23.2 If, during the period of time in which a prospectus is
required to be delivered in connection with the IPO, the Company or
Shareholder becomes aware of any fact or circumstance which would affect in
any material respect the accuracy of a representation or warranty of the
Company or Shareholder in this Agreement or a representation or disclosure
with respect to the Company or Shareholder in the Registration Statement or
Prospectus, the Company and Shareholder shall immediately give notice of
such fact or circumstance to NEI. However, such notification shall not
relieve either the Company or Shareholder from their respective obligations
under this Agreement, and the truth and accuracy of all representations and
warranties of the Company and Shareholder as of the date of this Agreement
and as of the Delivery Date and the Closing Date shall be a precondition to
the consummation of this transaction.
3.24 Acknowledgment. Shareholder acknowledges and agrees: (a) that there
exists no firm commitment, binding agreement or promise of any kind, express or
implied, that a Registration Statement will become effective or that the IPO
will occur; (b) that neither NEI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the Company,
15
<PAGE>
Shareholder or any other Person for any failure of the Registration Statement to
become effective or any failure of the IPO to occur at a particular price or
within a particular range of prices or to occur at all; (c) that NEI has not
committed to pay any dividends on the NEI Stock and that, in all likelihood, no
dividends will be paid on the NEI Stock in the foreseeable future; (d) that if
the Registration Statement becomes effective there is no guaranty the NEI Stock
will appreciate or not depreciate in value, that an active market will exist for
the NEI Stock, or that Shareholder will be able in the future to sell his NEI
Stock at a price equal to or greater than the public offering price per share in
the IPO; and (e) that the decision of Shareholder to enter into this Agreement
has been made independent of, and without reliance upon, any statements,
opinions, communications or due diligence investigations made or performed by
any prospective Underwriter.
3.25 Interest in Customers and Suppliers and Related Party Transactions.
Except in connection with the Lease or as described in SCHEDULE 3.25, neither
Shareholder nor any officer, director or Affiliate of the Company or of
Shareholder: (a) possesses, directly or indirectly, any financial interest in
or is a director, officer, employee or Affiliate of any corporation, firm,
association or business organization that is a customer, supplier or competitor
of the Company or is engaged in any other business relationship with the
Company; or (b) is or will be a party to any agreement or arrangement that
involves receipt by such person of compensation or property from the Company
other than through a customary employment relationship.
3.26 Registration Statement. To the best of Shareholder's knowledge, none
of the information (including financial information) supplied or to be supplied
by the Company or Shareholder specifically for inclusion in the Registration
Statement contains or will contain any untrue statement of material fact
concerning the Company or Shareholder or omits or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein concerning the Company or Shareholder, in light of the
circumstances under which they are made, not misleading. The Company and
Shareholder shall have the right to review and approve in advance any statements
made about the Company and Shareholder in the Registration Statement.
3.27 Brokers and Finders. Neither Shareholder nor the Company has
retained any broker or finder in connection with this transaction, and neither
NEI nor any subsidiary shall become liable for the fees of any brokers or
finders retained by the Company or Shareholder as a result of this transaction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEI
NEI makes the following representations and warranties and
acknowledges that Shareholder and the Company have relied thereon in entering
into this Agreement. Each such representation and warranty is true and correct
on the date hereof and shall be true and correct on
16
<PAGE>
the Delivery Date and the Closing Date, shall not be affected by any
investigation conducted by Shareholder, and shall survive for a period of
eighteen months following the Closing Date.
4.1 Corporate. NEI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. NEI has the requisite
power and authority to enter into this Agreement and acquire the Assets.
4.2 Authorization. This Agreement has been duly authorized, executed and
delivered by NEI and constitutes the legal, valid and binding obligation of NEI
enforceable in accordance with its terms.
4.3 Capital Stock of NEI. The authorized capital stock of NEI shall
conform to the description thereof in the Registration Statement and shall be
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind other than as
described in the Registration Statement. All of the issued and outstanding
shares of capital stock of NEI have been duly authorized and validly issued, are
fully paid and nonassessable and were offered, issued, sold and delivered by NEI
in compliance with all applicable federal and state securities laws.
4.4 Transactions in Capital Stock. Except for the Other Agreements and
except as described in the Registration Statement or in connection with any
future acquisitions or mergers which may be conducted by NEI or its
subsidiaries: (a) there are no options, warrants, calls, conversion rights or
commitments of any kind which obligate NEI to issue any of its authorized but
unissued capital stock; and (b) NEI has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of its securities or any interest
therein or to pay any dividend or make any distribution in respect thereof.
4.5 Financial Statements. The Financial Statements of NEI and its
subsidiaries to be included in the Registration Statement (the "NEI Financial
Statements") will have been prepared in accordance with GAAP and will present
fairly the financial position of NEI and its subsidiaries as of the dates
thereof and the results of operations of NEI and its subsidiaries for the
periods then ended.
4.6 Liabilities And Obligations. Except as set forth in the Registration
Statement, NEI has no material liabilities or obligations of any kind, other
than liabilities incurred in the ordinary course of business or as contemplated
by this Agreement or the Other Agreements or in connection with other
acquisitions or mergers contemplated by NEI and the fees and expenses incurred
or to be incurred in connection with the transactions contemplated hereby and
thereby.
4.7 Conformity With Law; Litigation. Except as disclosed in the
Registration Statement, NEI is not in violation of any law or regulation or any
order of any court or federal, state, municipal or other governmental agency
having jurisdiction over it and there are no claims, actions, suits or
proceedings pending or, to the best knowledge of NEI, threatened against or
affecting NEI at law or in equity or before or by any federal, state, municipal
or other governmental agency and no
17
<PAGE>
notice of any such claim, action, suit or proceeding, whether pending or
threatened, has been received. NEI has conducted its business in material
compliance with the requirements of applicable law and regulation.
Notwithstanding the foregoing, NEI makes no representation or warranty to
Shareholder or the Company regarding any Other Founding Company.
4.8 No Violations.
4.8.1 NEI is not in violation of the NEI Charter Documents or, to the
best knowledge of NEI, any lease, instrument, agreement, license or permit
to which NEI is a party or by which NEI or any of its assets are bound.
4.8.2 The execution and delivery of this Agreement by NEI do not
conflict with or result in a breach of any provision of, or constitute a
default under any of the terms or conditions of: (a) the NEI Charter
Documents; (b) any law, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable
to NEI or any of its assets; or (c) any other contract to which NEI is a
party.
4.8.3 Except for: (a) the filings with the SEC pursuant to the 1933
Act in connection with the IPO, the purchase and sale of the Assets and the
acquisition or merger of the Other Founding Companies; (b) the declaration
of effectiveness of the Registration Statement by the SEC and filings with
various state blue sky authorities; and (c) any filings required under the
Hart-Scott Act in connection with the acquisition or merger of the Other
Founding Companies, the NEI Plan of Organization does not require notice
to, registration or filing with or the consent or approval of any
governmental agency or other third party.
4.9 NEI Stock. At the time of its issuance and delivery, the NEI Stock
will constitute duly authorized and validly issued shares of NEI common stock,
fully paid and nonassessable, and with the exception of restrictions upon resale
set forth in Articles XII and XIII hereof, will be identical in all material
respects (not including the form of certificate upon which it is printed or the
presence or absence of a CUSIP number on any such certificate) to any NEI common
stock issued and outstanding as of the date hereof. The NEI Stock shall at the
time of such issuance and delivery be free and clear of any liens, claims or
encumbrances, except as provided in Articles XII and XIII. The NEI Stock shall
be issued to the Company or Shareholder in accordance with Shareholder's
instructions, with Shareholder to bear all Taxes arising from issuance or
transfer of the NEI Stock to Shareholder.
4.10 No Side Agreements. NEI has not entered into and will not enter into
any agreement with any of the Other Founding Companies or their shareholders,
other than the Other Agreements and the agreements described in the Registration
Statement, including the employment agreements, leases and Indemnification
Agreements referred to therein or entered into in connection with the
transactions contemplated thereby.
18
<PAGE>
4.11 Disclosure. The Registration Statement and Prospectus will not as of
their respective dates contain an untrue statement of material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, that the
foregoing does not apply to any statements contained in or omitted from the
Registration Statement or Prospectus in reliance upon information furnished by
the Company or Shareholder or by the Other Founding Companies or their
shareholders for inclusion in the Registration Statement.
4.12 Other Agreements. The Other Agreements will have been duly
authorized, executed and delivered by NEI and will constitute the legal, valid
and binding obligations of NEI and its subsidiaries enforceable against NEI and
such subsidiaries in accordance with their respective terms.
4.13 Registration Statement. The Registration Statement will comply as to
form in all material respects with the applicable requirements of the 1933 Act
and the regulations thereunder, provided that the foregoing does not apply to
any information that the Company or Shareholder or the Other Founding Companies
or their shareholders furnish to NEI specifically for inclusion in the
Registration Statement.
ARTICLE V
ACTIONS BY SHAREHOLDER AND THE COMPANY PENDING CLOSING
From the date hereof through the Closing Date:
5.1 Access. Shareholder and the Company shall permit NEI and its
representatives and the Underwriters and their representatives to perform such
inspections, investigations and due diligence with respect to the Company, its
assets, business and financial condition, as NEI or the Underwriters deem
advisable. Shareholder and the Company shall provide NEI and its
representatives and the Underwriters and their representatives full access to
and an opportunity to inspect all properties, facilities, books, records,
accounts, contracts and documents of the Company, and shall make themselves,
their counsel and the officers and employees of the Company available to NEI and
the Underwriters and otherwise cooperate with NEI's and the Underwriters' due
diligence investigations. Shareholder and the Company shall furnish NEI and its
representatives and the Underwriters and their representatives all information
with respect to the business and affairs of the Company as NEI or the
Underwriters reasonably request. Shareholder and the Company shall permit NEI
and the Underwriters to have access to other third parties, including
contractors, suppliers and bankers with which the Company does business, as
reasonably required for verification of any information obtained by NEI or the
Underwriters during their due diligence investigation. Shareholder and the
Company shall permit NEI to conduct appraisals of the Company's equipment and/or
real estate at NEI's expense. NEI will coordinate such due diligence
investigations with Shareholder to avoid disruption or undue interference with
the operations of the Company. Shareholder shall deliver to NEI copies of all
environmental audits, risk assessments and other
19
<PAGE>
investigations performed with respect to the Company or its assets at any time
prior to the Closing Date. Notwithstanding the foregoing, the representations
and warranties in Article III shall not be affected by any due diligence
investigation conducted by NEI, the Underwriters or their respective
representatives.
5.2 Carry on in Ordinary Course. The Company shall carry on its business
in the ordinary course and substantially in the manner as heretofore conducted.
The Company shall not institute any methods of purchase, sale, bidding,
management, accounting or operation which are inconsistent with past practice or
with accepted standards in the industry without the prior written consent of
NEI. The Company shall not sell or transfer or enter into any contract or
commitment to sell or transfer any of the Assets (other than inventory or as
necessary to perform contracts in the ordinary course) or engage in any
transaction or incur any indebtedness or obligations outside the ordinary course
of business without the prior written consent of NEI. The Company shall keep
all performance bonds and insurance policies in full force and effect.
5.3 General Increases Limited. Without the prior written consent of NEI
or as required under existing employment agreements or to meet commitments
previously made and disclosed to NEI, the Company shall not: (a) increase or
decrease the compensation or benefits of its officers or employees; or (b) pay
or commit to pay any bonuses or commissions to officers.
5.4 Preservation of Organization. Shareholder shall use his best efforts
to preserve the Company's business organization intact, to keep available to NEI
the present employees of the Business and to preserve for NEI the present
relationships of the Company with customers (including Material Customers),
contractors and suppliers (including Material Suppliers) and others doing
business with it. The Company shall not amend its Articles of Incorporation or
Bylaws or make any changes in its authorized or issued capital stock. The
Company shall not issue to Shareholder or any other Person any shares of common
stock or other securities or grant to Shareholder or other Person any right,
option or warrant to purchase any common stock or other securities of the
Company or securities convertible into the same.
5.5 No Default. The Company shall perform all obligations under and shall
not default under any Employment Agreement, Contract, commitment, obligation or
indebtedness.
5.6 Dividends. The Company shall not declare or pay any dividend or make
any distribution, directly or indirectly, in respect of the Company Stock, nor
redeem any of the Company Stock, without the written consent of NEI.
5.7 Voting Trusts or Other Arrangements. Shareholder shall not enter into
any voting trust, voting agreement or other arrangement with respect to the
Company Stock or the election of directors of the Company.
20
<PAGE>
5.8 Interim Financial and Borrowing Statements. Shareholder shall deliver
to NEI such interim balance sheets and operating statements and statements of
Company borrowings at such intervals as NEI reasonably requests.
5.9 Bids and Contracts. The Company shall provide NEI with a copy of all
bids submitted by and contracts awarded to or entered into by the Company
between the date of this Agreement and the Closing Date.
5.10 Cash Withdrawals. No cash shall be withdrawn from the accounts of
the Company or withheld from its revenues, except as required for: (a) the
conduct of the Business in the ordinary course; and (b) the payment of
obligations incurred in the ordinary course.
5.11 Environmental Audits. Shareholder and the Company shall, and shall
cause the Company's landlords to, permit NEI to conduct Phase I environmental
assessments of the Facility at NEI's expense. If NEI reasonably determines that
a Phase II environmental assessment or any environmental remediation is
necessary or advisable with respect to the Facility, such assessment and/or
remediation shall be completed as soon as practicable at Shareholder's expense.
5.12 No Transfer. Shareholder shall not transfer to any Person any of the
Company Stock, nor grant to any Person or entity any right, title or interest in
or right or option to acquire any Company Stock.
5.13 No Shop. Neither Shareholder, nor the Company, nor any agent,
officer, director, trustee or representative of Shareholder or the Company
shall, during the period commencing on the date of this Agreement and ending on
the earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly solicit or initiate the
submission of proposals or offers from any Person for, participate in any
discussions pertaining to, furnish any information to any Person other than NEI
or its authorized agents in connection with, or enter into any transaction,
agreement, understanding, arrangement or commitment in connection with: (a) any
sale or acquisition of all or a material amount of the Company Stock or all or a
material amount of the Assets; or (b) any merger, consolidation, joint venture
(except joint ventures entered into in the ordinary course of business in
connection with the provision of electrical contracting services and disclosed
in writing to NEI) or business combination of the Company with any other entity.
5.14 (Intentionally Omitted).
5.15 Notification of Certain Matters. Shareholder and the Company shall
give prompt notice to NEI upon becoming aware of any Material Adverse Change,
any event or condition likely to have a Material Adverse Effect, or any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or Shareholder contained herein to be
untrue or inaccurate in any material respect on or prior to the Closing Date.
NEI shall give prompt notice to Shareholder of any event the occurrence or non-
occurrence of which would be likely
21
<PAGE>
to cause any representation or warranty of NEI contained herein to be untrue or
inaccurate in any material respect on or prior to the Closing Date.
5.16 Cooperation in Preparation of Registration Statement. The Company
and Shareholder shall furnish or cause to be furnished to NEI and the
Underwriters all information concerning the Company and Shareholder required for
inclusion in, and will cooperate with NEI and the Underwriters in the
preparation of, the Registration Statement and Prospectus (including, to the
extent required, audited and unaudited historical and pro forma financial
statements prepared in accordance with GAAP, in form suitable for inclusion in
the Registration Statement). Shareholder shall execute and deliver such
documents, including questionnaires, representation certificates and lock-up
agreements, deemed advisable by NEI or the Underwriters in connection with the
IPO. The disclosure of information with respect to the Company and Shareholder
in the Registration Statement and in the conduct of the IPO shall not constitute
a violation of any confidentiality agreement, including Section 11.2 of this
Agreement, among the parties hereto. All information and disclosures provided
by Shareholder or the Company in accordance with this Section 5.16 shall be
subject to the provisions of Sections 3.2.3, 3.2.4 and 3.2.6 hereof. The
Company and Shareholder agree promptly to advise NEI if at any time during the
period in which a prospectus relating to the IPO is required to be delivered
under the 1933 Act, they discover that any information contained in the
Prospectus concerning the Company or Shareholder becomes inaccurate or
incomplete in any material respect, and to provide the information needed to
correct any such inaccuracy.
5.17 Authorized Capital. Prior to the Closing Date, NEI shall maintain
its authorized capital stock as set forth in the Registration Statement, except
for stock splits, changes made in response to comments made by the SEC or
requirements of any exchange or automated trading system for which application
is made to list the NEI Stock.
ARTICLE VI
CONDITIONS PRECEDENT TO SHAREHOLDER'S OBLIGATIONS
Each and every obligation of Shareholder to be performed on the
Closing Date shall be subject to the satisfaction prior to or on the Closing
Date of the following conditions, unless waived in writing by Shareholder:
6.1 Representations and Warranties True. NEI's representations and
warranties in this Agreement shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had been
given on the Closing Date, and Shareholder shall receive a certificate from an
officer of NEI to that effect.
6.2 Compliance with Agreement. NEI shall have complied with all its
obligations under this Agreement which are to be performed or complied with by
it prior to or on the Closing Date, and Shareholder shall receive a certificate
from an officer of NEI to that effect.
22
<PAGE>
6.3 No Litigation. No action or proceeding before any court or
governmental agency shall have been instituted or threatened to restrain the
purchase and sale of the Assets or the IPO.
6.4 Employment Agreements. Ralph Pangonis, Sr., Robert Pangonis and Ralph
Pangonis, Jr. shall have entered into employment and noncompetition agreements
mutually acceptable to each such Person and NEI.
6.5 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
ARTICLE VII
CONDITIONS PRECEDENT TO NEI'S OBLIGATIONS
Each and every obligation of NEI to be performed on the Closing Date
shall be subject to the satisfaction prior to or on the Closing Date of the
following conditions, unless waived in writing by NEI:
7.1 Representations and Warranties True. The representations and
warranties of Shareholder and the Company in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been given on the Closing Date, and NEI shall
receive a certificate from Shareholder to that effect.
7.2 Compliance with Agreement. Shareholder and the Company shall have
complied with all of their obligations under this Agreement which are to be
performed or complied with by them prior to or on the Closing Date, and NEI
shall receive a certificate from Shareholder to that effect.
7.3 Execution and Deliverables. Shareholder and the Company shall have
executed counterparts of this Agreement and all Deliverables shall have been
delivered to NEI.
7.4 Corporate Documents. Shareholder shall have delivered to NEI: (a)
certified copies of the Articles of Incorporation and Bylaws of the Company; and
(b) certificates from the proper state officials evidencing the good standing of
the Company in the State of Incorporation and all other states in which the
Company is qualified to do business.
7.5 Due Diligence. NEI shall be satisfied with the results of its due
diligence investigation, including but not limited to the following matters:
7.5.1 NEI shall have completed and shall be satisfied with the
results of the inspections, investigations and due diligence referred to in
Section 5.1, including but not
23
<PAGE>
limited to: (a) verification of the quality, quantity and valuation of the
Company's assets and liabilities; (b) verification of Shareholder's factual
representations regarding the Company's business operations; (c)
verification of the Company's historical and expected operating
performance, as reflected in the Financial Statements and other information
provided to NEI; and (d) approval of the Financial Statements.
7.5.2 NEI shall have reviewed and approved all labor contracts
relating to the Company and shall be satisfied with the Company's labor
relations.
7.5.3 NEI shall be satisfied that the Company has clear and
marketable title to the Assets, free and clear of all liens, claims,
mortgages, restrictions and encumbrances other than in connection with the
Assumed Liabilities.
7.5.4 NEI shall be satisfied that the transaction contemplated by
this Agreement will not cause a breach or termination of any Contract
materially beneficial to the Business.
7.5.5 NEI shall have completed and shall be satisfied with the
results of the Phase I environmental assessments and any Phase II
environmental assessments contemplated in Section 5.11.
7.6 Employment Agreements. NEI shall have entered into employment
agreements acceptable to NEI with Ralph Pangonis, Sr., Robert Pangonis and Ralph
Pangonis, Jr. and shall have made such other arrangements with respect to the
Company's key employees as NEI deems advisable.
7.7 No Material Adverse Change. There shall not have been any Material
Adverse Change from the Balance Sheet Date to the Closing Date, nor any event or
condition which NEI believes is likely to have a Material Adverse Effect.
7.8 Opinion of Counsel for Shareholder. NEI shall have received from
Shareholder's counsel a written opinion, dated as of the Closing Date,
addressed to NEI and satisfactory to counsel for NEI in form and substance.
7.9 Approval. The transaction contemplated hereby shall have been
approved by Shareholder and the Board of Directors of the Company.
7.10 No Litigation. No action or proceeding before any court or
governmental agency shall have been instituted or threatened to restrain or
prohibit the purchase and sale of the Assets or the IPO.
7.11 Shareholder's Release. Shareholder shall have delivered to NEI an
instrument dated the Closing Date releasing the Company and NEI from: (a) any
and all claims of Shareholder against the Company and NEI; and (b) obligations
of the Company and NEI to Shareholder, except for: (i)
24
<PAGE>
continuing obligations to Shareholder relating to his employment; and (ii)
obligations arising under this Agreement or the transactions contemplated
hereby.
7.12 Termination of Related Party Agreements. Except for the Lease and as
described in SCHEDULE 7.12, all existing agreements between the Company and
Shareholder or his Affiliates shall have been terminated on or before the
Closing Date.
7.13 Other Founding Companies. NEI shall have entered into the Other
Agreements with the Other Founding Companies and closing shall have occurred
thereunder, with closing of this Agreement and the Other Agreements deemed to
have occurred simultaneously.
7.14 FIRPTA Certificate. If requested by NEI in connection with the
Lease, Shareholder shall have delivered to NEI a certificate to the effect that
he is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury
regulations.
7.15 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
7.16 Minimum Net Book Value. The net book value of the Company as of the
Closing Date, in accordance with an unaudited balance sheet of the Company
prepared in accordance with GAAP and acceptable to NEI, shall be not less than
$400,000.
ARTICLE VIII
COVENANTS
8.1 Release From Guarantees; Repayment of Certain Obligations. NEI shall
use reasonable efforts to have Shareholder released from any and all guarantees
of the Assumed Liabilities. In the event NEI cannot obtain such releases from
the lenders of any such guaranteed indebtedness within 120 days following the
Closing Date, NEI shall promptly pay off or otherwise refinance or retire such
indebtedness such that Shareholder's personal liability shall be released. NEI
will indemnify Shareholder against any loss or damage suffered during such 120
day period as a result of such personal guarantees.
8.2 Preparation And Filing of Tax Returns.
8.2.1 The Company, if possible, or otherwise Shareholder shall file
or cause to be filed all federal, state and local income Tax Returns for
the Company for all taxable periods prior to and after the Closing Date,
and shall permit NEI to review prior to filing the Company's Tax Returns
for the fiscal year in which the Closing Date occurs. Shareholder shall
pay or cause to be paid all Tax liabilities based on taxable income of the
Company.
25
<PAGE>
8.2.2 If applicable, each of the Company, NEI and Shareholder shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and will treat this
transaction as a tax-free contribution under Section 351(a) of the Code
subject to gain, if any, recognized on the receipt or constructive receipt
of cash or other property under Section 351(b) of the Code. Shareholder
shall pay or cause to be paid all Taxes (including federal, state, and
local income Tax and transfer Tax) arising from any taxable gain on the
sale of the Assets effected hereby.
8.2.3 The Company and/or Shareholder shall file IRS Form 8594 and/or
any other appropriate Tax forms under Section 1060 of the Internal Revenue
Code reflecting the purchase price allocation elected by NEI.
8.3 Further Assurances.
8.3.1 Shareholder will use his best efforts to: (a) obtain any
consents by third parties or governmental authorities required or deemed
desirable by NEI in connection with the consummation of the transaction
contemplated hereby and NEI's acquisition of the Assets; (b) fulfill or
cause to be fulfilled each of the conditions precedent to NEI's
obligations recited in Article VII hereof on or prior to the Closing Date;
and (c) perform each of the acts and observe each of the covenants required
to be performed or observed by Shareholder and the Company at or prior to
the Closing Date.
8.3.2 Shareholder and the Company shall execute and deliver or cause
to be executed and delivered such further instruments and take such other
action as NEI deems necessary or desirable to remedy any breach of
representation or warranty made by Shareholder or the Company herein or to
more effectively carry out the transfer of the Assets and the consummation
of the transaction contemplated by this Agreement.
8.3.3 NEI shall execute and deliver or cause to be executed and
delivered such further instruments and take such other action as
Shareholder deems necessary or desirable to remedy any breach of
representation or warranty made by NEI herein or to more effectively carry
out the transfer of the NEI Stock and the consummation of the transaction
contemplated by this Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Shareholder. Shareholder agrees to indemnify and
hold NEI, its officers, directors and representatives harmless from any and all
loss, cost, claim, damage, fine, penalty, expense (including reasonable
attorneys' fees), liability and cause of action arising from: (a) any breach of
the representations and warranties of Shareholder or the Company contained
herein or
26
<PAGE>
in any Schedules, certificates, questionnaires or other instruments delivered in
connection herewith; (b) any breach of this Agreement by Shareholder or the
Company; (c) any liability under the 1933 Act, the 1934 Act or other federal or
state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of material fact relating
to the Company or Shareholder which was based upon information provided to NEI
or its counsel or the Underwriters by the Company or Shareholder and contained
in the Registration Statement or Prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company or Shareholder required to be stated therein or necessary to make the
statements therein not misleading; provided, that such indemnity shall not inure
to the benefit of NEI to the extent such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and Shareholder provided written corrected information to
NEI for inclusion in the final Prospectus and such information was not so
included; (d) any default by the Company under any performance bond occurring
prior to the Closing Date; (e) any liability or obligation of the Company other
than the Assumed Liabilities, or the Company's breach of any agreements entered
into in connection with the Assumed Liabilities; (f) any violation by the
Company of any federal, state or local law, regulation or ordinance (including
but not limited to Environmental Laws or laws governing the employment of labor
or employee safety and health) occurring prior to the Closing Date; (g) any
breach of any Employment Agreement or Contract or the terms of any Permit
occurring prior to the Closing Date; (h) any litigation or claim arising from
the conduct of the Business prior to the Closing Date and not disclosed in
SCHEDULE 3.12.1; (i) any uninsured workers' compensation claims or liabilities
arising prior to the Closing Date and not disclosed in SCHEDULE 3.12.2; and (j)
all Taxes owed by the Company for periods prior to or after the Closing Date and
all Taxes owed by Shareholder or the Company in connection with this
transaction.
9.2 Indemnification by NEI. NEI agrees to indemnify and hold Shareholder
harmless from any loss, cost, claim, damage, fine, penalty, expense (including
reasonable attorneys' fees), liability and cause of action arising from: (a)
any breach by NEI of its representations and warranties contained herein or in
any Schedules or certificates furnished by NEI; (b) any breach by NEI of this
Agreement; or (c) any liability under the 1933 Act, the 1934 Act or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of material fact
relating to NEI or any of the Other Founding Companies contained in any
preliminary prospectus, the Registration Statement or Prospectus or arising out
of or based upon any omission or alleged omission to state therein a material
fact relating to NEI or any of the Other Founding Companies required to be
stated therein or necessary to make the statements therein not misleading,
except to the extent such statement or omission relates to the Company or
Shareholder.
9.3 Procedure. If any party entitled to indemnification hereunder
(whether individually or collectively, the "Indemnified Party") receives notice
of any claim or the commencement of any action or proceeding with respect to
which any other party (whether individually or collectively, the "Indemnifying
Party") is obligated to indemnify pursuant to Section 9.1 or 9.2, the
Indemnified Party shall promptly give the Indemnifying Party written notice
thereof. Such notice shall describe the
27
<PAGE>
claim in reasonable detail and shall indicate the amount (estimated if
necessary) of the loss that has been or may be sustained by the Indemnified
Party in connection therewith. The Indemnifying Party may elect to compromise
or defend, at the Indemnifying Party's own expense and by the Indemnifying
Party's own counsel, any such matter involving the asserted liability of the
Indemnified Party. If the Indemnifying Party elects to compromise or defend
such asserted liability, the Indemnifying Party shall within 30 days (or sooner,
if the nature of the asserted liability so requires) notify the Indemnified
Party of its intent to do so, and the Indemnified Party shall cooperate, at the
expense of the Indemnifying Party, in the compromise of, or defense against, any
such asserted liability. If: (a) the Indemnifying Party does not elect to
compromise or defend against the asserted liability; (b) the Indemnified Party
reasonably determines that the Indemnifying Party's counsel has a conflict of
interest with the Indemnified Party or that the Indemnifying Party or its
counsel is not diligently defending the claim; or (c) the Indemnifying Party
fails to notify the Indemnified Party of its election to compromise or defend
such asserted liability as provided herein, then the Indemnified Party may, if
acting in accordance with its good faith business judgment, pay, compromise or
defend such asserted liability at the Indemnifying Party's expense, and such
settlement shall be binding on the Indemnifying Party for purposes of this
Article IX. Notwithstanding the foregoing, neither the Indemnifying Party nor
the Indemnified Party may settle or compromise any claim over the reasonable
good faith objection of the other. In any event, the Indemnified Party and the
Indemnifying Party may each participate, at its own expense, in the defense
against the claim. If the Indemnifying Party chooses to defend any claim, the
Indemnified Party shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense.
9.4 Exclusive Remedy. The indemnification provided for in this Article IX
shall (except as provided in Articles XI and XIV or as prohibited by ERISA) be
the exclusive remedy in any action seeking damages or any other form of monetary
relief brought by any party to this Agreement against another party. Any
indemnity payment under this Article IX shall be treated as an adjustment to the
exchange consideration for tax purposes unless a final determination (which
shall include the execution of a Form 870-AD or successor form) with respect to
the Indemnified Party or its Affiliates causes any such payment not to be
treated as an adjustment to the exchange consideration for federal income Tax
purposes.
9.5 Limitations on Indemnification. Notwithstanding the foregoing
provisions of this Article IX:
9.5.1 NEI shall not assert any claim for indemnification against
Shareholder unless the aggregate of all claims which NEI may have against
Shareholder exceeds $10,000. The Company and Shareholder shall not assert
any claim for indemnification against NEI unless the aggregate of all
claims which the Company and Shareholder may have against NEI exceeds
$10,000.
28
<PAGE>
9.5.2 Shareholder shall not be liable under this Article IX for any
amount which exceeds the value, established in accordance with this
Agreement, of the cash and NEI Stock received by Shareholder hereunder.
9.5.3 Except as provided in Section 9.1(j), Shareholder shall not be
liable under this Article IX for any claim arising more than 18 months
after the Closing Date. The provisions of Section 9.1(j) shall survive for
the applicable limitations period.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date, but only:
10.1.1 By the mutual written consent of NEI and Shareholder
10.1.2 By NEI, if the Registration Statement shall not have been
declared effective by the SEC by the close of business, Kansas City time,
on December 31, 1998.
10.1.3 By Shareholder if the Registration Statement shall not have
been declared effective by the SEC by the close of business, Kansas City
time, on December 31, 1998 or this transaction shall not have Closed by
January 22, 1998, for any reason other than failure of Shareholder to
satisfy any of the conditions in Article VII which are within his control.
10.1.4 By Shareholder and the Company if the applicable conditions
set forth in Article VI hereof have not been satisfied or waived as of the
Closing Date
10.1.5 By NEI if the applicable conditions set forth in Article VII
hereof have not been satisfied or waived as of the Closing Date
10.1.6 By NEI if NEI in its sole discretion elects to terminate the
underwriting agreement with respect to the IPO or if NEI in its sole
discretion elects not to proceed with the IPO or the NEI Plan of
Organization.
10.2 Liabilities in Event of Termination. NEI shall have no liability to
Shareholder or the Company for any legal, accounting or other fees or expenses
incurred by either of them in the event of any termination of this Agreement.
29
<PAGE>
ARTICLE XI
NONCOMPETITION AND NONDISCLOSURE
11.1 Noncompete Covenant. Shareholder agrees that for a term commencing on
the Closing Date and ending five years thereafter, he shall not, directly or
indirectly: (a) own or have any interest in, or be an officer, director,
partner, joint venturer, employee, agent, representative or consultant of, or in
any way assist, any corporation, partnership, limited liability company or other
entity engaged in the commercial or industrial electrical contracting business
anywhere in the United States of America (provided, the foregoing shall not
prohibit the ownership of less than 5% of any publicly-traded entity); (b)
divert or attempt to divert any customers or contractors of NEI or its
subsidiaries; or (c) entice or induce any employee or officer of NEI or its
subsidiaries to leave such service for the purpose of engaging in a competing
commercial or industrial electrical contracting business. Shareholder
acknowledges the foregoing covenants are reasonable in scope or duration and are
a material inducement for NEI to participate in this Agreement. Notwithstanding
the foregoing, if a court of competent jurisdiction determines that the scope or
duration of any such covenants are unreasonable and unenforceable in any
respect, such covenants shall automatically be modified to the extent such court
deems reasonable and enforceable under the circumstances and, as so modified,
such covenants shall remain in full force and effect.
11.2 Confidential Information.
11.2.1 Shareholder agrees that he shall not disclose to any Person
(other than NEI and its representatives and the Underwriters and their
representatives) nor use for any purpose (other than in connection with the
IPO or the conduct of the Business prior to the Closing Date) any
confidential information, trade secrets, customer lists, price lists, bids,
technical know-how or other confidential or proprietary information of or
with respect to the Company, whether or not marked or specifically
identified as confidential.
11.2.2 If this transaction does not close or if this Agreement is
terminated for any reason, NEI shall not disclose to any Person nor use for
any purpose (other than in connection with any action brought under this
Agreement or pursuant to any subpoena or order of a court or administrative
agency) any confidential information, trade secrets, customer lists, price
lists, bids, technical know-how or other confidential or proprietary
information of or with respect to the Company, whether or not marked or
specifically identified as confidential.
11.3 Enforcement.
11.3.1 Shareholder acknowledges that any breach of the covenants in
Section 11.1 or 11.2.1 would cause irreparable injury to NEI which would
not be fully compensable in damages. Accordingly, NEI may enforce any
breach of such covenants by obtaining injunctive or specific relief from a
court of competent jurisdiction, without the necessity of posting bond or
proving lack of an adequate remedy at law.
30
<PAGE>
11.3.2 NEI acknowledges that any breach of the covenants in Section
11.2.2 would cause irreparable injury to the Company which would not be
fully compensable in damages. Accordingly, the Company may enforce any
breach of such covenants by obtaining injunctive or specific relief from a
court of competent jurisdiction, without the necessity of posting bond or
proving lack of an adequate remedy at law.
11.3.3 The remedies specified in this Section 11.3 shall be
cumulative and not exclusive of other remedies available at law or in
equity.
ARTICLE XII
TRANSFER RESTRICTIONS
Unless otherwise agreed by NEI, except for transfers to immediate
family members of Shareholder who agree to be bound by the restrictions in this
Article XII (or trusts for the benefit of Shareholder or such family members),
for a period of one year from the Closing Date, except pursuant to Article XIV
hereof, Shareholder shall not sell, assign, exchange, transfer or otherwise
dispose of any shares of NEI Stock received by him pursuant to this Agreement.
The certificates evidencing the NEI Stock will bear a legend substantially in
the form set forth below and containing such other information as NEI may deem
necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN CONSENT OF
THE ISSUER, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION OR OTHER DISPOSITION PRIOR TO
THE FIRST ANNIVERSARY OF THE DATE HEREOF. UPON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
ARTICLE XIII
FEDERAL SECURITIES ACT REPRESENTATIONS
13.1 Compliance with Law. Shareholder acknowledges that the shares of NEI
Stock to be delivered to Shareholder pursuant to this Agreement have not been
and will not be registered under the 1933 Act (except as provided in Article
XIV) and may not be resold without compliance with the 1933 Act and regulations
thereunder. The NEI Stock is being acquired by Shareholder solely for his own
account, for investment purposes only, and with no present intention of
31
<PAGE>
distributing, selling or otherwise disposing of such stock in connection with a
distribution. Shareholder represents and agrees that none of the shares of NEI
Stock issued to him will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except in full compliance with all
applicable provisions of the 1933 Act and the rules and regulations of the SEC.
The NEI Stock shall bear the following legend in addition to the legend required
under Article XII:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER THE FEDERAL AND APPLICABLE STATE SECURITIES LAWS OR
THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH LAWS.
13.2 Economic Risk; Sophistication. Shareholder represents that he is able
to bear the economic risk of an investment in the NEI Stock and can afford to
sustain a total loss of such investment. Shareholder has substantial knowledge
and experience in making investment decisions of this type (or is relying on
qualified purchaser representatives with such knowledge and experience) and is
capable, either individually or together with such purchaser representatives, of
evaluating the merits and risks of this investment. Shareholder has had an
adequate opportunity to ask questions and receive answers from the officers of
NEI concerning the transaction contemplated hereby. Shareholder represents that
he is an "accredited investor" as defined in Rule 501(a) under the 1933 Act, or
if not an accredited investor, he has sufficient income and net worth to
withstand the risks of the investment contemplated hereby and, individually or
together with his purchaser representatives, is sufficiently sophisticated to
evaluate the merits and risks of such investment. Shareholder acknowledges that
the risks of this transaction include tax risks and Shareholder has consulted
with his tax advisors with respect to and fully accepts such risks.
ARTICLE XIV
REGISTRATION RIGHTS
14.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever NEI proposes to register any NEI Stock for its own or others'
account under the 1933 Act for a public offering, other than: (a) any shelf or
other registration of shares to be used as consideration for acquisitions of
additional businesses by NEI; or (b) registrations relating to employee benefit
plans, NEI shall give Shareholder written notice of its intent to do so. Upon
the written request of Shareholder given within 10 days after receipt of such
notice, NEI shall cause to be included in such registration all of the NEI Stock
issued to Shareholder pursuant to this Agreement which Shareholder requests,
other than shares of NEI Stock which may then be sold under Rule 144(k) (or any
similar or successor provision) under the 1933 Act, and other than shares of NEI
Stock that have been theretofore sold by Shareholder in accordance with the 1933
Act, provided that NEI shall have the right to reduce pro rata the number of
shares of each Selling Shareholder included in such registration to the extent
that inclusion of such shares could, in the written opinion of tax counsel to
NEI or its
32
<PAGE>
independent auditors, jeopardize the tax status of the transactions contemplated
hereby and by the Registration Statement. In addition, if NEI is advised in
writing in good faith by any managing underwriter of an underwritten offering of
securities pursuant to a registration statement under this Section 14.1 that the
number of shares to be sold by Persons other than NEI is greater than the number
of such shares which may be offered without adversely affecting the success of
the offering, NEI may reduce pro rata (among Shareholder and all other selling
security holders in the offering) the number of shares offered for the accounts
of such Persons to a number deemed satisfactory by the managing underwriter. If
Shareholder disapproves of the terms of the underwriting, Shareholder may elect
to withdraw therefrom by written notice to NEI and the managing underwriter, and
Shareholder's shares of NEI Stock so withdrawn shall be withdrawn from
registration.
14.2 Registration Procedures. Whenever NEI is required to register shares
of NEI Stock pursuant to Section 14.1, NEI will, as expeditiously as possible:
14.2.1 Prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, NEI will
furnish a representative of Shareholder with copies of such documents
proposed to be filed) as promptly as practicable.
14.2.2 Notify Shareholder of any stop order issued or threatened by
the SEC and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
14.2.3 Prepare and file with the SEC such amendments and supplements
to such registration statement and prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period of not less than 120 days, cause the prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 474 under the 1933 Act; and comply with the provisions of
the 1933 Act applicable to it with respect to the disposition of all
securities covered by such registration statement during the applicable
period in accordance with the intended methods of disposition by the
sellers thereof set forth in the registration statement or prospectus, as
amended or supplemented.
14.2.4 Furnish to Shareholder such number of copies of such
registration statement, each supplement thereto and the prospectus included
therein (including each preliminary prospectus and any term sheet
associated therewith), and such other documents as he may reasonably
request in order to facilitate the disposition of the shares.
14.2.5 If requested by the managing underwriter or underwriters, if
any, or Shareholder, promptly incorporate in a prospectus supplement or
post-effective amendment or term sheet such information as the managing
underwriter or underwriters or Shareholder, as the case may be, reasonably
requests to be included therein, including, without limitation,
33
<PAGE>
information with respect to the number of shares of NEI Stock being sold by
Shareholder to any underwriter or underwriters, the purchase price being
paid therefor and the terms of the offering, and promptly make all required
filings of the same by prospectus supplement or post-effective amendment.
14.2.6 Make available for inspection by Shareholder, any underwriter
participating in any disposition pursuant to such registration statement,
counsel retained by Shareholder, counsel for the underwriters and any
accountant or other agent retained by Shareholder or any underwriter
(collectively, the "Inspectors"), all financial and other records and
pertinent corporate documents of NEI (the "Records") as shall be reasonably
necessary to enable them to exercise their due diligence responsibility,
and cause NEI's officers, directors and employees to supply all information
reasonably requested by any such Inspectors in connection with such
registration statement; provided, that records which NEI determines, in
good faith, to be confidential and which NEI notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless: (a) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement; or (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or administrative agency after delivery of
sufficient notice to NEI to enable NEI to contest such subpoena or order.
14.2.7 Take all other steps reasonably necessary to effect the
registration of the shares of NEI Stock contemplated hereby.
14.2.8 Use best efforts to register the securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as shall be reasonably requested by Shareholder, and to keep
such registration or qualification effective during the period such
registration statement is required to be kept effective, provided that NEI
shall not be required to become subject to taxation, to qualify generally
to do business or to file a general consent to service of process in any
such states or jurisdictions.
14.2.9 Cause all such shares of NEI Stock to be listed or included
not later than the date of the first sale of such shares under the
registration statement on any securities exchange or trading system on
which similar securities issued by NEI are then listed or included.
14.2.10 Notify Shareholder at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the period
that NEI is required to keep the registration statement effective of the
happening of any event as a result of which the prospectus included in such
registration statement (as then in effect), together with any associated
term sheet, contains an untrue statement of material fact or omits to state
any fact required to be stated therein or necessary to make the statements
therein (in light of the circumstances under which they were made) not
misleading, and, at the request of Shareholder, NEI will promptly prepare a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of the covered shares, such prospectus will not
34
<PAGE>
contain an untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein (in light of the circumstances under which they were made) not
misleading.
All expenses incurred in connection with a registration under this Article
XIV and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printing and
accounting fees and expenses, but excluding underwriting commissions and
discounts attributable to the shares being registered hereunder), shall be borne
by NEI.
14.3 Indemnification.
14.3.1 In connection with any registration under Section 14.1, NEI
shall indemnify, to the extent permitted by law, Shareholder against any
and all loss, cost, claim, damage, expense (including reasonable attorneys'
fees), liability and cause of action arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or associated
term sheet or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or
contained in or omitted from any information furnished in writing to NEI by
Shareholder expressly for use therein, or by a Shareholder's failure to
deliver a copy of the registration statement or prospectus or any amendment
or supplement thereto after NEI has furnished Shareholder with a sufficient
number of copies of the same.
14.3.2 In connection with any registration under Section 14.1,
Shareholder shall furnish to NEI in writing such information concerning
Shareholder and his proposed offering of shares as is reasonably requested
by NEI for use in any such registration statement or prospectus and will
indemnify, to the extent permitted by law, NEI, its directors, officers and
representatives and each Person who controls NEI (within the meaning of the
1933 Act) against any and all loss, cost, claim, damage, expense (including
reasonable attorneys' fees), liability and cause of action resulting from
any untrue or alleged untrue statement of material fact or any omission or
alleged omission to state therein a material fact required to be stated in
the registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not
misleading, but only to the extent such untrue or alleged untrue statement
or omission or alleged omission is contained in or omitted from information
furnished in writing to NEI by Shareholder expressly for use in the
registration statement. Notwithstanding the foregoing, the liability of
Shareholder under this Section 14.3.2 shall be limited to an amount equal
to the net proceeds actually received by Shareholder from the sale of the
relevant shares covered by the registration statement.
14.3.3 The indemnification provided hereunder shall be governed by the
procedures recited in Section 9.3.
35
<PAGE>
14.4 Underwriting Agreement. In connection with each registration pursuant
to Section 14.1 covering an underwritten registered offering, NEI and
Shareholder agree to enter into a written agreement with the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an arrangement for companies of NEI's size and
investment stature, including indemnification; provided, Shareholder shall be
exempt from any indemnification of the managing underwriters other than with
respect to information provided by Shareholder to NEI or the managing
underwriters specifically for inclusion in the registration statement.
14.5 Transfer of Rights. The right to cause NEI to register shares of NEI
Stock under this Agreement may be assigned by Shareholder, but only to a member
of Shareholder's immediate family or a trust or partnership for the benefit of
Shareholder or such family members.
14.6 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 NEI Stock
to the public without registration, NEI agrees to use its reasonable efforts to:
14.6.1 Make current public information regarding NEI available as
contemplated in Rule 144 under the 1933 Act for a period of five years
beginning 90 days following the effective date of the Registration
Statement.
14.6.2 File with the SEC on a timely basis all reports and other
documents required of NEI under the 1934 Act at any time after it has
become subject to such reporting requirements.
14.6.3 So long as Shareholder owns any restricted NEI Stock, furnish
to Shareholder upon written request a written statement by NEI as to its
compliance with the current public information requirements of Rule 144 (at
any time from and after 90 days following the effective date of the
Registration Statement), and of the 1934 Act (any time after it has become
subject to such reporting requirements), a copy of the most recent annual
or quarterly report of NEI, and such other reports and documents so filed
as Shareholder may reasonably request in availing himself of any rule or
regulation of the SEC allowing Shareholder to sell any such shares without
registration.
ARTICLE XV
MISCELLANEOUS
15.1 Assignment. This Agreement shall not be assigned by either party
without the prior written consent of the other party. Any attempted assignment
without such written consent shall be null and void and without legal effect.
Notwithstanding the foregoing, NEI may assign to any wholly-owned subsidiary of
NEI its right to acquire the Assets.
36
<PAGE>
15.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the state of Missouri, without reference
to conflicts of laws rules.
15.3 Notices. All notices or other communications required or permitted
hereunder shall be in writing and may be hand delivered or sent by certified
mail, commercial overnight delivery service or facsimile transmission:
If to Shareholder: Ralph Pangonis, Sr.
Potter Electric Company, Inc.
7150 Placid Street
Las Vegas, NV 89119
FAX: (702) 263-0936
with a copy to: Lukens & Kent, Chartered
302 East Carson Avenue, Suite 400
Las Vegas, NV 89101
FAX: (702) 385-3474
Attn: John P. Lukens, Esq.
If to NEI: Nationwide Electric, Inc.
1201 Walnut, Suite 1300
Kansas City, Missouri 64106
FAX: (816) 556-2389
Attn: President
with a copy to: Stinson, Mag & Fizzell, P.C.
1201 Walnut Street, Suite 2800
Kansas City, Missouri 64106
FAX: (816) 691-3495
Attn: Marc Salle
or to such other address or facsimile number as any party may provide the others
in writing.
15.4 Entire Agreement. Together with the Schedules and Exhibits hereto,
this constitutes the entire agreement of the parties with respect to the subject
matter hereof and may not be modified, altered or amended except by written
instrument executed by all parties hereto.
15.5 Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
15.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which, taken together, shall
constitute a single instrument.
37
<PAGE>
15.7 Headings. Headings in this Agreement are for convenience of
reference only and shall have no effect in the interpretation of this Agreement.
15.8 Expenses. Each party shall pay its own expenses in connection with
the transaction contemplated hereby, whether or not such transaction is
consummated. Without limitation, the fees and expenses of Shareholder's legal,
accounting and financial advisors shall be paid by Shareholder.
15.9 Survival. Those provisions of this Agreement which by their nature
are intended to survive the Closing Date shall so survive for the period recited
therein, or if no time period is recited therein, shall survive indefinitely.
15.10 Costs. If any action or proceeding is brought for the enforcement
or interpretation of this Agreement or because of an alleged dispute, breach,
default or misrepresentation in connection with this Agreement, the successful
or prevailing party shall be entitled to recover reasonable attorneys' fees and
all other costs and expenses incurred in such action or proceeding, in addition
to any other relief to which it may be entitled.
15.11 Publicity. No public disclosure, announcement or publicity with
respect to the transaction contemplated hereby, the IPO or the NEI Plan of
Organization may be made except by and with the prior approval of NEI. NEI
shall coordinate with Shareholder in making announcements of this transaction to
the Company's customers, suppliers and employees.
38
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
NATIONWIDE ELECTRIC, INC.
By: /s/ Gregory J. Orman
-------------------------------------
"NEI"
POTTER ELECTRIC COMPANY, INC.
By: /s/ Ralph Pangonis, Sr.
-------------------------------------
Ralph Pangonis, Sr., President
The "Company"
SHAREHOLDER:
/s/ Ralph Pangonis, Sr.
-----------------------------------------
Ralph Pangonis, Sr.
NATIONWIDE ELECTRIC, INC. -- POTTER ELECTRIC COMPANY, INC
ASSET PURCHASE AGREEMENT SIGNATURE PAGE
<PAGE>
Exhibit 4.1
[LOGO OF NATIONWIDE APPEARS HERE] INCORPORATED UNDER
LAWS OF THE
STATE OF DELAWARE
========== ==========
NUMBER SHARES
C NATIONWIDE ELECTRIC, INC.
========== ==========
THIS CERTIFICATE IS SEE REVERSE FOR
TRANSFERABLE CERTAIN DEFINITIONS
IN NEW YORK, NY OR CUSIP 638609 10 7
MINNEAPOLIS, MN
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
IS THE OWNER OF
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Nationwide Electric, Inc. transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
This certificate and the shares of stock represented hereby are issued and
shall be held subject to all of the provisions of the Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws of the Corporation,
and all amendments thereto, copies of which are on file at the office of the
Transfer Agent, to all of which the holder, by accepting this certificate,
assents.
This certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED: [DELAWARE CORPORATE SEAL OF NATIONWIDE
ELECTRIC, INC. APPEARS HERE]
COUNTERSIGNED AND REGISTERED: [SIGNATURES APPEAR HERE]
NORWEST BANK MINNESOTA, N.A.
TRANSFER AGENT AND REGISTRAR PRESIDENT
BY
[SIGNATURES APPEAR HERE]
AUTHORIZED SIGNATURE
SECRETARY
(C) AMERICAN BANKNOTE COMPANY
======================================= ======================================
<PAGE>
NATIONWIDE ELECTRIC, INC.
The Corporation will furnish to any shareholder, upon request and without
charge, a full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each authorized class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights, to the extent that the same have been fixed.
Such request may be made to the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT --______________Custodian______________
(Cust) (Minor)
Under Uniform Gifts to Minors
Act _________________________
(State)
UNIF TRANS MIN ACT--______________Custodian______________
(Cust) (Minor)
Under Uniform Transfers to Minors
Act _________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received,_____________________hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________
______________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE,
OF ASSIGNEE
______________________________________________________________________
______________________________________________________________________
<PAGE>
________________________________________________________________Shares of the
Common Stock represented by the within certificate, and do hereby irrevocably
constitute and appoint ____________________________
______________________________________________________________Attorney to
transfer the said shares on the books of the within named Corporation with full
power of substitution in the premises.
Dated_________________
X
___________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
By____________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17AG-15.
<PAGE>
Exhibit 5.1
Opinion of Stinson, Mag and Fizzell
<PAGE>
_______, 1998
Nationwide Electric, Inc.
1201 Walnut Street
Suite 1300
Kansas City, Missouri 64106
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-1 of Nationwide
Electric, Inc., a Delaware corporation (the "Company"), filed with the
Securities and Exchange Commission (File No. 333-57013) (the "Registration
Statement") for the purposes of registering under the Securities Act of 1933, as
amended, up to 5,000,000 shares (and up to an additional 750,000 shares to cover
Underwriters' overallotments) of the Company's Common Stock, par value $.01 per
share (the "Shares") to be offered by the Company in an initial public offering
(the "Offering").
We have examined the Amended and Restated Certificate of
Incorporation, the Bylaws of the Company, a currently in effect, minutes of the
applicable meetings of the board of directors and stockholders of the Company,
together with such other corporate records, certificates of public officials and
other documents as we have deemed relevant to this opinion.
Based solely upon the foregoing, it is our opinion that the Shares to
be issued in the Offering will, when sold, be legally issued, fully paid and
nonassessable.
<PAGE>
We hereby consent to the reference to our firm under the heading
"Legal Matters" in the Prospectus which constitutes a part of such Registration
Statement. We also consent to the inclusion of this opinion in the Registration
Statement as an exhibit thereto.
Very truly yours,
STINSON, MAG & FIZZELL, P.C.
By:
--------------------------------
<PAGE>
Exhibit 10.1
Employment Agreement (John Wood)
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 1st day of April,
1998, by and between Nationwide Electric, Inc., a Delaware corporation with its
principal place of business at 1201 Walnut, Kansas City, Missouri 64105 (the
"Company"), and John Wood, an individual residing at 8321 W. 121st, Overland
Park, Kansas 66213 (the "Employee").
RECITALS
--------
The Company desires to employ the Employee, and the Employee desires to be
employed by the Company. In consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Term (the "Initial Term") of this Agreement
shall commence on the date hereof and, subject to the further provisions of this
Agreement, shall end on the 31/st/ day of March, 2001; provided, however, this
Agreement shall be automatically renewed for successive one (1) year periods
("Renewal Term") unless, at least ninety (90) days prior to the expiration of
the Initial Term or any Renewal Term, either party gives written notice to the
other party specifically electing to terminate this Agreement at the end of the
Initial Term or any such Renewal Term.
2. Title; Capacity. The Employee shall serve as Vice President -
Acquisitions of the Company or in such other position as the Company's Board of
Directors (the "Board") may determine from time to time. The Employee shall be
subject to the supervision of, and shall have such authority as is delegated to
him by, the President of the Company.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board or its designee shall from time to time reasonably
assign to him. The Employee agrees to devote his entire business time,
attention and energies to the business and interests of the Company (and its
affiliates as required by the Company's investments and the Employee's positions
therein) during the Employment Period. The Employee agrees to abide by the
rules, regulations, instructions, personnel practices and policies of the
Company and any changes therein which may be adopted from time to time. The
Employee acknowledges receipt of copies of all such rules and policies committed
to writing as of the date of this Agreement.
3. Compensation and Benefits.
a. Salary. The Company shall pay the employee, in semi-monthly
installments, an annual base salary of $140,000.00 for the one-year period
commencing on the Commencement Date. Such salary shall be subject to adjustment
thereafter as determined by the Board.
<PAGE>
b. Fringe Benefits. The Employee shall be entitled to participate in
all bonus and benefit programs that the Company establishes and makes available
to its employees, if any, to the extent that Employee's position, tenure,
salary, age, health and other qualifications make him eligible to participate.
c. Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
amount available for such travel, entertainment and other expenses may be fixed
in advance by the President. Upon prior approval by the President, the Company
shall reimburse Employee, or directly pay for, dues and membership fees for
industry organizations relevant to Employee's duties.
d. Stock. In further consideration of the obligations and
undertakings of the Employee in this Agreement, the Company shall sell certain
shares of its common stock to Employee pursuant to that certain Employee
Restricted Stock Purchase Agreement of even date herewith.
4. Employment Termination. The employment of the Employee by the Company
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
a. Expiration of the Employment Period in accordance with Section 1;
b. At the election of the Company, for "Cause", immediately upon
written notice by the Company to the Employee. "Cause" for such termination
shall include, but not limited to, the following:
i. Dishonesty of the Employee with respect to the Company;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the effect of injuring the reputation, business or business
relationships of the Company or its respective officers, directors or employees;
iii. Upon a charge by a governmental entity against the
Employee of any crime involving moral turpitude which is demonstrably and
materially injurious to the Company or upon the filing of any civil action
involving a charge of embezzlement, theft, fraud, or other similar act which is
demonstrably and materially injurious to the Company;
iv. Willful or prolonged absence from work by the Employee
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Employee to perform his duties and
responsibilities without the same being corrected upon ten (10) days prior
written notice; or
2
<PAGE>
v. Breach by the Employee of any of the covenants contained in
this Agreement.
c. Immediately upon the death or disability of the Employee. As used
in this Agreement, the term "disability" shall mean the inability of the
employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360 day period to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to the Company.
d. At the election of the Company or the Employee, with or without
cause upon 90 days written notice by one party to the other.
5. Effect of Termination.
a. Termination for Cause or at Election of Either Party. In the
event the Employee's employment is terminated for cause pursuant to Section
4(b), or at the election of either party pursuant to Section 4(d), the Company
shall pay to the Employee the compensation and benefits otherwise payable to him
under Section 3 through the last day of his actual employment by the Company.
b. Termination for Death or Disability. If the Employee's employment
is terminated by death or because of disability pursuant to Section 4(c), the
Company shall pay to the estate of the Employee or to the Employee, as the case
may be, the compensation which would otherwise be payable to the Employee up to
the end of the month in which the termination of his employment because of death
or disability occurs.
c. Survival. The provisions of Sections 6 and 7 shall survive the
termination of this Agreement.
6. Non-Compete.
a. Except as provided in Section 6.d., below, during the Employment
Period and for a period of three (3) years after the termination or expiration
thereof, the Employee will not directly or indirectly, in the territory
comprised by the continental United States:
i. as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than five percent (5%) of the
total outstanding stock of, a publicly held company), engage in the business of
developing, producing, marketing or selling products or services of the kind or
type developed or being developed, produced, marketed or sold by the Company or
its affiliates, while the Employee was employed by the Company (such products or
services may include, but shall
3
<PAGE>
not be limited to, commercial and industrial electrical contracting services and
the acquisition of companies providing such services);
ii. recruit, solicit or induce, or attempt to induce employee
or employees of the Company to terminate their employment with, or otherwise
cease their relationship with, the Company; or
iii. solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
b. If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
c. The restrictions contained in this Section 6 are necessary for
the protection of the business and goodwill of the Company and are considered by
the Employee to be reasonable for such purpose. The Employee agrees that any
breach of this Section 6 will cause the Company substantial and irrevocable
damage and therefore, in the event of any such breach, in addition to such other
remedies which may be available, the Company shall have the right to seek
specific performance and injunctive relief. The prevailing party in a legal
proceeding to remedy a breach under this Agreement shall be entitled to receive
its reasonable attorney's fees, expert witness fees, and out-of-pocket costs
incurred in connection with such proceeding, in addition to any other relief it
may be granted.
d. The restrictions set forth in Section 6.a. shall extend for a
period of one (1) year after termination if such termination was at the election
of the Company without cause, or by the Employee on account of a breach of a
material provision of this Agreement by the Company.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-how, whether or
not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, and customer and supplier
lists. Employee will not disclose any Proprietary Information to others outside
the Company or use the same for any unauthorized purposes without written
approval by an officer of the
4
<PAGE>
Company, either during or after his employment, unless and until such
Proprietary Information has become public knowledge without fault by the
Employee.
ii. Employee agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, or other tangible material containing
Proprietary Information, whether created by the Employee or others, which shall
come into his custody or possession, shall be and are the exclusive property of
the Company to be used by the Employee only in the performance of his duties for
the Company.
iii. Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Employee in the course of the Company's business.
b. Developments.
i. Employee will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, whether patentable or not, which are created,
made, conceived or reduced to practice by the Employee or under his direction or
jointly with others during his employment by the Company, whether or not during
normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
ii. Employee agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this Section
7.2(b) shall not apply to Developments which do not relate to the present or
planned business or research and development of the Company and which are made
and conceived by the Employee not during normal working hours, not on the
Company's premises and not using the Company's tools, devices, equipment or
Proprietary Information.
iii. Employee agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. Employee shall
sign all papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignment of proprietary
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development.
c. Other Agreements. Employee hereby represents that he is not bound
by the terms of any agreement with any previous employer or other party to
refrain from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the
5
<PAGE>
Company or to refrain from competing, directly or indirectly, with the business
of such previous employer or any other party. Employee further represents that
his performance of all the terms of this Agreement and as an employee of the
Company does not and will not breach any agreement to keep in confidence
proprietary information, knowledge or data acquired by him in confidence or in
trust prior to his employment with the Company.
d. Company's Right to Notify Subsequent Employers. The Company may
do all permissible things, and take all permissible action, necessary or
advisable, in the Company's discretion, to protect its rights under this Section
7, including without limitation notifying any subsequent employer of the
Employee of the existence of (and furnishing to any such employer) the
provisions of this Agreement.
8. Liquidated Damages. Insofar as any damages sustained by the Company in
the case of a breach by the Employee of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if the Employee breaches
or violates any provision of this Agreement, the Company shall be entitled, in
addition to any other right and remedy available to it, to retain as liquidated
damages any sums owed but not paid by the Company to the Employee.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 9.
10. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
12. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Missouri, without giving
effect to that State's conflict of laws provisions.
14. Choice of Venue. All actions or proceedings with respect to this
Agreement shall be instituted only in any state or federal court sitting in
Jackson County, Missouri, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject to the jurisdiction (both
subject matter and personal) of each such court and irrevocably and
unconditionally waive: (a) any objection that the parties might now or hereafter
have to the venue of any of such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an inconvenient forum.
6
<PAGE>
15. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
16. Waiver. No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
17. Captions and Headings. The captions of the sections of this Agreement
are for convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
18. Severability. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
19. Counterparts. This Agreement may be executed in a number of
counterparts and all of such counterparts executed by the Company or the
Employee, shall constitute one and the same agreement, and it shall not be
necessary for all parties to execute the same counterpart hereof.
20. Facsimile Signatures. The parties hereby agree that, for purposes of
the execution of this Agreement, facsimile signatures shall constitute original
signatures.
21. Incorporation by Reference. The preamble and recitals to this
Agreement are hereby incorporated by reference and made a part hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
Nationwide Electric, Inc. EMPLOYEE:
A Delaware Corporation
/s/ Gregory J. Orman /s/ John Wood
- ------------------------------- -------------------------------
Name: Gregory J. Orman John Wood
Title: Chairman of the Board
7
<PAGE>
Exhibit 10.2
Employment Agreement (Frederick C. Green IV)
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and effective this
1/st/ day of April, 1998, by and between Nationwide Electric, Inc. a corporation
with its principal place of business at 1201 Walnut Kansas City, MO 64106, (the
"Company"), and Frederick C. Green IV, an individual residing at 3131 Excelsior
Blvd., Apt. 612, Minneapolis, MN 55416 (the "Employee").
RECITALS
--------
The Company desires to employ the Employee, and the Employee desires to be
employed by the Company. In consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Term (the "Initial Term") of this Agreement
shall commence on April 1/st/, 1998 (the "Commencement Date") and, subject to
the further provisions of this Agreement, shall end on the 1/st/ day of April,
2001; provided, however, this Agreement shall be automatically renewed for
successive one (1) year periods ("Renewal Term") unless, at least ninety (90)
days prior to the expiration of the Initial Term or any Renewal Term, either
party gives written notice to the other party specifically electing to terminate
this Agreement at the end of the Initial Term or any such Renewal Term.
2. Title; Capacity. The Employee shall serve as Chief Executive Officer
and President of the Company and shall be subject to the supervision of, and
shall have such authority as is delegated to him by the Board of Directors of
the Company.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board or its designee shall from time to time reasonably
assign to him. The Employee agrees to devote his entire business time, attention
and energies to the business and interests of the Company (and its affiliates as
required by the Company's investments and the Employee's positions therein)
during the Employment Period. The Employee agrees to abide by the rules,
regulations, instructions, personnel practices and policies of the Company and
any changes therein which may be adopted from time to time. The Employee
acknowledges receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
3. Compensation and Benefits.
a. Salary. The Company shall pay the employee, in semi-monthly
installments, an annual base salary of $168,000.00 commencing on the
Commencement Date and continuing for so long as the Employee is employed by the
Company. Such salary shall be subject to adjustment thereafter as determined by
the Board, provided that the Board will annually review Employee's base salary
on or about each anniversary of the date hereof.
<PAGE>
b. Fringe Benefits. The Employee shall be entitled to participate in
all profit-sharing and benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that Employee's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. Notwithstanding the above, Company shall provide to Employee health
insurance benefits and will cover the COBRA payment to continue his health
insurance coverage with his previous employer until he and his family are
covered by the Company's health plan without any exclusions for prior
conditions. Employee specifically warrants that he and his family to be covered
herein have had uninterrupted health insurance coverage for the preceding 18
months.
c. Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
amount available for such travel, entertainment and other expenses may be fixed
in advance by the Board. Upon prior approval by the Board, the Company shall
reimburse Employee, or directly pay for, dues and membership fees for industry
organizations relevant to Employee's duties.
d. Stock Options. The Employee shall receive a one-time stock option
grant in the amount of 100,000 shares of Company common stock at a strike price
based upon the Initial Public Offering ("IPO") price of the Company's stock. The
option grant assumes that the Company shall have 10,000,000 fully diluted shares
outstanding post-IPO. Notwithstanding the above, in the event that there are
more than 11,000,000 or less than 9,000,000 shares outstanding immediately
following the IPO, the Employee shall be entitled only to an amount equal to 1%
of the then outstanding fully diluted shares. The options covered under this
grant shall be governed based upon the terms and conditions adopted by the Board
of Directors when a formal stock option plan is established. In no event shall
the vesting applied to Employee's options be for a term greater than four years
from the date of this Agreement and shall be proportionate in terms of the
number of options vested each year. In the event that an IPO does not occur
within two years of the date of this Agreement, then Employee shall receive
options covering 1% of the then outstanding shares of stock at a strike price to
be determined by mutual agreement between the Employee and the Company. For the
purposes of this Agreement, the term "fully diluted shares outstanding" shall
mean (i) all shares of common stock then issued and outstanding, (ii) the number
of shares of common stock issuable upon the exercise of all options (including
the IPO underwriters' "green shoe" option and any options granted upon
completion of the IPO), warrants and other rights to acquire common stock then
outstanding, and (iii) the number of shares of common stock issuable upon the
conversion of any securities then outstanding which are convertible into common
stock.
e. Common Stock. The Employee and the Company shall enter into and
close an agreement whereby the Employee shall, within fifteen (15) days after
the date hereof, purchase 100,000 shares of common stock in the Company for $.30
per share assuming 10,000,000 fully diluted shares are outstanding post-IPO. In
the event that there are less than 9,000,000 fully diluted shares outstanding
post-IPO, then the Company may, within thirty (30) days after completion of the
2
<PAGE>
IPO, redeem, at $.30 per share a sufficient number of shares sold to Employee
under this Section 3(e) so that, after giving effect to the redemption, the
remaining shares sold to the Employee under this Section 3(e) will represent 1%
of the fully diluted shares outstanding post-IPO. At the time of the sale of the
shares to Employee pursuant to this Section 3(e), the Company will also provide
Employee with a warrant to purchase shares at $.30 per share equal to 1% of the
excess of the fully diluted shares outstanding post-IPO over 10,000,000 which
warrant will be exercisable during the sixty (60) days immediately following the
completion of the IPO or which warrant will be cancelled upon completion of the
IPO, prior to the sixty (60) day exercise period, if the fully diluted shares
outstanding post-IPO is equal to or less than 11,000,000. These shares may
contain restrictions on re-sale based upon agreements between the Company and
its Underwriters. The Employee may elect to borrow funds from the Company to
purchase these shares on terms and conditions substantially similar to those
offered other senior officers of the Company. The Company represent and warrants
to the Employee that the fair market value of the shares on the date the
Employee purchases the 100,000 shares pursuant to the first sentence of this
Section 3(e) is $.30 per share and agrees to indemnify and hold the Employee
harmless from any incremental income taxes incurred by the Employee if the
foregoing representation is not correct.
4. Employment Termination. The employment of the Employee by the Company
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
a. Expiration of the Employment Period in accordance with Section 1;
b. At the election of the Company, for "Cause", immediately upon
written notice by the Company to the Employee. "Cause" for such termination
shall mean the following:
i. Willful dishonesty of the Employee with respect to the
Company;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the effect of injuring the reputation, business or business
relationships of the Company or its respective officers, directors or employees;
iii. Upon a charge by a governmental entity against the Employee
of any crime involving moral turpitude which is demonstrably and materially
injurious to the Company or upon the filing of any civil action involving a
charge of embezzlement, theft, fraud, or other similar act which is demonstrably
and materially injurious to the Company;
iv. Willful or prolonged absence from work by the Employee
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Employee to perform his duties and
responsibilities without the same being corrected upon ten (10) days prior
written notice;
v. Failure of the Employee to meet agreed-upon performance
objectives which are within the Employee's reasonable control without the same
being corrected upon ten (10) days prior written notice; or
3
<PAGE>
vi. Breach by the Employee of any of the covenants contained in
this Agreement.
c. Immediately upon the death or disability of the Employee. As used
in this Agreement, the term "disability" shall mean the inability of the
employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360 day period to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to the Company.
d. By the Employee for "good reason" which shall be defined as:
i. an adverse change in the Employee's status or position as an
executive officer of the Company, including without limitation, a material
diminution in the Employee's duties, responsibilities or authority as of the
date of this Agreement (except for termination of the Employee for the reasons
stated in subsections (a) through (c) and (e) of this Section 4);
ii. a reduction by the Company in Employee's Base Salary as
defined in Section 3(a) of this Agreement or as the same may be increased from
time to time;
iii. without replacement by a plan providing benefits to
Employee equal to our greater than those discontinued, the failure by the
Company to continue in effect, within its maximum stated term, any plan in which
the Employee is participating or the taking of any action by the Company that
would adversely affect Employee's participation or materially reduce Employee's
benefits under any plan;
iv. the Company's requiring Employee to be based anywhere other
than Minneapolis, Minnesota;
v. the failure of the Company to complete the IPO contemplated
by the Company within two (2) years of the date of this Agreement;
vi. the change of control of the Company either through the
acquisition of the Company by another entity post-IPO or the acquisition of at
least 50.1% of the voting stock of the Company by an entity other than the
existing shareholders of the Company prior to the IPO (existing shareholders to
be defined as KLT Energy Services, Inc., Reardon Capital, LLC, and any officer
of the Company);
vii. the failure of the Company to comply with any material
provision of this Agreement.
Notwithstanding the above, Employee must give written notice to the Company
within thirty (30) days following the occurrence of any of the reasons stated in
Section 4d of this Agreement and, in the case of Section 4(d)(i),(iii), or (vii)
the Company shall have ten (10) days from receipt of such notice to cure. If the
Employee does not provide notice of such a reason within thirty (30) days of
4
<PAGE>
an occurrence, that specific occurrence shall no longer be considered a good
reason to terminate the Agreement.
e. At the election of the Company without cause upon 90 days written
notice to the Employee.
f. At the election of the Employee without good reason upon at least
90 days written notice to the Company.
5. Effect of Termination.
a. Termination for Cause or at Election of Employee. In the event
the Employee's employment is terminated for cause pursuant to Section 4(b), or
at the election of the Employee pursuant to Section 4(f), the Company shall pay
to the Employee the compensation and benefits otherwise payable to him under
Section 3 through the last day of his actual employment by the Company plus
Employee shall be entitled to all COBRA or other comparable benefits providing
for continuation, at Employee's expense, of Employee's health insurance
coverage.
b. Termination for Death or Disability. If the Employee's employment
is terminated by death or because of disability pursuant to Section 4(c), the
Company shall pay to the estate of the Employee or to the Employee, as the case
may be, the compensation which would otherwise be payable to the Employee up to
the end of the month in which the termination of his employment because of death
or disability occurs.
c. Termination without Cause or for Good Reason. In the event of
termination of Employee's employment by Employee for good reason as set forth in
Section 4(d) or by the Company without cause as set forth in Section 4(e), then
the Company shall pay to Employee all compensation and continue all health
insurance benefits in effect for Employee (and Employee's family) due through
the end of the term of this Agreement; and all stock options granted to Employee
as of the date of termination shall be deemed fully vested and shall be
exercisable during the Severance Period.
d. Survival. The provisions of Sections 6, 7, 8, 11, 13, 14 and 18
shall survive the termination of this Agreement.
6. Non-Compete.
a. During the Employment Period and for a period of three (3) years
after the termination or expiration thereof, the Employee will not directly or
indirectly, in the territory comprised by the continental United States:
(1) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than one percent (1%) of the
total outstanding stock of, a publicly held company),
5
<PAGE>
engage in the business of developing, producing, marketing or selling products
or services of the kind or type developed or being developed, produced, marketed
or sold by the Company or its affiliates, while the Employee was employed by the
Company; or
(2) recruit, solicit or induce, or attempt to induce employee or
employees of the Company or its affiliates to terminate their employment with,
or otherwise cease their relationship with, the Company or its affiliates; or
(3) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts of the Company or its affiliates, or prospective clients, customers or
accounts, of the Company or its affiliates which were contacted, solicited or
served by the Employee while employed by the Company.
b. If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
c. The restrictions contained in this Section 6 are necessary for the
protection of the business and goodwill of the Company and are considered by the
Employee to be reasonable for such purpose. The Employee agrees that any breach
of this Section 6 will cause the Company substantial and irrevocable damage and
therefore, in the event of any such breach, in addition to such other remedies
which may be available, the Company shall have the right to seek specific
performance and injunctive relief. The prevailing party in a legal proceeding to
remedy a breach under this Agreement shall be entitled to receive its reasonable
attorney's fees, expert witness fees, and out-of-pocket costs incurred in
connection with such proceeding, in addition to any other relief it may be
granted.
d. As part of the consideration to Employee for undertaking the
restrictions contained in this Section 6, the Company shall advance to the
employee $150,000 in the form of a non-interest bearing loan. In the event that
this Agreement is not terminated pursuant to Section 4(b) or at the Employee's
election pursuant to Section 4(f) prior to April 1/st/ 1999, the Company shall
forgive $50,000.00 of the indebtedness due by the Employee. In the event that
this Agreement is not terminated pursuant to Section 4(b) or at the Employee's
election pursuant to Section 4(f) prior to April 1/st/ 2000, the Company shall
forgive the remaining loan balance. In the event this Agreement is terminated
pursuant to Section 4(b) or at the Employee's election pursuant to Section 4(f)
the remaining loan balance shall become immediately due and payable.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-how, whether or
not in writing, of a private, secret or confidential nature concerning the
Company's business or financial
6
<PAGE>
affairs (collectively, "Proprietary Information") is and shall be the exclusive
property of the Company. By way of illustration, but not limitation, Proprietary
Information may include inventions, products, processes, methods, techniques,
formulas, compositions, compounds, projects, developments, plans, research data,
clinical data, financial data, personnel data, computer programs, and customer
and supplier lists. Employee will not disclose any Proprietary Information to
others outside the Company except in the ordinary course of business for valid
business purposes of the Company or use the same for any unauthorized purposes
without written approval by an officer of the Company, either during or after
his employment, unless and until such Proprietary Information has become public
knowledge without fault by the Employee.
ii. Employee agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program listings, or
other written, photographic, or other tangible material containing Proprietary
Information, whether created by the Employee or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
Company to be used by the Employee only in the performance of his duties for the
Company.
iii. Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (i) and
(ii) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Employee in the course of the Company's business.
b. Developments.
i. Employee will make full and prompt disclosure to the Company
of all inventions, improvements, discoveries, methods, developments, software,
and works of authorship, whether patentable or not, which are created, made,
conceived or reduced to practice by the Employee or under his direction or
jointly with others during his employment by the Company, whether or not during
normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
ii. Employee agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this Section
7.2(b) shall not apply to Developments which do not relate to the present or
planned business or research and development of the Company and which are made
and conceived by the Employee not during normal working hours, not on the
Company's premises and not using the Company's tools, devices, equipment or
Proprietary Information.
iii. Employee agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. Employee shall
sign all papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignment of proprietary
rights, and
7
<PAGE>
powers of attorney, which the Company may deem necessary or desirable in order
to protect its rights and interests in any Development.
c. Other Agreements. Employee hereby represents that his employment
by the Company does not violate any previous employment agreement entered into
by the Employee, and Employee agrees to indemnify, defend, and hold harmless
Company for any alleged breach or violation of any previous agreement for which
Company is responsible. Employee further represents that his performance of all
the terms of this Agreement and as an employee of the Company does not and will
not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by him in confidence or in trust prior to his
employment with the Company.
d. Company's Right to Notify Subsequent Employers. The Company may
do all permissible things, and take all permissible action, necessary or
advisable, in the Company's discretion, to protect its rights under this Section
7, including without limitation notifying any subsequent employer of the
Employee of the existence of (and furnishing to any such employer) the
provisions of this Agreement.
8. Liquidated Damages. Insofar as any damages sustained by the Company in
the case of a breach by the Employee of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if the Employee breaches
or violates any provision of this Agreement, the Company shall be entitled, in
addition to any other right and remedy available to it, to retain as liquidated
damages any sums owed but not paid by the Company to the Employee.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 9.
10. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
12. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Minnesota, without giving
effect to that State's conflict of laws provisions.
8
<PAGE>
14. Choice of Venue. All actions or proceedings with respect to this
Agreement shall be instituted only in any state or federal court sitting in
Hennepin County, Minnesota and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject to the jurisdiction (both
subject matter and personal) of each such court and irrevocably and
unconditionally waive: (a) any objection that the parties might now or hereafter
have to the venue of any of such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an inconvenient forum.
15. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
16. Waiver. No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
17. Captions and Headings. The captions of the sections of this Agreement
are for convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
18. Severability. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
19. Counterparts. This Agreement may be executed in a number of
counterparts and all of such counterparts executed by the Company or the
Employee, shall constitute one and the same agreement, and it shall not be
necessary for all parties to execute the same counterpart hereof.
20. Facsimile Signatures. The parties hereby agree that, for purposes of
the execution of this Agreement, facsimile signatures shall constitute original
signatures.
21. Incorporation by Reference. The preamble and recitals to this
Agreement are hereby incorporated by reference and made a part hereof.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
Nationwide Electric, Inc.
/s/ Greg Orman
______________________________
Greg Orman
CEO and President
EMPLOYEE:
/s/ Frederick C. Green IV
______________________________
Frederick C. Green IV
10
<PAGE>
Exhibit 10.3
Employment Agreement (David Smith)
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 1st day of April,
1998, by and between Nationwide Electric, Inc., a Delaware corporation with its
principal place of business at 1201 Walnut, Kansas City, Missouri 64105 (the
"Company"), and David Smith, an individual residing at ____________________ (the
"Employee").
RECITALS
--------
The Company desires to employ the Employee, and the Employee desires to be
employed by the Company. In consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Term (the "Initial Term") of this Agreement
shall commence on the date hereof and, subject to the further provisions of this
Agreement, shall end on the 31st day of March, 2001; provided, however, this
Agreement shall be automatically renewed for successive one (1) year periods
("Renewal Term") unless, at least ninety (90) days prior to the expiration of
the Initial Term or any Renewal Term, either party gives written notice to the
other party specifically electing to terminate this Agreement at the end of the
Initial Term or any such Renewal Term.
2. Title; Capacity. The Employee shall serve as Vice President -
Operations of the Company or in such other position as the Company's Board of
Directors (the "Board") may determine from time to time. The Employee shall be
subject to the supervision of, and shall have such authority as is delegated to
him by, the President of the Company.
The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company (and
its affiliates as required by the Company's investments and the Employee's
positions therein) during the Employment Period. The Employee agrees to abide by
the rules, regulations, instructions, personnel practices and policies of the
Company and any changes therein which may be adopted from time to time. The
Employee acknowledges receipt of copies of all such rules and policies committed
to writing as of the date of this Agreement.
3. Compensation and Benefits.
a. Salary. The Company shall pay the employee, in semi-monthly
installments, an annual base salary of $140,000.00 for the one-year period
commencing on the Commencement Date. Such salary shall be subject to adjustment
thereafter as determined by the Board.
1
<PAGE>
b. Fringe Benefits. The Employee shall be entitled to participate in
all bonus and benefit programs that the Company establishes and makes available
to its employees, if any, to the extent that Employee's position, tenure,
salary, age, health and other qualifications make him eligible to participate.
c. Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
amount available for such travel, entertainment and other expenses may be fixed
in advance by the President. Upon prior approval by the President, the Company
shall reimburse Employee, or directly pay for, dues and membership fees for
industry organizations relevant to Employee's duties.
d. Stock. In further consideration of the obligations and
undertakings of the Employee in this Agreement, the Company shall sell certain
shares of its common stock to Employee pursuant to that certain Employee
Restricted Stock Purchase Agreement of even date herewith.
4. Employment Termination. The employment of the Employee by the Company
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
a. Expiration of the Employment Period in accordance with Section 1;
b. At the election of the Company, for "Cause", immediately upon
written notice by the Company to the Employee. "Cause" for such termination
shall include, but not limited to, the following:
i. Dishonesty of the Employee with respect to the Company;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the effect of injuring the reputation, business or business
relationships of the Company or its respective officers, directors or employees;
iii. Upon a charge by a governmental entity against the Employee
of any crime involving moral turpitude which is demonstrably and materially
injurious to the Company or upon the filing of any civil action involving a
charge of embezzlement, theft, fraud or other similar act which is demonstrably
and materially injurious to the Company;
iv. Willful or prolonged absence from work by the Employee
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Employee to perform his duties and
responsibilities without the same being corrected upon ten (10) days prior
written notice; or
2
<PAGE>
v. Breach by the Employee of any of the covenants contained in
this Agreement, or
vi. Failure by the Employee to meet agreed upon performance
objectives, which are within Employee's reasonable control.
c. Immediately upon the death or disability of the Employee. As used
in this Agreement, the term "disability" shall mean the inability of the
employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360 day period to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to the Company.
d. At the election of the Company or the Employee, with or without
cause upon 90 days written notice by one party to the other.
5. Effect of Termination.
a. Termination for Cause or at Election of Either Party. In the
event the Employee's employment is terminated for cause pursuant to Section
4(b), or at the election of either party pursuant to Section 4(d), the Company
shall pay to the Employee the compensation and benefits otherwise payable to him
under Section 3 through the last day of his actual employment by the Company.
b. Termination for Death or Disability. If the Employee's employment
is terminated by death or because of disability pursuant to Section 4(c), the
Company shall pay to the estate of the Employee or to the Employee, as the case
may be, the compensation which would otherwise be payable to the Employee up to
the end of the month in which the termination of his employment because of death
or disability occurs.
c. Survival. The provisions of Sections 6 and 7 shall survive the
termination of this Agreement.
6. Non-Compete.
a. Except as provided in Section 6.d., below, during the Employment
Period and for a period of three (3) years after the termination or expiration
thereof, the Employee will not directly or indirectly, in the territory
comprised by the continental United States:
i. as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than five percent (5%) of the
total outstanding stock of, a publicly held company), engage in the business of
developing, producing, marketing or selling products or services of the kind or
type developed or being developed, produced, marketed or sold by the Company or
its affiliates,
3
<PAGE>
while the Employee was employed by the Company (such products or services may
include, but shall not be limited to, commercial and industrial electrical
contracting services and the acquisition of companies providing such services);
ii. recruit, solicit or induce, or attempt to induce employee
or employees of the Company to terminate their employment with, or otherwise
cease their relationship with, the Company; or
iii. solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
b. If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
c. The restrictions contained in this Section 6 are necessary for
the protection of the business and goodwill of the Company and are considered by
the Employee to be reasonable for such purpose. The Employee agrees that any
breach of this Section 6 will cause the Company substantial and irrevocable
damage and therefore, in the event of any such breach, in addition to such other
remedies which may be available, the Company shall have the right to seek
specific performance and injunctive relief. The prevailing party in a legal
proceeding to remedy a breach under this Agreement shall be entitled to receive
its reasonable attorney's fees, expert witness fees, and out-of-pocket costs
incurred in connection with such proceeding, in addition to any other relief it
may be granted.
d. The restrictions set forth in Section 6.a. shall extend for a
period of one(1) year after termination if such termination was at the election
of the Company without cause, or by the Employee on account of a breach of a
material provision of this Agreement by the Company.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-how, whether
or not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, and customer and supplier
lists. Employee will not disclose any Proprietary Information to others outside
the Company
4
<PAGE>
or use the same for any unauthorized purposes without written approval by an
officer of the Company, either during or after his employment, unless and until
such Proprietary Information has become public knowledge without fault by the
Employee.
ii. Employee agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, or other tangible material containing
Proprietary Information, whether created by the Employee or others, which shall
come into his custody or possession, shall be and are the exclusive property of
the Company to be used by the Employee only in the performance of his duties for
the Company.
iii. Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Employee in the course of the Company's business.
b. Developments.
i. Employee will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, whether patentable or not, which are created,
made, conceived or reduced to practice by the Employee or under his direction or
jointly with others during his employment by the Company, whether or not during
normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
ii. Employee agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this Section
7.2(b) shall not apply to Developments which do not relate to the present or
planned business or research and development of the Company and which are made
and conceived by the Employee not during normal working hours, not on the
Company's premises and not using the Company's tools, devices, equipment or
Proprietary Information.
iii. Employee agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. Employee shall
sign all papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignment of proprietary
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development.
c. Other Agreements. Employee hereby represents that he is not bound
by the terms of any agreement with any previous employer or other party to
refrain from using or disclosing
5
<PAGE>
any trade secret or confidential or proprietary information in the course of his
employment with the Company or to refrain from competing, directly or
indirectly, with the business of such previous employer or any other party.
Employee further represents that his performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information, knowledge or data
acquired by him in confidence or in trust prior to his employment with the
Company.
d. Company's Right to Notify Subsequent Employers. The Company may
do all permissible things, and take all permissible action, necessary or
advisable, in the Company's discretion, to protect its rights under this Section
7, including without limitation notifying any subsequent employer of the
Employee of the existence of (and furnishing to any such employer) the
provisions of this Agreement.
8. Liquidated Damages. Insofar as any damages sustained by the Company in
the case of a breach by the Employee of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if the Employee breaches
or violates any provision of this Agreement, the Company shall be entitled, in
addition to any other right and remedy available to it, to retain as liquidated
damages any sums owed but not paid by the Company to the Employee.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 9.
10. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
12. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Missouri, without giving
effect to that State's conflict of laws provisions.
14. Choice of Venue. All actions or proceedings with respect to this
Agreement shall be instituted only in any state or federal court sitting in
Jackson County, Missouri, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject to the jurisdiction (both
6
<PAGE>
subject matter and personal) of each such court and irrevocably and
unconditionally waive: (a) any objection that the parties might now or hereafter
have to the venue of any of such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an inconvenient forum.
15. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of both parties and their respective successors and assigns,
including any corporation with which or into which the Company may be merged or
which may succeed to its assets or business, provided, however, that the
obligations of the Employee are personal and shall not be assigned by him.
16. Waiver. No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
17. Captions and Headings. The captions of the sections of this Agreement
are for convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
18. Severability. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
19. Counterparts. This Agreement may be executed in a number of
counterparts and all of such counterparts executed by the Company or the
Employee, shall constitute one and the same agreement, and it shall not be
necessary for all parties to execute the same counterpart hereof.
20. Facsimile Signatures. The parties hereby agree that, for purposes of
the execution of this Agreement, facsimile signatures shall constitute original
signatures.
21. Incorporation by Reference. The preamble and recitals to this
Agreement are hereby incorporated by reference and made a part hereof.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
Nationwide Electric, Inc.
A Delaware Corporation
/s/ Gregory J. Orman
------------------------------
Name: Gregory J. Orman
Title: Chairman of the Board
EMPLOYEE:
/s/ David Smith
------------------------------
David Smith
8
<PAGE>
Exhibit 10.4
Employment Agreement (Frank Clark)
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 1st day of April,
1998, by and between Nationwide Electric, Inc., a Delaware corporation with its
principal place of business at 1201 Walnut, Kansas City, Missouri 64105 (the
"Company"), and Frank R. Clark, an individual residing at ____________________
(the "Employee").
RECITALS
--------
The Company desires to employ the Employee, and the Employee desires to be
employed by the Company. In consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Term (the "Initial Term") of this Agreement
shall commence on the date hereof and, subject to the further provisions of this
Agreement, shall end on the 31st day of March, 2001; provided, however, this
Agreement shall be automatically renewed for successive one (1) year periods
("Renewal Term") unless, at least ninety (90) days prior to the expiration of
the Initial Term or any Renewal Term, either party gives written notice to the
other party specifically electing to terminate this Agreement at the end of the
Initial Term or any such Renewal Term.
2. Title; Capacity. The Employee shall serve as Vice President, Chief
Financial Officer and Treasurer of the Company or in such other position as the
Company's Board of Directors (the "Board") may determine from time to time. The
Employee shall be subject to the supervision of, and shall have such authority
as is delegated to him by, the President of the Company.
The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company (and
its affiliates as required by the Company's investments and the Employee's
positions therein) during the Employment Period. The Employee agrees to abide by
the rules, regulations, instructions, personnel practices and policies of the
Company and any changes therein which may be adopted from time to time. The
Employee acknowledges receipt of copies of all such rules and policies committed
to writing as of the date of this Agreement.
3. Compensation and Benefits.
a. Salary. The Company shall pay the employee, in semi-monthly
installments, an annual base salary of $140,000.00 for the one-year period
commencing on the Commencement Date. Such salary shall be subject to adjustment
thereafter as determined by the Board.
<PAGE>
b. Fringe Benefits. The Employee shall be entitled to participate in
all bonus and benefit programs that the Company establishes and makes available
to its employees, if any, to the extent that Employee's position, tenure,
salary, age, health and other qualifications make him eligible to participate.
c. Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
amount available for such travel, entertainment and other expenses may be fixed
in advance by the President. Upon prior approval by the President, the Company
shall reimburse Employee, or directly pay for, dues and membership fees for
industry organizations relevant to Employee's duties.
d. Stock. In further consideration of the obligations and
undertakings of the Employee in this Agreement, the Company shall sell certain
shares of its common stock to Employee pursuant to that certain Employee
Restricted Stock Purchase Agreement of even date herewith.
4. Employment Termination. The employment of the Employee by the Company
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
a. Expiration of the Employment Period in accordance with Section 1;
b. At the election of the Company, for "Cause", immediately upon
written notice by the Company to the Employee. "Cause" for such termination
shall include, but not limited to, the following:
i. Dishonesty of the Employee with respect to the Company;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the effect of injuring the reputation, business or business
relationships of the Company or its respective officers, directors or employees;
iii. Upon a charge by a governmental entity against the Employee
of any crime involving moral turpitude which is demonstrably and materially
injurious to the Company or upon the finding of any civil court against the
Employee in an action involving a charge of embezzlement, theft, fraud, or other
similar act which is demonstrably and materially injurious to the Company;
iv. Willful or prolonged absence from work by the Employee
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Employee to perform his duties and
responsibilities without the same being corrected upon ten (10) days prior
written notice; or
2
<PAGE>
v. Breach by the Employee of any of the covenants contained in
this Agreement.
c. Immediately upon the death or disability of the Employee. As used
in this Agreement, the term "disability" shall mean the inability of the
employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360 day period to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to the Company.
d. At the election of the Company or the Employee, with or without
cause upon 90 days written notice by one party to the other.
5. Effect of Termination.
a. Termination for Cause or at Election of Either Party. In the
event the Employee's employment is terminated for cause pursuant to Section
4(b), or at the election of either party pursuant to Section 4(d), the Company
shall pay to the Employee the compensation and benefits otherwise payable to him
under Section 3 through the last day of his actual employment by the Company.
b. Termination for Death or Disability. If the Employee's employment
is terminated by death or because of disability pursuant to Section 4(c), the
Company shall pay to the estate of the Employee or to the Employee, as the case
may be, the compensation which would otherwise be payable to the Employee up to
the end of the month in which the termination of his employment because of death
or disability occurs.
c. Survival. The provisions of Sections 6 and 7 shall survive the
termination of this Agreement.
6. Non-Compete.
a. Except as provided in Section 6.d., below, during the Employment
Period and for a period of three (3) years after the termination or expiration
thereof, the Employee will not directly or indirectly, in the territory
comprised by the continental United States:
i. as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than five percent (5%) of the
total outstanding stock of, a publicly held company), engage in the business of
developing, producing, marketing or selling products or services of the kind or
type developed or being developed, produced, marketed or sold by the Company or
its affiliates, while the Employee was employed by the Company (such products or
services may include, but shall not be limited to, commercial and industrial
electrical contracting services and the acquisition of companies providing such
services);
3
<PAGE>
ii. recruit, solicit or induce, or attempt to induce employee
or employees of the Company to terminate their employment with, or otherwise
cease their relationship with, the Company; or
iii. solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
b. If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
c. The restrictions contained in this Section 6 are necessary for
the protection of the business and goodwill of the Company and are considered by
the Employee to be reasonable for such purpose. The Employee agrees that any
breach of this Section 6 will cause the Company substantial and irrevocable
damage and therefore, in the event of any such breach, in addition to such other
remedies which may be available, the Company shall have the right to seek
specific performance and injunctive relief. The prevailing party in a legal
proceeding to remedy a breach under this Agreement shall be entitled to receive
its reasonable attorney's fees, expert witness fees, and out-of-pocket costs
incurred in connection with such proceeding, in addition to any other relief it
may be granted.
d. The restrictions set forth in Section 6.a. shall extend for a
period of one (1) year after termination if such termination was at the election
of the Company without cause, or by the Employee on account of a breach of a
material provision of this Agreement by the Company. In addition, the Employee
may, upon retirement, but no earlier than age 60, act as a consultant to
businesses engaged in activities similar to those of the Company, provided all
other terms and conditions of this Agreement are honored by the Employee.
e. If this Agreement is terminated within ninety (90) days of the
change of control of the Company, then the restrictions contained in Section
6.1.(i) shall be eliminated. Notwithstanding the above, at the Company's
election, the Company may continue to compensate the Employee based on the
Compensation outlined in Section 3 above and Employee agrees to maintain the
restrictions contained in Section 6.1.(i). For the purposes of this Agreement
"change of control" shall be defined as any person (as that term is used in
Section 13(e) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act)), other than the holders of any of the Company's securities as of
the date of this Agreement, is or becomes the beneficial owner (as defined in
Rule 13d-3 promulgated under the Exchange Act) directly or indirectly of
securities of the Company representing a majority of the combined voting power
of the Company's then outstanding securities (assuming conversion of all
outstanding convertible non-voting securities into voting securities and the
exercise of all outstanding options and all other securities which are
convertible to voting securities), or upon the approval by the Company's
shareholders of (A) the sale of all or
4
<PAGE>
substantially all of the assets of the Company, (B) the merger or consolidation
or any reorganization or restructuring of the Company (other than a merger,
consolidation, reorganization or restructuring in which the Company is the
surviving corporation and which does not result in any capital reorganization or
reclassification or other change in the ownership of the Company's then
outstanding shares that would be deemed a change in control pursuant to clause
(i), above), or (C) a plan of liquidation or dissolution of the Company.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-how, whether
or not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, and customer and supplier
lists. Employee will not disclose any Proprietary Information to others outside
the Company or use the same for any unauthorized purposes without written
approval by an officer of the Company, either during or after his employment,
unless and until such Proprietary Information has become public knowledge
without fault by the Employee.
ii. Employee agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, or other tangible material containing
Proprietary Information, whether created by the Employee or others, which shall
come into his custody or possession, shall be and are the exclusive property of
the Company to be used by the Employee only in the performance of his duties for
the Company.
iii. Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Employee in the course of the Company's business.
b. Developments.
i. Employee will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, whether patentable or not, which are created,
made, conceived or reduced to practice by the Employee or under his direction or
jointly with others during his employment by the Company, whether or not during
normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
5
<PAGE>
ii. Employee agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this Section
7.2(b) shall not apply to Developments which do not relate to the present or
planned business or research and development of the Company and which are made
and conceived by the Employee not during normal working hours, not on the
Company's premises and not using the Company's tools, devices, equipment or
Proprietary Information.
iii. Employee agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. Employee shall
sign all papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignment of proprietary
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development.
c. Other Agreements. Employee hereby represents that he is not bound
by the terms of any agreement with any previous employer or other party to
refrain from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. Employee further represents that his performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence proprietary information, knowledge or
data acquired by him in confidence or in trust prior to his employment with the
Company.
d. Company's Right to Notify Subsequent Employers. The Company may
do all permissible things, and take all permissible action, necessary or
advisable, in the Company's discretion, to protect its rights under this Section
7, including without limitation notifying any subsequent employer of the
Employee of the existence of (and furnishing to any such employer) the
provisions of this Agreement.
8. Liquidated Damages. Insofar as any damages sustained by the Company in
the case of a breach by the Employee of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if the Employee breaches
or violates any provision of this Agreement, the Company shall be entitled, in
addition to any other right and remedy available to it, to retain as liquidated
damages any sums owed but not paid by the Company to the Employee.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 9.
6
<PAGE>
10. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
12. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Missouri, without giving
effect to that State's conflict of laws provisions.
14. Choice of Venue. All actions or proceedings with respect to this
Agreement shall be instituted only in any state or federal court sitting in
Jackson County, Missouri, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject to the jurisdiction (both
subject matter and personal) of each such court and irrevocably and
unconditionally waive: (a) any objection that the parties might now or hereafter
have to the venue of any of such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an inconvenient forum.
15. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of both parties and their respective successors and assigns,
including any corporation with which or into which the Company may be merged or
which may succeed to its assets or business, provided, however, that the
obligations of the Employee are personal and shall not be assigned by him.
16. Waiver. No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
17. Captions and Headings. The captions of the sections of this Agreement
are for convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
18. Severability. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
19. Counterparts. This Agreement may be executed in a number of
counterparts and all of such counterparts executed by the Company or the
Employee, shall constitute one and the same agreement, and it shall not be
necessary for all parties to execute the same counterpart hereof.
7
<PAGE>
20. Facsimile Signatures. The parties hereby agree that, for purposes of
the execution of this Agreement, facsimile signatures shall constitute original
signatures.
21. Incorporation by Reference. The preamble and recitals to this
Agreement are hereby incorporated by reference and made a part hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
Nationwide Electric, Inc.
A Delaware Corporation
/s/ Gregory J. Orman
----------------------------
Name: Gregory J. Orman
Title: Chairman of the Board
EMPLOYEE:
/s/ Frank R. Clark
-----------------------------
Frank R. Clark
8
<PAGE>
Exhibit 10.5
Non-Qualified Stock Option Plan
<PAGE>
NATIONWIDE ELECTRIC, INC.
NON-QUALIFIED STOCK OPTION PLAN
-------------------------------
This Non-Qualified Stock Option Plan (the "Plan") is executed effective as
of April 1, 1998, by Nationwide Electric, Inc. (the "Corporation") for the
benefit of certain of the Corporation's employees.
Whereas, the Corporation believes it is in the best interest of the
Corporation and its employees to establish a plan for the purpose of providing
certain benefits for eligible employees, and
Whereas, the Corporation wishes to offer an inducement to the eligible
employees to remain as employees in the form of additional compensation for
services which they have rendered or will hereafter render.
Now, therefore, the Corporation establishes the following Plan.
1. Definitions and Purpose
a. Definitions. Unless otherwise specified or unless the context
otherwise requires, the following terms have the following meanings:
i. "Board of Directors" or "Board" means the Board of Directors of
Nationwide Electric, Inc.
ii. "Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
iii. "Corporation" or "Company" means Nationwide Electric, Inc., a
Delaware corporation.
iv. "Disability" or "Disabled" shall mean any ailment, illness or
other physical or mental incapacity or condition, which despite
reasonable accommodation by the Corporation, disables Employee or
Consultant from performing substantially all of his or her duties
with the Corporation for a period of ninety (90) days, whether or
not consecutive, during any 360 day period. A determination of
disability shall be made by a physician satisfactory to the
Corporation. If the Employee or Consultant has a written
employment or consulting agreement with the Corporation which
contains a specific definition of "Disability" or "Disabled",
then that definition shall control.
v. "Discharged for Cause" shall mean the termination of employment
or consultation for any of the following reasons: dishonesty of
the Employee
<PAGE>
with respect to the Company; willful misfeasance or nonfeasance
of duty intended to injure or having the effect of injuring the
reputation, business or business relationships of the
Corporation or its respective officers, directors or employees;
upon a charge by a governmental entity against the Employee of
any crime involving moral turpitude or which could reflect
unfavorably upon the Corporation or upon the filing of any
civil action involving a charge of embezzlement, theft, fraud
or other similar act; willful or prolonged absence from work by
the Employee (other than by reason of Disability) or failure,
neglect or refusal by the Employee to perform his or her duties
and responsibilities without the same being corrected upon ten
(10) days prior written notice; or breach by the Employee of
any of the covenants contained in an employment agreement with
the Corporation. If the Employee has a written employment
agreement with the Corporation which contains a specific
definition of "Discharged for Cause" or "Cause", then that
definition shall control.
vi. "Employee" means an employee of the Corporation.
vii. "Nonqualified Option" shall mean an Option, as defined below,
which is designated as such and which, when granted, is not
intended to be an "incentive stock option" as defined in Code
Section 422A.
viii. "Option" means an option to purchase certain shares of the
Corporation's common stock granted under the Plan.
ix. "Optionee" means an Employee to whom one or more Options are
granted under the Plan.
x. "Plan" means this Nonqualified Stock Option Plan.
xi. "Shares" means shares of the common stock, $0.01 par value, of
the Corporation, or any shares of capital stock into which the
Shares are changed or for which they are exchanged pursuant to
Article 7 of the Plan.
xii. "Subsidiary" shall mean any corporation, the majority of the
outstanding capital stock of which is owned, directly or
indirectly, by the Corporation.
b. Purpose. The purpose of the Plan is to advance the interests of the
Corporation and its shareholders by affording to key management
employees of the Company an opportunity to acquire or increase their
proprietary interest in the Corporation by the grant to such employees
of Options or Awards under the terms set forth herein. By thus
encouraging such employees to become owners of Company shares, the
Company seeks to motivate, retain, and attract those highly competent
2
<PAGE>
individuals upon whose judgment, initiative, leadership, and continued
efforts the success of the Company in large measure depends.
2. Eligibility. Any Employee of the Corporation or its Subsidiaries shall be
eligible to participate in the Plan.
3. Shares subject to the Plan. The aggregate number of Shares as to which
Options may be granted from time to time shall be 500,000 (as adjusted
pursuant to Article 6). The Shares to be issued shall be made available
from authorized but unissued Shares. If any Option granted under the Plan
shall expire, be canceled or terminate without being exercised in whole or
in part, new Options may be granted covering the Shares not purchased.
4. Administration of the Plan. The Plan shall be administered by the Board or
by a committee of Corporation directors appointed by such Board. In the
intervals between the meetings of the Board, the Executive Committee of the
Board, pursuant to the powers granted to it by the Corporation's bylaws,
shall administer the Plan except with respect to any matters which, by
resolution of the Board, may from time to time be reserved for action by
the Board. As and to the extent authorized by the Board, a committee may
exercise the power and authority vested in the Board under the Plan. The
Board shall have the authority, in its sole discretion, to determine the
Employees to whom, and the time or times at which and the terms upon which,
Options shall be granted and may be exercised, and the number of Shares to
be subject to each Option, the exercise price of Options, and to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to
the Plan, to determine the terms and provisions of the respective Option
agreements (which need not be identical) and to make all other
determinations and take all other actions necessary or advisable for the
administration of the Plan. The Board's determinations of the matters
referred to in this Plan shall be conclusive and without a right of review.
5. Terms and Conditions of Options.
a. General. Any Option granted under the Plan shall be in such form as
the Board may from time to time approve. Any such Option shall be
subject to the below terms and conditions and may contain such
additional terms and conditions, not inconsistent with the Plan, as
the Board shall deem desirable. Options granted pursuant to the Plan
shall be evidenced by option agreements in such form, consistent with
the Plan, as the Board shall prescribe from time to time. Any Option
granted prior to the approval by the Corporation's shareholders of the
Plan shall be granted subject to such approval.
3
<PAGE>
b. Option Price. The purchase price of each of the Shares purchasable
under an Option shall be as determined by the Board.
c. Option Period. The period of each Option shall be fixed by the Board,
but no Option shall be exercisable after the expiration of ten years
from the date the Option is granted or upon an Optionee failing to
meet the requirements of exercising the Option as set forth in the
Plan or the associated option agreement.
d. Exercise of Option. Except as provided in Section 5.e or in the
associated option agreement, Options become vested, and may be
exercised, in four (4) annual amounts equal to twenty five percent
(25%) of the total Options granted to the Optionee, with the first
twenty five percent (25%) amount vested and exercisable no sooner than
the first anniversary of the Option grant. Unless earlier terminated,
one hundred percent (100%) of the granted Options will automatically
vest and become exercisable on the fourth anniversary date of the
Options being granted. Options will not ratably vest for a portion of
any year or period, unless such vesting is specifically allowed under
the associated option agreement. Optionee may exercise any vest
Options, prior to such Options being terminated, by giving written
notice of exercise to the Corporation, specifying the number of Shares
to be purchased, together with payment in full of the purchase price.
Payment must be made by cash or check equal to the exercise price. In
addition to and at the time of such payment, Optionee shall pay to the
Corporation the full amount of all federal and state withholding or
other employment taxes applicable to the taxable income of such
Optionee resulting from such exercise. An Optionee shall have the
rights of a shareholder only with respect to Shares for which Options
have been exercised, full payment made and certificates therefor
issued. Any term or provision set forth in this Section 5.d. may be as
otherwise set forth in the specific option agreement, with such
agreement's language controlling. Notwithstanding anything to the
contrary herein, no transfer or issuance of Shares pursuant to the
exercise of an Option shall be made by the Corporation while the stock
transfer books are closed. Any Option exercise attempted during the
period in which the stock transfer books are closed shall only take
place after the stock transfer books have been reopened.
e. Termination of Employment. Except to the extent otherwise provided in
any option agreement, the Options and all rights granted by this Plan,
to the extent those rights have not been exercised, will terminate and
4
<PAGE>
become null and void on the Option termination date or sooner if the
Employee ceases to be in the continuous employ of the Company (whether
by resignation, retirement, dismissal, or otherwise). However, in the
event of the termination of such employment for any reason other than
the Employee's death or Disability, the Employee may exercise the
Option at any time within the following three-month period to the
extent such Option was exercisable by him on the date of termination
of such employment. If the Employee dies while employed by the
Company, or if Employee's employment is terminated because of
Disability, the Employee or the person or persons to whom his rights
under the Option shall pass, whether by will or by the applicable laws
of descent and distribution, as applicable, may exercise such Option
to the extent the Employee was entitled to exercise it on the date of
his death or termination of employment because of Disability, for a
period of one year following such death or termination of employment
because of Disability, as applicable.
f. Change of Control, Dissolution and Liquidation. If there is a change
of control of the Corporation, then the Option to acquire the Shares
vests in full immediately (or as stated otherwise in the option
agreement), and such Option must be exercised within thirty (30) days
of the change of control. For the purposes of this Plan, a "change in
control" (unless otherwise defined in the option agreement) occurs (i)
when any person (as that term is used in Section 13(e) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than the holders of any of the Corporation's securities as of
the date such Option was granted, is or becomes the beneficiary owner
(as defined in Rule 13d-3 promulgated under the Exchange Act) directly
or indirectly of securities of the Corporation representing a majority
of the combined voting power of the Corporation's then outstanding
securities (assuming conversion of all outstanding convertible non-
voting securities into voting securities and the exercise of all
outstanding Options and all other securities which are convertible to
voting securities); or (ii) upon the approval by the Corporation's
shareholders of (A) the sale of all or substantially all of the assets
of the Corporation, (B) the merger or consolidation or any
reorganization or restructuring of the Corporation (other than a
merger, consolidation, reorganization or restructuring in which the
Corporation is the surviving corporation and which does not result in
any capital reorganization or reclassification or other change in the
ownership of the Corporation's then outstanding shares that would
5
<PAGE>
be deemed a change in control pursuant to clause (i) above) or (C) a
plan of liquidation or dissolution of the Corporation.
6. Adjustments upon Changes in Capitalization. If the number of authorized
shares are changed by reason of stock dividends, recapitalizations,
mergers, consolidations, split-ups, combinations or exchanges of shares or
the like, the aggregate number of shares to which Options may be granted to
Employees shall be ratably adjusted by the Board and, in the case of each
Option outstanding at the time of any such action, the number and class of
shares which may thereafter be purchased thereunder and the exercise price
of each Option shall be adjusted to such ratable extent as determined by
the Board, whose determination shall be conclusive and without a right of
review.
7. Leave of Absence. The Board shall determine the extent to which military or
Government service or leave of absence for any other reason shall
constitute termination of employment for the purposes of the Plan or any
Option.
8. Fair Market Value of Shares and Options. In the event the fair market value
of either Shares or Options shall be required for any reason related to
this Plan, such fair market value shall be determined by the Corporation
appointing one appraiser and the Optionees appointing one appraiser. The
two appraisers so appointed shall appoint a third appraiser. The decision
of the three appraisers shall be by majority vote and shall be binding upon
all parties disputing or requiring the establishment of fair market value
under this Plan.
9. Government Regulations. The Plan, the grant and exercise of Options and the
obligations of the Corporation to sell and deliver Shares under such
Options shall be subject to all applicable federal and state laws, rules
and regulations, and to such approvals by any regulatory or governmental
agency as may be required, including but not limited to the admission of
such Shares to listing on all stock exchanges on which the Corporation's
stock is then listed, the completion of any registration or other
qualification of such shares under any federal or state law or under the
rulings or regulations of the Securities and Exchange Commission or any
other governmental regulatory body, which the Board shall in its sole
discretion deem necessary or advisable, and the obtaining of any approval
or other clearance from any federal or state governmental agency which the
Board shall in its sole discretion determine to be necessary or advisable.
10. Term and Termination of the Plan. The Plan shall become effective on the
date that the shareholders of the Corporation shall, by unanimous consent
or by the
6
<PAGE>
affirmative vote of a majority in interest of the common shares, in
addition to the affirmative vote of a majority in interest of all the
shares of the Corporation, have approved the Plan, and shall terminate on
December 31, 2018. The Plan may be terminated at an earlier date by the
Board; provided, however, that any such earlier termination shall not
effect any Options granted prior to the date of such termination.
11. Amendments. The Plan may be amended by the Board; provided, however, that
no such amendment may increase the number of Shares for which Options may
be granted (except as provided by Article 6) and no such amendment may
alter the designation of the class of persons eligible to receive Options
under the Plan, unless such amendment is approved by the shareholders of
the Corporation. No amendment shall affect any Options previously granted
unless such amendment shall expressly so provide and unless any Optionee to
whom an Option has been granted who would be adversely affected by such
amendment consents in writing.
12. No Guarantee of Grant or Continued Employment. The adoption of this Plan
shall not be deemed to give any Employee any right to be granted an Option
to purchase Shares, except to the extent and upon such terms and conditions
as may be determined by the Board. Nothing herein contained shall be deemed
to be a guarantee or other assurance of continued employment of an Employee
or Optionee, or be deemed to prevent the Corporation from terminating such
employment for any reason, with or without cause.
13. Miscellaneous Provisions.
a. The Corporation and Optionees (by acceptance of Options) agree to
execute such further instruments and to take such further action as
may reasonably be necessary to carry out the intent of this Agreement.
b. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed to Optionee at his
address shown on the Corporation's employment records and to the
Corporation at the address of its principal corporate offices
(attention: President) or at such other address as such party may
designate by ten days' advance written notice to the other party
hereto.
7
<PAGE>
c. This agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Delaware, without giving
effect to that State's conflict of laws provisions.
d. All actions or proceedings with respect to this Agreement shall be
instituted only in any state or federal court sitting in Jackson
County, Missouri, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject to the jurisdiction
(both subject matter and personal) of each such court and irrevocably
and unconditionally waive: (a) any objection that the parties might
now or hereafter have to the venue of any of such court; and (b) any
claim that any action or proceeding brought in any such court has been
brought in an inconvenient forum.
e. No delay or omission by the Corporation in exercising any right under
this Plan shall operate as a waiver of that or any other right. A
waiver or consent given by the Corporation on any one occasion shall
be effective only in that instance and shall not be construed as a bar
or waiver of any right on any other occasion.
f. The captions of the sections of this Agreement are for convenience of
reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
g. In case any provision of this Plan shall be invalid, illegal or
otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired
thereby.
In witness whereof, the Corporation has executed this Plan as of the date
first above written.
NATIONWIDE ELECTRIC, INC.
By: /s/ Gregory J. Orman
-----------------------------------
Gregory J. Orman, Chairman of the Board
Attest:
/s/ Mark G. English
- -----------------------
Secretary
8
<PAGE>
Exhibit 10.6
Incentive Stock Option Plan
<PAGE>
NATIONWIDE ELECTRIC, INC.
INCENTIVE STOCK OPTION PLAN
---------------------------
NATIONWIDE ELECTRIC, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), hereby formulates and adopts,
having been approved by the holders of a majority of the issued and outstanding
shares of common stock of the Company ("NEI Common Stock") voting by unanimous
consent, an incentive stock option plan for key employees of the Company and its
subsidiaries as follows:
1. Purpose of Plan. The purpose of this Incentive Stock Option Plan (the
"Plan") is to encourage the key employees of the Company and its subsidiaries to
participate in the ownership of the Company, and to provide additional incentive
for such employees to promote the success of its business through sharing in the
future growth of such business.
2. Effectiveness of Plan. The provisions of this Plan shall become effective
on the date the Plan is adopted by the Board of Directors of the Company (the
"Board of Directors").
3. Administration. This Plan shall be administered by a compensation committee
("Compensation Committee") which shall be selected by the Board of Directors and
which shall be composed of not less than two nor more than five members of the
Board of Directors who are non-employee directors within the meaning of
Securities and Exchange Commission Rule 16b-3. The Compensation Committee shall
have full power and authority to construe, interpret and administer the Plan,
and may from time to time adopt such rules and regulations for carrying out this
Plan as it may deem proper and in the best interests of the Company. Subject to
the terms, provisions and conditions of the Plan, the Compensation Committee
shall have exclusive authority (i) to select key employees to whom options shall
be granted, (ii) to determine the number of shares subject to each option, (iii)
to determine the time or times when options will be granted, (iv) to determine
the option price of the shares subject to each option, (v) to determine the time
when each option may be exercised, (vi) to fix such other provisions of each
option agreement as the Compensation Committee may deem necessary or desirable,
consistent with the terms of this Plan, and (vii) to determine all other
questions relating to the administration of this Plan. The interpretation and
construction of this Plan by the Compensation Committee shall be final,
conclusive and binding upon all persons.
<PAGE>
4. Eligibility.
(a) Key employees--Options to purchase shares of NEI Common Stock shall be
granted under this Plan only to key employees of the Company or of any of its
subsidiary corporations, as the term "subsidiary corporations" is defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code").
Key employees to whom options may be granted under this Plan will be those
employees selected by the Compensation Committee from time to time who, in the
sole discretion of the Compensation Committee, have made material contributions
in the past, or who are expected to make material contributions in the future,
to the successful performance of the Company. However, in no event shall an
employee who owns more than 5 percent of the total combined voting power of all
classes of stock of the Company or of any of its subsidiary corporations be
eligible to receive an option under this Plan.
5. Shares Subject to the Plan. Options granted under this Plan shall be
granted solely with respect to shares of NEI Common Stock. Subject to any
adjustments made pursuant to the provisions of Section 13, the aggregate number
of shares of NEI Common Stock which may be issued upon exercise of the options
which will be granted under this Plan shall not exceed 500,000.
If any option granted under this Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject to
such option shall be added to the number of shares otherwise available for
options which may be granted in accordance with the terms of this Plan.
The shares to be delivered upon exercise of the options granted under this
Plan shall be made available, at the discretion of the Board of Directors, from
either the authorized but unissued shares of NEI Common Stock or any treasury
shares of NEI Common Stock held by the Company.
6. Option Agreement. Each option granted under this Plan shall be evidenced by
an incentive stock option agreement, which shall be signed by an officer of the
Company and by the employee to whom the option is granted (the "optionee"). The
terms of such incentive stock option agreement shall be in accordance with the
provisions of this Plan, but it may include such other provisions as may be
approved by the Compensation Committee. The granting of an option under this
Plan shall be deemed to occur on the date on which the incentive stock option
agreement evidencing such option is executed by the Company and the optionee.
Each incentive stock option agreement shall constitute a binding contract
between the Company and the optionee, and every optionee, upon the execution of
an incentive stock option agreement, shall be bound by the terms and
restrictions of this Plan and such incentive stock option agreement.
7. Option Price. The price at which shares of NEI Common Stock may be
purchased under an option granted pursuant to this Plan shall be determined by
the Compensation Committee, but
2
<PAGE>
in no event shall the price be less than the greater of (a) the par value
thereof, or (b) 100 percent of the fair market value of such shares on the date
that the option is granted. The fair market value of shares of NEI Common Stock
for purposes of this Plan shall be determined by using the closing price on the
New York Stock Exchange or other exchange on the latest date prior to option
grant. In the absence of finding such a closing price, the fair market value
shall be determined by the Compensation Committee, in its sole discretion, and
the Compensation Committee may adopt such formulas as in its opinion shall
reflect the true fair market value of such stock from time to time, and may rely
on such independent advice with respect to such fair market value as the
Compensation Committee shall deem appropriate.
8. Period and Exercise of Option.
(a) Period--Subject to the provisions of Sections 10 and 11 hereof with
respect to the death or termination of employment of an optionee, the period
during which each option granted under this Plan may be exercised shall be fixed
by the Compensation Committee at the time such option is granted, provided that
such period shall expire no later than seven years from the date on which the
option is granted. In the event the Company shall not be the surviving
corporation in any merger, consolidation or reorganization, or in the event of
acquisition by another corporation of all or substantially all of the assets or
common stock of the Company, every option outstanding hereunder may be assumed
(with appropriate changes) by the surviving, continuing, successor or purchasing
corporation, as the case may be, subject to any applicable provisions of the
Code or replaced with new options of comparable value (in accordance with
Section 424(a) of the Code). In the event (i) that such surviving, continuing,
successor or purchasing corporation, as the case may be, does not assume or
replace the outstanding options hereunder, or (ii) of liquidation or dissolution
of the Company, the Compensation Committee may provide that each optionee shall
have the right, within a period commencing not more than 30 days immediately
prior to and ending on the day immediately prior to such merger, consolidation,
reorganization or acquisition by another corporation of all or substantially all
of the assets or common stock of the Company or the liquidation or dissolution
of the Company, to exercise the optionee's outstanding options to the extent of
all or any part of the aggregate number of shares subject to such option(s). The
Compensation Committee may provide in any option granted under this Plan that
the time at which such options may be exercised by the optionee shall be
accelerated to the date in which a "Change of Control" (as defined below) takes
place. For purposes of this paragraph (a), "Change of Control" shall mean a
change in control of a nature that would be required to be reported in response
to item 6(e) of Schedule 14A of Regulation 14A (as in effect on the date hereof)
promulgated under the Securities Exchange Act of 1934, as in effect on the date
hereof (the "Exchange Act"); provided, however, that, without limitation, such a
change of control shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act; other than any
underwriter or member of an underwriting syndicate or group with respect to a
public offering of securities of the Company registered under the Securities Act
of 1933, the Company or any "person" who on the date hereof is a director or
officer of the Company or whose shares of NEI Common Stock are treated as
"beneficially owned" (as defined in Rule 13d-3 under the Exchange Act, as in
effect on the date hereof) by any such director or
3
<PAGE>
officer) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then-outstanding securities, (ii) less than a majority of the
members of the Board of Directors of the Company are persons who were either
nominated for election by the Board of Directors or selected by the Board of
Directors of the Company, (iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the Voting Securities (as defined below)
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities of
the surviving entity) at least 80 percent of the total voting power represented
by the Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all the
Company's assets. As used in this paragraph (a), "Voting Securities" shall mean
any securities of the Company which vote generally in the election of directors.
(b) Exercise--Any option granted under this Plan may be exercised by the
optionee (or by the purchaser acting under Section 11 below) only by (i)
delivering to the Company written notice of the number of shares with respect to
which the optionee is exercising his or her option right, (ii) paying in full
the option price of the purchased shares, and (iii) if the shares to be
purchased have not been registered under the applicable securities laws and if
necessary, in the opinion of counsel for the Company to secure an exemption from
such registration, furnishing to the Company such representation or agreement in
writing signed by the optionee (or purchaser) as shall be necessary in the
opinion of such counsel to secure such exemption. Subject to the limitations of
this Plan and the terms and conditions of the respective incentive stock option
agreement, each option granted under this Plan shall be exercisable in whole or
in part at such time or times as the Compensation Committee may specify in such
incentive stock option agreement.
(c) Payment for shares--Payment for shares of NEI Common Stock purchased
pursuant to an option granted under this Plan may be made either in cash or in
other shares of NEI Common Stock. If NEI Common Stock is used for payment, the
value of such Common Stock shall be the fair market value of such shares on the
latest date prior to payment. The fair market value of such shares shall be
determined in the manner set forth in Section 7 of this Plan.
(d) Delivery of certificates--As soon as practicable after receipt by the
Company of the notice and representation described in subsection (b), and
payment in full of the option price for all of the shares being purchased
pursuant to an option granted under this Plan, a certificate or certificates
representing such shares of stock shall be registered in the name of the
optionee and shall be delivered to the optionee. No certificate for fractional
shares of stock shall be issued by the Company, but in lieu thereof the Company
shall distribute at such time to the optionee who otherwise would have been
entitled to receive a fractional share an amount in cash equal to the value of
such fractional share determined by multiplying the fraction either by (i) the
average of
4
<PAGE>
the high and low bid prices of NEI Common Stock on the date on which the Company
receives the notice and representation described in subsection (b), if NEI
Common Stock is then listed on the New York Stock Exchange or (ii) the fair
value of NEI Common Stock on the date on which the Company receives the notice
and representation described in subsection (b), if NEI Common Stock is not then
so listed. Neither any optionee, nor the legal representative, legatee or
distributee of any optionee, shall be deemed to be a holder of any shares of
stock subject to an option granted under this Plan unless and until the
certificate or certificates for such shares have been issued. All stock
certificates issued upon the exercise of any options granted pursuant to this
Plan may bear such legend as the Compensation Committee shall deem appropriate
regarding restrictions upon the transfer or sale of the shares evidenced
thereby.
(e) Limitations on exercise--Except as provided in Sections 10 and 11
hereof, no option granted under this Plan shall be exercised unless the optionee
is at the time of such exercise employed by the Company or one of its subsidiary
corporations and shall have been so employed by the Company or one of its
subsidiary corporations at all times since the date on which such option was
granted.
9. Limitation on Options Granted to Individual Employees. The aggregate fair
market value (determined at the time the options are granted) of stock with
respect to which incentive stock options are exercisable for the first time by
any individual during any calendar year under this Plan (and under any other
plan or plans of such individual's employer corporation and any parent or
subsidiary corporation or corporations) shall not exceed $100,000. The
limitation provided by the preceding sentence shall be applied by taking options
into account in the order in which they are granted.
10. Termination of Employment. If an optionee shall cease to be employed by the
Company or any of its subsidiary corporations for any reason other than death,
any option or unexercised portion thereof granted to him or her under this Plan
which is otherwise exercisable shall terminate unless it is exercised within
thirty days of the date on which such optionee ceases to be so employed, and in
any event no later than the expiration date of such option as specified in the
respective incentive stock option agreement. Nothing in this Plan or in any
incentive stock option agreement shall be construed as an obligation on the part
of the Company or any of its subsidiary corporations to continue the employment
of any employee.
11. Death of Optionee. In the event of the death of an optionee while he or she
is an employee of the Company or any of its subsidiary corporations (or within
ninety days of the date on which such optionee ceases to be so employed) any
option or unexercised portion thereof granted to him or her under this Plan
which is otherwise exercisable may be exercised by the person or persons to whom
such optionee's rights under the option pass by operation of the optionee's will
or the laws of descent and distribution, at any time within a period of ninety
days following the death of the optionee (but in no event later than the
expiration date of the option as specified in the respective incentive stock
option agreement).
5
<PAGE>
12. Nontransferability of Options. No option granted under this Plan shall be
transferable or assignable by the optionee other than by will or the laws of
descent and distribution, and during the lifetime of the optionee may be
exercised only by the optionee.
13. Adjustments upon Changes in Capitalization. In the event of any change in
the capital structure of the Company, including but not limited to a change
resulting from a stock dividend, stock split, reorganization, merger,
consolidation, liquidation or any combination or exchange of shares, the number
of shares of NEI Common Stock subject to this Plan and the number of such shares
subject to each option granted hereunder shall be correspondingly adjusted by
the Compensation Committee. The option price for which shares of NEI Common
Stock may be purchased pursuant to an option granted under this Plan shall also
be adjusted so that there will be no change in the aggregate purchase price
payable upon the exercise of any option.
14. Amendment and Termination of Plan. No option shall be granted pursuant to
this Plan after June 15, 2008, on which date this Plan will expire except as to
options then outstanding under the Plan, which options shall remain in effect
until they have been exercised or have expired. The Board of Directors may at
any time before such date amend, modify or terminate the Plan; provided,
however, that the Board of Directors may not, without further approval by the
holders of a majority of the issued and outstanding shares of NEI Common Stock
voting in person or by proxy at a duly constituted meeting of the stockholders
of the Company, (i) increase the maximum number of shares of NEI Common Stock as
to which options may be granted pursuant to this Plan, (ii) change the class of
employees eligible to be granted options pursuant to the Plan, (iii) extend the
period under this Plan during which options may be granted or exercised, or (iv)
change the provisions of Section 7 hereof with respect to the determination of
the option price, other than to change the manner of determining the fair market
value of shares of NEI Common Stock to conform with any then applicable
provisions of the Internal Revenue Code or the regulations issued thereunder. No
amendment, modification or termination of this Plan may adversely affect the
rights of any optionee under any then outstanding option granted hereunder
without the consent of such optionee.
15. Governing Law. This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
Delaware.
6
<PAGE>
Exhibit 10.7
Executive Stock Purchase Plan
<PAGE>
NATIONWIDE ELECTRIC, INC.
EXECUTIVE STOCK PURCHASE PLAN
-----------------------------
1. Purpose.
This Plan (the "Plan") is intended to promote the interests of
Nationwide Electric, Inc. (the "Corporation") and its stockholders by providing
an incentive for key executives of the Corporation and its subsidiaries.
2. Adoption and Administration of Plan.
The Plan shall become effective as of August 1, 1998. Absent contrary
action by the Corporation's Board of Directors, (the "Board"), any action taken
by the Board, or by the committee of directors appointed by the Board to
administer the Plan (the "Compensation Committee") with respect to the Plan's
implementation, interpretation, or administration of the Plan shall be final,
conclusive and binding. As used herein, the term "Compensation Committee" shall
refer to the Board if no Compensation Committee then exists or is then
designated.
3. Stock Subject to Plan.
There is hereby established an Executive Stock Purchase Plan Reserve
to which shall be allocated 250,000 shares of common stock, par value $.01 per
share, of the Corporation ("Stock"). If the shares of Stock of the Corporation
should, as a result of a stock split, stock dividend, combination of shares, or
any other change or exchange for other securities by reclassification,
reorganization, redesignation, merger, consolidation, recapitalization or
otherwise, be increased or decreased or changed into, or exchanged for, a
different number or kind of shares of stock or other securities of the
Corporation or of another corporation, the number of shares then remaining in
the Reserve shall be appropriately adjusted to reflect such action. If any such
adjustment shall result in a fractional share, such fraction shall be
disregarded. Upon the sale of shares pursuant to this Plan, the Reserve will be
reduced by the number of shares sold, and upon the repurchase of any shares sold
hereunder upon exercise of the Corporation's right of first refusal, the Reserve
will be increased by such number of shares, and such reacquired shares may again
be sold under this Plan. Sales under this Plan may be made from authorized but
unissued shares or from treasury shares.
4. Eligibility.
The Compensation Committee will designate, from time to time, key
executives of the Corporation or any of its subsidiaries, or parents or
affiliated corporations (including officers and directors of the Corporation),
engaged in activities which further the Corporation's objectives, who will be
eligible to purchase shares under the Plan and the number of shares of Stock of
the Corporation to be sold to each. In selecting the persons to whom offers to
purchase shares hereunder will be made and in determining the number of shares
to be offered, the Compensation Committee will consider the position and
responsibilities of such persons, the value of their
<PAGE>
services to the Corporation or its subsidiaries, and such other factors as the
Compensation Committee deems pertinent.
5. Rights to Purchase.
After the Compensation Committee has determined to offer a person the
right to purchase shares under the Plan, it will advise the offeree in writing
of the offer's terms, including the number of shares which such person will be
entitled to purchase, the purchase price per share, and any other terms,
conditions, and restrictions relating thereto. This notice will also provide
that such person has 45 days from the date of the offer to accept the offer in
the manner set forth in the offer. The form by which this offer will be made is
attached hereto and incorporated herein as "Exhibit A." The Compensation
Committee may, in the exercise of its discretion, extend the offer's term.
Subject to the Plan's express provisions, the Compensation Committee may make
such offer subject to any terms and conditions it establishes, and the offers
made to different persons, or to the same person at different times, may be
subject to terms, conditions and restrictions which differ from each other.
6. Terms of Offers.
(a) Purchase Price. The Compensation Committee will determine the purchase
price of the shares being offered under this Plan. As determined by the
Compensation Committee, the purchase price will reflect a discount from the then
current market value of the shares due to the lack of marketability because of
the provisions of the Plan. The purchase price must be paid in full, in cash or
certified bank check, at the Corporation's principal office before the offer
expires, for the offer's acceptance to be effective. The date upon which the
purchase price is paid and the offer is accepted is sometimes hereinafter called
the "Closing Date." On the Closing Date, the Corporation shall deliver the
shares registered in the name of the executive and the executive shall
concurrently deliver cash or a certified bank check for the purchase price of
the shares.
(b) Financing. The Corporation will arrange a full-recourse loan in an
amount not to exceed 85% of the purchase price, to be evidenced by a promissory
note, to be dated as of the Closing Date, payable with interest at the prime
rate (as quoted in the Wall Street Journal as the base rate on corporate loans
posted by at least 75% of the nation's 30 largest banks) and payable to the
Corporation, to pay a portion of the purchase price for the shares. To secure
the obligations of the executive under the loan, the executive will enter into a
pledge agreement with the Corporation.
2
<PAGE>
(c) Vesting. Shares purchased pursuant to this Plan shall constitute
"Vested Shares" in accordance with the following schedule:
Portion of Shares
Which Are Vested
-----------------
Closing Date 1/3
First Anniversary of Closing Date 2/3
Second Anniversary of Closing Date 100%
"Unvested Shares" shall mean shares which are not "Vested Shares."
(d) Termination of Employment. If the employment of the executive with the
Corporation is terminated for any reason, including the executive's death or
disability, any Unvested Shares shall be offered for sale to the Corporation,
within 30 days from the date of termination, at the original price paid for such
shares by the executive under the terms of this Plan. If the Corporation chooses
to repurchase such shares from the executive, the Corporation shall have 30 days
to exercise such right. Under no circumstance is the Corporation obligated to
repurchase such shares.
(e) Restrictions. By purchasing the shares under this Plan being offered to
him or her, an offeree agrees and consents to the following:
(i) No shares purchased hereunder will be conveyed, transferred,
encumbered or otherwise disposed of (any such disposition being herein
called a "transfer") by the holder thereof unless all shares covered by
this Plan owned by the holder first have been offered to the Corporation if
the offer occurs within one year after the Closing Date, at a price per
share equal to the original price paid by the holder for such shares. The
Corporation will have 15 business days from the date it receives any such
offer to accept. The Corporation will accept by giving notice to the
holder. If the Corporation does accept, the purchase and sale of such
shares will occur at the Corporation's principal office at the time and
date specified in such notice of acceptance. In no event, however, will the
date for consummating the transaction be later than 30 business days from
the date of the notice of acceptance. At the closing, the holder will
deliver to the Corporation certificates representing all of the shares
subject to the offer, duly endorsed, with all necessary transfer stamps
affixed. Upon receipt of such share certificates, the Corporation will
deliver to the holder a check in the amount of the purchase price.
(ii) No shares subject to the restrictions under the Plan will be
transferred on the Corporation's books until the Corporation has received
in writing from the
3
<PAGE>
transferee an agreement to be bound by the provisions and restrictions of
this Plan, as well as any other agreements affecting the transfer and
ownership of shares of the Corporation.
Any transfer or purported transfer made by a purchaser of shares under this
Plan, except at the times and in the manner herein specified and until
receipt by the Corporation of such agreement, will be null and void and the
Corporation shall not recognize or give effect to such transfer on its
books and records or recognize the person or persons to whom such proposed
transfer has been made as the legal or beneficial holder of those shares.
(iii) If the Corporation fails to accept the offer within the 15 business
day period of subparagraph 6(e)(i) above, then the shares shall become
freely transferable.
(iv) Upon the death of a holder of vested yet restricted shares subject to
this Plan, those shares may be conveyed by will or by the laws of descent
and distribution, without first being offered to the Corporation. Any
successor in interest to the holder in such event may not further convey,
transfer, encumber or otherwise dispose of such shares until such shares
would have otherwise become unrestricted shares as provided herein.
(v) Certificates representing shares which are subject to this Plan will
bear the following legend, in addition to such other legends as counsel to
the Corporation may deem appropriate.
RESTRICTED SHARES
"The shares represented by this certificate may be subject to Nationwide
Electric, Inc.'s right of first refusal to purchase and to all other terms,
conditions, and restrictions of the Corporation's Executive Stock Purchase
Plan, a copy of which is on file and available for inspection during normal
business hours at the Corporation's principal office."
7. Expenses.
The Corporation will pay all expenses and costs in connection with the
Administration of the Plan.
8. No Prior Right of Offer.
Nothing in the Plan will be deemed to give any director, officer, or
employee, or such individual's legal representatives or assigns, or any other
person or entity claiming under or through such individual, any contractual or
other right to participate in the benefits of the Plan.
4
<PAGE>
9. Indemnification of the Compensation Committee.
In addition to such other rights or indemnification as they may have,
the Corporation will indemnify members of the Compensation Committee against all
costs and expenses reasonably incurred by them or any of them in connection
with: any action, suit, or proceeding to which they or any of them may be a
party by reason of any action taken, or failure to act, under or in connection
with the Plan or any award granted pursuant thereto and against all amounts paid
by them in settlement thereof (provided such settlement is approved by legal
counsel selected by the Corporation) or paid by them in satisfaction of a
judgment in any action, suit or proceeding; provided that upon institution of
any such action, suit, or proceeding, the person desiring indemnification gives
the Corporation an opportunity, at its own expense, to handle and defend the
same.
10. Amendment and Termination of Plan.
The Board may at any time terminate or extend the Plan, or modify the
Plan as it deems advisable. No termination or amendment of the Plan shall,
without the consent of any person affected thereby, modify or in any way affect
any right or obligation created prior to such termination or amendment.
11. Liability of Corporation.
The Corporation's liability under this Plan and any sale made
hereunder is limited to the obligations set forth with respect to such sale and
nothing in this Plan will be construed to impose any liability on the
Corporation in favor of the purchaser with respect to any loss, cost, or expense
which the purchaser may incur in connection with, or arising out of, any
transaction in connection therewith.
12. No Agreement to Employ.
Nothing in the Plan will be construed to constitute, or evidence, an
agreement or understanding, express or implied, by the Corporation to employ or
retain the purchaser for any specific period of time.
13. Notices.
Any notice or other communication required or permitted to be made or
given hereunder will be sufficiently made or given if sent by certified mail
addressed to the offeree or holder at such individual's address as set forth in
the Corporation's regular books and records and, if to the Corporation,
addressed to it at its principal office.
5
<PAGE>
Exhibit 10.8
Form of Indemnification Agreement
(and list of parties who will execute such agreement)
<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made this ____ day of _________, 1998, between Nationwide
Electric, Inc., a Delaware corporation (the "Company"), and
__________________________ (the "Indemnitee").
WHEREAS, it is important to the Company to attract and retain as directors
and officers the most capable persons available; and
WHEREAS, the Bylaws of the Company (the "Bylaws") provide for the
indemnification of the directors, officers, employees and agents of the Company
as authorized by Delaware General Corporation Law Section 145 (the "State
Statute"); and
WHEREAS, such Bylaws and the State Statute specifically provide that they
are not exclusive, and thereby contemplate that contracts may be entered into
between the Company and its directors and officers with respect to
indemnification of such directors and officers; and
WHEREAS, in accordance with the authorization provided by the State Statute
and the Bylaws, the Company may purchase a policy or policies of Directors and
Officers Liability Insurance ("D&O Insurance"), covering certain liabilities
which may be incurred by its directors and officers in the performance of their
services for the Company; and
WHEREAS, recent developments with respect to the terms and availability of
D&O Insurance and with respect to the application, amendment and enforcement of
statutory and bylaw indemnification provisions generally have raised questions
concerning the adequacy and reliability of the protection afforded to directors
and officers thereby; and
WHEREAS, in order to resolve such questions and thereby induce the
Indemnitee to agree to serve or continue to serve as a director and/or officer
of the Company, the Company has determined and agreed to enter into this
contract with the Indemnitee;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
agreeing to serve or continuing to serve as a director and/or officer of the
Company, the parties hereto agree as follows:
1. Indemnity. The Company hereby agrees to hold harmless and indemnify the
Indemnitee to the full extent permitted by law:
(a) Against any and all expenses (including attorneys' fees),
judgments, fines, penalties and amounts paid in settlement (including,
without limitation, all interest, assessments and other charges paid or
payable in connection therewith) actually and reasonably incurred by the
Indemnitee in connection with any threatened, pending or completed action,
suit or proceeding, whether brought by or in the right of the Company
<PAGE>
or otherwise and whether civil, criminal, administrative or investigative,
to which the Indemnitee is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that the Indemnitee
is, was or at any time becomes a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the
Company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or
other entity or enterprise, or by reason of anything done or not done by
Indemnitee in any such capacity, whether prior to or subsequent to the date
of this Agreement; and
(b) Against any and all expenses (including attorneys' fees) actually
and reasonably incurred by the Indemnitee in serving or preparing to serve
as a witness or other participant in any threatened, pending or completed
action, suit or proceeding, whether brought by or in the right of the
Company or otherwise and whether civil, criminal, administrative or
investigative, if Indemnitee is such a witness or participant by reason of
the fact that the Indemnitee is, was or at any time becomes a director,
officer, employee, agent or fiduciary of the Company or is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other entity or enterprise.
2. Specific Limitations on Indemnity. Indemnitee shall not be entitled
to indemnification under this Agreement:
(a) In respect to remuneration paid to or advantage gained by the
Indemnitee if it shall be determined by a final judgment or other final
adjudication that the Indemnitee was not legally entitled to such
remuneration or advantage;
(b) On account of the Indemnitee's conduct which is determined by a
final judgment or other final adjudication to have been knowingly
fraudulent, deliberately dishonest or willful misconduct;
(c) Prior to a Change in Control (as defined in Section 4(e)), in
respect of any action, suit or proceeding initiated by the Indemnitee
against the Company or any director or officer of the Company (unless the
Company has joined in or consented to the initiation of such action, suit
or proceeding), except (i) as set forth in Section 12(b) hereof, (ii) in
respect of any counterclaims made against Indemnitee in any such action,
suit or proceeding, and (iii) to the extent Indemnitee seeks contribution
or apportionment of an award or settlement against Indemnitee and against
the Company and/or any other director or officer of the Company;
(d) On account of any matter determined by a final judgment or other
final adjudication to be a violation by the Indemnitee of the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended (the "Act"),
or the rules and regulations promulgated thereunder, as amended from time
to time; or
2
<PAGE>
(e) With respect to any matter if it shall be determined by a final
judgment or other final adjudication that such indemnification is not
lawful.
3. Advance of Expenses and Payment of Indemnification. Upon the written
request of Indemnitee, expenses that are subject to indemnification under this
Agreement shall be advanced by the Company within five (5) business days of
receipt of such request. Subject to Section 4(a), indemnification shall be made
under this Agreement no later than sixty (60) days after receipt by the Company
of the written request of Indemnitee, which written request shall identify the
judgments, fines, penalties and amounts paid in settlement that are subject to
indemnification under this Agreement and for which indemnification is requested.
Written request shall be deemed received three days after the date postmarked if
sent by prepaid mail properly addressed to the Company at the address set forth
in Section 11 hereof.
4. Determination of Indemnification.
(a) Notwithstanding any other provision of this Agreement (i) the
obligations of the Company under Section 1 shall be subject to the condition
that the Reviewing Party shall have determined (in a written opinion, in any
case in which the Independent Legal Counsel referred to in Section 4(c) is
involved) that Indemnitee would be permitted to be indemnified under this
Agreement, (ii) the obligation of the Company to make an expense advance
pursuant to Section 3 shall be subject to the condition that, if, when and to
the extent that it is finally determined that Indemnitee would not be permitted
to be indemnified for such expenses under this Agreement, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees and undertakes to
reimburse the Company) for all such amounts theretofore paid, and (iii) the
obligation of the Company to make an expense advance pursuant to Section 3 shall
be made without regard to the Indemnitee's ability to repay the amount advanced
and without regard to the Indemnitee's ultimate entitlement to indemnification
under this Agreement or otherwise. Indemnitee's obligation to reimburse the
Company for expense advances shall be unsecured and no interest shall be charged
thereon.
(b) The Reviewing Party shall be selected by the Board of Directors,
provided, however, that if there has been a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control) the
Reviewing Party shall be the Independent Legal Counsel referred to in Section
4(c). If there has been no determination by the Reviewing Party within the
sixty (60) day period referred to in Section 3, the Reviewing Party shall be
deemed to have made a determination that it is permissible to indemnify
Indemnitee under this Agreement.
(c) The Company agrees that if there is a Change in Control of the Company
(other than a Change in Control which has been approved by a majority of the
Company's Board of Directors who were directors immediately prior to such Change
in Control) then Independent Legal Counsel shall be selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld) and
such Independent Legal Counsel shall determine whether
3
<PAGE>
the director or officer is entitled to indemnification for expenses, judgments,
fines, penalties and amounts paid in settlement (including, without limitation,
all interest, assessments and other charges paid or payable in connection
therewith) under this Agreement or any other agreement or the Certificate of
Incorporation or Bylaws of the Company now or hereafter in effect relating to
indemnification. Such Independent Legal Counsel shall render its written opinion
to the Company and Indemnitee as to whether and to what extent the Indemnitee
will be permitted to be indemnified for expenses, judgments, fines, penalties
and amounts paid in settlement (including, without limitation, all interest,
assessments and other charges paid or payable in connection therewith). The
Company agrees to pay the reasonable fees of the Independent Legal Counsel and
to indemnify fully such Independent Legal Counsel against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement or the engagement of Independent Legal Counsel
pursuant hereto.
(d) If a determination denying Indemnitee's claim is made by a Reviewing
Party (other than Independent Legal Counsel), notice of such determination shall
disclose with particularity the reasons for such determination. If a
determination denying Indemnitee's claim is made by Independent Legal Counsel,
the notice shall include a copy of the related legal opinion of such counsel.
(e) "Change in Control" shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Act), other
than a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Company representing 15% or more of the total voting power represented by
the Company's then outstanding Voting Securities, or (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director whose
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or (iii) the stockholders
of the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 85% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or substantially all of the
assets of the Company.
4
<PAGE>
(f) "Reviewing Party" shall mean any appropriate person or body consisting
of a member or members of the Board of Directors of the Company or any other
person or body appointed by the Board who is not a party to the particular
action, suit or proceeding with respect to which Indemnitee is seeking
indemnification, or Independent Legal Counsel.
(g) "Independent Legal Counsel" shall mean an attorney, selected in
accordance with the provisions of Section 4(c), who shall not have otherwise
performed services for the Company or Indemnitee within the last five years
(other than in connection with seeking indemnification under this Agreement).
Independent Legal Counsel shall not be any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an action to
determine Indemnitee's rights under this Agreement, nor shall Independent Legal
Counsel be any person who has been sanctioned or censured for ethical violations
of applicable standards of professional conduct.
(h) "Voting Securities" shall mean any securities of the Company which vote
generally in the election of directors.
5. Partial Indemnity. If the Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines, penalties and amounts paid in settlement (including,
without limitation, all interest, assessments and other charges paid or payable
in connection therewith) incurred by the Indemnitee, but not for the total
amount thereof, the Company shall indemnify Indemnitee for the portion thereof
to which Indemnitee is entitled. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee has been successful on merits or
otherwise in defense of any or all actions, suits or proceedings relating in
whole or in part to an event subject to indemnification hereunder or in defense
of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against expenses incurred in connection with
such action, suit, proceeding, issue or matter, as the case may be.
6. Non-exclusivity. The rights of the Indemnitee under this Agreement
shall be in addition to any other rights Indemnitee may have under the
Certificate of Incorporation, the Bylaws, any other agreement of the Company,
the Delaware General Corporation Law ("DGCL"), D&O Insurance or otherwise. To
the extent that any change in the DGCL (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under the Certificate of Incorporation and the Bylaws of the Company and this
Agreement, it is the intent of the parties hereto that Indemnitee shall by this
Agreement be entitled to the greater benefits so afforded by such change.
7. Liability Insurance. To the extent the Company maintains D&O
Insurance, the Company shall maintain coverage for Indemnitee under such policy
or policies, in accordance with its or their terms, to the maximum extent of the
coverage provided under such policy or policies in effect for any other director
or officer of the Company.
5
<PAGE>
8. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any claim against the
Indemnitee to the extent the Indemnitee has otherwise actually received payment
(under any insurance policy, Bylaw or otherwise) of the amounts otherwise
indemnifiable hereunder or to the extent that Indemnitee is entitled to be
indemnified directly by any insurance company under the individual directors'
and officers' liability provisions of any D&O Insurance maintained by the
Company.
9. No Presumption. For purposes of this Agreement, the termination of
any claim, actions, suit or proceeding by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not of itself create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.
10. Continuation of Indemnity. All agreements and obligations of the
Company contained herein shall continue during the period the Indemnitee is a
director, officer, employee, agent or fiduciary of the Company, or is serving at
the request of the Company as a director, officer, employee, agent or fiduciary
of another corporation, partnership, joint venture, trust or other entity or
enterprise, and shall continue thereafter so long as the Indemnitee shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative, by reason of the fact
that the Indemnitee was a director or officer of the Company or serving in any
other capacity referred to herein.
11. Notification of Proceedings; Consent to Settlements; Defense.
(a) Promptly after receipt by the Indemnitee of notice of the commencement
of any action, suit or proceeding, the Indemnitee shall, if a claim in respect
thereof is to be made against the Company under this Agreement, notify the
Company of the commencement thereof. Notice shall be in writing and shall be
addressed as follows:
Nationwide Electric, Inc.
1201 Walnut Street
Suite 1300
Kansas City, MO 64106
Attention: Frederick C. Green, IV
Such notice shall be deemed received if sent by prepaid mail properly
addressed. Indemnitee and the Company shall cooperate fully with each other in
the defense of any such action, suit or proceeding and each shall provide the
other with such information as the other may reasonably require. The Company
shall not be liable to indemnify the Indemnitee under this Agreement for any
amounts paid in settlement of any action, suit or proceeding effected without
its prior written consent (which consent shall not be unreasonably withheld).
6
<PAGE>
(b) The Company shall be entitled to participate in the Proceeding at its
own expense.
(c) Except as otherwise provided below, the Company may, at its option,
assume the defense of such action, suit or proceeding with legal counsel
reasonably satisfactory to the Indemnitee. After notice from the Company to the
Indemnitee of its election to assume the defense of an action, suit or
proceeding, the Company will not be liable to the Indemnitee for expenses
incurred by the Indemnitee in connection with such action, suit or proceeding
under this Agreement, including Section 3 hereof, other than Indemnitee's
reasonable costs of investigation or participation in such action, suit or
proceeding (including, without limitation, travel expenses) and except as
provided below. The Indemnitee shall have the right to employ Indemnitee's own
counsel in any such action, suit or proceeding, but the fees and expenses of
such counsel incurred after notice from the Company of its assumption of the
defense of such action, suit or proceeding shall be at the expense of the
Indemnitee, unless (i) the employment of counsel by the Indemnitee has been
authorized by the Company, (ii) the Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and the Indemnitee
in the conduct of the defense of such action, suit or proceeding, or (iii) the
Company shall not in fact have employed counsel to assume the defense of such
action, suit or proceeding, in each of which cases the fees and expenses of the
Indemnitee's counsel shall be advanced by the Company as provided in Section 3
hereof. The Company shall not be entitled to assume the defense of any such
action, suit or proceeding brought by or on behalf of the Company.
(d) If two or more persons, including the Indemnitee, may be entitled to
indemnification from the Company as parties to any action, suit or proceeding,
the Company may require the Indemnitee to use the same legal counsel as the
other parties. The Indemnitee shall have the right to use separate legal counsel
in such action, suit or proceeding, but the Company shall not be liable to the
Indemnitee under this Agreement, including Section 3 hereof, for the fees and
expenses of separate legal counsel incurred after notice from the Company of the
requirement to use the same legal counsel as the other parties, unless the
Indemnitee reasonably concludes that there may be a conflict of interest between
the Indemnitee and any of the other parties required by the Company to be
represented by the same legal counsel.
(e) The Indemnitee shall permit the Company to settle any action, suit or
proceeding that the Company assumes the defense of, except that the Company
shall not, without the Indemnitee's written consent, settle any action, suit or
proceeding unless such settlement includes a provision whereby the parties to
the settlement unconditionally release Indemnitee from all liabilities, damages,
fines, penalties, costs and expenses in respect of claims by reason of the
settlement or release of the parties in such action, suit or proceeding.
12. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on it hereby in order to induce
the Indemnitee to agree to serve or to continue to serve as a director and/or
officer of the Company and
7
<PAGE>
acknowledges that the Indemnitee is relying upon this Agreement in agreeing to
serve or continuing to serve in such capacity.
(b) The right to indemnification provided by this Agreement shall be
enforceable by Indemnitee in any court in the State of Delaware having subject
matter jurisdiction thereof and in which venue is proper. The Indemnitee shall
have the right to commence litigation in any such court challenging any
determination by the Reviewing Party or any aspect thereof, or the legal or
factual bases therefor. The Company shall reimburse Indemnitee for any and all
reasonable expenses (including attorneys' fees) incurred by Indemnitee in
connection with any claim asserted or action brought by Indemnitee to enforce
rights or to collect moneys due under this Agreement, the Certificate of
Incorporation or the Bylaws of the Company or any other agreement with the
Company nor or hereafter in effect relating to indemnification, or any D&O
Insurance purchased and maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance expense payment or insurance coverage, as the case may be, unless the
court determines that the claim or action is frivolous or that assertions made
therein were made with no reasonable basis.
(c) In connection with any determination by the Reviewing Party or
otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the
burden of proof shall be on the Company to establish that Indemnitee is not so
entitled.
13. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
14. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in accordance with the
laws of the State of Delaware without giving effect to the principles of
conflicts of laws thereof.
(b) This Agreement shall be binding upon the Indemnitee and upon the
Company, its successors and assigns (including any transferee of all or
substantially all of the assets of the Company and any successor by merger or
operation of law), and shall inure to the benefit of the Indemnitee, his or her
heirs, personal representatives and assigns and to the benefit of the Company,
its successors and assigns. The Company shall require and cause any successor to
all or substantially all of its assets, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no succession had taken place.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto. No
waiver of any provision of this
8
<PAGE>
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof, and no such waiver shall constitute a continuing waiver.
15. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of such Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
16. Change in Other Rights. The Company will not adopt any amendment to
the Certificate of Incorporation or Bylaws of the Company the effect of which
would be to deny, diminish or encumber the Indemnitee's rights to
indemnification, advancement of expenses, exculpation or maintenance of the D &
O Insurance hereunder, under such other documents or under applicable law, as
applied to any act or failure to act occurring in whole or in part prior to the
date upon which any such amendment was approved by the Board of Directors or the
stockholders, as the case may be. Notwithstanding the foregoing, if the Company
adopts any amendment to the Certificate of Incorporation or Bylaws the effect of
which is to so deny, diminish or encumber such rights, such amendment will apply
only to acts or failures to act occurring entirely after the effective date
thereof.
17. Savings Clause. If this Agreement or any provision hereof is
invalidated on any ground by any court of competent jurisdiction, the Company
shall nevertheless indemnify the Indemnitee as to any expenses, judgments,
fines, penalties and amounts paid in settlement actually and reasonably incurred
by the Indemnitee in connection with any action, suit or proceeding to the
fullest extent permitted by any applicable provision of this Agreement that has
not been invalidated and to the fullest extent permitted by Delaware law.
18. Deposit of Funds in Trust. In the event that the Company decides to
voluntarily dissolve or to file a voluntary petition for relief under applicable
bankruptcy, moratorium or similar laws, then not later than ten (10) days prior
to such dissolution or filing, the Company shall deposit in trust for the
exclusive benefit of Indemnitee a cash amount equal to all amounts previously
authorized to be paid to Indemnitee hereunder, such amounts to be used to
discharge the Company's obligations to Indemnitee hereunder. Any amount in such
trust not required for such purpose shall be returned to the Company.
19. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NATIONWIDE ELECTRIC, INC.
By:
------------------------
10
<PAGE>
LIST OF PARTIES WHO WILL EXECUTE INDEMNIFICATION AGREEMENTS
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
Gregory J. Orman Chairman of the Board and Director
Frederick C. Green, IV President, Chief Executive Officer and
Director Nominee
Frank R. Clark Vice President, Chief Financial Officer,
Secretary and Treasurer
John B. Wood Vice President, Acquisitions
David W. Smith Vice President, Operations
Robert B. Allison Director Nominee
Bernard J. Beaudoin Director
Robert H. Hoffman Director
Andrew V. Johnson Director
Wade C. Lau Director Nominee
Ronald G. Wasson Director
</TABLE>
11
<PAGE>
Exhibit 10.9
Restricted Stock Purchase Agreement (John Wood)
<PAGE>
NATIONWIDE ELECTRIC, INC. EMPLOYEE
RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made as of the 1st day of April, 1998, by and between
Nationwide Electric, Inc., a Delaware corporation (the "Corporation"), and John
Wood ("Purchaser").
In consideration of the mutual covenants and representations set forth
herein, the Corporation and Purchaser agree as follows:
1. Purchase and Sale of Stock.
(a) Subject to the terms and conditions of this Agreement, the
Corporation hereby agrees to sell to Purchaser and Purchaser agrees to purchase
from the Corporation on the Closing Date (as herein defined), 100,000 shares of
the Corporation's Common Stock (the "Stock") at a price of $0.30 per share, for
an aggregate purchase price of $30,000. The purchase price for the Stock shall
be paid, at the election of the Purchaser, either (a) in cash or, (b) by
Purchaser's full recourse promissory note (the "Note"), in the form attached
hereto as Exhibit A, in a principal amount of not more than $25,000, and cash
for the remainder of the purchase price. As security for the payment of the Note
or Notes and any renewal or modification thereof, the Purchaser hereby grants to
the Company a security interest in, and pledges with and delivers to the
Company, the Stock, to be held pursuant to the escrow described in Section 8
hereof (the "Escrow").
(b) In the event that the Purchaser prepays all or a portion of such
Note, in accordance with the provisions thereof, the Purchaser intends that the
shares of Stock represented by the portion of such Note so paid, including
annual interest thereon, shall continue to be held as collateral for the
outstanding portion of such Note and shall continue to be held in Escrow, to
serve as independent collateral for the outstanding portion of such Note for the
purpose of commencing the holding period set forth in Securities and Exchange
Commission Rule 144(d).
(c) Upon the occurrence of a default in the payment of the Note when
due, the Corporation shall be entitled to immediate possession of the Stock and
all rights and remedies of a secured party under the Uniform Commercial Code of
the State of Missouri.
2. Closing. The purchase and sale of the Stock shall occur at a Closing to
be held at such time and place (the "Closing Date"), as designated by the
Corporation by written notice to the Purchaser of at least two business days
prior to the Closing Date. The Closing will take place at the principal office
of the Corporation or at such other place as shall be designated by the
Corporation. At the Closing, Purchaser shall deliver to the Corporation a check
payable to the order of the Corporation and the Note in the aggregate amount of
the purchase price of the Stock, and the Corporation will issue, as promptly
thereafter as practicable, a certificate representing the Stock registered in
the name of the Purchaser.
<PAGE>
3. Purchase Option.
(a) All of the Stock shall be subject to the right and option of the
Corporation to repurchase the Stock (the "Purchase Option") as set forth in this
Section 3. In the event Purchaser shall, prior to the closing of a registered
public offering of the Corporation's Common Stock, cease to be employed by the
Corporation (including a parent or subsidiary of the Corporation) for any
reason, or no reason, with or without cause, including involuntary termination,
death or temporary or permanent disability (the "Termination"), the Purchase
Option shall come into effect. Following a Termination, the Corporation shall
have the right, as provided in subparagraph (b) hereof, to purchase from the
Purchaser or his personal representative, as the case may be, at the purchase
price per share originally paid as set forth in Section 1 hereof (the "Option
Price"), all of the Stock.
(b) Within 180 days following a Termination, the Corporation shall
notify Purchaser by written notice delivered or mailed as provided in
subparagraph 9(c), as to whether it wishes to purchase the Stock pursuant to
exercise of the Purchase Option. If the Corporation (or its assignee) elects to
purchase the Stock hereunder, it shall set a date for the closing of the
transaction at a place and time specified by the Corporation, or, at
Corporation's option, such closing may be consummated by mail as provided in
Section 9(c) hereof. At such closing, the Corporation (or its assignee) shall
tender payment for the Stock and the certificates representing the Stock so
purchased shall be cancelled. The Option Price shall be payable, at the option
of the Corporation, by cancellation of all or any outstanding indebtedness of
Purchaser to the Corporation or in cash or by check.
(c) The Purchase Option shall expire and shall be of no effect upon
the occurrence of any of the following:
(i) one year after the date of this Agreement,
(ii) a change of control of the Company, which is defined as any
person (as that term is used in Section 13(e) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other than the holders of
any of the Company's securities as of the date of this Agreement, is or becomes
the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange
Act) directly or indirectly of securities of the Company representing a majority
of the combined voting power of the Company's then outstanding securities
(assuming conversion of all outstanding convertible non-voting securities into
voting securities and the exercise of all outstanding options and all other
securities which are convertible to voting securities), or
(iii) upon the approval by the Company's shareholders of (A) the
sale of all or substantially all of the assets of the Company, (B) the merger or
consolidation or any reorganization or restructuring of the Company (other than
a merger, consolidation, reorganization or restructuring in which the Company is
the surviving corporation and which does
2
<PAGE>
not result in any capital reorganization or reclassification or other change in
the ownership of the Company's then outstanding shares that would be deemed a
change in control pursuant to clause (i), above), or (C) a plan of liquidation
or dissolution of the Company.
4. Stock Splits, etc. If, from time to time during the term of this
Agreement:
(a) There is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Corporation; or
(b) There is any consolidation, merger or sale of all, or
substantially all, of the assets of the Corporation;
then, in such event, any and all new, substituted or additional securities or
other property to which Purchaser is entitled by reason of his ownership of
Stock shall be immediately subject to this Agreement and be included in the word
"Stock" for all purposes with the same force and effect as the shares of Stock
presently subject to the Purchase Option, right of first refusal and other terms
of this Agreement. While the aggregate Option Price shall remain the same after
each such event, the Option Price per share of Stock upon execution of the
Purchase Option shall be appropriately adjusted.
5. Restriction on Transfer.
(a) Purchaser shall not sell, transfer, pledge, hypothecate or
otherwise dispose of any shares of the Stock which remain subject to the
Purchase Option.
(b) The provisions of this Section 5 shall not apply to a transfer of
any shares of Stock by Purchaser, either during his or her lifetime or on death
by will or intestacy to his or her ancestors, descendants or spouse, or any
custodian or trustee for the account of Purchaser or Purchaser's ancestors,
descendants or spouse, provided, in each such case, a transferee shall receive
and hold such shares subject to the provisions of this Section 5 and there shall
be no further transfer of such shares in accordance herewith.
(c) The Corporation shall not be required (i) to transfer on its books
any shares of Stock which shall have been sold or transferred in violation of
any of the provisions set forth in this Agreement, or (ii) to treat as owner of
such shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares shall have been so transferred.
6. Legends. All certificates representing any of the shares of Stock
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
3
<PAGE>
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATION ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHT OF REPURCHASE AS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
(b) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) Any legend required to be placed thereon by applicable securities
laws of any state.
7. Purchaser's Representations. In connection with his purchase of the
Stock, the Purchaser hereby represents and warrants to the Corporation as
follows:
(a) Investment Intent; Capacity to Protect Interests. The Purchaser is
purchasing the Stock solely for Purchaser's own account for investment and not
with a view to or for sale in connection with any distribution of the Stock or
any portion thereof and not with any present intention of selling, offering to
sell or otherwise disposing of or distributing the Stock or any portion thereof
in any transaction other than a transaction exempt from registration under the
Act. The Purchaser also represents that the entire legal and beneficial
interests of the Stock is being purchased, and will be held, for the Purchaser's
account only, and neither in whole nor in part for any other person. Purchaser
either has a preexisting business or personal relationship with the Corporation
or any of its officers, directors or controlling persons or by reason of
Purchaser's business or financial experience or the business or financial
experience of Purchaser's professional advisors who are unaffiliated with and
who are not compensated by the Corporation or any affiliate or selling agent of
the Corporation, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Corporation
and to protect Purchaser's own interests in connection with this transaction.
(b) Residence. The Purchaser's principal residence is within the State
of Minnesota and is located at the address indicated beneath the Purchaser's
signature below.
(c) Information Concerning Corporation. The Purchaser has heretofore
discussed the Corporation and its plans, operations and financial condition with
the Corporation's officers and has heretofore received all such information as
the Purchaser has deemed necessary and appropriate to enable the Purchaser to
evaluate the financial risk inherent in making an investment in the Stock, and
the Purchaser has received satisfactory and complete information
4
<PAGE>
concerning the business and financial condition of the Corporation in response
to all inquiries in respect thereof.
(d) Economic Risk. The Purchaser realizes that the purchase of the
Stock will be a highly speculative investment and involves a high degree of
risk, and the Purchaser is able, without impairing the Purchaser's financial
condition, to hold the Stock for an indefinite period of time and suffer a
complete loss on the Purchaser's investment.
(e) Restricted Securities. The Purchaser understands and acknowledges
that:
(i) the sale of the Stock has not been registered under the
Securities Act of 1933 (the "Act"), the Stock must be held indefinitely unless
subsequently registered under the Act or an exemption from such registration is
available and the Corporation is under no obligation to register the Stock;
(ii) the share certificate representing the Stock will be stamped
with the legends specified in Section 6 hereof; and
(iii) the Corporation will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(f) Disposition of the Stock. The Purchaser is familiar with the
provisions of Rules 701 and 144, each promulgated under the Act, which, in
substance, permit limited public sale of "restricted securities" acquired,
directly or indirectly from the issuer thereof, in a nonpublic offering, subject
to the satisfaction of certain conditions.
(g) Further Limitations on Disposition. Without in any way limiting
Purchaser's representations set forth above, the Purchaser further agrees that
he or she shall in no event make any disposition of all or any portion of the
Stock unless and until:
(i)(A) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or (B)(1) the Purchaser shall have
notified the Corporation of the proposed disposition and shall have furnished
the Corporation with a detailed statement of the circumstances surrounding the
proposed disposition, (2) the Purchaser shall have furnished the Corporation
with an opinion of the Purchaser's counsel to the effect that such disposition
will not require registration of such shares under the Act, and (3) such opinion
of the Purchaser's counsel shall have been concurred in by counsel for the
Corporation and the Corporation shall have advised the Purchaser of such
concurrence; and,
(ii) The shares of Stock proposed to be transferred are no longer
subject to the Purchase Option set forth in Section 3 hereof and the Purchaser
shall have complied with the right of first refusal set forth in Section 5
hereof.
5
<PAGE>
(h) Valuation of Common Stock. The Purchaser understands that the
Stock has been valued by the board of directors of the Corporation and that the
Corporation believes this valuation represents a fair attempt at reaching an
accurate appraisal of its worth; the Purchaser understands, however, that the
Corporation can give no assurances that such price is in fact the fair market
value of the Stock and that it is possible that, with the benefit of hindsight,
the Internal Revenue Service would successfully assert that the value of the
Common Stock on the date of purchase is greater than so determined. If the
Internal Revenue Service were to succeed in a tax determination that the Stock
received had value greater than that upon which the transaction was based, the
additional value would constitute ordinary income as of the date of its receipt.
The additional taxes (and interest) due would be payable by the Purchaser, and
there is no provision for the Corporation to reimburse the Purchaser for that
tax liability, and the Purchaser assumes all responsibility for such potential
tax liability. In the event such additional value would represent more than 25
percent of the Purchaser's gross income for the year in which the value of the
shares were taxable, the Internal Revenue Service (the "I.R.S.") would have six
years from the due date for filing the return (or the actual filing date of the
return if filed thereafter) within which to assess the Purchaser the additional
tax and interest which would then be due. The Corporation would have the
benefit, in any such transaction, if a determination was made prior to the
three-year statute of limitations period affecting the Corporation, of an
increase in its deduction for compensation paid, which would offset its
operating profits, or, if not profitable, would create a net operating loss
carry forward arising from operations in that year.
(i) Section 83(b) Election. The Purchaser understands that Section 83
of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the amount paid for the Stock and the fair market
value of the Stock as of the date any restrictions on the Stock lapse. In this
context, "restriction" means the right of the Company to buy back the stock
pursuant to the Purchase Option. In the event the Company has registered its
securities under the Exchange Act, "restriction" with respect to officers,
directors and 10% shareholders also means the six-month period after the Closing
during which such officers, directors and 10% shareholders are subject to suit
under Section 16(b) of the Exchange Act. The Purchaser understands that if such
provision is applicable to him he may elect to be taxed at the time the Stock is
purchased rather than when and as the Purchase Option or six-month Section 16(b)
period expires by filing an election under Section 83(b) of the Code with the
I.R.S. within thirty (30) days from the date of purchase. Even if the fair
market value of the Stock equals the amount paid for the Stock, the election
must be made to avoid adverse tax consequences in the future. The Purchaser
understands that failure to make this filing timely will result in the
recognition of ordinary income by the Purchaser, as the Purchase Option lapses,
or after the lapse of the six month Section 16(b) period, on the difference
between the purchase price and the fair market value of the Stock at the time
such restrictions lapse.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE CORPORATION'S TO FILE TIMELY THE ELECTION UNDER INTERNAL REVENUE
CODE SECTION 83(b) AND UNDER ANY CORRESPONDING PROVISIONS OF STATE TAX LAW, EVEN
IF THE PURCHASER
6
<PAGE>
REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE
PURCHASER'S BEHALF.
8. Pledge. As security for the faithful performance of the terms of this
Agreement and the Note or Notes and to ensure the availability for delivery of
the Purchaser's Stock upon exercise of the Purchase Option herein provided for,
the Purchaser agrees to deliver to and deposit with the Secretary of the
Corporation, two Stock Powers duly endorsed (with date and number of shares
blank) in the form attached hereto as Exhibit B, together with the certificate
or certificates evidencing the Stock; and a Pledge Agreement duly executed in
the form attached hereto as Exhibit C.
9. Miscellaneous.
(a) Subject to the provisions and limitations hereof, Purchaser may,
during the term of this Agreement, exercise all rights and privileges of a
stockholder of the Corporation with respect to the Stock deposited in said
escrow.
(b) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.
(c) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to Purchaser at his address shown on the
Corporation's employment records and to the Corporation at the address of its
principal corporate offices (attention: President) or at such other address as
such party may designate by ten days' advance written notice to the other party
hereto.
(d) The Corporation may assign its rights and delegate its duties
under this Agreement, including paragraphs 3 and 5 hereof. If any such
assignment or delegation requires consent of any state securities authorities,
the parties agree to cooperate in requesting such consent. This Agreement shall
inure to the benefit of the successors and assigns of the Corporation and,
subject to the restrictions on transfer herein set forth, be binding upon
Purchaser, his or her heirs, executors, administrators, successors and assigns.
(e) Purchaser hereby authorizes and directs the Secretary or Transfer
Agent of the Corporation to transfer the Stock as to which the Purchase Option
has been exercised from Purchaser to the Corporation.
(f) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation, or a parent or subsidiary of the
Corporation, to terminate Purchaser's employment, for any reason, with or
without cause.
7
<PAGE>
(g) This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
(h) This Agreement may be amended or modified only by a written
instrument executed by both the Corporation and the Employee.
(i) This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Delaware, without giving effect to that
State's conflict of laws provisions.
(j) All actions or proceedings with respect to this Agreement shall be
instituted only in any state or federal court sitting in Jackson County,
Missouri, and by execution and delivery of this Agreement, the parties
irrevocably and unconditionally subject to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and unconditionally waive: (a)
any objection that the parties might now or hereafter have to the venue of any
of such court; and (b) any claim that any action or proceeding brought in any
such court has been brought in an inconvenient forum.
(k) No delay or omission by the Corporation in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Corporation on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion.
(l) The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or substance
of any section of this Agreement.
(m) In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
(n) This Agreement may be executed in a number of counterparts and all
of such counterparts executed by the Company or the Employee, shall constitute
one and the same agreement, and it shall not be necessary for all parties to
execute the same counterpart hereof.
(o) The parties hereby agree that, for purposes of the execution of
this Agreement, facsimile signatures shall constitute original signatures.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
Nationwide Electric, Inc.
A Delaware corporation
By:/s/ Gregory J. Orman
--------------------------------
Gregory J. Orman, Chairman of the Board
13/th/ Floor
1201 Walnut
Kansas City, MO 64106
(816) 556-2802 (fax)
Purchaser
/s/ John Wood
--------------------------------------------
John Wood
9
<PAGE>
Exhibit 10.10
Restricted Stock Purchase Agreement (Frederick C. Green IV)
<PAGE>
NATIONWIDE ELECTRIC, INC. EMPLOYEE
RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made as of the 7th day of April, 1998, by and between
Nationwide Electric, Inc., a Delaware corporation (the "Corporation"), and
Frederick C. Green IV ("Purchaser").
In consideration of the mutual covenants and representations set forth
herein, the Corporation and Purchaser agree as follows:
1. Purchase and Sale of Stock.
(a) Subject to the terms and conditions of this Agreement, the
Corporation hereby agrees to sell to Purchaser and Purchaser agrees to purchase
from the Corporation on the Closing Date (as herein defined), 100,000 shares of
the Corporation's Common Stock (the "Stock") at a price of $0.30 per share, for
an aggregate purchase price of $30,000. The purchase price for the Stock shall
be paid, at the election of the Purchaser, either (a) in cash or, (b) by
Purchaser's full recourse promissory note (the "Note"), in the form attached
hereto as Exhibit A, in a principal amount of not more than $25,000, and cash
for the remainder of the purchase price. As security for the payment of the Note
or Notes and any renewal or modification thereof, the Purchaser hereby grants to
the Company a security interest in, and pledges with and delivers to the
Company, the Stock, to be held pursuant to the escrow described in Section 8
hereof (the "Escrow").
(b) In the event that the Purchaser prepays all or a portion of such
Note, in accordance with the provisions thereof, the Purchaser intends that the
shares of Stock represented by the portion of such Note so paid, including
annual interest thereon, shall continue to be held as collateral for the
outstanding portion of such Note and shall continue to be held in Escrow, to
serve as independent collateral for the outstanding portion of such Note for the
purpose of commencing the holding period set forth in Securities and Exchange
Commission Rule 144(d).
(c) Upon the occurrence of a default in the payment of the Note when
due, the Corporation shall be entitled to immediate possession of the Stock and
all rights and remedies of a secured party under the Uniform Commercial Code of
the State of Missouri.
2. Closing. The purchase and sale of the Stock shall occur at a Closing to
be held at such time and place (the "Closing Date"), as designated by the
Corporation by written notice to the Purchaser of at least two business days
prior to the Closing Date. The Closing will take place at the principal office
of the Corporation or at such other place as shall be designated by the
Corporation. At the Closing, Purchaser shall deliver to the Corporation a check
payable to the order of the Corporation and the Note in the aggregate amount of
the purchase price of the Stock, and the Corporation will issue, as promptly
thereafter as practicable, a certificate representing the Stock registered in
the name of the Purchaser.
<PAGE>
3. Purchase Option.
(a) All of the Stock shall be subject to the right and option of the
Corporation to repurchase the Stock (the "Purchase Option") as set forth in this
Section 3. In the event Purchaser shall, prior to the closing of a registered
public offering of the Corporation's Common Stock, cease to be employed by the
Corporation (including a parent or subsidiary of the Corporation) for any
reason, or no reason, with or without cause, including involuntary termination,
death or temporary or permanent disability (the "Termination"), the Purchase
Option shall come into effect. Following a Termination, the Corporation shall
have the right, as provided in subparagraph (b) hereof, to purchase from the
Purchaser or his personal representative, as the case may be, at the purchase
price per share originally paid as set forth in Section 1 hereof (the "Option
Price"), all of the Stock.
(b) Within 180 days following a Termination, the Corporation shall
notify Purchaser by written notice delivered or mailed as provided in Section
9(c), as to whether it wishes to purchase the Stock pursuant to exercise of the
Purchase Option. If the Corporation (or its assignee) elects to purchase the
Stock hereunder, it shall set a date for the closing of the transaction at a
place and time specified by the Corporation, or, at Corporation's option, such
closing may be consummated by mail as provided in Section 9(c) hereof. At such
closing, the Corporation (or its assignee) shall tender payment for the Stock
and the certificates representing the Stock so purchased shall be cancelled. The
Option Price shall be payable, at the option of the Corporation, by cancellation
of all or any outstanding indebtedness of Purchaser to the Corporation or in
cash or by check.
(c) The Purchase Option shall also apply in the event immediately
after the closing of the initial registered public offering of the Corporation's
Common Stock (the "Closing"), the Corporation shall have outstanding less than
9,000,000 shares of its Common Stock (calculated on a fully diluted basis) (the
"Outstanding Shares"). In that event, the Corporation shall have the option to
purchase, at the Option Price, a portion of the Stock so that, after the
purchase, the Purchaser (including all permitted transferees) has Stock equal to
1% (rounded to the nearest whole share) of the Outstanding Shares (such portion
being defined as the "Excess Shares"). Within ten days following Closing, the
Corporation shall notify Purchaser by written notice delivered or mailed as
provided in Section 9(c), as to whether it wishes to purchase the Excess Shares,
and shall set a date for the closing of the purchase (not later than thirty days
following Closing) at a place and time specified by the Corporation, or, at
Corporation's option, such closing may be by mail as provided in Section 9(c) .
At closing, the Corporation (or its assignee) shall tender payment for the
Excess Shares and the certificates representing the Excess Shares so purchased
shall be cancelled. The Option Price shall be payable, at the option of the
Corporation, by cancellation of all or any outstanding indebtedness of Purchaser
to the Corporation or in cash or by check.
(d) The Purchase Option shall expire and shall be of no effect upon
the occurrence of any of the following:
2
<PAGE>
(i) one year after the date of this Agreement,
(ii) a change of control of the Company, which is defined as any
person (as that term is used in Section 13(e) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act)), other than the holders of
any of the Company's securities as of the date of this Agreement, is or becomes
the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange
Act) directly or indirectly of securities of the Company representing a majority
of the combined voting power of the Company's then outstanding securities
(assuming conversion of all outstanding convertible non-voting securities into
voting securities and the exercise of all outstanding options and all other
securities which are convertible to voting securities, or
(iii) upon the approval by the Company's shareholders of (A) the
sale of all or substantially all of the assets of the Company, (B) the merger or
consolidation or any reorganization or restructuring of the Company (other than
a merger, consolidation, reorganization or restructuring in which the Company is
the surviving corporation and which does not result in any capital
reorganization or reclassification or other change in the ownership of the
Company's then outstanding shares that would be deemed a change in control
pursuant to clause (i), above), or (C) a plan of liquidation or dissolution of
the Company.
4. Stock Splits, etc. If, from time to time during the term of this
Agreement:
(a) There is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Corporation; or
(b) There is any consolidation, merger or sale of all, or
substantially all, of the assets of the Corporation;
then, in such event, any and all new, substituted or additional securities or
other property to which Purchaser is entitled by reason of his ownership of
Stock shall be immediately subject to this Agreement and be included in the word
"Stock" for all purposes with the same force and effect as the shares of Stock
presently subject to the Purchase Option, right of first refusal and other terms
of this Agreement. While the aggregate Option Price shall remain the same after
each such event, the Option Price per share of Stock upon execution of the
Purchase Option shall be appropriately adjusted.
5. Restriction on Transfer.
(a) Purchaser shall not sell, transfer, pledge, hypothecate or
otherwise dispose of any shares of the Stock which remain subject to the
Purchase Option.
3
<PAGE>
(b) The provisions of this Section 5 shall not apply to a transfer of
any shares of Stock by Purchaser, either during his or her lifetime or on death
by will or intestacy to his or her ancestors, descendants or spouse, or any
custodian or trustee for the account of Purchaser or Purchaser's ancestors,
descendants or spouse, provided, in each such case, a transferee shall receive
and hold such shares subject to the provisions of this Section 5 and there shall
be no further transfer of such shares in accordance herewith.
(c) The Corporation shall not be required (i) to transfer on its books
any shares of Stock which shall have been sold or transferred in violation of
any of the provisions set forth in this Agreement, or (ii) to treat as owner of
such shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares shall have been so transferred.
6. Legends. All certificates representing any of the shares of Stock
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATION ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHT OF REPURCHASE AS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
(b) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) Any legend required to be placed thereon by applicable securities
laws of any state.
7. Purchaser's Representations. In connection with his purchase of the
Stock, the Purchaser hereby represents and warrants to the Corporation as
follows:
(a) Investment Intent; Capacity to Protect Interests. The Purchaser is
purchasing the Stock solely for Purchaser's own account for investment and not
with a view to or for sale in connection with any distribution of the Stock or
any portion thereof and not with any present intention of selling, offering to
sell or otherwise disposing of or distributing the Stock or any portion thereof
in any transaction other than a transaction exempt from registration under the
Act. The Purchaser also represents that the entire legal and beneficial
interests of the Stock is being purchased, and will be held, for the Purchaser's
account only, and neither in whole nor in part for any other person. Purchaser
either has a preexisting business or personal relationship with the Corporation
or any of its officers, directors or controlling persons or by reason of
Purchaser's
4
<PAGE>
business or financial experience or the business or financial experience of
Purchaser's professional advisors who are unaffiliated with and who are not
compensated by the Corporation or any affiliate or selling agent of the
Corporation, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Corporation
and to protect Purchaser's own interests in connection with this transaction.
(b) Residence. The Purchaser's principal residence is within the State
of Minnesota and is located at the address indicated beneath the Purchaser's
signature below.
(c) Information Concerning Corporation. The Purchaser has heretofore
discussed the Corporation and its plans, operations and financial condition with
the Corporation's officers and has heretofore received all such information as
the Purchaser has deemed necessary and appropriate to enable the Purchaser to
evaluate the financial risk inherent in making an investment in the Stock, and
the Purchaser has received satisfactory and complete information concerning the
business and financial condition of the Corporation in response to all inquiries
in respect thereof.
(d) Economic Risk. The Purchaser realizes that the purchase of the
Stock will be a highly speculative investment and involves a high degree of
risk, and the Purchaser is able, without impairing the Purchaser's financial
condition, to hold the Stock for an indefinite period of time and suffer a
complete loss on the Purchaser's investment.
(e) Restricted Securities. The Purchaser understands and acknowledges
that:
(i) the sale of the Stock has not been registered under the
Securities Act of 1933 (the "Act"), the Stock must be held indefinitely unless
subsequently registered under the Act or an exemption from such registration is
available and the Corporation is under no obligation to register the Stock;
(ii) the share certificate representing the Stock will be stamped
with the legends specified in Section 6 hereof; and
(iii) the Corporation will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(f) Disposition of the Stock. The Purchaser is familiar with the
provisions of Rules 701 and 144, each promulgated under the Act, which, in
substance, permit limited public sale of "restricted securities" acquired,
directly or indirectly from the issuer thereof, in a nonpublic offering, subject
to the satisfaction of certain conditions.
(g) Further Limitations on Disposition. Without in any way limiting
Purchaser's representations set forth above, the Purchaser further agrees that
he or she shall in no event make any disposition of all or any portion of the
Stock unless and until:
5
<PAGE>
(i)(A) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or (B)(1) the Purchaser shall have
notified the Corporation of the proposed disposition and shall have furnished
the Corporation with a detailed statement of the circumstances surrounding the
proposed disposition, (2) the Purchaser shall have furnished the Corporation
with an opinion of the Purchaser's counsel to the effect that such disposition
will not require registration of such shares under the Act, and (3) such opinion
of the Purchaser's counsel shall have been concurred in by counsel for the
Corporation and the Corporation shall have advised the Purchaser of such
concurrence; and,
(ii) The shares of Stock proposed to be transferred are no longer
subject to the Purchase Option set forth in Section 3 hereof and the Purchaser
shall have complied with the right of first refusal set forth in Section 5
hereof.
(h) Section 83(b) Election. The Purchaser understands that Section 83
of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the amount paid for the Stock and the fair market
value of the Stock as of the date any restrictions on the Stock lapse. In this
context, "restriction" means the right of the Company to buy back the stock
pursuant to the Purchase Option. In the event the Company has registered its
securities under the Exchange Act, "restriction" with respect to officers,
directors and 10% shareholders also means the six-month period after the Closing
during which such officers, directors and 10% shareholders are subject to suit
under Section 16(b) of the Exchange Act. The Purchaser understands that if such
provision is applicable to him he may elect to be taxed at the time the Stock is
purchased rather than when and as the Purchase Option or six-month Section 16(b)
period expires by filing an election under Section 83(b) of the Code with the
I.R.S. within thirty (30) days from the date of purchase. Even if the fair
market value of the Stock equals the amount paid for the Stock, the election
must be made to avoid adverse tax consequences in the future. The Purchaser
understands that failure to make this filing timely will result in the
recognition of ordinary income by the Purchaser, as the Purchase Option lapses,
or after the lapse of the six month Section 16(b) period, on the difference
between the purchase price and the fair market value of the Stock at the time
such restrictions lapse.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE CORPORATION'S TO FILE TIMELY THE ELECTION UNDER INTERNAL REVENUE
CODE SECTION 83(b) AND UNDER ANY CORRESPONDING PROVISIONS OF STATE TAX LAW, EVEN
IF THE PURCHASER REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS
FILING ON THE PURCHASER'S BEHALF.
8. Pledge. As security for the faithful performance of the terms of this
Agreement and the Note or Notes and to ensure the availability for delivery of
the Purchaser's Stock upon exercise of the Purchase Option herein provided for,
the Purchaser agrees to deliver to and deposit with the Secretary of the
Corporation, two Stock Powers duly endorsed (with date and
6
<PAGE>
number of shares blank) in the form attached hereto as Exhibit B, together with
the certificate or certificates evidencing the Stock; and a Pledge Agreement
duly executed in the form attached hereto as Exhibit C.
9. Miscellaneous.
(a) Subject to the provisions and limitations hereof, Purchaser may,
during the term of this Agreement, exercise all rights and privileges of a
stockholder of the Corporation with respect to the Stock deposited in said
escrow.
(b) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.
(c) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to Purchaser at his address shown on the
Corporation's employment records and to the Corporation at the address of its
principal corporate offices (attention: President) or at such other address as
such party may designate by ten days' advance written notice to the other party
hereto.
(d) The Corporation may assign its rights and delegate its duties
under this Agreement, including paragraphs 3 and 5 hereof. If any such
assignment or delegation requires consent of any state securities authorities,
the parties agree to cooperate in requesting such consent. This Agreement shall
inure to the benefit of the successors and assigns of the Corporation and,
subject to the restrictions on transfer herein set forth, be binding upon
Purchaser, his or her heirs, executors, administrators, successors and assigns.
(e) Purchaser hereby authorizes and directs the Secretary or Transfer
Agent of the Corporation to transfer the Stock as to which the Purchase Option
has been exercised from Purchaser to the Corporation.
(f) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation, or a parent or subsidiary of the
Corporation, to terminate Purchaser's employment, for any reason, with or
without cause.
(g) This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
(h) This Agreement may be amended or modified only by a written
instrument executed by both the Corporation and the Employee.
7
<PAGE>
(i) This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Delaware, without giving effect to that
State's conflict of laws provisions.
(j) All actions or proceedings with respect to this Agreement shall be
instituted only in any state or federal court sitting in Jackson County,
Missouri, and by execution and delivery of this Agreement, the parties
irrevocably and unconditionally subject to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and unconditionally waive: (a)
any objection that the parties might now or hereafter have to the venue of any
of such court; and (b) any claim that any action or proceeding brought in any
such court has been brought in an inconvenient forum.
(k) No delay or omission by the Corporation in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Corporation on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion.
(l) The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or substance
of any section of this Agreement.
(m) In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
(n) This Agreement may be executed in a number of counterparts and all
of such counterparts executed by the Company or the Employee, shall constitute
one and the same agreement, and it shall not be necessary for all parties to
execute the same counterpart hereof.
(o) The parties hereby agree that, for purposes of the execution of
this Agreement, facsimile signatures shall constitute original signatures.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
Nationwide Electric, Inc.
A Delaware corporation
By:/s/ Gregory J. Orman
------------------------------------------
Gregory J. Orman, Chairman of the Board
8
<PAGE>
13/th/ Floor
1201 Walnut
Kansas City, MO 64106
(816) 556-2802 (fax)
Purchaser
/s/ Frederick C. Green IV
---------------------------------------------
Frederick C. Green IV
9
<PAGE>
Exhibit 10.11
Restricted Stock Purchase Agreement (David Smith)
<PAGE>
NATIONWIDE ELECTRIC, INC.
EMPLOYEE RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made as of the 1st day of April, 1998, by and between
Nationwide Electric, Inc., a Delaware corporation (the "Corporation"), and David
Smith ("Purchaser").
In consideration of the mutual covenants and representations set forth
herein, the Corporation and Purchaser agree as follows:
1. Purchase and Sale of Stock.
(a) Subject to the terms and conditions of this Agreement, the
Corporation hereby agrees to sell to Purchaser and Purchaser agrees to purchase
from the Corporation on the Closing Date (as herein defined), 40,000 shares of
the Corporation's Common Stock (the "Stock") at a price of $0.30 per share, for
an aggregate purchase price of $12,000. The purchase price for the Stock shall
be paid, at the election of the Purchaser, either (a) in cash or, (b) by
Purchaser's full recourse promissory note (the "Note"), in the form attached
hereto as Exhibit A, in a principal amount of not more than $10,000, and cash
for the remainder of the purchase price. As security for the payment of the Note
or Notes and any renewal or modification thereof, the Purchaser hereby grants to
the Company a security interest in, and pledges with and delivers to the
Company, the Stock, to be held pursuant to the escrow described in Section 8
hereof (the "Escrow").
(b) In the event that the Purchaser prepays all or a portion of such
Note, in accordance with the provisions thereof, the Purchaser intends that the
shares of Stock represented by the portion of such Note so paid, including
annual interest thereon, shall continue to be held as collateral for the
outstanding portion of such Note and shall continue to be held in Escrow, to
serve as independent collateral for the outstanding portion of such Note for the
purpose of commencing the holding period set forth in Securities and Exchange
Commission Rule 144(d).
(c) Upon the occurrence of a default in the payment of the Note when
due, the Corporation shall be entitled to immediate possession of the Stock and
all rights and remedies of a secured party under the Uniform Commercial Code of
the State of Missouri.
2. Closing. The purchase and sale of the Stock shall occur at a Closing to
be held at such time and place (the "Closing Date"), as designated by the
Corporation by written notice to the Purchaser of at least two business days
prior to the Closing Date. The Closing will take place at the principal office
of the Corporation or at such other place as shall be designated by the
Corporation. At the Closing, Purchaser shall deliver to the Corporation a check
payable to the order of the Corporation and the Note in the aggregate amount of
the purchase price of the Stock, and the Corporation will issue, as promptly
thereafter as practicable, a certificate representing the Stock registered in
the name of the Purchaser.
<PAGE>
3. Purchase Option.
(a) All of the Stock shall be subject to the right and option of the
Corporation to repurchase the Stock (the "Purchase Option") as set forth in this
Section 3. In the event Purchaser shall, prior to the closing of a registered
public offering of the Corporation's Common Stock, cease to be employed by the
Corporation (including a parent or subsidiary of the Corporation) for any
reason, or no reason, with or without cause, including involuntary termination,
death or temporary or permanent disability (the "Termination"), the Purchase
Option shall come into effect. Following a Termination, the Corporation shall
have the right, as provided in subparagraph (b) hereof, to purchase from the
Purchaser or his personal representative, as the case may be, at the purchase
price per share originally paid as set forth in Section 1 hereof (the "Option
Price"), all of the Stock.
(b) Within 180 days following a Termination, the Corporation shall
notify Purchaser by written notice delivered or mailed as provided in
subparagraph 9(c), as to whether it wishes to purchase the Stock pursuant to
exercise of the Purchase Option. If the Corporation (or its assignee) elects to
purchase the Stock hereunder, it shall set a date for the closing of the
transaction at a place and time specified by the Corporation, or, at
Corporation's option, such closing may be consummated by mail as provided in
Section 9(c) hereof. At such closing, the Corporation (or its assignee) shall
tender payment for the Stock and the certificates representing the Stock so
purchased shall be cancelled. The Option Price shall be payable, at the option
of the Corporation, by cancellation of all or any outstanding indebtedness of
Purchaser to the Corporation or in cash or by check.
(c) The Purchase Option shall expire and shall be of no effect upon
the occurrence of any of the following:
(i) one year after the date of this Agreement,
(ii) a change of control of the Company, which is defined as any
person (as that term is used in Section 13(e) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act)), other than the holders of
any of the Company's securities as of the date of this Agreement, is or becomes
the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange
Act) directly or indirectly of securities of the Company representing a majority
of the combined voting power of the Company's then outstanding securities
(assuming conversion of all outstanding convertible non-voting securities into
voting securities and the exercise of all outstanding options and all other
securities which are convertible to voting securities, or
(iii) upon the approval by the Company's shareholders of (A) the
sale of all or substantially all of the assets of the Company, (B) the merger or
consolidation or any reorganization or restructuring of the Company (other than
a merger, consolidation, reorganization or restructuring in which the Company is
the surviving corporation and which does
2
<PAGE>
not result in any capital reorganization or reclassification or other change in
the ownership of the Company's then outstanding shares that would be deemed a
change in control pursuant to clause (i), above), or (C) a plan of liquidation
or dissolution of the Company, or
(iv) upon the termination of the Employee's employment from the
Company, by the Company without Cause as defined in the Employee's Employment
Agreement.
4. Stock Splits, etc. If, from time to time during the term of this
Agreement:
(a) There is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Corporation; or
(b) There is any consolidation, merger or sale of all, or
substantially all, of the assets of the Corporation;
then, in such event, any and all new, substituted or additional securities or
other property to which Purchaser is entitled by reason of his ownership of
Stock shall be immediately subject to this Agreement and be included in the word
"Stock" for all purposes with the same force and effect as the shares of Stock
presently subject to the Purchase Option, right of first refusal and other terms
of this Agreement. While the aggregate Option Price shall remain the same after
each such event, the Option Price per share of Stock upon execution of the
Purchase Option shall be appropriately adjusted.
5. Restriction on Transfer.
(a) Purchaser shall not sell, transfer, pledge, hypothecate or
otherwise dispose of any shares of the Stock which remain subject to the
Purchase Option.
(b) The provisions of this Section 5 shall not apply to a transfer of
any shares of Stock by Purchaser, either during his or her lifetime or on death
by will or intestacy to his or her ancestors, descendants or spouse, or any
custodian or trustee for the account of Purchaser or Purchaser's ancestors,
descendants or spouse, provided, in each such case, a transferee shall receive
and hold such shares subject to the provisions of this Section 5 and there shall
be no further transfer of such shares in accordance herewith.
(c) The Corporation shall not be required (i) to transfer on its books
any shares of Stock which shall have been sold or transferred in violation of
any of the provisions set forth in this Agreement, or (ii) to treat as owner of
such shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares shall have been so transferred.
6. Legends. All certificates representing any of the shares of Stock
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
3
<PAGE>
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATION ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHT OF REPURCHASE AS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
(b) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) Any legend required to be placed thereon by applicable securities
laws of any state.
7. Purchaser's Representations. In connection with his purchase of the
Stock, the Purchaser hereby represents and warrants to the Corporation as
follows:
(a) Investment Intent; Capacity to Protect Interests. The Purchaser is
purchasing the Stock solely for Purchaser's own account for investment and not
with a view to or for sale in connection with any distribution of the Stock or
any portion thereof and not with any present intention of selling, offering to
sell or otherwise disposing of or distributing the Stock or any portion thereof
in any transaction other than a transaction exempt from registration under the
Act. The Purchaser also represents that the entire legal and beneficial
interests of the Stock is being purchased, and will be held, for the Purchaser's
account only, and neither in whole nor in part for any other person. Purchaser
either has a preexisting business or personal relationship with the Corporation
or any of its officers, directors or controlling persons or by reason of
Purchaser's business or financial experience or the business or financial
experience of Purchaser's professional advisors who are unaffiliated with and
who are not compensated by the Corporation or any affiliate or selling agent of
the Corporation, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Corporation
and to protect Purchaser's own interests in connection with this transaction.
(b) Residence. The Purchaser's principal residence is within the State
of Minnesota and is located at the address indicated beneath the Purchaser's
signature below.
(c) Information Concerning Corporation. The Purchaser has heretofore
discussed the Corporation and its plans, operations and financial condition with
the Corporation's officers and has heretofore received all such information as
the Purchaser has deemed necessary and appropriate to enable the Purchaser to
evaluate the financial risk inherent in making an investment in the Stock, and
the Purchaser has received satisfactory and complete information
4
<PAGE>
concerning the business and financial condition of the Corporation in response
to all inquiries in respect thereof.
(d) Economic Risk. The Purchaser realizes that the purchase of the
Stock will be a highly speculative investment and involves a high degree of
risk, and the Purchaser is able, without impairing the Purchaser's financial
condition, to hold the Stock for an indefinite period of time and suffer a
complete loss on the Purchaser's investment.
(e) Restricted Securities. The Purchaser understands and acknowledges
that:
(i) the sale of the Stock has not been registered under the
Securities Act of 1933 (the "Act"), the Stock must be held indefinitely unless
subsequently registered under the Act or an exemption from such registration is
available and the Corporation is under no obligation to register the Stock;
(ii) the share certificate representing the Stock will be stamped
with the legends specified in Section 6 hereof; and
(iii) the Corporation will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(f) Disposition of the Stock. The Purchaser is familiar with the
provisions of Rules 701 and 144, each promulgated under the Act, which, in
substance, permit limited public sale of "restricted securities" acquired,
directly or indirectly from the issuer thereof, in a nonpublic offering, subject
to the satisfaction of certain conditions.
(g) Further Limitations on Disposition. Without in any way limiting
Purchaser's representations set forth above, the Purchaser further agrees that
he or she shall in no event make any disposition of all or any portion of the
Stock unless and until:
(i)(A) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or (B)(1) the Purchaser shall have
notified the Corporation of the proposed disposition and shall have furnished
the Corporation with a detailed statement of the circumstances surrounding the
proposed disposition, (2) the Purchaser shall have furnished the Corporation
with an opinion of the Purchaser's counsel to the effect that such disposition
will not require registration of such shares under the Act, and (3) such opinion
of the Purchaser's counsel shall have been concurred in by counsel for the
Corporation and the Corporation shall have advised the Purchaser of such
concurrence; and,
(ii) The shares of Stock proposed to be transferred are no longer
subject to the Purchase Option set forth in Section 3 hereof and the Purchaser
shall have complied with the right of first refusal set forth in Section 5
hereof.
5
<PAGE>
(h) Valuation of Common Stock. The Purchaser understands that the
Stock has been valued by the board of directors of the Corporation and that the
Corporation believes this valuation represents a fair attempt at reaching an
accurate appraisal of its worth; the Purchaser understands, however, that the
Corporation can give no assurances that such price is in fact the fair market
value of the Stock and that it is possible that, with the benefit of hindsight,
the Internal Revenue Service would successfully assert that the value of the
Common Stock on the date of purchase is greater than so determined. If the
Internal Revenue Service were to succeed in a tax determination that the Stock
received had value greater than that upon which the transaction was based, the
additional value would constitute ordinary income as of the date of its receipt.
The additional taxes (and interest) due would be payable by the Purchaser, and
there is no provision for the Corporation to reimburse the Purchaser for that
tax liability, and the Purchaser assumes all responsibility for such potential
tax liability. In the event such additional value would represent more than 25
percent of the Purchaser's gross income for the year in which the value of the
shares were taxable, the Internal Revenue Service (the "I.R.S.") would have six
years from the due date for filing the return (or the actual filing date of the
return if filed thereafter) within which to assess the Purchaser the additional
tax and interest which would then be due. The Corporation would have the
benefit, in any such transaction, if a determination was made prior to the
three-year statute of limitations period affecting the Corporation, of an
increase in its deduction for compensation paid, which would offset its
operating profits, or, if not profitable, would create a net operating loss
carry forward arising from operations in that year.
(i) Section 83(b) Election. The Purchaser understands that Section 83
of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the amount paid for the Stock and the fair market
value of the Stock as of the date any restrictions on the Stock lapse. In this
context, "restriction" means the right of the Company to buy back the stock
pursuant to the Purchase Option. In the event the Company has registered its
securities under the Exchange Act, "restriction" with respect to officers,
directors and 10% shareholders also means the six-month period after the Closing
during which such officers, directors and 10% shareholders are subject to suit
under Section 16(b) of the Exchange Act. The Purchaser understands that if such
provision is applicable to him he may elect to be taxed at the time the Stock is
purchased rather than when and as the Purchase Option or six-month Section 16(b)
period expires by filing an election under Section 83(b) of the Code with the
I.R.S. within thirty (30) days from the date of purchase. Even if the fair
market value of the Stock equals the amount paid for the Stock, the election
must be made to avoid adverse tax consequences in the future. The Purchaser
understands that failure to make this filing timely will result in the
recognition of ordinary income by the Purchaser, as the Purchase Option lapses,
or after the lapse of the six month Section 16(b) period, on the difference
between the purchase price and the fair market value of the Stock at the time
such restrictions lapse.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE CORPORATION'S TO FILE TIMELY THE ELECTION UNDER INTERNAL REVENUE
CODE SECTION 83(b) AND UNDER ANY CORRESPONDING PROVISIONS OF STATE TAX LAW, EVEN
IF THE PURCHASER
6
<PAGE>
REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE
PURCHASER'S BEHALF.
8. Pledge. As security for the faithful performance of the terms of this
Agreement and the Note or Notes and to ensure the availability for delivery of
the Purchaser's Stock upon exercise of the Purchase Option herein provided for,
the Purchaser agrees to deliver to and deposit with the Secretary of the
Corporation, two Stock Powers duly endorsed (with date and number of shares
blank) in the form attached hereto as Exhibit B, together with the certificate
or certificates evidencing the Stock; and a Pledge Agreement duly executed in
the form attached hereto as Exhibit C.
9. Miscellaneous.
(a) Subject to the provisions and limitations hereof, Purchaser may,
during the term of this Agreement, exercise all rights and privileges of a
stockholder of the Corporation with respect to the Stock deposited in said
escrow.
(b) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.
(c) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to Purchaser at his address shown on the
Corporation's employment records and to the Corporation at the address of its
principal corporate offices (attention: President) or at such other address as
such party may designate by ten days' advance written notice to the other party
hereto.
(d) The Corporation may assign its rights and delegate its duties
under this Agreement, including paragraphs 3 and 5 hereof. If any such
assignment or delegation requires consent of any state securities authorities,
the parties agree to cooperate in requesting such consent. This Agreement shall
inure to the benefit of the successors and assigns of the Corporation and,
subject to the restrictions on transfer herein set forth, be binding upon
Purchaser, his or her heirs, executors, administrators, successors and assigns.
(e) Purchaser hereby authorizes and directs the Secretary or Transfer
Agent of the Corporation to transfer the Stock as to which the Purchase Option
has been exercised from Purchaser to the Corporation.
(f) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation, or a parent or subsidiary of the
Corporation, to terminate Purchaser's employment, for any reason, with or
without cause.
7
<PAGE>
(g) This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
(h) This Agreement may be amended or modified only by a written
instrument executed by both the Corporation and the Employee.
(i) This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Delaware, without giving effect to that
State's conflict of laws provisions.
(j) All actions or proceedings with respect to this Agreement shall be
instituted only in any state or federal court sitting in Jackson County,
Missouri, and by execution and delivery of this Agreement, the parties
irrevocably and unconditionally subject to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and unconditionally waive: (a)
any objection that the parties might now or hereafter have to the venue of any
of such court; and (b) any claim that any action or proceeding brought in any
such court has been brought in an inconvenient forum.
(k) No delay or omission by the Corporation in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Corporation on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion.
(l) The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or substance
of any section of this Agreement.
(m) In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
(n) This Agreement may be executed in a number of counterparts and all
of such counterparts executed by the Company or the Employee, shall constitute
one and the same agreement, and it shall not be necessary for all parties to
execute the same counterpart hereof.
(o) The parties hereby agree that, for purposes of the execution of
this Agreement, facsimile signatures shall constitute original signatures.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
8
<PAGE>
Nationwide Electric, Inc.
A Delaware corporation
By:/s/ Gregory J. Orman
--------------------------------
Gregory J. Orman, Chairman of the Board
13/th/ Floor
1201 Walnut
Kansas City, MO 64106
(816) 556-2802 (fax)
Purchaser
/s/ David Smith
--------------------------------------------
David Smith
9
<PAGE>
Exhibit 10.12
Restricted Stock Purchase Agreement (Frank R. Clark)
<PAGE>
NATIONWIDE ELECTRIC, INC. EMPLOYEE
RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made as of the 1st day of April, 1998, by and between
Nationwide Electric, Inc., a Delaware corporation (the "Corporation"), and Frank
R. Clark ("Purchaser").
In consideration of the mutual covenants and representations set forth
herein, the Corporation and Purchaser agree as follows:
1. Purchase and Sale of Stock. Subject to the terms and conditions of
this Agreement, the Corporation hereby agrees to sell to Purchaser and Purchaser
agrees to purchase from the Corporation on the Closing Date (as herein defined),
60,000 shares of the Corporation's Common Stock (the "Stock") at a price of
$0.30 per share, for an aggregate purchase price of $18,000. The purchase price
for the Stock shall be paid, in cash.
2. Closing. The purchase and sale of the Stock shall occur at a Closing to
be held at such time and place (the "Closing Date"), as designated by the
Corporation by written notice to the Purchaser of at least two business days
prior to the Closing Date. The Closing will take place at the principal office
of the Corporation or at such other place as shall be designated by the
Corporation. At the Closing, Purchaser shall deliver to the Corporation a check
payable to the order of the Corporation and the Note in the aggregate amount of
the purchase price of the Stock, and the Corporation will issue, as promptly
thereafter as practicable, a certificate representing the Stock registered in
the name of the Purchaser.
3. Purchase Option.
(a) The Stock shall be subject to the right and option of the
Corporation to repurchase the Stock (the "Purchase Option") as set forth in this
Section 3. In the event Purchaser shall cease to be employed by the Corporation
(including a parent or subsidiary of the Corporation) for any reason, or no
reason, with or without cause, including involuntary termination, death or
temporary or permanent disability (the "Termination"), the Purchase Option shall
come into effect. Following a Termination, the Corporation shall have the right,
as provided in subparagraph (b) hereof, to purchase from the Purchaser or his or
her personal representative, as the case may be, at the purchase price per share
originally paid as set forth in Section 1 hereof (the "Option Price"), the Stock
as follows:
(i) If the Termination giving rise to the right to exercise the
Purchase Option occurs on or prior to the closing of a registered public
offering of the Corporation's Common Stock (the "Commencement Date"), the
Purchase Option shall apply to 60,000 shares of the Stock.
(ii) If the Termination giving rise to the right to exercise the
Purchase Option occurs within thirty six months after the Commencement Date, the
Purchase Option shall apply to 20,000 shares of the Stock.
<PAGE>
(b) Within 180 days following a Termination, the Corporation shall
notify Purchaser by written notice delivered or mailed as provided in
subparagraph 9(c), as to whether it wishes to purchase the Stock pursuant to
exercise of the Purchase Option. If the Corporation (or its assignee) elects to
purchase the Stock hereunder, it shall set a date for the closing of the
transaction at a place and time specified by the Corporation, or, at
Corporation's option, such closing may be consummated by mail as provided in
Section 9(c) hereof. At such closing, the Corporation (or its assignee) shall
tender payment for the Stock and the certificates representing the Stock so
purchased shall be cancelled. The Option Price shall be payable, at the option
of the Corporation, by cancellation of all or any outstanding indebtedness of
Purchaser to the Corporation or in cash or by check.
(c) The Purchase Option referenced in Section 3(a)(i) shall expire and
shall be of no effect for 40,000 shares of the Stock upon the occurrence of any
of the following:
(i) one year after the date of this Agreement,
(ii) a change of control of the Company, which is defined as any
person (as that term is used in Section 13(e) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other than the holders of
any of the Company's securities as of the date of this Agreement, is or becomes
the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange
Act) directly or indirectly of securities of the Company representing a majority
of the combined voting power of the Company's then outstanding securities
(assuming conversion of all outstanding convertible non-voting securities into
voting securities and the exercise of all outstanding options and all other
securities which are convertible to voting securities), or
(iii) upon the approval by the Company's shareholders of (A) the
sale of all or substantially all of the assets of the Company, (B) the merger or
consolidation or any reorganization or restructuring of the Company (other than
a merger, consolidation, reorganization or restructuring in which the Company is
the surviving corporation and which does not result in any capital
reorganization or reclassification or other change in the ownership of the
Company's then outstanding shares that would be deemed a change in control
pursuant to clause (i), above), or (C) a plan of liquidation or dissolution of
the Company.
4. Stock Splits, etc. If, from time to time during the term of this
Agreement:
(a) There is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Corporation; or
(b) There is any consolidation, merger or sale of all, or
substantially all, of the assets of the Corporation;
2
<PAGE>
then, in such event, any and all new, substituted or additional securities or
other property to which Purchaser is entitled by reason of his ownership of
Stock shall be immediately subject to this Agreement and be included in the word
"Stock" for all purposes with the same force and effect as the shares of Stock
presently subject to the Purchase Option, right of first refusal and other terms
of this Agreement. While the aggregate Option Price shall remain the same after
each such event, the Option Price per share of Stock upon execution of the
Purchase Option shall be appropriately adjusted.
5. Restriction on Transfer.
(a) Purchaser shall not sell, transfer, pledge, hypothecate or
otherwise dispose of any shares of the Stock which remain subject to the
Purchase Option.
(b) The provisions of this Section 5 shall not apply to a transfer of
any shares of Stock by Purchaser, either during his or her lifetime or on death
by will or intestacy to his or her ancestors, descendants or spouse, or any
custodian or trustee for the account of Purchaser or Purchaser's ancestors,
descendants or spouse, provided, in each such case, a transferee shall receive
and hold such shares subject to the provisions of this Section 5 and there shall
be no further transfer of such shares in accordance herewith.
(c) The Corporation shall not be required (i) to transfer on its books
any shares of Stock which shall have been sold or transferred in violation of
any of the provisions set forth in this Agreement, or (ii) to treat as owner of
such shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares shall have been so transferred.
6. Legends. All certificates representing any of the shares of Stock
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATION ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHT OF REPURCHASE AS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
(b) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) Any legend required to be placed thereon by applicable securities
laws of any state.
3
<PAGE>
7. Purchaser's Representations. In connection with his purchase of the
Stock, the Purchaser hereby represents and warrants to the Corporation as
follows:
(a) Investment Intent; Capacity to Protect Interests. The Purchaser is
purchasing the Stock solely for Purchaser's own account for investment and not
with a view to or for sale in connection with any distribution of the Stock or
any portion thereof and not with any present intention of selling, offering to
sell or otherwise disposing of or distributing the Stock or any portion thereof
in any transaction other than a transaction exempt from registration under the
Act. The Purchaser also represents that the entire legal and beneficial
interests of the Stock is being purchased, and will be held, for the Purchaser's
account only, and neither in whole nor in part for any other person. Purchaser
either has a preexisting business or personal relationship with the Corporation
or any of its officers, directors or controlling persons or by reason of
Purchaser's business or financial experience or the business or financial
experience of Purchaser's professional advisors who are unaffiliated with and
who are not compensated by the Corporation or any affiliate or selling agent of
the Corporation, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Corporation
and to protect Purchaser's own interests in connection with this transaction.
(b) Residence. The Purchaser's principal residence is within the State
of Kansas and is located at the address indicated beneath the Purchaser's
signature below.
(c) Information Concerning Corporation. The Purchaser has heretofore
discussed the Corporation and its plans, operations and financial condition with
the Corporation's officers and has heretofore received all such information as
the Purchaser has deemed necessary and appropriate to enable the Purchaser to
evaluate the financial risk inherent in making an investment in the Stock, and
the Purchaser has received satisfactory and complete information concerning the
business and financial condition of the Corporation in response to all inquiries
in respect thereof.
(d) Economic Risk. The Purchaser realizes that the purchase of the
Stock will be a highly speculative investment and involves a high degree of
risk, and the Purchaser is able, without impairing the Purchaser's financial
condition, to hold the Stock for an indefinite period of time and suffer a
complete loss on the Purchaser's investment.
(e) Restricted Securities. The Purchaser understands and acknowledges
that:
(i) the sale of the Stock has not been registered under the
Securities Act of 1933 (the "Act"), the Stock must be held indefinitely unless
subsequently registered under the Act or an exemption from such registration is
available and the Corporation is under no obligation to register the Stock;
(ii) the share certificate representing the Stock will be stamped
with the legends specified in Section 6 hereof; and
4
<PAGE>
(iii) the Corporation will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(f) Disposition of the Stock. The Purchaser is familiar with the
provisions of Rules 701 and 144, each promulgated under the Act, which, in
substance, permit limited public sale of "restricted securities" acquired,
directly or indirectly from the issuer thereof, in a nonpublic offering, subject
to the satisfaction of certain conditions.
(g) Further Limitations on Disposition. Without in any way limiting
Purchaser's representations set forth above, the Purchaser further agrees that
he or she shall in no event make any disposition of all or any portion of the
Stock unless and until:
(i)(A) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or (B)(1) the Purchaser shall have
notified the Corporation of the proposed disposition and shall have furnished
the Corporation with a detailed statement of the circumstances surrounding the
proposed disposition, (2) the Purchaser shall have furnished the Corporation
with an opinion of the Purchaser's counsel to the effect that such disposition
will not require registration of such shares under the Act, and (3) such opinion
of the Purchaser's counsel shall have been concurred in by counsel for the
Corporation and the Corporation shall have advised the Purchaser of such
concurrence; and,
(ii) The shares of Stock proposed to be transferred are no longer
subject to the Purchase Option set forth in Section 3 hereof and the Purchaser
shall have complied with the right of first refusal set forth in Section 5
hereof.
(h) Valuation of Common Stock. The Purchaser understands that the
Stock has been valued by the board of directors of the Corporation and that the
Corporation believes this valuation represents a fair attempt at reaching an
accurate appraisal of its worth; the Purchaser understands, however, that the
Corporation can give no assurances that such price is in fact the fair market
value of the Stock and that it is possible that, with the benefit of hindsight,
the Internal Revenue Service would successfully assert that the value of the
Common Stock on the date of purchase is greater than so determined. If the
Internal Revenue Service were to succeed in a tax determination that the Stock
received had value greater than that upon which the transaction was based, the
additional value would constitute ordinary income as of the date of its receipt.
The additional taxes (and interest) due would be payable by the Purchaser, and
there is no provision for the Corporation to reimburse the Purchaser for that
tax liability, and the Purchaser assumes all responsibility for such potential
tax liability. In the event such additional value would represent more than 25
percent of the Purchaser's gross income for the year in which the value of the
shares were taxable, the Internal Revenue Service (the "I.R.S.") would have six
years from the due date for filing the return (or the actual filing date of the
return if filed thereafter) within which to assess the Purchaser the additional
tax and interest which would then be due. The Corporation would have the
benefit, in any such transaction, if a determination was made prior to the
5
<PAGE>
three-year statute of limitations period affecting the Corporation, of an
increase in its deduction for compensation paid, which would offset its
operating profits, or, if not profitable, would create a net operating loss
carry forward arising from operations in that year.
(i) Section 83(b) Election. The Purchaser understands that Section 83
of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the amount paid for the Stock and the fair market
value of the Stock as of the date any restrictions on the Stock lapse. In this
context, "restriction" means the right of the Company to buy back the stock
pursuant to the Purchase Option. In the event the Company has registered its
securities under the Exchange Act, "restriction" with respect to officers,
directors and 10% shareholders also means the six-month period after the Closing
during which such officers, directors and 10% shareholders are subject to suit
under Section 16(b) of the Exchange Act. The Purchaser understands that if such
provision is applicable to him he may elect to be taxed at the time the Stock is
purchased rather than when and as the Purchase Option or six-month Section 16(b)
period expires by filing an election under Section 83(b) of the Code with the
I.R.S. within thirty (30) days from the date of purchase. Even if the fair
market value of the Stock equals the amount paid for the Stock, the election
must be made to avoid adverse tax consequences in the future. The Purchaser
understands that failure to make this filing timely will result in the
recognition of ordinary income by the Purchaser, as the Purchase Option lapses,
or after the lapse of the six month Section 16(b) period, on the difference
between the purchase price and the fair market value of the Stock at the time
such restrictions lapse.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE CORPORATION'S TO FILE TIMELY THE ELECTION UNDER INTERNAL REVENUE
CODE SECTION 83(b) AND UNDER ANY CORRESPONDING PROVISIONS OF STATE TAX LAW, EVEN
IF THE PURCHASER REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS
FILING ON THE PURCHASER'S BEHALF.
8. Miscellaneous.
(a) Subject to the provisions and limitations hereof, Purchaser may,
during the term of this Agreement, exercise all rights and privileges of a
stockholder of the Corporation with respect to the Stock.
(b) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.
(c) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to Purchaser at his address shown on the
Corporation's employment records and to the Corporation at the address of
6
<PAGE>
its principal corporate offices (attention: President) or at such other address
as such party may designate by ten days' advance written notice to the other
party hereto.
(d) The Corporation may assign its rights and delegate its duties
under this Agreement, including paragraphs 3 and 5 hereof. If any such
assignment or delegation requires consent of any state securities authorities,
the parties agree to cooperate in requesting such consent. This Agreement shall
inure to the benefit of the successors and assigns of the Corporation and,
subject to the restrictions on transfer herein set forth, be binding upon
Purchaser, his or her heirs, executors, administrators, successors and assigns.
(e) Purchaser hereby authorizes and directs the Secretary or Transfer
Agent of the Corporation to transfer the Stock as to which the Purchase Option
has been exercised from Purchaser to the Corporation.
(f) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation, or a parent or subsidiary of the
Corporation, to terminate Purchaser's employment, for any reason, with or
without cause.
(g) This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
(h) This Agreement may be amended or modified only by a written
instrument executed by both the Corporation and the Employee.
(i) This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Missouri, without giving effect to that
State's conflict of laws provisions.
(j) All actions or proceedings with respect to this Agreement shall be
instituted only in any state or federal court sitting in Jackson County,
Missouri, and by execution and delivery of this Agreement, the parties
irrevocably and unconditionally subject to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and unconditionally waive: (a)
any objection that the parties might now or hereafter have to the venue of any
of such court; and (b) any claim that any action or proceeding brought in any
such court has been brought in an inconvenient forum.
(k) No delay or omission by the Corporation in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Corporation on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion.
7
<PAGE>
(l) The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or substance
of any section of this Agreement.
(m) In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
(n) This Agreement may be executed in a number of counterparts and all
of such counterparts executed by the Company or the Employee, shall constitute
one and the same agreement, and it shall not be necessary for all parties to
execute the same counterpart hereof.
(o) The parties hereby agree that, for purposes of the execution of
this Agreement, facsimile signatures shall constitute original signatures.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
Nationwide Electric, Inc.
A Delaware corporation
By: /s/ Gregory J. Orman
---------------------------------------
Gregory J. Orman, Chairman of the Board
13/th/ Floor
1201 Walnut
Kansas City, MO 64106
(816) 556-2802 (fax)
Purchaser
/s/ Frank R. Clark
------------------------------------------
Frank R. Clark
8
<PAGE>
Exhibit 21.1
List of Subsidiaries
<PAGE>
Exhibit 21.1
Subsidiaries
Subsidiary Jurisdiction of Incorporation
---------- -----------------------------
Parsons Electric Co. Minnesota
Eagle Electric Holdings, Inc. Minnesota
* The Allison Company Georgia
* Allison-Smith Company(1) Georgia
* Henderson Electric Co. Inc. Kentucky
* Eagle Electrical Systems, Inc.(2) Ohio
* Potter Electric Co., Inc. Nevada
* To be acquired concurrently with the closing of the Offering made hereby.
(1) Allison-Smith Company is the operating company and wholly-owned subsidiary
of The Allison Company
(2) Eagle Electrical Systems, Inc. is the wholly-owned subsidiary of Henderson
Electric Co., Inc.
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No.1 Registration Statement No.
333-57013 of Nationwide Electric, Inc. of our report dated June 12, 1998,
appearing in the Prospectus, which is part of this Registration Statement.
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-57013 of The Allison Company of our report dated June 12, 1998, appearing in
the Prospectus, which is part of this Registration Statement.
We consent to the use in this Amendment No. 1 Registration Statement No.
333-57013 of the consolidated financial statements of Henderson Electric Co.,
Inc. and Subsidiaries of our report dated June 12, 1998, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
Kansas City, Missouri
July 30, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1
Amendment #1 of our report dated June 10, 1998, related to the financial
statements of Parsons Electric Co. We also consent to the reference to our Firm
under the caption "Experts" in the Prospectus.
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
July 30, 1998
<PAGE>
Exhibit 23.4
Consent of Frederick C. Green IV
<PAGE>
CONSENT TO BE NAMED AS A DIRECTOR
In the Registration Statement on Form S-1 (the "Registration Statement")
filed by Nationwide Electric, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission, I am named as a designee to the Board of
Directors of the Company, to be appointed upon the closing of the acquisitions
described in the Registration Statement. I consent to the use of my name and
other information in the Registration Statement for such purposes.
Date: June 20, 1998.
/s/ Frederick C. Green, IV
----------------------
Frederick C. Green, IV
<PAGE>
Exhibit 23.5
Consent of Wade Lau
<PAGE>
CONSENT TO BE NAMED AS A DIRECTOR
In the Registration Statement on Form S-1 (the "Registration Statement")
filed by Nationwide Electric, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission, I am named as a designee to the Board of
Directors of the Company, to be appointed upon the closing of the acquisitions
described in the Registration Statement. I consent to the use of my name and
other information in the Registration Statement for such purposes.
Date: June 19, 1998.
/s/ Wade Lau
--------------------
Wade Lau
<PAGE>
Exhibit 23.6
Consent of Robert B. Allison
<PAGE>
CONSENT TO BE NAMED AS A DIRECTOR
In the Registration Statement on Form S-1 (the "Registration Statement")
filed by Nationwide Electric, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission, I am named as a designee to the Board of
Directors of the Company, to be appointed upon the closing of the acquisitions
described in the Registration Statement. I consent to the use of my name and
other information in the Registration Statement for such purposes.
Date: June 12, 1998.
/s/ Robert B. Allison
------------------------------
Robert B. Allison
