<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1998
REGISTRATION NO. 333-
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- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value per share...... $74,750,000 $25,651.52
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
----------------
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.
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<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
JUNE 17, 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 $ and $ 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. See "Use of Proceeds." Application will be 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.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY (1)
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................ $ $ $
Total (2)........................ $ $ $
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</TABLE>
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(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
3,300,000 shares of Common Stock 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: the Allison-Smith
Company (through its parent, The Allison Company) ("Allison-Smith"), Henderson
Electric Co. Inc. ("Henderson"), and Potter Electric Company, 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
$13.00 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 the business conducted by Parsons, its wholly-owned
subsidiary, 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.
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 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
3
<PAGE>
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 electrical contracting industry generated
annual revenues of approximately $49.1 billion in 1995, representing a compound
annual growth rate of 7.8% from 1991 to 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............ 9,964,099 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) 1,015,768 shares to be issued to the owners of the Acquired
Companies, (ii) 5,000,000 shares to be sold in the Offering and (iii)
3,948,331 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 29% of the net
proceeds of the Offering, 25% if the over-allotment option is exercised in
full) and 1,015,768 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." For a more detailed description of
these transactions, see "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>
INCOME STATEMENT DATA:
Revenues................................................. $145,821
Cost of services, excluding depreciation shown separately
below................................................... 120,819
--------
Gross profit............................................. 25,002
--------
Selling, general and administrative expenses (1)(9)...... 14,528
Depreciation............................................. 862
Goodwill amortization (2)................................ 580
--------
Operating income......................................... 9,032
Interest and other income (expense), net (3)............. 312
--------
Income before income taxes............................... 9,344
Income taxes (4)......................................... 3,918
--------
Net income............................................... $ 5,426
========
Net income per share--basic and diluted.................. $ 0.54
========
Shares used in computing net income per share--basic and
diluted (5)............................................. 9,964
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
MARCH 31, 1998
----------------------------
COMBINED(6) AS ADJUSTED(7)
----------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)........................ $ (901)(8) $50,501
Total assets..................................... 67,592 91,903
Long-term debt, net of current maturities........ 1,410 --
Redeemable Preferred Stock....................... 6,188 --
Total stockholders' equity....................... 12,235 71,235
</TABLE>
- - --------
(1) The unaudited pro forma combined income statement 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.
(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 $11.1 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) 3,948,331 shares of Common Stock issued or to be issued to
certain management personnel and the existing stockholders, (ii) 1,015,768
shares of Common Stock to be issued to the owners of the Acquired
Companies, (iii) 2,718,231 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 (iv)
2,281,769 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.
(9) 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 $3.6 million 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.
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):
Revenues............ $52,017 $58,563 $58,005 $9,700 $4,305
Gross profit........ 8,355 9,401 10,657 1,870 703
ALLISON-SMITH(2):
Revenues............ 20,278 32,392 28,000
Gross profit........ 2,820 5,068 5,199
HENDERSON(3):
Revenues............ 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.
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 service 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, Founding stockholders (i.e., KLT Energy Services, Inc. and Reardon
Capital, LLC), former stockholders of the Acquired Companies and entities
affiliated with them will beneficially own 4,964,099 shares of Common Stock,
representing approximately 49.8% of the aggregate outstanding shares of Common
Stock (46.3% 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."
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<PAGE>
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 have not 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, 1,015,768 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 3,948,331 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."
The Company has agreed that it will not offer, sell or issue 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 beneficially own 4,964,099 shares of
Common Stock in the aggregate 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. See "Shares Eligible for Future
Sale."
12
<PAGE>
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 will be 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.
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 $7.63 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
13
<PAGE>
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 earned 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 a three-year employment agreement with the
Company.
HENDERSON. Henderson was founded in 1948, 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 a three-year employment agreement 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 agreed to enter 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 any person who will become
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., (ii) approximately
$187,500 in payment of accrued but unpaid dividends on the outstanding shares
of Redeemable Preferred Stock, and (iii) approximately $12 million to repay
outstanding indebtedness of Nationwide and the Acquired Companies, although
the exact amount and specific debt to be repaid has not been determined at
this time. 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.
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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........... $17,271(2) $ --
======= =======
Long-term debt, less current maturities............... $ 1,410 $ --
------- -------
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; 4,964,099 shares issued and
outstanding, pro forma combined; and 9,964,099
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 71,599
Shareholder notes................................... (50) (50)
Retained earnings (deficit)......................... (414) (414)
------- -------
Total stockholders' equity........................ 12,235 71,235
------- -------
Total capitalization.............................. $19,833 $71,235
======= =======
</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 oustanding
shares of Class A Nonvoting Common Stock shall automatically convert into
1,089,999 shares of Common Stock.
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<PAGE>
DILUTION
The deficit in pro forma combined net tangible book value of the Company at
March 31, 1998 was approximately $(5.0) million, or $(1.00) 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 4,964,099 shares outstanding after the
Acquisitions but prior to the Offering. 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 $53.5 million or $5.37 per share. This
represents an immediate increase in pro forma net tangible book value of $6.47
per share to existing stockholders and an immediate dilution to new investors
purchasing Common Stock in the Offering of $7.63 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.................. $13.00
Pro forma combined deficit in net tangible book value
per share prior to the Offering........................ $(1.10)
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 6.47
------
Pro forma combined net tangible book value per share after the
Offering...................................................... 5.37
------
Dilution in net tangible book value per share to new investors... $ 7.63
======
</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)..................... 4,964,099 49.8% $(5,462,000) $(1.10)
New investors..................... 5,000,000 50.2% 65,000,000 13.00
--------- ------ -----------
Total......................... 9,964,099 100.0% $59,538,000
========= ====== ===========
</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
Founding 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.
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:
Revenues................ $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 amortizations.. -- -- -- -- -- -- 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:
Revenues................................................... $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)................................... 580
--------
Operating income........................................... 9,032
Interest and other income (expense), net(3)................ 312
--------
Income before income taxes................................. 9,344
Income taxes(4)............................................ 3,918
--------
Net income................................................. $ 5,426
========
Net income per share--basic and diluted.................... $ 0.54
========
Shares used in computing pro forma income per share(5)--
basic and diluted......................................... 9,964
</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 $ (901)(8) $50,501
Total assets............ 13,104 12,373 18,017 16,096 20,959 23,368 67,592 91,903
Long-term debt, net of
current maturities..... -- 412 362 312 262 -- 1,410 --
Redeemable Preferred
Stock.................. -- -- -- -- -- 6,000 6,188 --
Total stockholders'
equity................. 4,663 4,676 6,108 6,959 6,500 837 12,235 71,235
</TABLE>
- - --------
(1) The unaudited pro forma combined statement 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 $3.6 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.
(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 $11.1 million of historical
debt of 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.
20
<PAGE>
(4) Assumes all pretax income before non-deductible goodwill and other
permanent items is subject to a statutory 40% tax rate.
(5) Includes (i) 3,948,331 shares of Common Stock issued or to be issued to
certain management personnel and the existing stockholders, (ii) 1,015,768
shares of Common Stock to be issued to the owners of the Acquired
Companies, (iii) 2,718,231 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 (iv)
2,281,769 of 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 and Parsons' Unaudited Pro Forma Combined
Financial Statements, 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 $3.6 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 $13.0 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 $17.3 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 an $11.05
per share value for the Common Stock. This valuation reflects a 15% discount
from the assumed initial public offering price. 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 services. 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 $32.3
million of pro forma cash and cash equivalents, $50.5 million of pro forma
working capital and no outstanding indebtedness. It is anticipated that the
Acquired Companies' indebtedness of $2.5 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>
Revenues.......................... $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 construction 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%.
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%.
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>
Revenues................ $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.
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%.
Allison-Smith results for the year ended June 30, 1997 compared to the year
ended June 30, 1996
Revenues. 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, primarily as a result of the abnormally high demand for general
contracting services in the year ended June 30, 1996 which resulted from the
building activity associated with the Olympics.
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%.
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,
27
<PAGE>
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 1948 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.
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%.
28
<PAGE>
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%.
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 the business conducted by Parsons, its
wholly-owned subsidiary, 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 twelve month
period ended March 31, 1998. During the twelve month period, the Company
generated pro forma combined revenues, operating income and net income of
$145.8, $9.0 and $5.4 million, respectively. 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 were $49.1 billion in 1995, approximately 81% of which
were derived from non-residential customers. For the period from 1991 through
1995, the annual revenues of the industry grew at a compound annual growth
rate of 7.8%.
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
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<PAGE>
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; (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
31
<PAGE>
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" 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. 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-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
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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.
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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.
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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
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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.
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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
Bachelors 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
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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.
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<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 and 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.
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<PAGE>
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 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).
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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 but has not yet
determined which of the Option Plans the options will be granted under. 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 ten 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 will adopt 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.
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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 300,000 shares of Common Stock (purchased post-split). In
addition two outside directors and one director nominee paid nominal cash
consideration for 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 May 31,
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.
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)
1,015,768 shares of Common Stock (assuming an initial public offering price of
$13 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) $5,454,995 for Allison--Smith, $6,249,997 for
Henderson and $1,499,992 for Potter, by (b) in each case, the actual initial
public offering price.
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
----------- ------------
<S> <C> <C>
Allison-Smith.................................... $10,130,005 419,615
Henderson........................................ 5,250,003 480,769
Potter........................................... 1,500,008 115,384
----------- ---------
Total........................................ $16,880,016 1,015,768
=========== =========
</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 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
45
<PAGE>
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) 293,716 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. These
guarantees are expected to be terminated within 90 days following the
completion of the Offering.
Following completion of the Offering, the Company may repay up to $2.5
million of the Acquired Companies', and $8.6 million of Nationwide's,
outstanding debt (some of such indebtedness will be repaid to persons who will
become officers, directors or key employees of the Company after the
Acquisitions). The exact amount and specific debt to be repaid has not been
determined at this time.
The Company plans to enter into certain real property leases with affiliates
of the Acquired Companies. The Company will 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, for a five-year term
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
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.
The Company 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 net pre-tax income of the Potter
Division, 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.
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.
46
<PAGE>
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% 23.7%
Reardon Capital, LLC................ 1,271,666 32.2% 12.8%
Gregory J. Orman (1)(2)............. 1,271,666 32.2% 12.8%
Frederick C. Green, IV (3).......... 100,000 2.0% 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% 0.1%
Robert H. Hoffman................... 5,000 0.1% 0.1%
Andrew V. Johnson................... 5,000 0.1% 0.1%
Ronald G. Wasson (1)................ -- -- --
Bernard J. Beaudoin (1)............. -- -- --
Robert B. Allison (4)............... 293,716 -- 2.9%
All executive officers, directors
and director nominees as a group
(11 persons) (1)................... 1,971,903 41.4% 19.4%
</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 Company, 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 23.7% after the Offering. 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 Capital, LLC.
(4) All shares to be issued at the time of the Acquisition of Allison-Smith.
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.
47
<PAGE>
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 will be made to list
the Common Stock on the NYSE.
COMMON STOCK
Following the Offering, there will be 9,964,099 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.
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
48
<PAGE>
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
voting stock entitled to vote. This provision, in conjunction with the
provision of the Amended and Restated Articles 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. 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 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, 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 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 to
49
<PAGE>
stockholders, then notice must be received within 15 days of the date of the
notice). 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 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
50
<PAGE>
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 9,964,099 shares of Common Stock (10,714,099 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 4,964,099 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, its executive officers, directors, current stockholders and
persons acquiring shares of Common Stock in connection with the Acquisitions
have agreed not to offer, sell, contract to sell, grant any option or other
right for the sale of, or otherwise dispose of any shares of Common Stock or
any securities, indebtedness or other rights exercisable for or convertible or
exchangeable into Common Stock owned or acquired in the future in any manner
for a period of one year following the date of this Prospectus (the "Lockup
Period") without the prior written consent of BT Alex. Brown Incorporated,
except that the Company may, subject to certain conditions, issue Common Stock
in connection with future acquisitions. See "Underwriting." These restrictions
will be applicable to any shares acquired by any of those persons in the
Offering or otherwise during the Lockup Period. The foregoing transfer
restrictions to the contrary notwithstanding, in connection with the
Acquisitions, the Company has granted registration rights to stockholders of
the Acquired Companies in connection with registrations of sales of Common
Stock by the Company.
Prior to the Offering, there has been no established public market for the
Common Stock. No prediction can be made 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 beneficially own 1,971,903 shares in the aggregate
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 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 three months then ended 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
statement 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 another smaller
Company (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, 1997. The unaudited pro forma combined statement of
operations gives effect to these transactions as if they had occurred on April
1, 1997.
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.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
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 $ 4,485 $ 7,974 $ 24,311 $32,285
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 4,600 46,655 24,311 70,966
Property and equipment,
net.................... 1,597 631 1,956 (944) 3,240 -- 3,240
Deferred income taxes... -- -- -- -- -- -- --
Intangibles and other
assets................. 4,667 -- 245 12,785 17,697 -- 17,697
------- ------- ------- -------- ------- -------- -------
Total assets......... $23,368 $11,726 $16,057 $ 16,441 $67,592 $ 24,311 $91,903
======= ======= ======= ======== ======= ======== =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Current portion long-
term debt............. $ -- $ 112 $ 279 $ -- $ 391 $ (391) $ --
Accounts payable....... 3,237 1,163 4,009 1,149 9,558 -- 9,558
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 19,658 47,556 (27,091) 20,465
Long-term debt.......... -- 1,042 368 -- 1,410 (1,410) --
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) --
Class A common, $1.00
par................... -- -- -- -- -- -- --
Additional paid-in
capital............... 1,096 -- -- 11,553 12,649 58,950 71,599
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 59,000 71,235
------- ------- ------- -------- ------- -------- -------
Total liabilities and
stockholders'
equity.............. $23,368 $11,726 $16,057 $ 16,441 $67,592 $ 24,311 $91,903
======= ======= ======= ======== ======= ======== =======
</TABLE>
F-3
<PAGE>
NATIONWIDE ELECTRIC, INC.
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:
Depreciation............. 443 97 272 50 862
Goodwill amortization.... -- -- -- 580 580
Selling, general and
administrative expenses. 7,613 2,208 4,104 603 14,528
------- ------- ------- ------ --------
Operating expenses......... 8,056 2,305 4,376 1,233 15,970
------- ------- ------- ------ --------
Operating income....... 3,102 3,996 1,672 262 9,032
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 1,943 872 9,344
Income tax (benefit)....... (121) 1,426 776 1,837 3,918
------- ------- ------- ------ --------
Net income............. $ 2,959 $ 2,324 $ 1,167 $ (965) $ 5,426
======= ======= ======= ====== ========
Net income per share....... $ 0.54
========
Shares used in computing
pro forma income per share
(1)....................... 9,964
</TABLE>
- - --------
(1) Includes (a) 3,948,331 shares issued to certain management personnel and
the existing stockholders of Nationwide, (b) 1,015,768 shares issued to
owners of the Acquired Companies, (c) 2,718,231 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)
2,281,769 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.
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.
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 the Acquired
Companies. 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 $11.05 per share (or $11.2 million), which is less than the
assumed initial public offering price of $13.00 per share. The number of
shares constituting the Acquisition Consideration will depend upon the actual
initial public offering price. 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
COMMON
CASH STOCK
------- ---------
(IN THOUSANDS)
<S> <C> <C>
The Allison Company..................................... $10,130 420
Henderson Electric Co. Inc. and Subsidiaries............ 5,250 481
Other Acquired Company.................................. 1,500 115
------- -----
Total............................................... $16,880 1,016
======= =====
</TABLE>
F-5
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
For purposes of the transactions discussed above, the Company utilized an
$11.05 per share value for the Common Stock in calculating goodwill. This
valuation reflects a 15% discount from the assumed initial public offering
price.
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ASSETS (A) (B) (C) (D) ADJUSTMENTS
- - ------ ---- ---- -------- ------ -----------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents........... $325 $-- $ 3,317 $ 843 $ 4,485
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 -- 1,042 3,233 4,600
Property and equipment, net........... -- -- (1,149) 205 (944)
Intangibles and other assets.......... -- -- 12,785 -- 12,785
---- ---- -------- ------ --------
Total assets...................... $325 $-- $ 12,678 $3,438 $ 16,441
==== ==== ======== ====== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
<S> <C> <C> <C> <C> <C>
Current Liabilities:
Accounts payable.................... $-- $-- $ 6 $1,143 $ 1,149
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......... -- -- 16,533 3,125 19,658
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............... -- -- (10) -- 10
Nonvoting, $1.00 par.............. -- -- -- -- --
Additional paid-in capital.......... 362 (23) 11,214 -- 11,553
Retained earnings (deficit)......... -- (150) (14,859) 298 (14,711)
Less treasury stock/shareholder
notes.............................. (50) -- 228 -- 178
---- ---- -------- ------ --------
Total stockholders' equity........ 325 (150) (3,855) 313 (3,367)
---- ---- -------- ------ --------
Total liabilities and
stockholders' equity............. $325 $-- $ 12,678 $3,438 $ 16,441
==== ==== ======== ====== ========
</TABLE>
F-6
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
POST MERGER
ASSETS (E) (F) ADJUSTMENTS
- - ------ ------- -------- -----------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents...................... $59,000 $(34,689) $ 24,311
------- -------- --------
Total current assets......................... 59,000 (34,689) 24,311
------- -------- --------
Total assets................................. $59,000 $(34,689) $ 24,311
======= ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
<S> <C> <C> <C>
Current Liabilities:
Current portion long term debt................. $ -- $ (391) $ (391)
Other current liabilities...................... -- (480) (480)
Line of credit................................. -- (9,340) (9,340)
Payables to Acquired Company stockholders...... -- (16,880) (16,880)
------- -------- --------
Total current liabilities.................... -- (27,091) (27,091)
Long-term debt................................. -- (1,410) (1,410)
Redeemable preferred stock....................... -- (6,188) (6,188)
Stockholders' Equity:
Common stock................................... 61 -- 61
Class A common, $.01 par....................... (11) -- (11)
Additional paid-in capital..................... 58,950 -- 58,950
------- -------- --------
Total stockholders' equity................... 59,000 -- 59,000
------- -------- --------
Total liabilities and stockholder's equity... $59,000 $(34,689) $ 24,311
======= ======== ========
</TABLE>
- - --------
(a) Records the sale of 315,000 and 950,000 shares of Nationwide common stock
to management, two directors and one director nominee, and a related
company, respectively. All the shares were paid for with cash plus
shareholder notes on certain of the management shares. Under certain
restricted stock purchase agreements, the Company has sold 315,000 shares
of Common Stock to management and outside directors. As a result, the
Company will record a non-recurring, non-cash compensation charge of $3.6
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.
(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 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 1.0 million
shares of Common Stock valued at $11.05 per share (or $11.2 million) for a
total estimated purchase price of $28.1 million resulting in excess
purchase price of $13.0 million over the net assets acquired of $15.1
million (see Note 2). Records the sale of certain assets to the former
shareholders for cash after the acquisitions. Based on its initial
assessment, management believes that the historical carrying value of the
Acquired Companies' assets and liabilities will approximate fair value and
that there are no other identifiable intangible assets to which any
material purchase price can be allocated.
F-7
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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....................... $15,915 $836 $15,079
======= ==== =======
</TABLE>
(d) Records the accounts of another Acquired Company for which historical
financial statements are not included.
(e) Records the cash proceeds of $59.0 million from the issuance of 5,000,000
shares of Nationwide Common Stock, net of underwriting discount of $4.55
million and estimated offering costs of $1.45 million (at an assumed
issuance price of $13 per share). Offering costs primarily consist of
accounting fees, legal fees and printing expenses.
(f) 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
$11.1 million and $480,000 distributions payable.
4. 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:
Depreciation............ (52) -- -- -- 102 -- 50
Goodwill amortization... -- -- $ 580 -- -- -- 580
Selling, general and
administrative
expenses............... (472) (468) -- -- 1,543 -- 603
----- ------- ----- ---- ------- ------- ------
Operating expenses........ (524) (468) 580 -- 1,645 -- 1,233
----- ------- ----- ---- ------- ------- ------
Operating income...... 524 58 (580) -- 260 -- 262
Interest and other income
(expense):
Interest expense........ -- 9 -- $603 -- -- 612
Other income, net....... (10) (4) -- -- 12 -- (2)
----- ------- ----- ---- ------- ------- ------
Income before Tax..... 514 63 (580) 603 272 -- 872
Income taxes.............. -- -- -- -- -- $ 1,887 1,837
----- ------- ----- ---- ------- ------- ------
Net income (loss)..... $ 514 $ 63 $(580) $603 $ 272 $(1,887) $ (965)
===== ======= ===== ==== ======= ======= ======
</TABLE>
F-8
<PAGE>
NATIONWIDE ELECTRIC, INC. AND ACQUIRED COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
- - --------
(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.
(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 $11.1 million of debt to be
repaid using proceeds from the Offering.
(e) Reflects results of operations of another acquired company 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 three months then ended. The combined financial statements include the
accounts of Nationwide Electric, Inc. and affiliated companies, Parsons
Electric Co. 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 three months then ended 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
Intangibles and other assets, net................................. 4,667,368
-----------
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
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<S> <C>
Contract revenues earned........................................... $4,304,818
Costs of services.................................................. 3,601,651
----------
Gross profit....................................................... 703,167
Selling, general and administrative expenses....................... 938,718
----------
Loss from operations............................................... (235,551)
Interest and other income (expense):
Interest expense.................................................. (124,448)
Other income, net................................................. 42,990
----------
(81,458)
----------
Loss before benefit for income taxes............................... (317,009)
Income tax benefit................................................. 120,500
----------
Net loss........................................................... $ (196,509)
==========
</TABLE>
See notes to combined financial statements.
F-12
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED 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, JANUARY 1,
1998................... -- $ -- -- $ -- $ 35,000 $ (29,490) $ 5,510
Issuance of Nationwide
common stock........... 233,331 2,333 99,999 1,000 961,667 -- 965,000
Issuance of Galt, Inc.
common stock........... 700 700 300 300 99,000 -- 100,000
Dividends on preferred
stock.................. -- -- -- -- -- (37,500) (37,500)
Net loss................ -- -- -- -- -- (196,509) (196,509)
------- ------ ------- ------ ---------- --------- --------
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
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................ $ (196,509)
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..................................... 690,365
Billings in excess of costs and estimated earnings............ (276,531)
------------
Net cash used in operating activities........................ (284,604)
------------
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........................................... 65,000
Payments on long term-debt...................................... (308,318)
------------
Net cash provided by financing activities.................... 12,556,682
------------
Net increase in cash and cash equivalents........................ 1,042,415
Cash and cash equivalents, at January 1, 1998.................... 3,838
------------
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
balance sheets of Nationwide Electric, Inc. ("Nationwide") and Galt Financial,
Inc. ("Galt, Inc."). Operating results have been presented for the period
January 1, 1998 (or date of incorporation, whichever is later) through March
31, 1998 for Nationwide and Galt, Inc. Operating results for Galt Financial,
LLC ("Galt LLC") have been presented for the period from January 1, 1998
through March 4, 1998 when it was merged into Galt, Inc. Such companies are
under common control and management. Nationwide acquired Galt, Inc. on May 31,
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 at March 31, 1998 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.
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>
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.
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.
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
F-16
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
use of the assets is less than the carrying value. No impairment has been
recognized through March 31, 1998.
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>
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>
F-17
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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. INTANGIBLES AND OTHER ASSETS
Intangible assets consist of the following:
<TABLE>
<S> <C>
Goodwill...................................................... $4,262,971
Non-compete agreements........................................ 425,000
Other......................................................... 1,126
----------
4,689,097
Less accumulated amortization................................. 21,729
----------
$4,667,368
==========
</TABLE>
The non-compete agreements at March 31, 1998 consist of agreements with two
key employees that are being amortized over 21 to 36 months. Goodwill is being
amortized over 40 years and is deductible for tax purposes.
F-18
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. 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.
8. 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.
9. 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.
10. 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>
F-19
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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>
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.
11. 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.
12. 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.
F-20
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
13. 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 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.
14. 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 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
F-21
<PAGE>
NATIONWIDE ELECTRIC, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
15. 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.
16. 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 May 31, 1998, Galt, Inc. was merged into
Nationwide in exchange for 3,300,000 shares of Common Stock (adjusted for the
stock split as described in Note 12) and 6,000 shares of Redeemable Preferred
Stock.
On May 29, 1998, the Company's Board of Directors approved an amendment to
Nationwide's Certificate of Incorporation, 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 (subject to certain adjustments) consists of $16.9 million cash
and 1,015,768 shares of common stock.
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 $331,713, $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 3), 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.
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 an agreement
and plan of merger with Nationwide Electric, Inc. ("Nationwide"), subject to
certain conditions, pursuant to which all outstanding 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 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.
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 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. 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 Notes offered hereby, whether or not partic-
ipating 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
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<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:
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<CAPTION>
ITEM AMOUNT
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<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>
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* 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
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<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.
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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.
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<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
1,015,768 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
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<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 February 19, 1998 and amended as of
April 3, 1998 by and among Nationwide Electric, Inc. and KLT
Energy Services Inc. and Reardon Capital LLC
4.3* 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* Opinion of Stinson, Mag & Fizzell, P.C.
9.1 Contained in Exhibits 4.2 and 4.3
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
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
10.4* Employment Agreement dated as of April 1, 1998 between Nationwide
Electric, Inc. and Frank R. Clark
10.5 Employment Agreement dated as of June 12, 1998 between Eagle
Electric Holdings, Inc. and Stephen Howell
10.6 Employment Agreement dated as of June 12, 1998 between Parsons
Electric Co. and Rodney Henderson
10.7 Employment Agreement dated as of June 12, 1998 between Parsons
Electric Co. and Bruce Henderson
10.8 Employment Agreement dated as of June 12, 1998 between Parsons
Electric Co. and Mickey Masterson
10.9 Employment Agreement dated as of June 12, 1998 between Parsons
Electric Co. and David Cartwright
10.10* Employment Agreement dated as of June 12, 1998 between Parsons
Electric Co. and Robert Allison
10.11 Employment Agreement dated as of June 12, 1998 between Parsons
Electric Co. and Lanny Thomas
10.12 Employment Agreement effective March 1, 1998, between Parsons
Electric Co. and Joel Moryn
10.13* Employment Agreement dated as of June 12, 1998 between Eagle
Electric Holdings, Inc. and Ralph Pangonis, Sr.
10.14* Non-Qualified Stock Option Plan
10.15* Incentive Stock Option Plan
10.16* Nationwide Electric, Inc. Executive Stock Purchase Plan
10.17* Form of Indemnification Agreement for each director and officer of
the Company
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
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>
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* 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.
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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) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registrations statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(iv) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(5) 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.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, NATIONWIDE ELECTRIC,
INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF KANSAS CITY, STATE
OF MISSOURI, ON JUNE 16, 1998.
Nationwide Electric, Inc.
/s/ Gregory J. Orman
By: _________________________________
Gregory J. Orman
Chairman of the Board
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
GREGORY J. ORMAN AND FREDERICK C. GREEN THE TRUE AND LAWFUL ATTORNEYS-IN-FACT
AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN
HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO EXECUTE IN THE NAME
OF EACH SUCH PERSON WHO IS THEN AN OFFICER OR DIRECTOR OF THE REGISTRANT, AND
TO FILE, ANY AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS
REGISTRATION STATEMENT AND ANY REGISTRATION STATEMENT FOR THE SAME OFFERING
FILED PURSUANT TO RULE 462 UNDER THE SECURITIES ACT AND TO FILE THE SAME, WITH
ALL EXHIBITS THERETO AND ALL OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING APPROPRIATE OR
NECESSARY TO BE DONE, AS FULLY AND FOR ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-
IN-FACT AND AGENTS OR THEIR SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON JUNE 16, 1998.
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<CAPTION>
SIGNATURE TITLE
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<S> <C>
/s/ Gregory J. Orman Chairman of the Board and Director
___________________________________________
Gregory J. Orman
/s/ Frederick C. Green, IV President, Chief Executive Officer and
___________________________________________ Director Nominee
Frederick C. Green, IV
/s/ Frank R. Clark Vice President, Chief Financial Officer,
___________________________________________ Secretary and Treasurer
Frank R. Clark
/s/ Andrew V. Johnson Director
___________________________________________
Andrew V. Johnson
/s/ Robert H. Hoffman Director
___________________________________________
Robert H. Hoffman
/s/ Bernard J. Beaudoin Director
___________________________________________
Bernard J. Beaudoin
</TABLE>
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<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
NATIONWIDE ELECTRIC, INC.
AND
HENDERSON ELECTRIC COMPANY, INC.
and its
SHAREHOLDERS
<PAGE>
TABLE OF CONTENTS
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Page
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<S> <C>
RECITALS...................................................................... 1
ARTICLE I DEFINITIONS......................................................... 1
ARTICLE II MERGER OF THE COMPANY INTO NEI..................................... 4
2.1 Merger....................................................... 4
2.2 Articles of Incorporation.................................... 4
2.3 Bylaws....................................................... 4
2.4 Directors and Officers....................................... 4
2.5 Further Action............................................... 4
2.6 Merger Consideration......................................... 4
2.7 Treatment of Shares of Constituent Corporations.............. 5
2.8 Dissenting Shares............................................ 5
2.9 Delivery Date................................................ 5
2.10 Merger Date.................................................. 6
2.11 The Registration Statement................................... 6
2.12 Dividends; Options........................................... 6
2.13 Redemption................................................... 6
2.14 Related Party Receivables; Henderson Property, Inc........... 7
2.15 Shareholder Distributions.................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
AND THE COMPANY.......................................................... 7
3.1 Validity..................................................... 7
3.2 The Company.................................................. 8
3.3 The Company Stock............................................ 8
3.4 Financial Statements......................................... 9
3.5 Absence of Certain Events.................................... 9
3.6 Title to and Condition of Personal Property.................. 9
3.7 Real Property................................................10
3.8 Leases.......................................................10
3.9 Receivables..................................................10
3.10 Contracts, Etc...............................................11
3.11 Material Customers and Suppliers.............................11
3.12 Litigation and Workers' Compensation Liability...............12
3.13 Insurance and Performance Bonds..............................12
3.14 Intellectual Property........................................12
3.15 Compliance with Laws.........................................13
3.16 Licenses, Permits and Authorizations.........................13
3.17 Taxes........................................................13
</TABLE>
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<TABLE>
<C> <S> <C> <C>
3.18 Books and Records....................................................13
3.19 Labor and Employment.................................................14
3.20 Environmental........................................................14
3.21 ERISA................................................................16
3.22 Guaranteed Obligations...............................................17
3.23 Disclosure...........................................................17
3.24 Acknowledgment.......................................................18
3.25 Interest in Customers and Suppliers and Related Party Transactions...18
3.26 Registration Statement...............................................19
3.27 Brokers and Finders..................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEI......................................19
4.1 Corporate............................................................19
4.2 Authorization........................................................19
4.3 Capital Stock of NEI.................................................19
4.4 Transactions in Capital Stock........................................20
4.5 Financial Statements.................................................20
4.6 Liabilities And Obligations..........................................20
4.7 Conformity With Law; Litigation......................................20
4.8 No Violations........................................................20
4.9 NEI Stock............................................................21
4.10 No Side Agreements...................................................21
4.11 Disclosure...........................................................21
4.12 Other Agreements.....................................................21
4.13 Registration Statement...............................................22
ARTICLE V ACTIONS BY SHAREHOLDERS AND THE COMPANY PENDING THE MERGER DATE.............22
5.1 Access...............................................................22
5.2 Carry on in Ordinary Course..........................................22
5.3 General Increases Limited............................................23
5.4 Preservation of Organization.........................................23
5.5 No Default...........................................................23
5.6 Dividends............................................................23
5.7 Voting Trusts or Other Arrangements..................................23
5.8 Interim Financial and Borrowing Statements...........................23
5.9 Bids and Contracts...................................................23
5.10 Cash Withdrawals.....................................................24
5.11 Environmental Audits.................................................24
5.12 No Transfer..........................................................24
5.13 No Shop..............................................................24
5.14 Agreements...........................................................24
5.15 Notification of Certain Matters......................................24
5.16 Cooperation in Preparation of Registration Statement.................25
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
5.17 Authorized Capital.................................. 25
5.18 Compliance With The Hart-Scott Act.................. 25
ARTICLE VI CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS.......... 26
6.1 Representations and Warranties True................. 26
6.2 Compliance with Agreement........................... 26
6.3 No Litigation....................................... 26
6.4 Employment Agreements............................... 26
6.5 IPO Closing......................................... 26
6.6 Real Estate Leases.................................. 26
6.7 Consents............................................ 26
6.8 Opinion of Counsel.................................. 27
6.9 Hart-Scott Act...................................... 27
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF NEI................. 27
7.1 Representations and Warranties True................. 27
7.2 Compliance with Agreement........................... 27
7.3 Execution and Deliverables.......................... 27
7.4 Corporate Documents................................. 27
7.5 Due Diligence....................................... 27
7.6 Employment Agreements............................... 28
7.7 No Material Adverse Change.......................... 28
7.8 Opinion of Counsel for Shareholders................. 28
7.9 Resignations........................................ 28
7.10 Board and Shareholder Approval...................... 28
7.11 No Litigation....................................... 28
7.12 Shareholders' Release............................... 29
7.13 Termination of Related Party Agreements............. 29
7.14 Other Founding Companies............................ 29
7.15 FIRPTA Certificate.................................. 29
7.16 IPO Closing......................................... 29
7.17 Leases.............................................. 29
7.18 Consents............................................ 29
7.19 Hart-Scott Act...................................... 29
ARTICLE VIII COVENANTS.................................................. 29
8.1 Release From Guarantees; Repayment of Certain
Obligations......................................... 29
8.2 Preparation And Filing of Tax Returns............... 30
8.3 Further Assurances.................................. 30
ARTICLE IX INDEMNIFICATION............................................ 30
9.1 Indemnification by The Shareholders................. 30
9.2 Indemnification by NEI.............................. 31
9.3 Procedure........................................... 31
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
9.4 Exclusive Remedy.................................... 32
9.5 Limitations on Indemnification...................... 32
ARTICLE X TERMINATION................................................ 33
10.1 Termination......................................... 33
10.2 Liabilities in Event of Termination................. 33
ARTICLE XI NONCOMPETITION AND NONDISCLOSURE........................... 34
11.1 Noncompete Covenant................................. 34
11.2 Confidential Information............................ 34
11.3 Enforcement......................................... 35
ARTICLE XII TRANSFER RESTRICTIONS...................................... 35
ARTICLE XIII FEDERAL SECURITIES ACT REPRESENTATIONS..................... 36
13.1 Compliance with Law................................. 36
13.2 Economic Risk; Sophistication....................... 36
ARTICLE XIV REGISTRATION RIGHTS........................................ 36
14.1 Piggyback Registration Rights....................... 36
14.2 Registration Procedures............................. 37
14.3 Indemnification..................................... 39
14.4 Underwriting Agreement.............................. 40
14.5 Transfer of Rights.................................. 40
14.6 Rule 144 Reporting.................................. 40
ARTICLE XV MISCELLANEOUS.............................................. 41
15.1 Assignment.......................................... 41
15.2 Governing Law....................................... 41
15.3 Notices............................................. 41
15.4 Entire Agreement.................................... 42
15.5 Successors.......................................... 42
15.6 Counterparts........................................ 42
15.7 Headings............................................ 42
15.8 Expenses............................................ 42
15.9 Survival............................................ 42
15.10 Costs............................................... 42
15.11 Publicity........................................... 43
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is entered into as of June 12, 1998, by NATIONWIDE
ELECTRIC, INC., a Delaware corporation ("NEI"), HENDERSON ELECTRIC COMPANY,
INC., a Kentucky corporation (the "Company"), and the shareholders of the
Company identified in SCHEDULE A attached hereto and executing counterparts of
this Agreement (the "Shareholders").
RECITALS
A. The Company is engaged in the electrical contracting business.
B. Shareholders own all of the issued and outstanding capital stock
of the Company (the "Company Stock").
C. 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."
D. The parties desire that the Company be merged into NEI, with
Shareholders to receive cash and NEI Stock in exchange for their Company Stock
in the merger.
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.
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"Articles of Merger" shall mean the Articles of Merger to be filed
with the Secretaries of State of the State of Delaware and the State of
Incorporation, pursuant to which the Company shall be merged into NEI.
"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 the Shareholders on the Delivery Date and the
Merger Date.
"Constituent Corporations" shall mean the Company and NEI.
"Delivery Date" shall mean the date specified by NEI on which the
Company Stock shall be delivered in trust pending the Merger Date, as
contemplated in Article II.
"DGCL" shall mean the Delaware General Corporation Law, as amended
from time to time.
"Dissenting Shares" shall mean any shares of Company Stock with
respect to which any Shareholder has exercised his or her appraisal rights under
the DGCL.
"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 and accompanying Rules.
"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 Company Stock.
"Material Adverse Effect" means a material adverse effect on the
business, operations, financial condition or prospects of the Company or the
value of the Company Stock.
"Merger" shall mean the transaction contemplated hereby, pursuant to
which: (a) the Company will be merged into NEI; and (b) the Shareholders will
receive the Merger Consideration in exchange for their Company Stock.
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"Merger Consideration" shall mean the cash and NEI Stock to be
received by each Shareholder in connection with the Merger.
"Merger Date" shall mean the effective date of the Merger as described
in Article II.
"NEI" shall mean Nationwide Electric, Inc.
"NEI Charter Documents" shall mean the Certificate of Incorporation
and Bylaws of NEI, as amended or restated from time to time.
"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.
"Requisite Shareholder Approval" shall mean the affirmative vote of
the holders of the requisite number of shares of Company Stock necessary to
approve the Merger pursuant to the DGCL and the laws of the State of
Incorporation.
"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.
"Shareholders" means the shareholders of the Company executing this
Agreement.
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"State of Incorporation" means the State of Kentucky.
"Surviving Corporation" shall mean NEI from and after the Merger Date.
"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
MERGER OF THE COMPANY INTO NEI
2.1 Merger. In accordance with and subject to the terms and conditions of
this Agreement and in reliance on the mutual representations and warranties
contained herein, effective on the Merger Date, the Company shall be merged into
NEI. As a result of the Merger, the separate corporate existence of the Company
shall cease, and NEI shall be the Surviving Corporation in the Merger. The
Merger shall have the effects set forth in the DGCL.
2.2 Articles of Incorporation. The Articles of Incorporation of NEI in
effect immediately prior to the Merger Date shall continue in effect as the
Articles of Incorporation of the Surviving Corporation until further amended or
restated.
2.3 Bylaws. The Bylaws of NEI as in effect immediately prior to the
Merger Date shall continue in effect as the Bylaws of the Surviving Corporation
until further amended and restated.
2.4 Directors and Officers. The officers and directors of NEI immediately
prior to the Merger Date shall be the officers and directors of the Surviving
Corporation, retaining their respective positions and terms of office.
2.5 Further Action. If at any time NEI shall determine that any further
instruments or assurances are necessary or desirable to confirm in NEI the title
to any property or rights of the Company acquired or to be acquired by NEI as a
result of the Merger, Shareholders and the officers and directors of the Company
immediately prior to the Merger Date are authorized and directed to execute and
deliver such instruments and assurances and do all things necessary or
advisable, in the name of the Company, to perfect or confirm title to such
property or rights in NEI and to otherwise carry out the provisions of this
Agreement and the Merger.
2.6 Merger Consideration. The aggregate Merger Consideration to be
received by the Shareholders in exchange for the Company Stock shall consist of
cash and shares of NEI Stock determined in accordance with SCHEDULE 2.6 attached
hereto. The cash portion of the Merger
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Consideration shall be payable by certified check or wire transfer on the Merger
Date. Notwithstanding the foregoing, NEI may reserve up to 5% of the cash
portion of the aggregate Merger Consideration 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 (as defined in Section
3.4) but not collected within one year after the Merger 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 by NEI in an interest-bearing account. Any amount remaining in the
Basket at the expiration of one year following the Merger Date and not retained
by NEI as compensation as set forth above, together with all interest earned on
the deposit of the Basket funds, shall be remitted pro rata to the Shareholders.
Each Shareholder not exercising his or her appraisal rights in accordance with
Section 2.8 shall be entitled to a pro rata portion of the aggregate Merger
Consideration in accordance with the percentage which the number of shares of
Company Stock owned by such Shareholder bears to the total number of shares of
Company Stock (other than Dissenting Shares) held by all the Shareholders.
Notwithstanding the provisions of the DGCL and the foregoing provisions of this
Article II, prior to the Merger Date, the Company may effect the asset
distribution and partial redemption of Company Stock contemplated in Section
2.13.
2.7 Treatment of Shares of Constituent Corporations.
2.7.1 Each share of Company Stock issued and outstanding immediately
prior to the Merger Date shall, by virtue of the Merger and without any
action on the part of the Shareholders, be automatically canceled and shall
cease to represent any interest in the Company, and, except for those
Dissenting Shares for which appraisal rights are perfected in accordance
with Section 2.8, each share of Company Stock shall entitle the holder
thereof solely to his or her pro rata share of the aggregate Merger
Consideration as provided in Section 2.6.
2.7.2 Each share of NEI Stock issued and outstanding immediately
prior to the Merger Date shall remain outstanding after the Merger Date as
one share of the issued and outstanding common stock of the Surviving
Corporation.
2.8 Dissenting Shares. Notwithstanding the foregoing provisions of this
Article II, any holder of Dissenting Shares who has perfected his or her
appraisal rights in accordance with the DGCL shall have no right to any Merger
Consideration, but shall have only such rights as provided by the DGCL.
Provided, any holder of Dissenting Shares whose appraisal rights are forfeited
in accordance with the DGCL shall have the right solely to the pro rata portion
of the aggregate Merger Consideration to which he or she is entitled hereunder.
2.9 Delivery Date. On the date specified by NEI by written notice to the
Shareholders (the "Delivery Date"), which may be prior or subsequent to the
Pricing, the Shareholders shall deliver in trust to NEI's counsel: (a) all
certificates for the Company Stock, duly endorsed in blank or accompanied by
duly executed stock powers; (b) resolutions duly adopted by the Shareholders
signifying the Requisite Shareholder Approval; and (c) such other documents,
instruments, opinions,
5
<PAGE>
schedules, financial statements and assurances as NEI shall request consistent
with the terms of this Agreement (collectively, the "Deliverables"). The
Deliverables shall be held in trust by NEI's counsel pending the Merger Date.
Prior to the Delivery Date, NEI shall advise Shareholders of the procedures
required for proper surrender of the certificates evidencing the Company Stock
and shall supply such transmittal letters and other documentation required for
such purpose.
2.10 Merger Date. On the date specified by NEI by written notice to the
Shareholders (the "Merger Date"), which shall be not later than 15 days after
the closing date of the IPO, the Company Stock and Deliverables shall be
delivered to NEI and NEI shall thereafter file Articles of Merger with the
Secretaries of State of the State of Delaware and the State of Incorporation.
Each Shareholder whose Deliverables were delivered to NEI's counsel on or prior
to the Delivery Date will receive that portion of the aggregate Merger
Consideration to which he or she is entitled. After the Merger Date, until
properly surrendered to NEI's counsel, each outstanding certificate for Company
Stock not delivered to NEI's counsel as of the Delivery Date and not
representing Dissenting Shares shall be deemed for all purposes to represent
only the right to receive that portion of the aggregate Merger Consideration
represented thereby. Unless and until surrendered as provided herein, no such
certificate shall entitle the holder thereof to any portion of the Merger
Consideration. Except as otherwise provided in Section 2.6, no Shareholder shall
be entitled to interest on any portion of the Merger Consideration. The record
holder of any certificate for Company Stock (other than Dissenting Shares) which
shall have been lost or destroyed shall nevertheless receive the portion of the
aggregate Merger Consideration to which he or she is entitled, provided such
holder delivers to NEI, at such holder's sole expense, a lost certificate
affidavit in form and substance acceptable to NEI, together with such surety as
NEI deems necessary to indemnify NEI for any loss or expense resulting from
presentation of such lost or destroyed certificate.
2.11 The Registration Statement. NEI shall use commercially reasonable
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 become effective by December 31, 1998, then
Shareholders and the Company may terminate this Agreement by giving written
notice to NEI not later than January 15, 1999.
2.12 Dividends; Options. Any and all dividends with respect to the Company
Stock (whether or not permitted under the terms of this Agreement) declared at
any time prior to the Merger Date and remaining unpaid on the Merger Date, and
any and all outstanding options or other rights to acquire capital stock of the
Company in existence at any time prior to the Merger Date, shall be canceled
effective as of the Merger Date.
2.13 Redemption. Immediately prior to the Delivery Date, the Company shall
redeem 244 shares of the Company Stock from the Shareholders by distributing to
them: (a) the life insurance policies owned by the Company on the lives of its
officers and Shareholders with an aggregate cash surrender value of
approximately $134,347; and (b) all of the real property and improvements
thereon owned by the Company, subject to any mortgages secured thereby (with a
net book value as of March 31, 1998 of $788,214) and subject to the leases
referred to in Sections 6.6 and 7.17. The
6
<PAGE>
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 connection with such
redemption in excess of $180,000 shall be reimbursed by the Shareholders within
30 days after receipt of NEI's written notice that it has paid such Taxes.
Shareholders shall not cause the Company to prepay the mortgages referred to in
Section 2.13(b) in excess of their regular amortization schedule prior to the
Merger Date. For purposes of computing such Taxes, NEI shall use the
Shareholders' valuation of the real property so long as such valuation is
reasonable.
2.14 Related Party Receivables; Henderson Property, Inc. On the Merger
Date: (a) all indebtedness and accounts payable owed to the Company by its
Affiliates (including but not limited to amounts owed by Rod Henderson, Bruce
Henderson and Henderson Property, Inc.) will be paid in full; and (b) the
Company's investment in Henderson Property, Inc. in the amount of $340,782 will
be purchased from the Company in cash by the Shareholders. The payment of such
amounts and the purchase of such investment will be made in cash on the Merger
Date concurrently with payment of the Merger Consideration to the Shareholders.
2.15 Shareholder Distributions. The Company shall not pay any dividends or
distributions to any of the Shareholders from the date of this Agreement through
the Merger Date, except as otherwise provided in Section 2.13. Notwithstanding
the foregoing, if the Merger Date occurs after August 15, 1998, then an amount
equal to 100% of the after-tax income of the Company for the period from August
15, 1998 through the Merger Date shall be added to the cash portion of the
Merger Consideration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND THE COMPANY
Shareholders and the Company jointly and severally make the following
representations and warranties and acknowledge that NEI has relied thereon in
entering into this Agreement. Such representations and warranties shall not be
affected by any investigation conducted by NEI, and shall survive for a period
of eighteen months following the Merger Date.
3.1 Validity.
3.1.1 This Agreement is, and any documents and instruments to be
executed and delivered by Shareholders or the Company pursuant hereto shall
be, legal, valid and binding obligations of Shareholders and/or the
Company, enforceable in accordance with their terms.
3.1.2 Except as provided in SCHEDULE 3.1, neither the execution and
delivery by Shareholders and the Company of this Agreement nor the
consummation of the Merger requires the consent or approval of, or the
giving of notice by Shareholders or the Company to, or the registration by
Shareholders or the Company with, or the taking of any other action
7
<PAGE>
by Shareholders or the Company in respect of, any federal, state or local
governmental authority or any third party, with the exception of the
required filing of the Articles of Merger with the Secretaries of State of
the State of Delaware and the State of Incorporation.
3.1.3 Except as provided in SCHEDULE 3.1, the execution and delivery
of this Agreement and the other instruments contemplated hereby and the
consummation of the Merger 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 any Shareholder or the Company is subject, or
any agreement, instrument or restriction of any kind to which any
Shareholder or the Company is a party or by which any of them are bound; or
(b) result in the creation or imposition of any lien, claim, charge or
encumbrance of any nature whatsoever upon the Company Stock or any assets
of the Company.
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. The Company has all requisite power and authority to effectuate the
Merger.
3.3 The Company Stock.
3.3.1 A description of the authorized capital stock of the Company is
attached as SCHEDULE 3.3. SCHEDULE A contains a complete list of all
Shareholders of the Company and the number of shares of Company Stock owned
by each Shareholder. The Company Stock is duly authorized, validly issued,
fully paid and nonassessable. There are no shares of common stock or other
securities of the Company issued and outstanding other than the Company
Stock. There are no outstanding options, warrants or other rights to
acquire any common stock or other securities of the Company or securities
convertible into the same. No Person has been issued any stock grants,
"phantom stock," stock appreciation rights or similar compensation
expressed in or computed on the basis of the Company's securities or the
value thereof. No Person has any preemptive right to purchase any
securities of the Company. There have been no stock splits, reverse stock
splits or other recapitalizations of the Company during the last five
years. The Company has not redeemed or retired any of its common stock or
other securities during the last four years.
3.3.2 All legal and beneficial right, title and interest in the
Company Stock is owned solely by the Shareholders and the Company Stock is
and shall on the Merger Date be free and clear of all liens, claims,
pledges, security interests, encumbrances and restrictions. No securities
of the Company other than the Company Stock are held by any Shareholder or
any
8
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other Person, and no Person other than Shareholders has any equity interest
in the Company. Except as provided herein, no Shareholder has entered into
any agreement, commitment or arrangement to transfer any Company Stock or
any interest therein to any Person other than NEI, nor to merge the Company
with or into any Person other than NEI. No Shareholder is a party to any
proxy, voting trust, voting agreement or similar understanding with respect
to the Company Stock or the election of directors of the Company.
3.4 Financial Statements. Attached or to be attached as SCHEDULE 3.4 are
the audited financial statements of the Company (including the notes thereto and
the report thereon of the Company's independent public accountants) for the
Company's fiscal years ended March 31, 1996, 1997 and 1998, together with the
unaudited consolidated balance sheet as of June 30, 1998 (the "Balance Sheet")
and unaudited income statement of the Company for the stub period then ended
(collectively, the "Financial Statements"). The Financial Statements present
fairly (and the unaudited Balance Sheet and income statement will present
fairly) the consolidated financial condition of the Company as of their
respective dates and the consolidated results of its operations for the
respective periods then ended and have been (or will be) prepared in conformity
with GAAP (provided, that the unaudited financial statements will be presented
without footnotes and will be subject to normal year-end adjustments). On the
Merger Date, the Company will have 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 date of the Balance Sheet (the "Balance Sheet Date") and the Merger Date],
which are not disclosed or 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 will be accurate in all material respects in accordance
with GAAP. The Balance Sheet will reflect all appropriate accruals for
obligations of the Company accrued through the Balance Sheet Date (subject to
normal year-end adjustments).
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 Merger Date.
3.6 Title to and Condition of Personal Property.
3.6.1 Attached as SCHEDULE 3.6.1 is a complete list of all tangible
personal property owned by the Company (the "Personal Property").
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3.6.2 The Company has good and marketable title to the Personal
Property, free and clear of any and all liens, claims, security interests,
restrictions and encumbrances (except as disclosed in SCHEDULE 3.6.2). All
of the Personal Property is in the Company's possession and control.
3.6.3 The Personal Property is and has been maintained in good
operating condition, ordinary wear and tear excepted. The Personal Property
includes all of the equipment, vehicles (other than leased equipment and
vehicles), tools and inventory required for the conduct of the Company's
operations as currently conducted.
3.6.4 The Company has not entered into any agreement or commitment to
sell any of the Personal Property or any other assets of the Company other
than the sale of materials and supplies in the ordinary course of business,
nor (except as disclosed in SCHEDULE 3.6.2) 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 Personal Property.
3.7 Real Property
3.7.1 Attached as SCHEDULE 3.7.1 is complete list of all real
property owned by the Company (the "Real Property").
3.7.2 The Company has good and marketable title to the Real Property,
free and clear of any and all liens, claims, security interests,
restrictions and encumbrances (except as disclosed in SCHEDULE 3.7.2.).
3.7.3 Except as provided in Sections 2.13 and 3.8, the Company has
not entered into any agreement or commitment to sell or lease any of the
Real Property nor, except as disclosed in SCHEDULE 3.7.2, 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 Real Property.
3.8 Leases. SCHEDULE 3.8 contains a list and description of all real
property leases ("Leases") to which the Company is a party, either as lessor or
lessee (the facilities subject to such Leases being referred to as the "Leased
Facilities"). Each of the Leases is in full force and effect and neither the
Company nor any other party thereto has committed any default thereunder. The
Company is not subject to any increase in rentals or other costs in connection
with any Leased Facility of which the Company is lessee which is not provided
for in the applicable 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 the
Company's 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.
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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 Shareholders
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. Shareholders shall cooperate with NEI in
making any changes in signatories desired by NEI following the Merger 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 twelve month
period prior to the date hereof and the estimated volume of business
conducted by the Company with the Material Customers during such period.
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.
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3.11.3 The Company's relationships with the Material Customers and
Material Suppliers are good commercial working relationships, and
Shareholders have no reason to believe that any Material Customer or
Material Supplier intends to terminate its relationship with the Company
before or after the Merger 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 any
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.
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3.14.2 The Company has the right to use all data and information
(including confidential information, trade secrets and know-how) used in
the conduct of its business.
3.14.3 To the best knowledge of Shareholders, 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 its business.
3.15 Compliance with Laws. The Company is in material compliance with all
federal, state and local laws, regulations and ordinances applicable to the
conduct of its 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 its 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 on SCHEDULE 3.17 attached hereto: (a) all Taxes owed by the
Company have been fully paid or provided for and all Returns in connection
therewith have been timely filed; and (b) the Company has adequately accrued for
all such Taxes payable subsequent to the last period for which they were paid,
and the Company will have no liability for Taxes for the period ending on the
Balance Sheet Date in excess of amounts accrued on the Balance Sheet. Any
federal or state Tax audit of the Company or any Shareholder occurring after the
Merger Date but based on tax years prior to the Merger Date, and any Taxes
assessed as a result of any such audit, shall be the responsibility of and shall
be paid by Shareholders; provided, however, that NEI files the Company's income
Tax Return for the taxable year in which the Merger Date occurs consistent with
the manner in which the Company has previously filed its income Tax Returns
(unless otherwise required by applicable tax law and regulation) and NEI pays
the Tax shown as due thereon; and provided further, that NEI shall have
discretion to take Tax positions with respect to the Company which differ from
those taken in prior periods, so long as such positions do not directly increase
any Tax obligation of Shareholders related to Taxes payable by the Company from
that which would have been in effect had the Returns been filed consistent with
the positions taken in prior periods, so long as such past positions are not
deemed improper by the relevant taxing authorities.
3.18 Books and Records. The books and records of the Company: (a) are
accurate and complete in all material 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
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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 shareholders 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 Shareholders 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 Shareholders, threatened charge or
complaint against the Company by the National Labor Relations Board or
comparable state or local agency; (d) the Company has complied in all
material respects 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 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 International Brotherhood of Electrical Workers has been
recognized by the Company as the bargaining unit for certain of its
employees and such union currently represents approximately 275 of the
Company's employees. All union dues and benefits and contributions to union
pension plans payable by the Company under collective bargaining agreements
have been fully paid, and the Company has complied in all material respects
with its obligations under such collective bargaining agreements.
3.20 Environmental. Except as otherwise provided in SCHEDULE 3.20:
3.20.1 To the best of Shareholders' knowledge, there has not been any
"release" (as defined in 42 U.S.C. (S) 9601(22)) or threat of "release" in
or about the Real Property or Leased Facilities (collectively, the
"Facilities") 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,
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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 To the best of Shareholders' knowledge, no part of the
Facilities is or has been used at any time prior to the Merger 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
Facilities, whether contained in barrels, tanks, equipment (moveable or
fixed) or other containers, except in compliance with applicable law and
regulations.
3.20.3 No part of the Facilities 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 Facilities.
3.20.5 No asbestos or asbestos-containing materials have been
installed, used, incorporated into or disposed of in or about the
Facilities.
3.20.6 No polychlorinated biphenyls are located in or about the
Facilities.
3.20.7 Accurate and complete copies of any and all environmental
investigations, studies, audits, tests, reviews and analyses in the
possession of any Shareholder or the Company and relating to the Facilities
have been delivered to NEI.
3.20.8 To the best of Shareholders' knowledge, there are no conditions
in or about the Facilities 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 Facilities and the Company's use
of the same and all business and electrical contracting practices of the
Company comply in all material respects with all Environmental Laws.
3.20.9 No litigation, claims or demands have been brought or, to the
best of Shareholders' knowledge, threatened against the Company by any
governmental authority or private claimant in connection with any Hazardous
Substances or alleging any violation of
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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 any of the
Personal Property or Facilities, and no governmental actions have been
taken or are in process which could subject any of the Personal Property or
Facilities to such liens.
3.20.11 To the best of Shareholders' knowledge, 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, if any, the most
recent annual report and actuarial 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 material 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, to the best of Shareholders' knowledge, there has been no prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Code which was not exempt, 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
Shareholders, threatened against the Company. All
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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.
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
any of the Shareholders as of the Merger Date (the "Guaranteed Obligations").
3.23 Disclosure.
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3.23.1 No representation or warranty of Shareholders 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
Shareholders or the Company pursuant to this Agreement or in connection
with the transactions contemplated hereby (including but not limited to the
Financial Statements and any questionnaires or representation certificates
furnished by the Company and the Shareholders) 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 Shareholders, there is no fact which
Shareholders have 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 any 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 the Shareholders in this Agreement or a representation or
disclosure with respect to the Company or the Shareholders in the
Registration Statement or Prospectus, the Company and the Shareholders
shall immediately give notice of such fact or circumstance to NEI. However,
such notification shall not relieve either the Company or the Shareholders
from their respective obligations under this Agreement, and the truth and
accuracy of all representations and warranties of the Company and the
Shareholders as of the date of this Agreement and as of the Delivery Date
and the Merger Date shall be a precondition to the consummation of the
Merger.
3.24 Acknowledgment. The Shareholders acknowledge and agree: (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 nor its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the Company, the
Shareholders 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 the Shareholders will be able in the future to sell their
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 the Shareholders to enter into
this Agreement and to exchange the Company Stock for NEI Stock and cash 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 as described in SCHEDULE 3.25, no Shareholder nor any officer, director
or Affiliate of the
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Company or of any 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 Shareholders' knowledge, none
of the information (including financial information) supplied or to be supplied
by the Company or the Shareholders specifically for inclusion in the
Registration Statement contains or will contain any untrue statement of material
fact concerning the Company or the Shareholders 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 the Shareholders, in light of
the circumstances under which they are made, not misleading. The Company and the
Shareholders shall have the right to review and approve in advance any
statements made about the Company and the Shareholders in the Registration
Statement.
3.27 Brokers and Finders. Neither Shareholders nor the Company have
retained any broker or finder in connection with this transaction, and NEI shall
not become liable for any broker's or finder's fees as a result of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEI
NEI makes the following representations and warranties and
acknowledges that Shareholders 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 the Delivery Date and the
Merger Date, shall not be affected by any investigation conducted by
Shareholders, and shall survive for a period of eighteen months following the
Merger 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, to effectuate the Merger and
provide the Merger Consideration to Shareholders.
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. Prior to the Merger Date, the Certificate of
Incorporation of NEI will be amended to provide for not less than 41,000,000
shares of authorized capital stock, consisting of not less than 30,000,000
shares of Common Stock, par value $.01 per share, 1,000,000
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shares of Class A Nonvoting Common Stock, par value $.01 per share, and
10,000,000 shares of "blank check" Preferred Stock, par value $.01 per share. On
the Merger Date, the authorized capital stock of NEI shall be free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind, with the exception of restrictions
against transfer of the nature described in Article XIII of this Agreement. 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 as otherwise contemplated with
respect to: (a) the Other Agreements and any future acquisitions or mergers
which may be conducted by NEI or its subsidiaries or Affiliates; (b) the
overallotment option to be granted to the Underwriters in connection with the
IPO; (c) the conversion of shares of Class A Nonvoting Common Stock to Common
Stock to be effected prior to the effective date of the IPO; and (d) the
issuance of shares of Common Stock of NEI in connection with NEI's acquisition
of Parsons Electric Co., 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. Except as contemplated in connection with
NEI's acquisition of Parsons Electric, Co., NEI has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its securities or any
interest therein nor any obligation to pay any dividend or make any distribution
in respect of any of its capital stock.
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. NEI has no material liabilities or
obligations of any kind, other than: (a) liabilities incurred in the ordinary
course of business; (b) the liabilities to be assumed under this Agreement and
the Other Agreements or in connection with other acquisitions or mergers
contemplated by NEI; (c) a revolving credit facility to be obtained by NEI; and
(d) the fees and expenses incurred or to be incurred in connection with the
transactions contemplated in this Agreement and the transactions described in
this Section 4.6.
4.7 Conformity With Law; Litigation. 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 notice of any such
claim, action, suit or proceeding, whether pending or threatened, has been
received, other than any such matters to which the Company or any of the Other
Founding Companies may be subject. NEI has conducted its business in material
compliance with the requirements of applicable law and regulation.
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Notwithstanding the foregoing, NEI makes no representation or warranty to the
Shareholders 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 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 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 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; (c) the filings required to consummate the Merger; and (d) any
filings required under the Hart-Scott Act in connection with the Merger or
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 issuance and delivery to the Shareholders,
the NEI Stock will constitute duly authorized and validly issued shares of NEI
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
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 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.
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.
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 the
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Shareholders 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 the Shareholders or the Other Founding
Companies or their shareholders have furnished to NEI specifically for inclusion
in the Registration Statement.
ARTICLE V
ACTIONS BY SHAREHOLDERS AND THE COMPANY PENDING THE MERGER DATE
From the date hereof through the Merger Date:
5.1 Access. Shareholders 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. Shareholders 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 of the Company available to NEI and the
Underwriters and otherwise cooperate with NEI's and the Underwriters' due
diligence investigations. Shareholders 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. Shareholders 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, provided such
investigation is conducted only in the presence of representatives of the
Company and at times reasonably acceptable to the Company. Shareholders 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 Shareholders to avoid disruption or undue interference with
the operations of the Company. Shareholders shall deliver to NEI copies of all
environmental audits, risk assessments and other investigations performed with
respect to the Company or its assets at any time prior to the Merger Date.
Notwithstanding the foregoing, the representations and warranties in Article III
shall not be affected by any due diligence investigation conducted by NEI, the
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Underwriters or their respective representatives. NEI will promptly advise the
Company and Shareholders if it learns of any facts which conflict with any of
the representations and warranties made by the Company and Shareholders herein.
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.
Except as provided in Section 2.13, the Company shall not enter into any
contract or commitment to purchase or sell any equipment, machinery, real
property, capital assets or other 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 collective bargaining or employment agreements or to
meet commitments previously made and disclosed to NEI, and except as described
in SCHEDULE 5.3 attached hereto, 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.
5.4 Preservation of Organization. Shareholders shall use their best efforts
to preserve the Company's business organization intact, to keep available to NEI
the present employees of the Company 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. Except as provided in Section 2.13, 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 any
Shareholder or any other Person any shares of common stock or other securities
or grant to any 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. Except as provided in Section 2.13, 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, unless
consented to by NEI in writing.
5.7 Voting Trusts or Other Arrangements. Shareholders 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.
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5.8 Interim Financial and Borrowing Statements. Shareholders 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 Merger 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 Company's business in the ordinary course; and (b) the payment of
obligations incurred in the ordinary course.
5.11 Environmental Audits. Shareholders and the Company shall, and shall
cause the Company's landlords to, permit NEI to conduct Phase I environmental
assessments of the Facilities 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 any Facility, such assessment and/or
remediation shall be completed as soon as practicable at Shareholders' expense.
Notwithstanding the foregoing, in no event shall Shareholders' obligation to
remediate exceed an aggregate cost of $100,000. If the amount of any such
required remediation exceeds $100,000 in the aggregate, then the Company and
Shareholders shall have the right to terminate this Agreement by giving written
notice to NEI (in which event neither party shall have any further liability to
the other), unless NEI in its sole discretion elects to assume such excess
remediation costs.
5.12 No Transfer. Except as provided in Section 2.13, no Shareholder shall
transfer to any Person other than NEI any of the Company Stock, nor grant to any
Person or entity other than NEI any right, title or interest in or right or
option to acquire any Company Stock.
5.13 No Shop. None of the Shareholders, nor the Company, nor any agent,
officer, director, trustee or representative of any of the Shareholders or the
Company shall, during the period commencing on the date of this Agreement and
ending on the earlier to occur of the Merger 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 of, or any equity interest in,
the Company; 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 Agreements. Shareholders and the Company shall terminate, on or prior
to the Merger Date: (a) any shareholder agreements, voting agreements, voting
trusts, options, warrants and Employment Agreements to which the Company is a
party or entered into with respect to the
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Company; and (b) any listing agreement between the Company and any Shareholder,
provided that nothing herein shall prohibit the Company from paying (either
prior to or on the Merger Date) notes or other obligations from the Company to
the Shareholders in accordance with their terms, which terms have been disclosed
to and accepted by NEI.
5.15 Notification of Certain Matters. Shareholders 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 the Shareholders contained herein
to be untrue or inaccurate in any material respect on or prior to the Merger
Date. NEI shall give prompt notice to Shareholders of any event the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty of NEI contained herein to be untrue or inaccurate in any material
respect on or prior to the Merger Date.
5.16 Cooperation in Preparation of Registration Statement. The Company and
the Shareholders shall furnish or cause to be furnished to NEI and the
Underwriters all information concerning the Company and the Shareholders
required for inclusion in, and will cooperate with NEI and the Underwriters in
the preparation of, the Registration Statement and Prospectus (including audited
and unaudited historical and pro forma financial statements prepared in
accordance with GAAP, in form suitable for inclusion in the Registration
Statement). Shareholders shall execute and deliver such documents, including
questionnaires, representation certificates and lock-up agreement not
inconsistent with the provisions of this Agreement, deemed advisable by NEI or
the Underwriters in connection with the IPO. The disclosure of information with
respect to the Company and the Shareholders 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 Shareholders or the Company in
accordance with this Section 5.16 shall be subject to the provisions of Sections
3.23, 3.24 and 3.26 hereof. The Company and the Shareholders 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 the
Shareholders 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 Merger 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.
5.18 Compliance With The Hart-Scott Act. If NEI determines that any filings
under the Hart-Scott Act are required in connection with this Agreement or any
Other Agreements, then: (a) each party agrees to cooperate and use its best
efforts to comply with the Hart-Scott Act; (b) such compliance by the
Shareholders and the Company shall be deemed a condition precedent to NEI's
obligations under this Agreement; and (c) the parties agree to cooperate and use
their best efforts to
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cause all filings required under the Hart-Scott Act to be made. If filings under
the Hart-Scott Act are required, the cost thereof (including filing fees) shall
be paid by NEI. The obligation of each party to consummate the transactions
contemplated by this Agreement is subject to the expiration or termination of
the waiting period under the Hart-Scott Act, if applicable.
ARTICLE VI
CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Each and every obligation of Shareholders to be performed on the
Merger Date shall be subject to the satisfaction prior to or on the Merger Date
of the following conditions, unless waived in writing by Shareholders:
6.1 Representations and Warranties True. The representations and
warranties of NEI in this Agreement shall be true and correct on and as of the
Merger Date with the same effect as though such representations and warranties
had been given on the Merger Date, and Shareholders shall receive a certificate
from an officer of NEI to that effect.
6.2 Compliance with Agreement. NEI shall have complied with its
obligations under this Agreement which are to be performed or complied with by
it prior to or on the Merger Date, and Shareholders shall receive a certificate
from an officer of NEI to that effect.
6.3 No Litigation. No action or proceeding before any court or
governmental agency shall have been instituted or threatened to restrain the
Merger or the IPO.
6.4 Employment Agreements. Rod Henderson and Bruce Henderson shall each
have entered into a mutually acceptable Employment Agreement with NEI or its
Affiliate providing for $150,000 in base salary plus a cash bonus (payable
quarterly and reconciled annually) in an amount equal to 6% of the annual pre-
Tax income of the Henderson Division of NEI (which for purposes of such
Employment Agreements will include the pre-Tax income of the former Eagle
Electric Company, Inc.), or, at the election of the employee, $170,000 in base
salary plus a bonus equal to 5% of such net income. In addition, NEI or its
Affiliate shall have entered into Employment Agreements with Micky Masterson and
Steve Howell.
6.5 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
6.6 Real Estate Leases. NEI or its Affiliate shall have entered into
leases (the "Leases") with the Shareholders for the real property located at
4502 Poplar Level Road, Louisville, Kentucky, 1140 Floyd Drive, Lexington,
Kentucky, and 40391 Creek Drive, Blue Ash, Ohio. The Leases shall be triple net
leases providing for a monthly aggregate rental of $15,000, shall be for a term
of seven years and shall otherwise be on such terms and conditions as agreed to
by the parties.
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6.7 Consents. The Company shall have obtained all consents from third
parties required to consummate the Merger.
6.8 Opinion of Counsel. Shareholders shall have received from NEI's
counsel a written "authority opinion," dated as of the Closing Date,
satisfactory in form and substance to Shareholders and their counsel.
6.9 Hart-Scott Act. If a filing is required under the Hart-Scott Act to
effectuate the Merger, such filing shall have been made and the expiration or
termination of the waiting period under the Hart-Scott Act shall have occurred.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF NEI
Each and every obligation of NEI to be performed on the Merger Date
shall be subject to the satisfaction prior to or on the Merger Date of the
following conditions, unless waived in writing by NEI:
7.1 Representations and Warranties True. The representations and
warranties of Shareholders and the Company in this Agreement shall be true and
correct on and as of the Merger Date with the same effect as though such
representations and warranties had been given on the Merger Date, and NEI shall
receive certificates from the Shareholders to that effect.
7.2 Compliance with Agreement. Shareholders 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 Merger Date, and NEI shall
receive certificates from the Shareholders to that effect.
7.3 Execution and Deliverables. Each of the Shareholders and the Company
shall have executed a counterpart of this Agreement and all Deliverables shall
have been delivered to NEI.
7.4 Corporate Documents. Shareholders 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:
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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 limited to: (a) verification of the quality,
quantity and valuation of the Company's assets and liabilities; (b)
verification of Shareholders' 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 its assets.
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 Company's business or operations.
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 or its Affiliate shall have entered into
Employment Agreements acceptable to NEI with Rod Henderson and Bruce Henderson
in accordance with the terms recited in Section 6.4 and Employment Agreements
acceptable to NEI with Micky Masterson and Steve Howell, 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 Merger Date, nor any event or
condition which NEI believes is likely to have a Material Adverse Effect.
7.8 Opinion of Counsel for Shareholders. NEI shall have received from
Shareholders' counsel a written opinion, dated as of the Merger Date, addressed
to NEI and satisfactory to counsel for NEI in form and substance.
7.9 Resignations. All directors of the Company shall have delivered their
written resignations to NEI.
7.10 Board and Shareholder Approval. The Merger shall have been approved
by the Board of Directors of the Company and the Requisite Shareholder Approval
shall have been obtained.
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7.11 No Litigation. No action or proceeding before any court or
governmental agency shall have been instituted or threatened to restrain or
prohibit the Merger or the IPO.
7.12 Shareholders' Release. The Shareholders shall have delivered to NEI
an instrument dated the Merger Date releasing the Company and NEI from: (a) any
and all claims of the Shareholders against the Company and NEI; and (b)
obligations of the Company and NEI to the Shareholders, except for: (i)
continuing obligations to any Shareholders relating to their employment; and
(ii) obligations arising under this Agreement or the transactions contemplated
hereby.
7.13 Termination of Related Party Agreements. Except as set forth in
SCHEDULE 7.13, all existing agreements between the Company and the Shareholders
or their Affiliates shall have been terminated on or before the Merger Date.
7.14 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.
7.15 FIRPTA Certificate. If requested by NEI in connection with any real
property lease to which any of the Shareholders and the Company, NEI or
Subsidiary will be parties, each Shareholder shall have delivered to NEI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
7.16 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
7.17 Leases. The Shareholders and NEI shall have entered into the Leases
in accordance with the terms recited in Section 6.6.
7.18 Consents. The Company shall have obtained all consents from third
parties required to consummate the Merger.
7.19 Hart-Scott Act. If a filing is required under the Hart-Scott Act to
effectuate the Merger, such filing shall have been made and the expiration or
termination of the waiting period under the Hart-Scott Act shall have occurred.
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ARTICLE VIII
COVENANTS
8.1 Release From Guarantees; Repayment of Certain Obligations. NEI shall
use reasonable efforts to have the Shareholders released from any and all
guarantees of the Company's indebtedness, including bond obligations, identified
on SCHEDULE 8.1. In the event NEI cannot obtain such releases from the lenders
of any such guaranteed indebtedness within 120 days following the Merger Date,
NEI shall promptly pay off or otherwise refinance or retire such indebtedness
such that the Shareholders' personal liability shall be released. NEI will
indemnify the Shareholders 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. The Company, if possible, or
otherwise the Shareholders shall file or cause to be filed all federal, state
and local income Tax Returns for the Company for all taxable periods ending
prior to the Merger Date, and shall permit NEI to review such Tax Returns prior
to filing. The Company shall pay all Taxes due and payable on or prior to the
Merger Date and shall adequately accrue for all Taxes due after the Merger Date
but based on periods occurring prior to the Merger Date.
8.3 Further Assurances.
8.3.1 Shareholders will use their 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 Merger; (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 Merger Date;
and (c) perform each of the acts and observe each of the covenants required
to be performed or observed by Shareholders and the Company at or prior to
the Merger Date.
8.3.2 Shareholders 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 more effectively carry out
the Merger.
8.3.3 NEI shall execute and deliver or cause to be executed and
delivered such further instruments and take such other action as
Shareholders deem necessary or desirable to more effectively carry out the
Merger.
ARTICLE IX
INDEMNIFICATION
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9.1 Indemnification by The Shareholders. Shareholders jointly and
severally agree to indemnify and hold NEI and 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 (to the extent not covered by insurance paid to or collected by NEI)
arising from: (a) any breach of the representations and warranties of
Shareholders or the Company contained herein or in any Schedules, certificates,
questionnaires or other instruments delivered in connection herewith; (b) any
breach of this Agreement by Shareholders 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 the
Shareholders which was based upon information provided to NEI or its counsel or
the Underwriters by the Company or the Shareholders 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 the Shareholders 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 the Shareholders provided written corrected
information to NEI for inclusion in the final Prospectus and such information
was not so included, and provided further, that no Shareholder shall be liable
for any indemnification pursuant to this Section 9.1(c) to the extent solely
attributable to a breach of any representation, warranty or agreement made by
any other Shareholder; (d) any default by the Company under any performance bond
occurring prior to the Merger Date; (e) any liability or obligation of the
Company which is not disclosed in the Balance Sheet or is not incurred in the
ordinary course of business from the Balance Sheet Date to the Merger Date; (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 Merger
Date; (g) any breach of any Employment Agreement or Contract or the terms of any
Permit occurring prior to the Merger Date; (h) any litigation or claim arising
from the conduct of the Company's business prior to the Merger Date and not
disclosed in SCHEDULE 3.12.1; (i) any uninsured workers' compensation claims or
liabilities arising prior to the Merger Date and not disclosed in SCHEDULE
3.12.2; or (j) subject to Section 3.17, any federal, state or local audit of the
Tax Returns of the Company for the tax year in which the Merger Date occurs or
any prior tax year and any additional Taxes which the Company or NEI is required
to pay in connection with any such audit or any resulting adjustment in the Tax
liability of the Company or NEI. Any liability of Shareholders under Section
9.1(j) shall be reduced by the net present value (computed at an annual
capitalization rate of 10%) of any corresponding Tax deduction which may
properly be taken by NEI as a result of any such adjustment.
9.2 Indemnification by NEI. NEI agrees to indemnify and hold the
Shareholders 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
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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 the Shareholders.
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 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; provided, however, that
if the Indemnifying Party can demonstrate that it is able to settle a matter for
a specific sum and the Indemnified Party objects to such settlement, then the
Indemnifying Party's liability in connection with such matter shall not exceed
the amount of the proposed settlement plus the defense and negotiation costs
incurred by the Indemnified Party in connection therewith. 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
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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 any
of the Shareholders unless the aggregate of all claims which NEI may have
against the Shareholders exceeds $50,000. The Company and the Shareholders
shall not assert any claim for indemnification against NEI unless the
aggregate of all claims which the Company and the Shareholders may have
against NEI exceeds $50,000.
9.5.2 No Shareholder shall 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 such Shareholder
hereunder.
9.5.3 Except as provided in Section 9.1(j), no Shareholder shall be
liable under this Article IX for any claim arising more than 18 months
after the Merger Date. Shareholders' obligations under Section 9.1(j) shall
survive for the applicable Tax statute of limitations period.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to the
Merger Date, but only:
10.1.1 By the mutual written consent of NEI and the Shareholders
10.1.2 By the Shareholders and the Company on the one hand, or by NEI
on the other hand, if the Registration Statement shall not have been
declared effective by the SEC by December 31, 1998.
10.1.3 By the Shareholders and the Company if the applicable
conditions set forth in Article VI hereof have not been satisfied or waived
as of the Merger Date
10.1.4 By NEI if the applicable conditions set forth in Article VII
hereof have not been satisfied or waived as of the Merger Date
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10.1.5 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. Neither NEI nor the Company and
the Shareholders shall have any liability to the other for any legal, accounting
or other fees or expenses incurred by any them in the event of any termination
of this Agreement.
ARTICLE XI
NONCOMPETITION AND NONDISCLOSURE
11.1 Noncompete Covenant. Each Shareholder agrees that for a term
commencing on the Merger Date and ending upon expiration of the period set forth
opposite such Shareholder's name in SCHEDULE 11.1 hereto, he or she 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. Shareholders
acknowledge the foregoing covenants are reasonable in scope and 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 Shareholders jointly and severally agree that they 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 Company's business prior
to the Merger 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 the Merger is not consummated 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
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<PAGE>
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.
If the Merger is not consummated, or if this Agreement is terminated for
any reason, NEI shall promptly return to the Company all information which
it has received from the Company or its Shareholders and will seek to cause
others to whom such information was provided by NEI, or at NEI's request,
to return all such information.
11.3 Enforcement.
11.3.1 Shareholders acknowledge 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.
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 Shareholders who agree to be bound by the restrictions in this
Article XII (or trusts for the benefit of the Shareholders or such family
members), for a period of one year from the Merger Date, except pursuant to
Article XIV hereof, none of the Shareholders shall sell, assign, exchange,
transfer or otherwise dispose of any shares of NEI Stock received by them
pursuant to the Merger. 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
35
<PAGE>
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. Shareholders acknowledge that the shares of NEI
Stock to be delivered to the Shareholders 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 the Shareholders
solely for their own respective accounts, for investment purposes only, and with
no present intention of distributing, selling or otherwise disposing of such
stock in connection with a distribution. The Shareholders represent and agree
that none of the shares of NEI Stock issued to them 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. The Shareholders represent that they
are able to bear the economic risk of an investment in the NEI Stock and can
afford to sustain a total loss of such investment. Each 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. The
Shareholders have had an adequate opportunity to ask questions and receive
answers from the officers of NEI concerning the transaction contemplated hereby.
Each Shareholder represents that he or she is an "accredited investor" as
defined in Rule 501(a) under the 1933 Act, or if not an accredited investor,
such Shareholder has sufficient income and net worth to withstand the risks of
the investment contemplated hereby and, individually or together with his or her
purchaser representatives, is sufficiently sophisticated to evaluate the merits
and risks of such investment. The Shareholders acknowledge that the risks of
this transaction include tax risks and the Shareholders have consulted with
their tax advisors with respect to and fully accept such risks.
36
<PAGE>
ARTICLE XIV
REGISTRATION RIGHTS
14.1 Piggyback Registration Rights. At any time following the Merger 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 each Shareholder written notice of its intent to do so.
Upon the written request of any 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 such Shareholder pursuant to this Agreement which any such
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 the
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 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 the Shareholders 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 any
Shareholder disapproves of the terms of the underwriting, that Shareholder may
elect to withdraw therefrom by written notice to NEI and the managing
underwriter. That Shareholder's shares of NEI Stock so withdrawn shall also be
withdrawn from registration; provided, that, if by the withdrawal of such shares
a greater number of shares of NEI Stock held by other Shareholders may be
included in such registration, then NEI shall offer to all other Shareholders
the right to include additional shares in the same proportion used in effecting
the above limitations.
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 the Shareholders with copies of such documents
proposed to be filed) as promptly as practicable.
14.2.2 Notify the Shareholders 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.
37
<PAGE>
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 each Shareholder who so requests 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 such
Shareholder 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 any participating Shareholder, promptly incorporate in a prospectus
supplement or post-effective amendment or term sheet such information as
the managing underwriter or underwriters or any participating Shareholder,
as the case may be, reasonably requests to be included therein, including,
without limitation, information with respect to the number of shares of NEI
Stock being sold by participating Shareholders 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 participating Shareholders,
any underwriter participating in any disposition pursuant to such
registration statement, counsel retained by the participating Shareholders,
counsel for the underwriters and any accountant or other agent retained by
participating Shareholders 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.
38
<PAGE>
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 the Shareholders, 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 each 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 such 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 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, each selling Shareholder
(each, an "Indemnified Party") 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 such
Indemnified Party expressly for use therein,
39
<PAGE>
or by any Indemnified Party's failure to deliver a copy of the registration
statement or prospectus or any amendment or supplement thereto after NEI
has furnished such Indemnified Party with a sufficient number of copies of
the same.
14.3.2 In connection with any registration under Section 14.1, each
selling Shareholder shall furnish to NEI in writing such information
concerning such Shareholder and his or her 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 so furnished in writing to NEI by such Shareholder
expressly for use in the registration statement. Notwithstanding the
foregoing, the liability of a Shareholder under this Section 14.3.2 shall
be limited to an amount equal to the net proceeds actually received by such
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.
14.4 Underwriting Agreement. In connection with each registration pursuant
to Section 14.1 covering an underwritten registered offering, NEI and each
participating Shareholder agrees 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, the
Shareholders shall be exempt from any indemnification of the managing
underwriters other than with respect to information provided by the respective
Shareholders 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 any Shareholder, but only to a
member of such Shareholder's immediate family or a trust or partnership for the
benefit of the 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:
40
<PAGE>
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 a Shareholder owns any restricted NEI Stock,
furnish to each 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 the Shareholder may reasonably request in availing itself of any
rule or regulation of the SEC allowing such Shareholder to sell any such
shares without registration.
ARTICLE XV
MISCELLANEOUS
15.1 Assignment. This Agreement shall not be assigned by any party without
the prior written consent of the other parties. Any attempted assignment without
such written consent shall be null and void and without legal effect.
15.2 Governing Law. With the exception of those provisions of the DGCL
applicable to the Merger, 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 Shareholders: Mr. Rodney Henderson
Mr. Bruce Henderson
Henderson Electric Company, Inc.
4502 Poplar Level Road
Louisville, Kentucky 40213-2185
FAX: (502) 452-1308
with a copy to: Greenebaum Doll & McDonald PLLC
3300 National City Tower
41
<PAGE>
Louisville, Kentucky 40202
FAX: (502) 540-2137
Attn: Charles Fassler
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. Notice shall be effective when received by the party to whom
addressed.
15.4 Entire Agreement. Together with the Schedules and Exhibits hereto and
the Articles of Merger, 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.
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
Merger, whether or not the Merger is consummated. Without limitation, the fees
and expenses of Shareholders' legal, accounting and financial advisors and any
brokers and any transfer taxes payable on the exchange of the Company Stock
shall be paid by Shareholders.
15.9 Survival. Those provisions of this Agreement which by their nature are
intended to survive the Merger Date shall so survive for the period recited
therein, or if no time period is recited therein, shall survive indefinitely.
42
<PAGE>
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 Merger, the IPO or the NEI Plan of Organization may be made
except by and with the prior approval of NEI. NEI shall coordinate with
Shareholders in making announcements of the Merger to the Company's customers,
suppliers and employees.
43
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
NATIONWIDE ELECTRIC, INC.
By:
________________________________________
"NEI"
HENDERSON ELECTRIC COMPANY, INC.
By:
_________________________________________
The "Company"
SHAREHOLDERS:
--------------------------------------------
Rodney Henderson
--------------------------------------------
Bruce Henderson
NATIONWIDE ELECTRIC, INC.--HENDERSON ELECTRIC COMPANY, INC.
MERGER AGREEMENT SIGNATURE PAGE
<PAGE>
SCHEDULE A
SHAREHOLDERS
<TABLE>
<CAPTION>
Number of Shares
Name of Company Stock*
- - ---- ----------------
<S> <C>
Rodney Henderson 1139
Bruce Henderson 1139
</TABLE>
* Subject to the redemption referred to in Section 2.13
<PAGE>
SCHEDULE 2.6
MERGER CONSIDERATION
<TABLE>
<CAPTION>
<S> <C>
TOTAL AGGREGATE MERGER CONSIDERATION $11,500,000
Cash /1/ /2/ $ 5,250,000
NEI Stock /3/ $ 6,250,000
</TABLE>
- - --------------
/1/ In the event the consolidated book value of the Company as of March 31,
1998 (computed in accordance with GAAP, after reflecting the entries related to
consummation of the redemption transaction referred to in Section 2.13 (without
taking into account the Tax consequences thereof) and after deducting the
Company's investment in Eagle Electric Company, Inc. in the amount of $518,445)
is less than or greater than $6,577,305, the cash portion of the Merger
Consideration shall be decreased by the amount of such deficiency or increased
by the amount of such excess, as the case may be.
/2/ Subject to increase in accordance with the provisions of Section 2.15.
/3/ The actual number of shares of NEI Stock shall be based upon the initial
offering price determined at the Pricing, rounded up to the nearest whole share.
<PAGE>
Exhibit 2.2
STOCK PURCHASE AGREEMENT
AMONG
NATIONWIDE ELECTRIC, INC.
AND
THE ALLISON COMPANY
and its
SHAREHOLDERS
AND
ALLISON-SMITH ELECTRIC COMPANY, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
RECITALS................................................................... 1
ARTICLE I DEFINITIONS...................................................... 1
ARTICLE II SALE AND PURCHASE OF COMPANY STOCK.............................. 5
2.1 Sale and Purchase...................................... 5
2.2 Purchase Price......................................... 5
2.3 Delivery Date.......................................... 5
2.4 Closing................................................ 6
2.5 The Registration Statement............................. 6
2.6 Dividends; Options..................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS,
THE COMPANY AND THE OPERATING COMPANY.................................... 7
3.1 Validity............................................... 7
3.2 Corporate.............................................. 8
3.3 The Company Stock and Operating Company Stock.......... 8
3.4 Financial Statements................................... 9
3.5 Absence of Certain Events.............................. 9
3.6 Title to and Condition of Personal Property............ 10
3.7 Real Property.......................................... 10
3.8 Leases................................................. 11
3.9 Receivables............................................ 11
3.10 Contracts, Etc......................................... 11
3.11 Material Customers and Suppliers....................... 12
3.12 Litigation and Workers' Compensation Liability......... 12
3.13 Insurance and Performance Bonds........................ 13
3.14 Intellectual Property.................................. 13
3.15 Compliance with Laws................................... 13
3.16 Licenses, Permits and Authorizations................... 14
3.17 Taxes.................................................. 14
3.18 Books and Records...................................... 14
3.19 Labor and Employment................................... 14
3.20 Environmental.......................................... 15
3.21 ERISA.................................................. 16
3.22 Guaranteed Obligations................................. 18
3.23 Disclosure............................................. 18
3.24 Acknowledgment......................................... 19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.25 Interest in Customers and Suppliers and Related
Party Transactions..................................... 19
3.26 Registration Statement................................. 19
3.27 Brokers and Finders.................................... 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEI........................... 20
4.1 Corporate.............................................. 20
4.2 Authorization.......................................... 20
4.3 Capital Stock of NEI................................... 20
4.4 Transactions in Capital Stock.......................... 20
4.5 Financial Statements................................... 21
4.6 Liabilities And Obligations............................ 21
4.7 Conformity With Law; Litigation........................ 21
4.8 No Violations.......................................... 21
4.9 NEI Stock.............................................. 22
4.10 No Side Agreements..................................... 22
4.11 Disclosure............................................. 22
4.12 Other Agreements....................................... 22
4.13 Registration Statement................................. 22
4.14 Investment Intent...................................... 22
ARTICLE V ACTIONS BY SHAREHOLDERS, THE COMPANY
AND THE OPERATING COMPANY................................................ 23
5.1 Access................................................. 23
5.2 Carry on in Ordinary Course............................ 23
5.3 General Increases Limited.............................. 24
5.4 Preservation of Organization........................... 24
5.5 No Default............................................. 24
5.6 Dividends.............................................. 24
5.7 Voting Trusts or Other Arrangements.................... 25
5.8 Interim Financial and Borrowing Statements............. 25
5.9 Bids and Contracts..................................... 25
5.10 Cash Withdrawals....................................... 25
5.11 Environmental Audits................................... 25
5.12 No Transfer............................................ 25
5.13 No Shop................................................ 26
5.14 Agreements............................................. 26
5.15 Notification of Certain Matters........................ 26
5.16 Cooperation in Preparation of Registration Statement... 27
5.17 Authorized Capital..................................... 27
5.18 Compliance With The Hart-Scott Act..................... 27
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
SHAREHOLDERS, THE COMPANY AND THE OPERATING COMPANY...................... 28
6.1 Representations and Warranties True.................... 28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
6.2 Compliance with Agreement..................................................... 28
6.3 No Litigation................................................................. 28
6.4 Employment Agreements......................................................... 28
6.5 IPO Closing................................................................... 28
6.6 Hart-Scott Act................................................................ 28
6.7 Opinion of Counsel............................................................ 28
6.8 No Material Adverse Change.................................................... 28
ARTICLE VII CONDITIONS PRECEDENT TO NEI'S OBLIGATIONS........................................... 29
7.1 Representations and Warranties True........................................... 29
7.2 Compliance with Agreement..................................................... 29
7.3 Execution and Deliverables.................................................... 29
7.4 Corporate Documents........................................................... 29
7.5 Due Diligence................................................................. 29
7.6 Employment Agreements......................................................... 30
7.7 No Material Adverse Change.................................................... 30
7.8 Opinion of Counsel for Shareholders........................................... 30
7.9 Resignations.................................................................. 30
7.10 Board Approval................................................................ 30
7.11 No Litigation................................................................. 30
7.12 Shareholders' Release......................................................... 30
7.13 Termination of Related Party Agreements....................................... 31
7.14 Other Founding Companies...................................................... 31
7.15 FIRPTA Certificate............................................................ 31
7.16 IPO Closing................................................................... 31
7.17 Facility Leases............................................................... 31
ARTICLE VIII COVENANTS.......................................................................... 31
8.1 Release From Guarantees; Repayment of Certain................................. 31
8.2 Preparation And Filing of Tax Returns......................................... 32
8.3 Further Assurances............................................................ 33
8.4 Satisfaction of Indebtedness.................................................. 33
8.5 Employment Agreements......................................................... 33
ARTICLE IX INDEMNIFICATION...................................................................... 33
9.1 Indemnification by The Shareholders........................................... 33
9.2 Indemnification by NEI........................................................ 34
9.3 Procedure..................................................................... 35
9.4 Exclusive Remedy.............................................................. 36
9.5 Limitations on Indemnification................................................ 36
ARTICLE X TERMINATION........................................................................... 37
10.1 Termination................................................................... 37
10.2 Liabilities in Event of Termination........................................... 38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
ARTICLE XI NONCOMPETITION AND NONDISCLOSURE..................................................... 38
11.1 Noncompete Covenant........................................................... 38
11.2 Confidential Information...................................................... 38
11.3 Enforcement................................................................... 39
ARTICLE XII TRANSFER RESTRICTIONS............................................................... 39
ARTICLE XIII FEDERAL SECURITIES ACT REPRESENTATIONS............................................. 40
13.1 Compliance with Law........................................................... 40
13.2 Economic Risk; Sophistication................................................. 40
ARTICLE XIV REGISTRATION RIGHTS................................................................. 41
14.1 Piggyback Registration Rights................................................. 41
14.2 Registration Procedures....................................................... 41
14.3 Indemnification............................................................... 43
14.4 Underwriting Agreement........................................................ 44
14.5 Transfer of Rights............................................................ 44
14.6 Rule 144 Reporting............................................................ 44
ARTICLE XV MISCELLANEOUS........................................................................ 45
15.1 Assignment.................................................................... 45
15.2 Governing Law................................................................. 45
15.3 Notices....................................................................... 45
15.4 Entire Agreement.............................................................. 46
15.5 Successors.................................................................... 46
15.6 Counterparts.................................................................. 46
15.7 Headings...................................................................... 46
15.8 Expenses...................................................................... 46
15.9 Survival...................................................................... 47
15.10 Costs......................................................................... 47
15.11 Publicity..................................................................... 47
15.12 Special Provisions Concerning the Profit Sharing Plan......................... 47
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of June 12, 1998, by NATIONWIDE
ELECTRIC, INC., a Delaware corporation ("NEI"), THE ALLISON COMPANY, a Georgia
corporation (the "Company"), the shareholders of the Company identified in
SCHEDULE A attached hereto and executing counterparts of this Agreement (the
"Shareholders") and ALLISON-SMITH ELECTRIC COMPANY, INC., a Georgia corporation
(the "Operating Company").
RECITALS
A. The Operating Company is a wholly-owned subsidiary of the Company
engaged in the electrical contracting business.
B. Shareholders own all of the issued and outstanding capital stock
of the Company (the "Company Stock").
C. 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."
D. The Shareholders desire to exchange their Company Stock for cash
and common stock of NEI, and NEI desires to acquire the Company Stock, in
accordance with the terms and conditions of this Agreement.
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.
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"Affiliate" with respect to any Person, means any Person controlling,
controlled by or under common control with such Person.
"Business Day" shall mean any day other than Saturday, Sunday or a day
on which banks are authorized or required to close in Kansas City, Missouri or
Atlanta, Georgia.
"Closing Date" shall mean the date as of which the exchange of Company
Stock for NEI Stock and cash is consummated in accordance with Article II.
"Company" shall mean The Allison Company, a Georgia corporation.
"Company Stock" shall mean all of the issued and outstanding capital
stock of the Company owned by the Shareholders on the Delivery Date and the
Closing Date.
"Delivery Date" shall mean the date on which the Company Stock is
required to be delivered in trust pending the Closing Date, as contemplated in
Article II.
"Earnout" shall mean that portion of the Purchase Price identified as
such on SCHEDULE 2.2.
"Effective Date" shall mean the date the Registration Statement is
declared effective by the SEC.
"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 and accompanying Rules.
"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
Operating Company or the value of the Company Stock or the Operating Company
Stock.
"Material Adverse Effect" means a material adverse effect on the
business, operations, financial condition or prospects of the Company or the
Operating Company or the value of the Company Stock or the Operating Company
Stock.
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"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.
"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.
"Operating Company" shall mean Allison-Smith Electric Company, Inc., a
Georgia corporation and wholly-owned subsidiary of the Company.
"Operating Company Stock" shall mean the outstanding capital stock of
the Operating Company, all of which is owned by the Company.
"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.
"Profit Sharing Plan" means The Allison-Smith Company Profit Sharing
Plan, as amended.
"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 Representative" means Robert Allison.
"Shareholders" means the shareholders of the Company executing this
Agreement.
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"State of Incorporation" means the State of Georgia.
"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.
In addition to the foregoing, the following definitions with respect
to the Profit Sharing Plan shall apply to this Agreement:
"David Cartwright Segregated Account" means the segregated account
maintained by the Plan Trustee under the terms of the Profit Sharing Plan at the
direction and for the benefit of David Cartwright.
"Lanny Thomas Segregated Account" means the segregated account
maintained by the Plan Trustee under the terms of the Profit Sharing Plan at the
direction and for the benefit of Lanny Davis.
"Robert Allison Segregated Account" means the segregated account
maintained by the Plan Trustee under the terms of the Profit Sharing Plan at the
direction and for the benefit of Robert Allison.
"Individual Shareholders" means the Shareholders other than the Plan
Segregated Accounts.
"Plan Segregated Accounts" means the Robert Allison Segregated
Account, the David Cartwright Segregated Account and the Lanny Thomas Segregated
Account.
"Plan Segregated Account Shares" means, in the case of each of the
respective Plan Segregated Accounts, the shares of Company Stock held in such
Plan Segregated Account, which as of the date of this Agreement are as follows:
Robert Allison Segregated Account __________ shares
David Cartwright Segregated Account __________ shares
Lanny Thomas Segregated Account __________ shares
"Plan Trustee" means Compass Bank, an Alabama state bank, but solely
in its capacity as Trustee of the Profit Sharing Plan and directed trustee of
the respective Plan Segregated Accounts.
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ARTICLE II
SALE AND PURCHASE OF COMPANY STOCK
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 Shareholders agree to sell
and deliver to NEI, and NEI agrees to purchase from the Shareholders, all of the
issued and outstanding shares of capital stock of the Company (the "Company
Stock").
2.2 Purchase Price. The aggregate Purchase Price for the Company Stock
shall consist of cash at Closing, NEI Stock and the Earnout determined and
allocated among the Shareholders in accordance with SCHEDULE 2.2 attached
hereto. The cash portion of the Purchase Price due at Closing shall be payable
by wire transfer to the account or accounts specified by the Shareholder
Representative on the Closing Date. Notwithstanding the foregoing, NEI may
reserve a cash amount of up to 2.5% of the aggregate Purchase Price as a basket
(the "Basket") to compensate NEI for any accounts receivable and/or retainages
of the Operating Company as stated on the Balance Sheet (as defined in Section
3.4 but without deduction for bad debt reserve in excess of $25,000) 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 by NEI in an
interest-bearing account. Any amount remaining in the Basket at the expiration
of one year following the Closing Date and not retained by NEI as compensation
as set forth above, together with all interest earned on the investment of the
Basket funds, shall be remitted pro rata to the Shareholders. Any accounts
receivable stated on the Balance Sheet but not collected within one year after
the Closing Date and for which funds in the Basket have been retained by NEI
shall be assigned to the Shareholder Representative for the benefit of the
Individual Shareholders and to the Plan Trustee for the benefit of the Profit
Sharing Plan, as applicable, within a reasonable time following the expiration
of such one year period. Each Shareholder shall be entitled to a pro rata
portion of the aggregate Purchase Price in accordance with the percentage which
the number of shares of Company Stock owned by such Shareholder bears to the
total number of shares of Company Stock held by all the Shareholders.
Notwithstanding the foregoing provisions of this Article II, prior to the
Closing Date, the Company may transfer to Shareholders the assets of the
Operating Company described in SCHEDULE 2.2 and approved in writing by NEI.
2.3 Delivery Date. On the date specified by NEI by written notice to the
Shareholders (the "Delivery Date"), which may be prior or subsequent to the
Pricing, the Shareholders shall deliver in trust to NEI's counsel (in accordance
with mutually acceptable escrow instructions): (a) all certificates for the
Company Stock, accompanied by duly executed stock powers; (b) resolutions duly
adopted by the Board of Directors of the Company approving this transaction; and
(c) such other documents, instruments, opinions, schedules, financial statements
and assurances as NEI shall reasonably request (collectively, the
"Deliverables"). The Deliverables shall be held in trust by NEI's counsel
pending the Closing Date or distributed as otherwise provided in the escrow
instructions. At least five days prior to the Delivery Date, NEI shall advise
Shareholders of the procedures
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required for proper surrender of the certificates evidencing the Company Stock
and shall supply such transmittal letters and other documentation required for
such purpose, in form and substance as mutually agreed by the parties.
2.4 Closing. On the date specified by NEI by written notice to the
Shareholders (the "Closing Date"), which shall be not later than 15 days after
the closing of the IPO, the Company Stock and Deliverables shall be delivered to
NEI and the exchange of the Company Stock for the Purchase Price in cash and NEI
Stock shall be consummated. Each Shareholder whose Deliverables were delivered
to NEI's counsel on or prior to the Closing Date will receive that portion of
the aggregate Purchase Price to which he or she is entitled. After the Closing
Date, until properly surrendered to NEI's counsel, each outstanding certificate
for Company Stock not delivered to NEI's counsel as of the Delivery Date shall
be deemed for all purposes to represent only the right to receive that portion
of the aggregate Purchase Price represented thereby. Unless and until
surrendered as provided herein, no such certificate shall entitle the holder
thereof to any portion of the Purchase Price. Except as provided in Section 2.2,
no Shareholder shall be entitled to interest on any portion of the Purchase
Price. The record holder of any certificate for Company Stock which shall have
been lost or destroyed shall nevertheless receive the portion of the aggregate
Purchase Price to which he or she is entitled, provided such holder delivers to
NEI, at such holder's sole expense, a lost certificate affidavit in form and
substance reasonably acceptable to NEI, together with such customary surety as
NEI reasonably deems necessary to indemnify NEI for any loss or expense
resulting from presentation of such lost or destroyed certificate.
2.5 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 the
Shareholders to satisfy any of the conditions in Article VII which are within
their control, then Shareholders and the Company may terminate this Agreement by
giving written notice to NEI not later than 15 days after such date.
2.6 Dividends; Options. Subject to the right to make distributions as
contemplated in Section 5.3, any and all dividends with respect to the Company
Stock and the Operating Company Stock (whether or not permitted under the terms
of this Agreement) declared at any time prior to the Closing Date and remaining
unpaid on the Closing Date, and any and all outstanding options or other rights
to acquire capital stock of the Company or the Operating Company in existence at
any time prior to the Closing Date, shall be canceled effective as of the
Closing Date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS,
THE COMPANY AND THE OPERATING COMPANY
The Individual Shareholders, the Company and the Operating 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, with the exception of the
representations and warranties in Section 3.17, which shall survive for a period
of three years following the Closing Date, except as otherwise provided in
Section 9.5.3.
3.1 Validity.
3.1.1 This Agreement is, and any documents and instruments to be
executed and delivered by Shareholders, the Company or the Operating
Company pursuant hereto shall be, legal, valid and binding obligations of
Shareholders, the Company and/or the Operating Company, enforceable in
accordance with their terms, subject to the effect of bankruptcy,
insolvency, moratorium and other similar laws.
3.1.2 Except as contemplated in Section 5.18 or in connection with any
government contracts disclosed to NEI and requiring the consent of the
governmental contracting authority, neither the execution and delivery by
Shareholders, the Company and the Operating Company of this Agreement nor
the consummation of the transactions contemplated hereby requires the
consent or approval of, or the giving of notice by Shareholders, the
Company or the Operating Company to, or the registration by Shareholders,
the Company or the Operating Company with, or the taking of any other
action by Shareholders, the Company or the Operating 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 or the Operating Company, any law,
regulation, order, judgment or decree to which any Shareholder, the Company
or the Operating Company is subject, or any agreement, instrument or
restriction of any kind to which any Shareholder, the Company or the
Operating Company is a party or by which any of them are bound; or (b)
result in the creation or imposition of any lien, claim, charge or
encumbrance of any nature whatsoever upon the Company Stock or Operating
Company Stock or any assets of the Company or the Operating Company.
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3.2 Corporate. The Company and the Operating Company are corporations duly
organized, validly existing and in good standing under the laws of the State of
Incorporation and have all requisite corporate power and authority to own their
respective property and operate their respective business as currently
conducted. The Operating Company is duly qualified and in good standing in all
states where the conduct of its business so requires and where failure to so
qualify would have a Material Adverse Effect. Except as disclosed in SCHEDULE
3.2, the Operating 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. The
Company has no subsidiaries other than the Operating Company.
3.3 The Company Stock and Operating Company Stock.
3.3.1 A description of the authorized capital stock of the Company is
attached as SCHEDULE 3.3.1. SCHEDULE 3.3.1 contains a complete list of all
Shareholders of the Company and the number of shares of Company Stock owned
by each Shareholder. The Company Stock and the Operating Company Stock are
duly authorized, validly issued, fully paid and nonassessable. There are no
shares of common stock or other securities of the Company issued and
outstanding other than the Company Stock, nor any shares of common stock or
other securities of the Operating Company issued and outstanding other than
the Operating Company Stock. There are no outstanding options, warrants or
other rights to acquire any common stock or other securities of the Company
or the Operating Company or securities convertible into the same. No Person
has been issued any stock grants, "phantom stock," stock appreciation
rights or similar compensation expressed in or computed on the basis of the
securities of the Company or the Operating Company or the value thereof. No
Person has any preemptive right to purchase any securities of the Company
or the Operating Company. There have been no stock splits, reverse stock
splits or other recapitalizations of the Company or the Operating Company
during the last five years. Neither the Company nor the Operating Company
has redeemed or retired any of its common stock or other securities during
the last five years.
3.3.2 All legal and beneficial right, title and interest in the
Company Stock is owned solely by the Shareholders and the Company Stock is
and shall on the Closing Date be transferred to NEI free and clear of all
liens, claims, pledges, security interests, encumbrances and restrictions.
No securities of the Company other than the Company Stock are held by any
Shareholder or any other Person, and no Person other than Shareholders has
any equity interest in the Company. Except as disclosed in SCHEDULE 3.3.2
concerning sales of shares of Company Stock to the Shareholder
Representative, no Shareholder has entered into any agreement, commitment
or arrangement to transfer any Company Stock or any interest therein to any
Person other than NEI or to merge the Company with or into any Person other
than NEI. No Shareholder is a party to any proxy, voting trust, voting
agreement or similar understanding with respect to the Company Stock or the
election of directors of the Company.
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3.3.3 All legal and beneficial right, title and interest in the
Operating Company Stock is owned solely by the Company and the Operating
Company Stock is and shall on the Closing Date be free and clear of all
liens, claims, pledges, security interests, encumbrances and restrictions.
No securities of the Operating Company are held by any Person other than
the Company, and no Person other than the Company has any equity interest
in the Operating Company. The Company has not entered into any agreement,
commitment or arrangement to transfer the Operating Company Stock or any
interest therein to any Person or to merge the Operating Company with or
into any Person. The Company is not a party to any proxy, voting trust,
voting agreement or similar understanding with respect to the Operating
Company Stock or the election of directors of the Operating Company.
3.4 Financial Statements. Attached as SCHEDULE 3.4 are the audited
consolidated financial statements of the Company and the Operating Company
(including the notes thereto and the report thereon of the Company's independent
public accountants) for the three most recent fiscal years of the Company and
the Operating Company or for such shorter period that the Operating Company has
been in business, together with the unaudited consolidated balance sheet (as
updated as herein provided, the "Balance Sheet") and income statement of the
Company and the Operating Company as of and for the period commencing on the
first day of the current fiscal year of the Company and ending on the last day
of the last month ended prior to the date hereof, and updated on a calendar
monthly basis thereafter during the period prior to the Closing Date
(collectively, the "Financial Statements"). The Financial Statements present
fairly (and the unaudited Balance Sheet and income statement, as updated, will
present fairly) the consolidated financial condition of the Company and the
Operating Company as of their respective dates and the consolidated results of
their operations for the respective periods then ended and have been (and will
be) prepared in conformity with GAAP (provided, that the unaudited Financial
Statements do not and will not include notes and are and will be subject to
normal year-end adjustments). To the best knowledge of Shareholders, the Company
and the Operating Company have 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 date of the Balance Sheet, as updated during the period prior to the Closing
Date (the date of the latest such updated Balance Sheet being the "Balance Sheet
Date") and the Closing Date], which are not disclosed or adequately provided for
in the most current Balance Sheet. To the best of Shareholders' knowledge, any
business backlogs of the Operating Company 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 the Operating Company's 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 Operating Company has been
conducted in the ordinary
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course; and (b) to the best of Shareholders' knowledge, there has not been any
Material Adverse Change, nor to the best of Shareholders' knowledge any
occurrence, circumstance or combination thereof which might reasonably be
expected to have a Material Adverse Effect.
3.6 Title to and Condition of Personal Property.
3.6.1 Attached as SCHEDULE 3.6.1 is a complete list of all tangible
personal property owned by the Operating Company (the "Personal Property"),
excluding miscellaneous items of personal property with an aggregate cost
of less than $10,000.
3.6.2 The Operating Company has good and marketable title to the
Personal Property, free and clear of any and all liens, claims, security
interests, restrictions and encumbrances (except as disclosed in SCHEDULE
3.6.2). All of the Personal Property is in the Operating Company's
possession and control.
3.6.3 The Personal Property is and has been maintained in operating
condition customary for similar property, ordinary wear and tear excepted.
The Personal Property includes all of the equipment, vehicles (other than
leased equipment and vehicles), tools and inventory required for the
conduct of the Operating Company's operations as currently conducted.
3.6.4 Except as contemplated in SCHEDULE 2.2 and approved by NEI,
neither the Company nor the Operating Company has entered into any
agreement or commitment to sell any of the Personal Property or any other
assets of the Operating Company other than the sale of materials and
supplies in the ordinary course of business, nor (except as disclosed in
SCHEDULE 3.6.2) has the Company or the Operating Company made any
commitment or taken or failed to take any action which would cause any lien
to attach to any of the Personal Property.
3.7 Real Property
3.7.1 Attached as SCHEDULE 3.7.1 is complete list of all real property
owned by the Company and/or the Operating Company (the "Real Property").
3.7.2 The Company and/or the Operating Company has good and marketable
title to the Real Property, free and clear of any and all liens, claims,
security interests, restrictions and encumbrances (except as disclosed in
SCHEDULE 3.7.2.).
3.7.3 Except as provided in Section 3.8, neither the Company nor the
Operating Company has entered into any agreement or commitment to sell or
lease any of the Real Property nor, except as disclosed in SCHEDULE 3.7.2,
has the Company or the Operating Company made any commitment or taken or
failed to take any action which would cause any lien to attach to any of
the Real Property.
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3.8 Leases. SCHEDULE 3.8 contains a list and description of all real
property leases (together with all amendments and supplements thereto, the
"Leases") to which the Company or the Operating Company is a party, either as
lessor or lessee (the facilities subject to such Leases being referred to as the
"Leased Facilities"). Each of the Leases is in full force and effect and neither
the Company nor the Operating Company nor (to the best knowledge of
Shareholders) any other party thereto has committed any default thereunder.
Neither the Company nor the Operating Company is subject to any increase in
rentals or other costs in connection with any Leased Facility of which the
Company or the Operating Company is lessee which is not provided for in the
applicable Lease.
3.9 Receivables. The accounts receivable of the Operating Company as
recorded on the Balance Sheet have been created in the ordinary course of
business, represent valid and enforceable obligations owed to the Operating
Company (subject to the Operating Company's bad debt reserve but, to the best
knowledge of the Shareholders, not subject to any penalties, claims or
retainages not disclosed in the Balance Sheet) and have been recorded in
accordance with GAAP consistently applied.
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
Operating 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 Operating Company is a party and which (with the exception of any
contracts with or for the benefit of any Shareholder or Affiliate of the
Company or the Operating Company) exceed $50,000 in aggregate consideration
to be received or paid thereunder (the "Contracts"). Each Contract is in
full force and effect and constitutes the legal, valid and binding
obligations of all parties thereto, subject to the effect of bankruptcy,
insolvency, moratorium or other similar laws. With the exception of good
faith disputes described in SCHEDULE 3.10.2, the Operating Company is not
in default and has not received or given any notice of default, and to the
best knowledge of Shareholders 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 Operating Company and requests for proposal received by the Operating
Company as of the date hereof for which contracts have not yet been
awarded.
3.10.4 Attached as SCHEDULE 3.10.4 is a list of all financial
institutions where the Operating Company maintains accounts and the names
of the signatories on those accounts.
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Shareholders 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 Operating Company of which the
Operating Company has received notice and 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
known to Shareholders under any of the Contracts. Except as disclosed in
SCHEDULE 3.10.6, to the best of Shareholders' knowledge, the relationships
of the Operating Company with its customers, contractors and suppliers are
satisfactory.
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 Operating Company (the "Material Customers") by dollar
volume of business during the twelve month period prior to the date hereof
and the estimated dollar volume of business conducted by the Operating
Company with each of the Material Customers during such period.
3.11.2 Attached as SCHEDULE 3.11.2 is a list of the ten largest
suppliers to the Operating Company's business (the "Material Suppliers") by
dollar volume of business during the twelve month period prior to the date
hereof and the estimated dollar volume of business conducted by the
Operating Company with each of the Material Suppliers during such period.
3.11.3 Shareholders have no reason to believe that any Material
Customer or Material Supplier intends to terminate its relationship with
the Operating Company before or after the Closing Date or that the
Operating Company's relationship with any Material Customer or Material
Supplier is unsatisfactory.
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 or the Operating 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, to the best of
Shareholders' knowledge, threatened against the Company or the Operating
Company or any Shareholder. Copies of all letters provided to accountants
by counsel for the Company and/or the Operating Company with respect to
litigation or claims involving the Company and/or the Operating Company in
the last five fiscal years have previously been delivered to NEI.
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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, to the best of Shareholders' knowledge, threatened
against the Operating Company as of the date hereof.
3.12.3 No disclosure of any litigation in SCHEDULE 3.12.1 shall exempt
such litigation from the indemnification provisions of Section 9.1.
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 Operating 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 Operating 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 Operating Company or assessed any liquidated damage
against the Operating 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 and copyrights owned or licensed by the Company or the Operating
Company. Except as disclosed in SCHEDULE 3.14, the Company or the Operating
Company owns all right, title and interest in all such owned intellectual
property.
3.14.2 The Operating Company has the right to use all data and
information (including confidential information, trade secrets and know-
how) used in the conduct of its business.
3.14.3 To the best knowledge of Shareholders, the Operating 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 Operating Company
is a party are in full force and effect, and the Operating Company has the
right to use all computer software used in its business.
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3.15 Compliance with Laws. The Operating Company is in compliance in all
material respects with all federal, state and local laws, regulations and
ordinances applicable to the conduct of its business. The Operating 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
Operating Company to conduct its business, the failure of which to be obtained
or maintained would have a Material Adverse Effect. All required Permits have
been obtained by the Operating 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: (a) all Taxes owed by the
Company and the Operating Company have been fully paid or provided for and all
Returns in connection therewith have been timely filed or extended; and (b) the
Company and the Operating Company have adequately accrued for all such Taxes
payable subsequent to the last period for which they were paid, and neither the
Company nor the Operating Company will have any liability for Taxes in excess of
amounts accrued on the Balance Sheet.
3.18 Books and Records. The books and records of the Company and the
Operating Company: (a) are accurate and complete in all material 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
the Operating Company; and (d) accurately and fairly reflect the basis for the
Financial Statements. The minute books of the Company and the Operating Company
reflect all corporate actions taken by the boards of directors and shareholders
of the Company and the Operating Company.
3.19 Labor and Employment.
3.19.1 A complete list of all employees of the Operating Company as of
the most recently available date has been delivered to NEI. Except as
disclosed in SCHEDULE 3.19: (a) the Operating Company has not had during
the last five years, nor to the best knowledge of Shareholders 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 Operating Company has not committed
any unfair labor practices; (c) there is no pending or, to the best
knowledge of Shareholders, threatened charge or complaint against the
Operating Company by the National Labor Relations Board or comparable state
or local agency; (d) the Operating Company has complied in all material
respects 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
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health, collective bargaining and the payment and withholding of taxes; (e)
the Operating Company 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, to the best knowledge of Shareholders, threatened
between the Operating Company and any of its employees or former employees;
and (g) the Operating 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 If the Operating Company is a union contractor, the
International Brotherhood of Electrical Workers has been recognized by the
Operating Company as the bargaining unit for certain of its employees and
such union currently represents approximately [____] of the Operating
Company's employees. All union dues and benefits and contributions to union
pension plans payable by the Operating Company under collective bargaining
agreements have been fully paid, and the Operating Company has complied
with its obligations under such collective bargaining agreements.
3.19.3 If the Operating Company is not a union contractor, no union
has sought to organize the Operating 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, to the best knowledge of
Shareholders, about the Real Property or Leased Facilities (collectively,
the "Facilities") 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 Facilities is or, to the best knowledge of
Shareholders, 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
Facilities, whether contained in barrels, tanks, equipment (moveable or
fixed) or other containers, other than those utilized in the ordinary
course of the Operating Company's business in conformity with applicable
laws and regulations.
3.20.3 No part of the Facilities is or has been at any time during the
Operating Company's operation of the same, a "facility" as defined in 42
U.S.C. (S) 9601(9)(B).
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3.20.4 Except as disclosed in SCHEDULE 3.20.4, there are not now, nor
has there been at any time during the Operating Company's operation
thereof, any underground storage tanks located in or, to the best knowledge
of Shareholders, about the Facilities.
3.20.5 No asbestos or asbestos-containing materials have been
installed, used, incorporated into or disposed of in or about the
Facilities.
3.20.6 No polychlorinated biphenyls are located in or, to the best
knowledge of Shareholders, about the Facilities.
3.20.7 Accurate and complete copies of any and all environmental
investigations, studies, audits, tests, reviews and analyses in the
possession of any Shareholder, the Company or the Operating Company and
relating to the Facilities have been delivered to NEI.
3.20.8 There are no conditions in or, to the best knowledge of
Shareholders, about the Facilities which violate in any material respect
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 Facilities and the Operating Company's use of the same and all
business and electrical contracting practices of the Operating Company
comply in all material respects with all Environmental Laws.
3.20.9 No litigation, claims or demands have been brought or, to the
best knowledge of Shareholders, threatened against the Company or the
Operating 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 any of the
Personal Property or Facilities, and no governmental actions have been
taken or are in process which could subject any of the Personal Property or
Facilities 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.
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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 Operating Company
or for which the Company or the Operating Company could have any actual or
contingent liability (collectively, "Benefit Plans"). The Company or the
Operating 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 or the Operating Company has also made available to NEI copies of
the summary plan description for each Benefit Plan, the most recent annual
report and actuarial 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
Operating Company in compliance in all material respects 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 or the Operating 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
Shareholders, threatened against the Company or the Operating Company. All
contributions required to be made to each Benefit Plan under its terms,
ERISA or other applicable law have been timely made. Neither the Company
nor the Operating Company has any 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
the Operating Company nor any member of their "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 the Operating Company or
any member of their controlled group participates or has
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participated, neither the Company nor the Operating 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 the
Operating Company nor any member of their 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.
3.21.6 No current or former employee of the Operating 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 the Operating Company or
member of their 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 or the Operating Company which
have been guaranteed by any of the Shareholders as of the Closing Date (the
"Guaranteed Obligations").
3.23 Disclosure.
3.23.1 No representation or warranty of Shareholders, the Company or
the Operating Company in this Agreement or any other document delivered
pursuant hereto or any statement, document, certificate or exhibit
furnished or to be furnished by Shareholders, or the Company or the
Operating 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 Questionnaires and any
other questionnaires or representation certificates furnished by the
Company, the Operating Company and/or the Shareholders)
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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.
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 the Operating
Company or any 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 the Operating Company or the Shareholders in
this Agreement or a representation or disclosure with respect to the
Company or the Operating Company or the Shareholders in the Registration
Statement or Prospectus, the Company, the Operating Company and the
Shareholders shall immediately give notice of such fact or circumstance to
NEI. However, such notification shall not relieve the Company, the
Operating Company or the Shareholders from their respective obligations
under this Agreement, and the truth and accuracy of all representations and
warranties of the Company, the Operating Company and the Shareholders as of
the date of this Agreement and as of the Delivery Date and the Closing
Date, as updated as herein provided, shall be a precondition to the
consummation of this transaction.
3.24 Acknowledgment. The Shareholders acknowledge and agree: (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, the
Operating Company, the Shareholders 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 the Shareholders will be
able in the future to sell their 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 the
Shareholders to enter into this Agreement and to exchange the Company Stock for
NEI Stock and cash 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 as described in SCHEDULE 3.25, no Shareholder nor any officer, director
or Affiliate of the Company or the Operating Company or of any 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 Operating Company
or is engaged in any other business relationship with the Company or the
Operating 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 or the Operating Company other than through a customary employment
relationship.
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3.26 Registration Statement. To the best of Shareholders' knowledge, none
of the information (including financial information) supplied or to be supplied
by the Company or the Operating Company or the Shareholders specifically for
inclusion in the Registration Statement contains or will contain any untrue
statement of material fact concerning the Company or the Operating Company or
the Shareholders 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 the Operating Company or the Shareholders, in light of the
circumstances under which they are made, not misleading. The Company and the
Shareholders shall have the right to review and approve in advance any
statements made about the Company, the Operating Company and the Shareholders in
the Registration Statement. Neither the Profit Sharing Plan nor the Plan Trustee
shall have any liability or responsibility for any information included in or
omitted from the Registration Statement, but the Plan Trustee shall have the
right to review information, if any, concerning the Profit Sharing Plan or the
Plan Segregated Accounts included in the Registration Statement.
3.27 Brokers and Finders. Neither Shareholders nor the Company nor the
Operating Company have retained any broker or finder in connection with this
transaction, and neither NEI nor any subsidiary shall become liable for the fees
of any such brokers or finders as a result of this transaction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEI
NEI makes the following representations and warranties and
acknowledges that Shareholders, the Company and the Operating 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
the Delivery Date and the Closing Date, shall not be affected by any
investigation conducted by Shareholders, 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 Company Stock.
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
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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 and the rules and
regulations thereunder.
4.4 Transactions in Capital Stock. Except for the Other Agreements and
except as set forth 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 which may be effected by NEI following the Closing Date
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 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.
4.8 No Violations.
4.8.1 NEI is not in violation of the NEI Charter Documents or any
material 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,
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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 Company Stock
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 purchase and sale
of the Company Stock or 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 issuance and delivery to the Shareholders,
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, and will be issued, sold and distributed by NEI in compliance with all
applicable federal and state securities laws. 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.
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.
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, the Operating Company or the Shareholders for inclusion in the
Registration Statement, and the Shareholders shall be entitled to rely thereon
without regard to any other investigation made by the Shareholders or the fact
that the NEI Stock issuable to Shareholders is not registered thereunder.
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,
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provided that the foregoing does not apply to any information that the Company,
the Operating Company or the Shareholders have furnished to NEI specifically for
inclusion in the Registration Statement.
4.14 Investment Intent. NEI is acquiring the Company Stock for its own
account (or the account of its wholly-owned subsidiary), for investment purposes
only, and without intention to sell, assign, transfer or distribute the same,
except to its wholly-owned subsidiary. NEI acknowledges that the Company Stock
has not been registered under the 1933 Act or any state securities laws and may
not be reoffered or sold except pursuant to a registration statement under or an
exemption from the registration provisions of the 1933 Act and applicable state
securities laws.
ARTICLE V
ACTIONS BY SHAREHOLDERS, THE COMPANY
AND THE OPERATING COMPANY PENDING CLOSING
From the date hereof through the Closing Date, and subject to the
confidentiality undertakings existing among the parties:
5.1 Access. Shareholders, the Company and the Operating Company shall
permit NEI and its representatives and the Underwriters and their
representatives to perform such reasonable inspections, investigations and due
diligence with respect to the Company and the Operating Company and their
respective assets, business and financial condition as NEI or the Underwriters
reasonably deem advisable. Shareholders, the Company and the Operating 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
the Operating Company, and shall make themselves, their counsel and the officers
and employees of the Company and the Operating Company reasonably available to
NEI and the Underwriters and otherwise cooperate with NEI's and the
Underwriters' due diligence investigations. Shareholders 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 and the Operating Company as NEI or the Underwriters reasonably request.
Shareholders, the Company and the Operating Company shall permit NEI and the
Underwriters to have access to other third parties, including contractors,
suppliers and bankers with which the Company or the Operating Company does
business, as reasonably required for verification of any information obtained by
NEI or the Underwriters during their due diligence investigation. Shareholders
and the Company shall permit NEI to conduct appraisals of the Operating
Company's equipment and/or real estate at NEI's expense. NEI will provide prior
notice to and will coordinate such due diligence investigations with
Shareholders to avoid disruption or undue interference with the operations of
the Operating Company or relations with customers or other third parties.
Shareholders shall deliver to NEI copies of all environmental audits, risk
assessments and other investigations performed with respect to the Operating
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
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by any due diligence investigation conducted by NEI, the Underwriters or their
respective representatives.
5.2 Carry on in Ordinary Course. The Operating Company shall carry on its
business in the ordinary course and substantially in the manner as heretofore
conducted. The Operating 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 Operating Company shall not enter into any contract
or commitment to purchase or sell any equipment, machinery, real property,
capital assets or other assets (other than inventory or as necessary to perform
contracts in the ordinary course) having a value in excess of $50,000, or engage
in any transaction or incur any indebtedness or obligations outside the ordinary
course of business (except as contemplated by this Agreement), without the prior
written consent of NEI. The Company shall enter into a new Facility lease
acceptable to NEI and Shareholders calling for a term of 10 years and a mutually
acceptable rental rate. The Operating Company shall keep all performance bonds
and insurance policies in full force and effect or shall provide reasonably
equivalent replacements in substitution therefor.
5.3 General Increases Limited. Without the prior written consent of NEI or
as required under existing collective bargaining or employment agreements or to
meet commitments previously made and disclosed to NEI, the Operating 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; provided,
the Company may pay bonuses to officers in an amount not to exceed 50% of the
consolidated pre-tax income of the Company for the period from July 1, 1997
through June 30, 1998, which the Company shall report as a deductible expense
and so accrue the same on the Balance Sheet. For purposes of this Section 5.3,
pre-tax income shall not be reduced by any bad debt reserve in excess of $25,000
attributable to the fiscal year of the Company which commenced July 1, 1997.
5.4 Preservation of Organization. The Company shall use its best efforts to
preserve the Operating Company's business organization intact (to the extent
failure to do so would cause a Material Adverse Effect), to keep available to
NEI the present employees of the Operating Company and to preserve for NEI the
present relationships of the Operating Company with customers (including
Material Customers), contractors and suppliers (including Material Suppliers)
and others doing business with it, and the Shareholders shall not take or
approve any action contrary to the Company's undertakings in this regard.
Neither the Company nor the Operating Company shall amend its Articles of
Incorporation or Bylaws or make any changes in its authorized or issued capital
stock. Neither the Company nor the Operating Company shall issue to any
Shareholder or any other Person any shares of common stock or other securities
or grant to any Shareholder or other Person any right, option or warrant to
purchase any common stock or other securities of the Company or the Operating
Company or securities convertible into the same.
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5.5 No Default. Except in connection with good faith disputes existing from
time to time and disclosed to NEI, the Operating Company shall perform all
obligations under and shall not default under any Employment Agreement,
Contract, commitment, obligation or indebtedness.
5.6 Dividends. Neither the Company nor the Operating Company shall declare
or pay any dividend or make any distribution, directly or indirectly, in respect
of the Company Stock or Operating Company Stock, nor redeem any of the Company
Stock or the Operating Company Stock, except as described and permitted in
Section 5.3 or as otherwise consented to in writing by NEI.
5.7 Voting Trusts or Other Arrangements. Neither Shareholders nor the
Company shall enter into any voting trust, voting agreement or other arrangement
with respect to the Company Stock or Operating Company Stock or the election of
directors of the Company or the Operating Company.
5.8 Interim Financial and Borrowing Statements. Shareholders shall deliver
to NEI such interim balance sheets and operating statements and statements of
borrowings of the Company and the Operating Company at such intervals as NEI
reasonably requests, but no more frequently than monthly.
5.9 Bids and Contracts. Shareholders shall provide NEI with a copy of all
bids submitted by and contracts awarded to or entered into by the Operating
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 the Operating Company or withheld from their respective revenues,
except: (a) as required for the conduct of the Operating Company's business in
the ordinary course; and (b) as required for the payment of obligations incurred
in the ordinary course; or (c) as otherwise expressly permitted in Section 5.3.
5.11 Environmental Audits. Shareholders shall, and shall cause the
landlords of the Company and the Operating Company to, permit NEI to conduct
Phase I environmental assessments of the Facilities 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 any
Facility, such assessment and/or remediation shall be completed as soon as
practicable at Shareholders' expense. Notwithstanding the foregoing,
Shareholders' total liability for the cost of any Phase II environmental
assessments shall not exceed $20,000.
5.12 No Transfer. (a) No Shareholder shall transfer to any Person other
than NEI or to other Shareholders or immediate family members of Shareholders
who agree to become parties to this Agreement (or trustees for the benefit of
Shareholders or such family members) (each, a "Permitted Transferee") any of the
Company Stock or cause or permit the Company to transfer to any Person any of
the Operating Company Stock, nor shall Shareholders, the Company or the
Operating Company grant to any Person other than NEI or a Permitted Transferee
any right, title or
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interest in or right or option to acquire any Company Stock or Operating Company
Stock or other interest in the Company or the Operating Company.
(b) To the fullest extent permitted by ERISA and other applicable
law, the Individual Shareholders further agree to not cause the Profit Sharing
Plan or the Plan Trustee to transfer any of the Plan Segregated Account Shares
to any Person other than NEI or to grant to any Person other than NEI any right,
title or interest in or right or option to acquire any of the Plan Segregated
Account Shares.
5.13 No Shop. None of the Shareholders, nor the Company nor the Operating
Company nor any agent, officer, director, trustee or representative of any of
the Shareholders, the Company or the Operating 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 Operating Company Stock or all or a
material amount of the assets of, or any equity interest in, the Company or the
Operating Company; 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 or the Operating Company with any other
entity; and provided further that the Individual Shareholders agree, to the
fullest extent permitted by ERISA and other applicable law, that they will not
cause the Profit Sharing Plan or the Plan Trustee to take any such actions or to
grant to any Person other than NEI any right, title or interest in or right or
option to acquire any of the Plan Segregated Account Shares.
5.14 Agreements. Shareholders, the Company and the Operating Company shall
terminate, on or prior to the Closing Date: (a) any shareholder agreements,
voting agreements, voting trusts, options, warrants and employment agreements to
which the Company or the Operating Company is a party or entered into with
respect to the Company or the Operating Company; and (b) any listing agreement
between the Company or the Operating Company and any Shareholder, provided that
nothing herein shall prohibit the Company or the Operating Company from paying
(either prior to or on the Closing Date) notes or other obligations from the
Company or the Operating Company to the Shareholders in accordance with their
terms, which terms have been disclosed to and accepted by NEI.
5.15 Notification of Certain Matters.
5.15.1 Shareholders shall give prompt written 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 the Operating Company or the Shareholders
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contained herein to be untrue or inaccurate in any material respect on or
prior to the Closing Date.
5.15.2 NEI shall give prompt written notice to Shareholders upon
becoming aware of any material adverse change in the business or financial
condition of NEI, any event or condition likely to have a material adverse
effect on the business or financial condition of NEI, or any event the
occurrence or non-occurrence of which would be likely 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, the
Operating Company and the Shareholders shall furnish or cause to be furnished to
NEI and the Underwriters all information concerning the Company, the Operating
Company and the Shareholders required for inclusion in, and will cooperate in
all reasonable respects with NEI and the Underwriters in the preparation of, the
Registration Statement and Prospectus (including audited and unaudited
historical and pro forma financial statements prepared in accordance with GAAP,
in form suitable for inclusion in the Registration Statement). Shareholders
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, the Operating Company and the Shareholders 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
Shareholders, the Operating Company 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, the Operating Company and the Shareholder
Representative 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, the Operating Company or the Shareholders becomes
inaccurate or incomplete in any material respect, and to provide the information
needed to correct any such inaccuracy. NEI shall reimburse Shareholders for any
legal and accounting fees incurred by them in performing the covenants in this
Section 5.16, up to a maximum aggregate reimbursement of $2,000.
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.
5.18 Compliance With The Hart-Scott Act. If NEI or the Company determines
that any filings under the Hart-Scott Act are required in connection with this
Agreement, then: (a) each party agrees to cooperate and use its best efforts to
comply with the Hart-Scott Act; (b) such compliance by the Shareholders, the
Operating Company and the Company shall be deemed a condition precedent to NEI's
obligations under this Agreement, and NEI's compliance shall be deemed a
condition precedent to the obligations of Shareholders, the Company and the
Operating Company
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hereunder; and (c) the parties agree to cooperate and use their best efforts to
cause all filings required under the Hart-Scott Act to be made. If filings under
the Hart-Scott Act are required, the cost thereof (including filing fees) shall
be paid by NEI. The obligation of each party to consummate the transactions
contemplated by this Agreement is subject to the expiration or termination of
the waiting period under the Hart-Scott Act, if applicable.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
SHAREHOLDERS, THE COMPANY AND THE OPERATING COMPANY
Each and every obligation of Shareholders, the Company and the
Operating Company 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 Shareholders:
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 Shareholders shall receive a certificate, dated
as of the Closing Date, 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 Shareholders shall receive a
certificate, dated as of the Closing Date, from an officer of NEI to that
effect.
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 Company Stock or the IPO.
6.4 Employment Agreements. Each of the Persons listed on SCHEDULE 6.4
shall have entered into an employment and noncompetition agreement mutually
acceptable to that Person and NEI.
6.5 IPO Closing. The Registration Statement shall have been declared
effective by the SEC, a copy thereof shall have been delivered to Shareholders,
and closing of the IPO shall have occurred.
6.6 Hart-Scott Act. If applicable, the expiration or termination of the
waiting period under the Hart-Scott Act shall have occurred.
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6.7 Opinion of Counsel. Shareholders shall have received from NEI's counsel
a written "authority opinion," dated as of the Closing Date, satisfactory in
form and substance to Shareholders and their counsel.
6.8 No Material Adverse Change. There shall not have been any material
adverse change in the business or financial condition of NEI on a consolidated
basis from that reflected in the Registration Statement, and the closing of
Other Agreements with at least two of the Other Founding Companies described in
the Registration Statement shall have occurred, or shall occur simultaneously
with Closing of this Agreement.
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 Shareholders, the Company and the Operating 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 certificates from the Shareholders to that effect.
7.2 Compliance with Agreement. Shareholders, the Company and the Operating
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 certificates from the Shareholders to that effect.
7.3 Execution and Deliverables. Each of the Shareholders shall have
executed a counterpart of this Agreement and all Deliverables shall have been
delivered to NEI.
7.4 Corporate Documents. Shareholders shall have delivered to NEI: (a)
certified copies of the Articles of Incorporation and Bylaws of the Company and
the Operating Company; and (b) certificates from the proper state officials
evidencing the good standing of the Operating Company in the State of
Incorporation and all other states in which the Operating 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
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limited to: (a) verification of the quality, quantity and valuation of the
Operating Company's assets and liabilities; (b) verification of
Shareholders' factual representations regarding the Operating Company's
business operations; (c) verification of the historical and expected
operating performance of the Company and the Operating Company, 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 Operating Company and shall be satisfied with the Operating
Company's labor relations.
7.5.3 NEI shall be satisfied that the Operating Company has clear and
marketable title to its assets.
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 Operating Company's business or operations.
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.
Notwithstanding the foregoing, NEI shall not rely on this Section 7.5 as
grounds for a refusal to Close following September 30, 1998, unless a material
fact or circumstance which was not disclosed prior to or which arose after such
date comes to the attention of NEI after such date which NEI, in its reasonable
good faith judgment, determines would cause a Material Adverse Effect.
7.6 Employment Agreements. The Operating Company shall have entered into
employment agreements acceptable to NEI with such key employees of the Operating
Company as designated by NEI and shall have made such other arrangements with
respect to the Operating Company's key employees as NEI deems advisable, in form
and substance substantially as set forth in SCHEDULE 7.6 attached hereto.
7.7 No Material Adverse Change. There shall not have been any Material
Adverse Change from the Balance Sheet Date to the Closing Date.
7.8 Opinion of Counsel for Shareholders. NEI shall have received from
Shareholders' counsel a written authority opinion, dated as of the Closing Date,
addressed to NEI and satisfactory to counsel for NEI in form and substance.
7.9 Resignations. All directors of the Company and the Operating Company
shall have delivered their written resignations to NEI unless otherwise
instructed by NEI.
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7.10 Board Approval. The transaction contemplated hereby shall have been
approved by the Boards of Directors of the Company and the Operating Company.
7.11 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 Company Stock or the IPO.
7.12 Shareholders' Release. The Shareholders shall have delivered to NEI an
instrument dated the Closing Date releasing the Company, the Operating Company
and NEI from: (a) any and all claims of the Shareholders against the Company,
the Operating Company and NEI arising prior to the Closing Date; and (b)
obligations of the Company, the Operating Company and NEI to the Shareholders
arising prior to the Closing Date, except for: (i) continuing obligations to any
Shareholders relating to their employment by the Operating Company; and (ii)
obligations arising under this Agreement or the transactions contemplated
hereby.
7.13 Termination of Related Party Agreements. Except as set forth in
SCHEDULE 7.13, all existing agreements between the Company or the Operating
Company and the Shareholders or their Affiliates shall have been terminated on
or before the Closing Date.
7.14 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.
7.15 FIRPTA Certificate. If requested by NEI in connection with any real
property lease to which any of the Shareholders and the Company, the Operating
Company or NEI are or will be parties, each Shareholder shall have delivered to
NEI a certificate to the effect that he or she is not a foreign person pursuant
to Section 1.1445-2(b) of the Treasury regulations.
7.16 IPO Closing. The Registration Statement shall have been declared
effective by the SEC and closing of the IPO shall have occurred.
7.17 Facility Leases. The Operating Company shall have entered into lease
agreements mutually acceptable to NEI and the Shareholders with respect to the
facilities currently occupied by the Operating Company.
ARTICLE VIII
COVENANTS
8.1 Release From Guarantees; Repayment of Certain Obligations. NEI shall
cause the Shareholders to be released from any and all guarantees of the
indebtedness or pre-Closing indemnity obligations or liabilities of the Company
and the Operating Company, including, without
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limitation the performance or surety bond obligations identified in SCHEDULE
8.1. In the event NEI cannot obtain such releases, in form and substance
reasonably satisfactory to the affected Shareholders, from the lenders or
bonding companies under any such guaranteed indebtedness or other liabilities
within 120 days following the Closing Date, NEI shall promptly liquidate or
otherwise refinance or retire such indebtedness or bond obligations such that
the Shareholders' personal liability thereunder shall be released. NEI will
indemnify the Shareholders against any loss or damage suffered by any of them
during such 120 day period as a result of any such failure to secure the release
of Shareholders.
8.2 Preparation And Filing of Tax Returns.
8.2.1 The Company and the Operating Company, if possible, or otherwise
the Shareholders shall file or cause to be filed all federal, state and
local income Tax Returns for the Company and the Operating Company for all
taxable periods ending prior to the Closing Date, and shall permit NEI to
review such Tax Returns prior to filing. The Shareholders shall pay or
cause to be paid all Tax liabilities based on taxable income of the Company
or the Operating Company prior to the Closing Date; provided, however, that
Shareholders shall be obligated to pay such Tax liabilities only to the
extent such liabilities have not otherwise been accrued or provided for in
a manner acceptable to NEI by the Company or the Operating Company on the
Balance Sheet. The Company and the Operating Company shall pay all of their
respective Taxes due and payable on or prior to the Closing Date and shall
adequately accrue for all Taxes due after the Closing Date but based on
periods occurring prior to the Closing Date.
8.2.2 NEI shall file or cause to be filed all Tax Returns for the
Company and the Operating Company for periods after the Closing Date.
8.2.3 (Intentionally omitted)
8.2.4 If applicable, each of the Company, the Operating Company, NEI
and each 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. The Shareholders shall pay any Tax (including federal, state, and
local income Tax and transfer Tax) arising from any taxable gain on the
sale of the Company Stock effected hereby and the transfer of the Company
Stock.
8.2.5 If Section 8.2.4 does not apply, the Company, the Operating
Company and/or the Shareholders 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 and consented to by
the Shareholders, such consent not to be unreasonably withheld or delayed.
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8.2.6 Shareholders shall fully cooperate with NEI in the event of any
audit of the Tax Returns of the Company or the Operating Company for the
tax year in which the Closing Date occurs or any prior tax year and,
subject to the limitations set forth in Section 9.5, shall pay and hold the
Company, the Operating Company and NEI harmless from any additional Taxes
required to be paid as a result of any such audit or any resulting
adjustment in the Tax liability of the Company, the Operating Company or
NEI, to the extent such Taxes have not been accrued or provided for in a
manner acceptable to NEI by the Company or the Operating Company on the
Balance Sheet.
8.3 Further Assurances.
8.3.1 Shareholders will use their best efforts to: (a) obtain any
consents by third parties or governmental authorities required or
reasonably deemed desirable by NEI in connection with the consummation of
the transactions contemplated hereby and NEI's assumption of control of the
Company and the Operating Company; (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 Shareholders, the Company and the Operating Company at or prior to the
Closing Date. NEI shall use its best efforts to fulfill or cause to be
fulfilled each of the conditions precedent recited in Article VI hereof on
or prior to the Closing Date and perform each of the acts and observe each
of the covenants required to be performed or observed by NEI at or prior to
the Closing Date.
8.3.2 Shareholders, the Company and the Operating Company shall
execute and deliver or cause to be executed and delivered such further
instruments, in form and substance mutually acceptable to the parties, and
use their best efforts to take such other action as NEI reasonably deems
necessary or desirable to remedy any breach of representation or warranty
made by Shareholders herein or to more effectively carry out the transfer
of the Company Stock 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 use its best efforts to take such
other action as Shareholders deem 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.
8.4 Satisfaction of Indebtedness. Contemporaneous with the Closing, NEI
shall cause the indebtedness of the Company and the Operating Company described
in SCHEDULE 8.4 to be paid in full.
8.5 Employment Agreements. NEI shall cause the Operating Company to perform
its obligations under the Employment Agreements.
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ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by The Shareholders. Shareholders jointly and severally
agree 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 Shareholders, the
Company or the Operating Company contained herein or in any Schedules,
certificates, questionnaires or other instruments delivered in connection
herewith; (b) any breach of this Agreement by Shareholders, the Company or the
Operating 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 the Operating Company or the Shareholders which was
based upon information provided to NEI or its counsel or the Underwriters by the
Company or the Operating Company or the Shareholders 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 the Operating Company or the Shareholders 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 the Shareholders
provided written corrected information to NEI for inclusion in the final
Prospectus and such information was not so included, and provided further, that
no Shareholder shall be liable for any indemnification pursuant to this Section
9.1(c) to the extent solely attributable to a breach of any representation,
warranty or agreement made by any other Shareholder; (d) any default by the
Operating Company under any performance bond occurring prior to the Closing
Date; (e) any liability or obligation of the Company or the Operating Company
which is not disclosed in the Balance Sheet or is not incurred in the ordinary
course of business from the Balance Sheet Date to the Closing Date, and any
liability arising from any litigation disclosed in SCHEDULE 3.12.1; (f) any
violation by the Company or the Operating 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 Operating Company's 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; or (j) any federal, state or
local audit of the Tax Returns of the Company or the Operating Company for the
tax year in which the Closing Date occurs or any prior tax year and/or any claim
or determination by any state other than Georgia that the Company or the
Operating Company owes income, sales or withholding Taxes for any such year, and
any additional Taxes which the Company, the Operating Company or NEI is required
to pay in connection with any such audit, claim or determination or any
resulting adjustment in the Tax liability of the Company, the Operating Company
or NEI, except to the extent
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any such Tax liability is accrued on the most current Balance Sheet. Any
liability of Shareholders under Section 9.1(j) shall be reduced by the net
present value (computed at an annual capitalization rate of 10%) of any
corresponding Tax deduction which may be taken by the Company, the Operating
Company or NEI as a result of any such adjustment.
9.2 Indemnification by NEI. NEI agrees to indemnify and hold the
Shareholders 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 in connection with any damage caused by NEI or its
representatives in the conduct of any environmental audits conducted pursuant to
Section 5.11 or other inspections conducted by NEI or its representatives; (c)
any liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise arising in connection with the Other
Agreements, or 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, the Operating Company or the Shareholders; or (d) decisions made
at the corporate level by NEI in connection with the conduct of the business of
the Company or the Operating Company following the Closing Date.
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 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
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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. Notwithstanding the foregoing, if one
or more of the Shareholders is an indemnifying party under any claim covered by
Section 9.1, the Shareholder Representative and an executive officer of NEI
shall meet as a committee (the "Indemnification Committee") for the purpose of
evaluating the merits and potential exposure of the indemnified parties under
the claim. If the Shareholder Representative is able to negotiate a settlement
of the claim on terms which provide a full release of the indemnified parties
and do not obligate the indemnified parties to pay any amount or be bound by any
injunctive or other equitable relief, and if the indemnified parties object to
the settlement terms negotiated by the Shareholder Representative, then the
liability of the indemnifying parties under Section 9.1 in connection with such
claim shall be limited to the settlement amount negotiated and agreed to by the
Shareholder Representative plus any investigation and defense costs incurred by
the indemnified parties in connection with such claim.
9.4 Exclusive Remedy. The indemnification provided for in this Article IX
shall (except as provided in Articles XI and XIV) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought under this
Agreement 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 any
of the Shareholders unless the aggregate of all claims which NEI may have
against the Shareholders exceeds a deductible of $50,000 (other than claims
for any failure to perform the covenants set forth in Article VIII), in
which event only such amounts as shall be in excess of $50,000 shall be
asserted. Neither the Company nor the Operating Company nor the
Shareholders shall assert any claim for indemnification against NEI unless
the aggregate of all claims which the Company, the Operating Company and
the Shareholders may have against NEI exceeds a deductible of $50,000
(other than claims for failure to pay or deliver the cash portion of the
Purchase Price, the Earnout or the NEI Stock or any failure to perform the
covenants set forth in Article VIII, which shall not be subject to the
deductible). Notwithstanding the foregoing, the litigation expenses
incurred in the ordinary course in the "Atlanta Gas Mart" litigation
described in SCHEDULE 3.12.1 shall not count against the $50,000 deductible
but shall be taken into account as an expense in computing the Earnout
described in SCHEDULE 2.2.
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9.5.2 The maximum aggregate liability of Shareholders under this
Article IX shall be $5,000,000. Notwithstanding the foregoing: (a) the
Trustee of the Profit Sharing Plan shall have no liability in its
individual or corporate capacity under this Article IX; and (b) any
indemnification for which Shareholders are liable under this Article IX
shall be satisfied first from the assets of the Individual Shareholders,
and then from assets of the Plan Segregated Assets allocated to such
Shareholders. In no event shall any plan assets of the Profit Sharing Plan
other than the Plan Segregated Assets be subject to the provisions of this
Article IX.
9.5.3 Except as provided in Section 9.1 (j), no Shareholder shall be
liable under this Article IX for any claim asserted more than 18 months
after the Closing Date. Shareholders' obligation under Section 9.1(j) shall
survive for a period of three years following the Closing Date, unless
Shareholders' obligation under Section 9.1(j) is due to Shareholders' Tax
fraud, in which case such obligation shall survive indefinitely, or to any
failure by Shareholders or the Company to file a federal or state income
Tax Return, in which case such obligation shall survive for the applicable
statute of limitations period.
9.5.4 Each Shareholder's respective obligation under this Article IX
shall be limited to a pro rata portion of the total liability of the
Shareholders under this Article IX based upon the percentage which the
portion of the Purchase Price to be received by such Shareholder bears to
the total Purchase Price.
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 the Shareholders
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 the Shareholders 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, 1999, for any reason other than failure of the Shareholders
to satisfy any of the conditions in Article VII which are within their
control.
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10.1.4 By the Shareholders, the Company and the Operating 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
the Company, the Operating Company or any Shareholder for any legal, accounting
or other fees or expenses incurred by any of them in the event of any
termination of this Agreement. Nothing contained in this Section 10.2 shall
otherwise limit the rights of a non-breaching party under this Agreement.
ARTICLE XI
NONCOMPETITION AND NONDISCLOSURE
11.1 Noncompete Covenant. Each Shareholder (other than the Profit Sharing
Plan or the Plan Trustee) agrees that for a term commencing on the Closing Date
and ending upon expiration of the period set forth opposite such Shareholder's
name in SCHEDULE 11.1 hereto, he or she 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
(other than the Operating Company) 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 the Operating Company; or (c) entice
or induce any employee or officer of NEI or its subsidiaries or the Operating
Company to leave such service for the purpose of engaging in a competing
commercial or industrial electrical contracting business. Shareholders (other
than the Profit Sharing Plan) acknowledge 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.
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11.2 Confidential Information.
11.2.1 Shareholders jointly and severally agree that they 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 Operating Company's
business prior to the Closing Date or pursuant to any subpoena or order of
any 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
or the Operating 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 or the Operating Company,
whether or not marked or specifically identified as confidential.
11.3 Enforcement.
11.3.1 Shareholders acknowledge 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.
11.3.2 NEI acknowledges that any breach of the covenants in Section
11.2.2 would cause irreparable injury to the Company and the Operating
Company which would not be fully compensable in damages. Accordingly, the
Company and the Operating 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.
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ARTICLE XII
TRANSFER RESTRICTIONS
Unless otherwise agreed by NEI, except for transfers to immediate
family members of Shareholders who agree to be bound by the restrictions in this
Article XII (or trusts for the benefit of the Shareholders or such family
members), for a period of one year from the Closing Date, except pursuant to
Article XIV hereof, none of the Shareholders shall sell, assign, exchange,
transfer or otherwise dispose of any shares of NEI Stock received by them
pursuant to this Agreement, except as contemplated in Section 15.1. 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. Shareholders acknowledge that the shares of NEI
Stock to be delivered to the Shareholders 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 or pursuant to an applicable exemption thereunder. The
NEI Stock is being acquired by the Shareholders solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of such stock in connection with a
distribution. The Shareholders represent and agree that none of the shares of
NEI Stock issued to them 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
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APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM THE
REGISTRATION PROVISIONS OF SUCH LAWS.
13.2 Economic Risk; Sophistication. The Shareholders represent that they
are able to bear the economic risk of an investment in the NEI Stock and can
afford to sustain a total loss of such investment. Each 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. The
Shareholders have had an adequate opportunity to ask questions and receive
answers from the officers of NEI concerning the transaction contemplated hereby.
Each Shareholder represents that he or she is an "accredited investor" as
defined in Rule 501(a) under the 1933 Act, or if not an accredited investor,
such Shareholder has sufficient income and net worth to withstand the risks of
the investment contemplated hereby and, individually or together with his or her
purchaser representatives, is sufficiently sophisticated to evaluate the merits
and risks of such investment. The Shareholders acknowledge that the risks of
this transaction include tax risks and the Shareholders have consulted with
their tax advisors with respect to and fully accept such risks. Nothing
contained in this Article XIII shall otherwise limit the rights of any
Shareholder in the event of a default by NEI under this Agreement.
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 each Shareholder written notice of its intent to do so.
Upon the written request of any 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 such Shareholder pursuant to this Agreement which any such
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 the
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 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 the Shareholders and all other selling security
holders in the offering) the number of shares offered for the accounts of such
persons to a number
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deemed satisfactory by the managing underwriter. If any Shareholder disapproves
of the terms of the underwriting, that Shareholder may elect to withdraw
therefrom by written notice to NEI and the managing underwriter. That
Shareholder's shares of NEI Stock so withdrawn shall also be withdrawn from
registration; provided, that, if by the withdrawal of such shares a greater
number of shares of NEI Stock held by other Shareholders may be included in such
registration, then NEI shall offer to all other Shareholders the right to
include additional shares in the same proportion used in effecting the above
limitations.
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 the Shareholders with copies of such documents
proposed to be filed) as promptly as practicable.
14.2.2 Notify the Shareholders 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 each Shareholder who so requests 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 such
Shareholder 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 any participating Shareholder, promptly incorporate in a prospectus
supplement or post-effective amendment or term sheet such information as
the managing underwriter or underwriters or any participating Shareholder,
as the case may be, reasonably requests to be included therein, including,
without limitation, information with respect to the number of shares of NEI
Stock being sold by participating Shareholders to any underwriter or
underwriters, the purchase
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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 participating Shareholders,
any underwriter participating in any disposition pursuant to such
registration statement, counsel retained by the participating Shareholders,
counsel for the underwriters and any accountant or other agent retained by
participating Shareholders 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 the Shareholders, 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 each 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 such 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 contain an untrue statement of material fact or omit to
state any material fact required to be
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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, each selling Shareholder
(each, an "Indemnified Party") 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 such
Indemnified Party expressly for use therein, or by any Indemnified Party's
failure to deliver a copy of the registration statement or prospectus or
any amendment or supplement thereto after NEI has furnished such
Indemnified Party with a sufficient number of copies of the same.
14.3.2 In connection with any registration under Section 14.1, each
selling Shareholder shall furnish to NEI in writing such information
concerning such Shareholder and his or her 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 so furnished in writing to NEI by such Shareholder
expressly for use in the registration statement. Notwithstanding the
foregoing, the liability of a Shareholder under this Section 14.3.2 shall
be limited to an amount equal to the net proceeds actually received by such
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.
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14.4 Underwriting Agreement. In connection with each registration
pursuant to Section 14.1 covering an underwritten registered offering, NEI and
each participating Shareholder agrees 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, the
Shareholders shall be exempt from any indemnification of the managing
underwriters other than with respect to information provided by the respective
Shareholders 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 any Shareholder, but only to a
member of such Shareholder's immediate family or a trust or partnership for the
benefit of the 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 a Shareholder owns any restricted NEI Stock,
furnish to each 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 the Shareholder may reasonably request in availing itself of any
rule or regulation of the SEC allowing such Shareholder to sell any such
shares without registration.
ARTICLE XV
MISCELLANEOUS
15.1 Assignment. This Agreement shall not be assigned by any party
without the prior written consent of the other parties. Any attempted assignment
without such written consent shall be null and void and without legal effect.
Notwithstanding the foregoing: (a) NEI may assign to any
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wholly-owned subsidiary of NEI its right to acquire and hold the Company Stock
hereunder; and (b) any Shareholder may assign Company Stock and the rights and
obligations of such Shareholder hereunder to Robert Allison or any Permitted
Transferee.
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 Shareholders,
the Company or the
Operating Company: c/o Mr. Robert Allison
2284 Marietta Blvd., N.W.
Atlanta, GA 30318
FAX: (404) 350-1065
with a copy to: Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
One Ninety One Peachtree Street
Atlanta, GA 30303
FAX: (404) 572-6999
Attn: David M. Armitage, Esq.
William B. Shearer, Jr., Esq.
If to NEI: Nationwide Electric, Inc.
1201 Walnut, Suite 1300
Kansas City, MO 64106
FAX: (816) 556-2389
Attn: President
with a copy to: Stinson, Mag & Fizzell, P.C.
1201 Walnut Street, Suite 2800
Kansas City, MO 64106
FAX: (816) 691-3495
Attn: Marc Salle, Esq.
or to such other address or facsimile number as any party may provide the others
in writing. Notice shall be effective when received by the party to whom
addressed.
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15.4 Entire Agreement. Together with the Schedules and Exhibits hereto
and the other agreements referenced herein, 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.
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. Except as provided in Section 5.16, 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 Shareholders' legal, accounting and financial advisors and any
brokers and any transfer taxes payable on transfer of the Company Stock shall be
paid by Shareholders.
15.9 Survival. Those provisions of this Agreement which by their nature
are intended to survive the Closing Date or by their terms explicitly survive
the Closing Date or termination of this Agreement 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 Shareholders in making announcements of this transaction to the
Operating Company's customers, suppliers and employees.
15.12 Special Provisions Concerning the Profit Sharing Plan. The
following special provisions are made concerning the operation and effect of the
provisions of this Agreement insofar as the Profit Sharing Plan, the Plan
Segregated Accounts and the Plan Trustee are concerned notwithstanding any other
provisions of this Agreement to the contrary.
(a) The representations, warranties and agreements appearing in
Article III shall be made by the Individual Shareholders, the Company and the
Operating Company and not by the
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Profit Sharing Plan, the Plan Segregated Accounts or the Plan Trustee. The
Profit Sharing Plan hereby makes the following special representations and
warranties:
(i) In the case of the shares of Company Stock reflected on
Schedule 3.3.1 as being owned by the respective Plan
Segregated Accounts, such shares are owned by the Profit
Sharing Plan and held in such Plan Segregated Accounts and
are not subject to any liens, claims, pledges, security
interests and encumbrances created by the Profit Sharing
Plan.
(ii) This Agreement is the legal, valid and binding obligation of
the Profit Sharing Plan enforceable against the Profit
Sharing Plan in accordance with its terms, subject to the
effect of ERISA, bankruptcy, insolvency, moratorium and
other similar laws.
(b) The following provisions of this Agreement shall, to the extent
that such provisions would otherwise create an agreement, acknowledgment or
covenant of the Shareholders, be deemed to create an agreement, acknowledgment
and/or covenant of the Individual Shareholders and not of the Profit Sharing
Plan, the Plan Segregated Accounts or the Plan Trustee: (i) Section 2.6; (ii)
Article V; (iii) Section 7.4; (iv) Section 8.2; (v) Section 8.3; and (vi)
Sections 11.1, 11.2 and 11.3.
(c) The references to "Shareholder" or "Shareholders" in the following
provisions shall be deemed to refer to the Individual Shareholders and not to
the Profit Sharing Plan, the Plan Segregated Accounts or the Plan Trustee: (i)
Section 7.4; (ii) Section 7.8; (iii) Section 7.12; (iv) Section 7.15; and (v)
Section 7.17.
(d) Without limitation to the provisions of Article IX or any other
provisions of this Agreement, no provision of this Agreement: (i) shall create
any liability or obligation, express or implied, of the Plan Trustee in its
individual or corporate capacity or in any capacity other than as a directed
trustee of the Plan Segregated Accounts under the Profit Sharing Plan; (ii)
shall be deemed to require or compel the Plan Trustee to take any action that
would be in violation of ERISA or other applicable law; or (iii) shall apply to,
or create any liability or obligation (express or implied, direct or indirect)
applicable to any assets of the Profit Sharing Plan other than the respective
Plan Segregated Accounts.
48
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
NATIONWIDE ELECTRIC, INC.
By:
-------------------------------------
"NEI"
SHAREHOLDERS: THE ALLISON COMPANY
By:
- - --------------------------------- -------------------------------------
Robert Allison The "Company"
- - --------------------------------- ALLISON-SMITH ELECTRIC COMPANY,
David Cartwright INC.
By:
- - --------------------------------- -------------------------------------
Lanny Thomas The "Operating Company"
The Allison-Smith Company Profit
Sharing Plan
By
-------------------------------
NATIONWIDE ELECTRIC, INC. -- THE ALLISON COMPANY
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
<PAGE>
SCHEDULE 2.2
PURCHASE PRICE
TOTAL PURCHASE PRICE DUE AT CLOSING/(1)/ $15,585,000
Cash 65%
NEI Stock/(2)/ 35%
ASSETS TO BE RETAINED [Bob Allison is
preparing list of assets
aggregating less
BY SHAREHOLDERS than $10,000]
LIABILITIES TO BE
LIQUIDATED BY
SHAREHOLDERS PRIOR
TO THE CLOSING DATE [None]
- - -------------------
/(1)/ In addition to the cash portion of the Purchase Price payable at Closing,
NEI agrees to pay to the Shareholders as additional Purchase Price, in
cash, an earnout amount (the "Earnout") equal to 25% of the amount by
which the consolidated EBIT of the Company (without taking into effect
any overhead or other costs attributable to NEI or any Other Founding
Company) for each of the fiscal years ending March 31, 1999 and 2000
(each, an "Earnout Period") exceeds $2,500,000. For purposes of this
provision, "consolidated" shall mean the Company and the Operating
Company only. The Earnout, if any, shall be paid by wire transfer to the
account or accounts designated by the Shareholder Representative, not
later than 15 business days after the Company's independent certified
public accountants shall have delivered to the Company, with a copy to
the Shareholder Representative, the audited consolidated financial
statements of the Company for each fiscal year during the Earnout Period.
For purposes of computing the Earnout, NEI shall maintain separate
consolidated books and records for the Company and the Operating Company
or the Division corresponding thereto.
/(2)/ The actual number of shares of NEI Stock shall be based upon the initial
offering price determined at the Pricing, rounded up to the nearest whole
share.
<PAGE>
SCHEDULE 3.3.1
SHAREHOLDERS
Number of Shares
Name of Company Stock
- - ---- ----------------
<PAGE>
SCHEDULE 11.1
TERM OF NONCOMPETE COVENANT
<TABLE>
<CAPTION>
Years from
Name the Closing Date
---- ----------------
<S> <C>
Robert Allison 5
David Cartwright 2
Lanny Thomas 2
</TABLE>
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONWIDE ELECTRIC, INC.
The undersigned, Nationwide Electric, Inc., a Delaware corporation (the
"Corporation"), for the purpose of amending and restating its Certificate of
Incorporation, in accordance with the General Corporation Law of the State of
Delaware, does hereby make and execute this Amended and Restated Certificate of
Incorporation and does hereby certify that:
I. The name of the Corporation is Nationwide Electric, Inc. Its
original Certificate of Incorporation was filed with the Secretary of State of
Delaware on February 17, 1998.
II. Resolutions approving the Amended and Restated Certificate of
Incorporation of the Corporation were duly adopted by unanimous consent of the
Board of Directors of the Corporation as of June 15, 1998, declaring such
amendment and restatement to be advisable and calling for a vote of the
Corporation's stockholders to approve the same.
III. The Amended and Restated Certificate of Incorporation of the
Corporation approved by resolution of the Board of Directors is as follows:
ARTICLE I
The name of this Corporation is NATIONWIDE ELECTRIC, INC.
ARTICLE II
The registered office of the Corporation in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The Registered Agent of the Corporation is The
Corporation Trust Company at Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware, 19801.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
<PAGE>
ARTICLE IV
The total number of shares of capital stock which may be issued by the
Corporation is 41,200,000 shares, of which 30,000,000 shares shall be Common
Stock, par value $0.01 per share, 1,200,000 shares shall be Class A Nonvoting
Common Stock, par value $0.01 per share, and 10,000,000 shares shall be
Preferred Stock, par value $0.01 per share.
GENERAL PROVISIONS RELATING TO ALL STOCK
No holder of shares of any class of capital stock of this Corporation or
holder of any security or obligation convertible into shares of any class of
capital stock of this Corporation shall have any preemptive right whatsoever to
subscribe for, purchase or otherwise acquire shares of this Corporation of any
class, whether now or hereafter authorized. Stockholders of the Corporation
shall not be entitled to cumulative voting of their shares in elections of
Directors.
GENERAL PROVISION RELATING TO COMMON STOCK
Each share of Common Stock shall be entitled to one vote on all matters
submitted for a vote of the stockholders.
GENERAL PROVISIONS RELATING TO
CLASS A NONVOTING COMMON STOCK
1. The Class A Nonvoting Common Stock shall have all of the powers,
preferences and rights of the Common Stock except that the Class A Nonvoting
Common Stock shall not have any voting rights.
2. Upon the sale of shares of Common Stock or debt securities of the
Corporation in a public offering pursuant to an effective registration statement
("Registration Statement") under the Securities Act of 1933, as amended (the
"Public Offering"), all of the issued and outstanding shares of the Class A
Nonvoting Common Stock shall, as of the date of the consummation of the sale of
Common Stock pursuant to the Registration Statement, be automatically converted
into the Conversion Shares (as defined below, and as in effect immediately prior
to the date of filing of the Registration Statement). The Corporation shall
give the holders of the Class A Nonvoting Common Stock notice of the filing with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, of any registration statement relating to any proposed Public Offering
prior to such filing. The holders of shares of Class A Nonvoting Common Stock
shall present such shares for surrender to the Corporation on or before the
closing date of such Public Offering and the Corporation shall issue to such
holders a certificate or certificates for shares of Common Stock in accordance
with these General Provisions on or before such closing date.
3. No fractional shares of Common Stock shall be issued upon
conversion of the Class A Nonvoting Common Stock. In lieu of any fractional
shares to which the holder would
2
<PAGE>
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of such fractional shares of Common Stock as
determined in good faith by the Corporation's Board of Directors, whose
determination shall be conclusive.
4. The Corporation shall at all times when the Class A Nonvoting
Common Stock shall be outstanding, reserve and keep available out of the
authorized but unissued Common Stock, for the purpose of effecting the
conversion of the Class A Nonvoting Common Stock, such number of its duly
authorized shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding Class A Nonvoting Common Stock.
5. Each share of Class A Nonvoting Common Stock shall be converted,
in accordance with these General Provisions, into one share of Common Stock,
adjusted as follows ("Conversion Share"). In case the Corporation shall
hereafter: (i) subdivide its outstanding shares of Common Stock; (ii) combine
its outstanding Common Stock into a smaller number of shares; or (iii) issue
other securities of the Corporation by reclassification of its Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), the number and
kind of Conversion Shares at the effective date of such subdivision, combination
or reclassification shall be proportionately adjusted so that the owner of any
Class A Nonvoting Common Stock converted after such date shall be entitled to
receive the number and kind of Conversion Shares which, if such Class A
Nonvoting Common Stock had been converted immediately prior to such time, he or
she would have owned upon such conversion and been entitled to receive upon such
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur; appropriate adjustment
(as determined in good faith by the Board of Directors of the Corporation) shall
be made to apply these General Provisions to any Conversion Shares which are not
Common Stock in a manner as similar as possible to that for the Common Stock.
In case of any consolidation or merger of the Corporation with or into another
corporation or the sale of all or substantially all of the assets of the
Corporation to another corporation, each share of Class A Nonvoting Common Stock
shall automatically convert into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of such Class A Nonvoting Common
Stock would have been entitled upon such consolidation, merger or sale;
appropriate adjustment (as determined in good faith by the Board of Directors of
the Corporation) shall be made to apply these General Provisions to any
Conversion Shares which are not Common Stock in a manner as similar as possible
to that of the Common Stock.
6. As long as any Class A Nonvoting Common Stock of this Corporation
is outstanding, this Corporation shall not without the consent of the holders of
at least two-thirds of the outstanding Class A Nonvoting Common Stock, given in
person or by proxy at a meeting of stockholders called for that purpose, or
given in writing:
(a) Amend or repeal any provision of the Certificate of Incorporation
of this Corporation or any amendment thereof or add any provision
to such Certificate, if such action would alter the preferences,
special rights or powers
3
<PAGE>
of the Class A Nonvoting Common Stock so as to affect that stock
adversely; or
(b) Authorize or create, or increase the authorized amount of, any
stock ("Prior Preference Stock") having preferential rights (to
dividends or to assets on the dissolution, liquidation or winding
up of this Corporation) which are prior to those of the Class A
Nonvoting Common Stock; or
(c) Authorize or create any stock, security, debt or obligation
convertible into or exchangeable for Prior Preference Stock or
evidencing the right to purchase Prior Preference Stock; or
(d) Increase the authorized amount of Class A Nonvoting Common Stock
or authorize or increase the authorized amount of any other
stock; or
(e) Reclassify any shares of Common Stock or any shares of junior
stock that may hereafter be created into Prior Preference Stock,
Class A Nonvoting Common Stock, or any stock having preferential
rights to dividends or to assets of this Corporation on
dissolution, liquidation or winding up, which are on a parity
with those of the Class A Nonvoting Common Stock; or
(f) By voluntary action dissolve, liquidate or wind up the
Corporation, or sell, lease or convey all or substantially all of
the assets of the Corporation (but, the execution and delivery of
a mortgage, deed of trust or instrument of pledge, covering all
or substantially all of the assets of the Corporation shall not
be considered a sale or conveyance thereof); or
(g) Effect the merger or consolidation of the Corporation, unless:
(i) the surviving or resulting corporation (which may be this
Corporation or another corporation) will have, immediately after
the merger or consolidation, no stock either authorized or
outstanding ranking prior to or on a parity with the Class A
Nonvoting Common Stock as to dividends or as to assets upon
dissolution, liquidation or winding up of the surviving or
resulting corporation, except the same or a lesser number of
shares of stock having such priority or parity with the same or
lesser rights, preferences and powers as the stock of this
Corporation authorized and outstanding immediately before the
merger or consolidation; and (ii) each holder of Class A
Nonvoting Common Stock immediately before the merger or
consolidation shall be entitled to retain or receive the same
number of shares (with the same rights, preferences and powers)
of the resulting corporation.
4
<PAGE>
Any action specified in this Section 6 as requiring the consent
of the holders of two-thirds of the outstanding Class A Nonvoting Common Stock
may (unless otherwise provided by statute or this Certificate of Incorporation)
be taken with that consent.
7. As long as any Class A Nonvoting Common Stock is outstanding,
this Corporation shall not without the consent of the holders of all the
outstanding Class A Nonvoting Common Stock (given in person or by proxy at a
meeting of stockholders called for that purpose, or given in writing) amend,
repeal or add to Section 6 of these General Provisions.
GENERAL PROVISIONS RELATING TO PREFERRED STOCK
1. The Preferred Stock may be issued from time to time in one or more
series, each of such series to have such voting powers (full or limited or
without voting powers), designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as are stated and expressed herein, or in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors as
hereinafter provided.
2. Authority is hereby granted to the Board of Directors, subject to
the provisions of this ARTICLE IV, to create one or more series of Preferred
Stock and, with respect to each series, to fix or alter as permitted by law, by
resolution or resolutions providing for the issue of such series:
(a) the number of shares to constitute such series and distinctive
designation thereof;
(b) the dividend rate or rates, if any, on the shares of such series
(or the method for the determination thereof), the dividend
payment dates, the periods in respect of which dividends are
payable ("dividend periods") on the shares of such series,
whether such dividends shall be cumulative, and if cumulative,
the date or dates from which dividends shall accumulate;
(c) whether or not the shares of such series shall be redeemable,
and, if redeemable, on what terms, including the redemption
prices which the shares of such series shall be entitled to
receive upon the redemption thereof;
(d) the amount payable upon the shares of such series in the event of
the liquidation, dissolution or other winding up of the
Corporation;
(e) whether or not the shares of such series shall be subject to the
operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement and, if such
retirement or sinking fund or funds be established, the annual
amount thereof and the terms and provisions relative to the
operation thereof;
5
<PAGE>
(f) whether or not the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes
or of any other series of the same or any other class or classes
of stock of the Corporation and the conversion price or prices or
rate or rates, or the rate or rates at which such exchange may be
made, with such adjustments, if any, as shall be stated and
expressed or provided in such resolution or resolutions;
(g) the voting power, if any, of the shares of such series; and
(h) such other rights, preferences, qualifications, limitations and
restrictions, if any, of the shares of such series as the Board
of Directors may deem advisable.
3. No dividend shall be declared and set apart for payment on any
series of Preferred Stock in respect of any dividend period for such series
unless there shall likewise be or have been paid, or declared and set apart for
payment, on all shares of Preferred Stock of each other series entitled to
cumulative dividends at the time outstanding which rank equally as to dividends
with the series in question, dividends ratably in accordance with the sums which
would be payable on such shares through the end of the last preceding dividend
period for such series if all dividends were declared and paid in full.
4. If upon any dissolution of the Corporation, the assets of the
Corporation distributable among the holders of any one or more series of
Preferred Stock which are: (i) entitled to a preference over the holders of the
Common Stock upon such dissolution; and (ii) rank equally in connection with any
such distribution, shall be insufficient to pay in full the preferential amount
to which the holders of such shares shall be entitled, then such assets, or the
proceeds thereof, shall be distributed among the holders of each such series of
the Preferred Stock ratably in accordance with the sums which would be payable
on such distribution if all sums payable were discharged in full.
5. In the event the Preferred Stock of any series shall be
redeemable, then, at the option of the Board of Directors, the Corporation may
at such time or times as may be specified by the Board of Directors as provided
in paragraph (c) of Section 2 of this ARTICLE IV redeem all, or any number less
than all, of the outstanding shares of such series at the redemption price
thereof and on the other terms specified by the Board of Directors as provided
in such paragraph (c) (the sum so payable upon any redemption of Preferred Stock
being referred to as the "redemption price").
6. Any amendment to the terms of the Certificate of Designations
pertaining to any series of the Preferred Stock of which shares are outstanding
shall require only: (i) that the Board of Directors adopt a resolution setting
forth the amendment proposed, declaring its advisability, and either calling a
special meeting of the holders of the outstanding shares of such series of
Preferred Stock for consideration of such amendment or directing that the
amendment proposed be considered at the next annual meeting of stockholders by
the holders of the outstanding shares of such series of Preferred Stock (in
either event, subject to the ability of such holders to act by written consent
in lieu
6
<PAGE>
of voting at a meeting); and (ii) that the holders of a majority (or such
greater number as may be required by the Certificate of Designations pertaining
to such series) of the outstanding shares of such series of Preferred Stock have
voted in favor of the amendment. Except for the holders of the outstanding
shares of a series of Preferred Stock the terms of which are being amended, no
holder of shares of Common Stock and no holder of shares of any series of
Preferred Stock shall be entitled to vote upon such amendment unless the rights
of such holders would be adversely affected by such amendment or such vote shall
otherwise be required by law.
ARTICLE V
1. Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders, and may not be effected by any consent in writing by such
stockholders, unless such consent is unanimous.
2. Except as otherwise required by law and subject to the rights, if
any, of the holders of Preferred Stock or any series thereof, special meetings
of the stockholders of the Corporation may be called only by the Chairman of the
Board of Directors, the President of the Corporation or the Board of Directors
pursuant to a resolution approved by a majority of the whole Board of Directors.
ARTICLE VI
1. The Corporation shall indemnify and hold harmless, to the fullest
extent permitted by applicable law as it presently exists or may hereafter be
amended, any person who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding") by reason of the fact that he
or she, or a person for whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, limited liability company, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans (an "Indemnitee"), against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by such
person. The Corporation shall be required to indemnify a person in connection
with a proceeding (or part thereof) initiated by such person only if the
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.
2. The right to indemnification conferred by this ARTICLE VI shall
be presumed to have been relied upon by the Indemnitee and shall be enforceable
as a contract right. The Corporation may enter into contracts to provide
individual Indemnitees with specific rights of indemnification to the fullest
extent permitted by applicable law and may create trust funds, grant security
interests, obtain letters of credit, purchase and maintain insurance or use
other means to ensure the payment of such amounts as may be necessary to effect
the rights provided in this ARTICLE VI or in any such contract. The right to
indemnification conferred by this ARTICLE VI
7
<PAGE>
shall be in addition to any other similar rights to indemnification which may be
provided by contract, the Bylaws of the Corporation or applicable law.
3. Upon making a request for indemnification, the Indemnitee shall
be presumed to be entitled to indemnification under this ARTICLE VI and the
Corporation shall have the burden of proof to overcome that presumption in
reaching any contrary determination. Such indemnification shall include the
right to receive payment in advance of any expenses incurred by the Indemnitee
in connection with any Proceeding, consistent with the provisions of applicable
law.
ARTICLE VII
1. The number of Directors of this Corporation shall not be less
than three nor more than twelve as may be determined from time to time by the
affirmative vote of the majority of the Board of Directors, which determination
must be approved by Continuing Director Action (as defined in Section 4 of
ARTICLE VIII). The Directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of Directors constituting the entire
Board of Directors. At the annual meeting of stockholders held in 1999, Class I
Directors shall be elected for a one-year term, Class II Directors for a two-
year term and Class III Directors for a three-year term. At each succeeding
annual meeting of stockholders beginning in 2000, successors to the class of
Directors whose term expires at that annual meeting shall be elected for a
three-year term. A Director shall hold office until the annual meeting for the
year in which his or her term expires and until his or her successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
If the number of Directors is changed, any increase or decrease shall
be apportioned among the classes so as to maintain the number of Directors in
each class as nearly equal as possible, and any additional Director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of Directors shorten the term of any
incumbent Director. Any Director elected to fill a vacancy not resulting from
an increase in the number of Directors shall have the same remaining term as
that of his or her predecessor. Any vacancy on the Board of Directors that
results from an increase in the number of Directors may be filled by the
affirmative vote of a majority of the Board of Directors then in office, and any
other vacancy occurring on the Board of Directors may be filled by the
affirmative vote of a majority of the Directors then in office, although less
than a quorum, or by a sole remaining Director; provided, however, that in any
case, each vacancy to be filled must also be approved by Continuing Director
Action.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect Directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this
8
<PAGE>
Certificate of Incorporation applicable thereto, and such Directors so elected
shall not be divided into classes pursuant to this ARTICLE VII unless expressly
provided by such terms.
2. There shall be no qualifications for election as Directors of the
Corporation; except that no person shall be eligible to stand for election as a
Director if such person has been convicted of a felony by a court of competent
jurisdiction where such conviction is no longer subject to direct appeal.
3. Except to the extent prohibited by law, the Board of Directors
shall have the right (which, to the extent exercised, shall be exclusive) to
establish the rights, powers, duties, rules and procedures that from time to
time shall govern the Board of Directors and each of its members, including
without limitation the vote required for any action by the Board of Directors,
and that from time to time shall affect the Directors' power to manage the
business and affairs of the Corporation; and no Bylaw shall be adopted by
stockholders which shall impair or impede the implementation of the foregoing.
4. A Director may be removed only for cause, and only by the
affirmative vote of the holders of a majority of shares entitled to vote in an
election of Directors. No Director so removed may be reinstated so long as the
cause for removal continues to exist. For purposes of this Section 4 of this
ARTICLE VII, "cause" shall be limited to: (i) conviction of a felony; (ii)
declaration of unsound mind by order of a court; (iii) gross dereliction of
duty; (iv) commission of a crime involving moral turpitude; or (v) commission of
an action which constitutes intentional misconduct or a knowing violation of law
if such action in either event results both in an improper substantial personal
benefit to the Director and a material injury to the Corporation.
5. Advance notice of nominations for the election of Directors other
than nominations made by the Board of Directors or a committee thereof shall be
given to the Corporation in the manner provided in the Bylaws.
ARTICLE VIII
1. In addition to any affirmative vote required by law or by this
Certificate of Incorporation, and except as otherwise provided in Section 3 of
this ARTICLE VIII:
(a) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with: (i) any Interested Stockholder (as
hereinafter defined); or (ii) any other corporation (whether or
not itself an Interested Stockholder) which is, or after such
merger or consolidation would be, an Affiliate (as hereinafter
defined) or Associate (as hereinafter defined) of an Interested
Stockholder; or
9
<PAGE>
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder of any assets of the Corporation or
of any Subsidiary having an aggregate Fair Market Value (as
hereinafter defined) equal to the greater of $1,000,000 or more,
or 5% or more of the consolidated stockholders' equity of the
Corporation and its consolidated subsidiaries as shown in the
most recent audited consolidated balance sheet of the Corporation
and its consolidated subsidiaries; or
(c) the issuance, sale or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) to
any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder of any securities of the Corporation or
any Subsidiary in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market Value
equal to the greater of $1,000,000 or more, or 5% or more of the
consolidated stockholders' equity of the Corporation and its
consolidated subsidiaries, as shown in the most recent audited
consolidated balance sheet of the Corporation and its
consolidated subsidiaries; or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries, or
any other transaction, in any such case whether or not with or
into or otherwise involving any Interested Stockholder), which,
in any such case, has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of
any class or series of stock or securities convertible into stock
of the Corporation or any Subsidiary which is directly or
indirectly beneficially owned by any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder,
shall not be consummated without: (i) the affirmative vote of the holders of at
least 80% of the combined voting power of the then outstanding shares of stock
of all classes and series of the Corporation entitled to vote generally in the
election of Directors ("Voting Stock"); and (ii) the affirmative vote of a
majority of the combined voting power of the then outstanding shares of Voting
Stock held by Disinterested Stockholders (as hereinafter defined), in each case
voting together as a single class.
10
<PAGE>
2. The term "Business Combination" as used in this ARTICLE VIII
shall mean any transaction which is referred to in any one or more of paragraphs
(a) through (e) of Section 1 of this ARTICLE VIII.
3. The provisions of Section 1 of this ARTICLE VIII shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
applicable provision of this Certificate of Incorporation, if all the conditions
specified in either of the following paragraphs (a) or (b) are met:
(a) the Business Combination shall have been approved by a majority
of the Continuing Directors (as hereinafter defined); provided,
however, that such approval shall only be effective if obtained
by Continuing Director Action; or
(b) each of the following conditions shall have been met:
(i) the aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders
of Common Stock in such Business Combination shall be at least
equal to the higher of the following: (A) if applicable, the
highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by the
Interested Stockholder for any shares of Common Stock acquired by
it (I) within the two-year period immediately prior to the first
public announcement of the proposal of the Business Combination
(the "Announcement Date"), or (II) in the transaction in which it
became an Interested Stockholder, whichever is higher; and (B)
the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is
referred to in this ARTICLE VIII as the "Determination Date"),
whichever is higher;
(ii) the aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders
of shares of any class or series of outstanding Preferred Stock
shall be at least equal to the highest of the following (it being
intended that the requirements of this subparagraph (ii) shall be
required to be met with respect to every class or series of
outstanding Preferred Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular
class or series of Voting Stock): (A) if applicable, the highest
per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Interested
Stockholder for any shares of such class or series of Preferred
Stock acquired by it (I) within the two-year period immediately
prior to the Announcement Date, or (II) in the transaction in
which it became an Interested Stockholder, whichever
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is higher; (B) if applicable, the highest preferential amount per
share to which the holders of shares of such class or series of
Preferred Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation; and (C) the Fair Market Value per share of such
class or series of Preferred Stock on the Announcement Date or on
the Determination Date, whichever is higher;
(iii) the consideration to be received by holders of a
particular class or series of outstanding Voting Stock shall be
in cash or in the same form as the Interested Stockholder has
previously paid for shares of such class or series of Voting
Stock. If the Interested Stockholder has paid for shares of any
class or series of Voting Stock with varying forms of
consideration, the form of consideration for such class or series
of Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class or series of Voting
Stock previously acquired by it;
(iv) after such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (A) except as approved by Continuing Director
Action, there shall have been no failure to declare and pay at
the regular date therefor any full quarterly dividends (whether
or not cumulative) on any outstanding Preferred Stock; (B) there
shall have been (I) no reduction in the annual rate of dividends
paid on Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by
Continuing Director Action, and (II) an increase in such annual
rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of
reducing the number of outstanding shares of Common Stock, unless
the failure so to increase such annual rate is approved by
Continuing Director Action; and (C) such Interested Stockholder
shall not have become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested
Stockholder;
(v) after such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received
the benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or otherwise;
and
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(vi) such Interested Stockholder shall not have made or caused
any major change in the Corporation's business or equity capital
structure without approval by Continuing Director Action.
4. For the purposes of this ARTICLE VIII:
(a) A "person" shall mean any individual, firm, corporation, general
partnership, limited partnership, limited liability company,
trust or other entity.
(b) "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which together with its
Affiliates and Associates:
(i) is the beneficial owner, directly or indirectly, of 10% or
more of the combined voting power of the then outstanding shares
of Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of 10% or more of
the combined voting power of the then outstanding shares of
Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to the
beneficial ownership of any shares of Voting Stock which were at
any time within the two-year period immediately prior to the date
in question beneficially owned by any Interested Stockholder, if
such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933, as
amended.
(c) "Disinterested Stockholder" shall mean a stockholder of the
Corporation (other than the Corporation or a Subsidiary) who is
not an Interested Stockholder or an Affiliate or an Associate of
an Interested Stockholder.
(d) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly within the meaning of
Rule 13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1, 1998;
or
(ii) which such person or any of its Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, warrants or options,
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or otherwise, or (B) the right to vote or to direct the vote
pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares of Voting Stock.
(e) For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph (b) or this Section 4, the
number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned by such person through application of
paragraph (d) of this Section 4 but shall not include any other
shares of Voting Stock which may be issuable to other persons
pursuant to any agreement, arrangement or understanding or upon
exercise of conversion rights, exchange rights, warrants or
options, or otherwise.
(f) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on January 1,
1998.
(g) "Subsidiary" shall mean any corporation of which a majority of
the outstanding stock having ordinary voting power for the
election of directors is owned by the Corporation, by a
Subsidiary or by the Corporation and one or more Subsidiaries,
provided, however, that for the purposes of the definitions set
forth in paragraphs (b) and (c) of this Section 4, the term
"Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned by the Corporation, by a
Subsidiary or by the Corporation and one or more Subsidiaries.
(h) "Continuing Director" means any member of the Board of Directors
of the Corporation in office at the applicable time who is
unaffiliated with, and not a nominee of, the Interested
Stockholder and was a member of the Board of Directors prior to
the time that the Interested Stockholder became an Interested
Stockholder, and any successor of a Continuing Director who is
unaffiliated with, and not a nominee of, the Interested
Stockholder and who is recommended to succeed a Continuing
Director by Continuing Director Action.
(i) "Continuing Director Action" means an action taken which is
approved by a majority of the Continuing Directors at a meeting
of Directors at which at least 80% of the Continuing Directors
then in office are present.
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(j) "Fair Market Value" means: (i) in the case of stock, the highest
closing sale price during the 30 calendar day period immediately
preceding the date in question of a share of such stock on the
New York Stock Exchange Composite Tape, or, if such stock is not
quoted on the Composite Tape, on the New York Stock Exchange, or,
if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing
sales price or bid quotation with respect to a share of such
stock during the 30 calendar day period preceding the date in
question of the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or, if no
such quotations are available, the fair market value on the date
in question of a share of such stock as determined by Continuing
Director Action; and (ii) in the case of stock of any class or
series which is not traded on any securities exchange or in the
over-the-counter market or in the case of property other than
cash or stock, the fair market value of such stock or property,
as the case may be, on the date in question as determined by
Continuing Director Action.
(k) "Announcement Date" means the date of first public announcement
of the proposed Business Combination.
(l) "Determination Date" means the date on which the Interested
Stockholder became an Interested Stockholder.
The Continuing Directors by Continuing Director Action shall have the
power and duty to determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine compliance with this
ARTICLE VIII, including, without limitation: (a) whether a person is an
Interested Stockholder; (b) the number of shares of Voting Stock beneficially
owned by any person; (c) whether a person is an Affiliate or Associate of
another person; (d) whether the requirements of Section 3 of this ARTICLE VIII
have been met with respect to any Business Combination; and (e) whether the
assets which are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities by the
Corporation or any Subsidiary in any Business Combination has, an aggregate Fair
Market Value equal to or in excess of the greater of $1,000,000 or more, or 5%
or more of the consolidated stockholders' equity of the Corporation, as shown in
the most recent audited consolidated balance sheet of the Corporation and its
consolidated subsidiaries. The good faith determination of the Continuing
Directors by Continuing Director Action on such matters shall be conclusive and
binding for all purposes of this ARTICLE VIII.
5. Nothing contained in this ARTICLE VIII shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
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6. The fact that any Business Combination complies with the
provisions of Section 3 of this ARTICLE VIII shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or recommend its
adoption or approval to the stockholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of or actions and
responses taken with respect to such Business Combination.
ARTICLE IX
1. In addition to any affirmative vote required by law or by this
Certificate of Incorporation, and except as otherwise provided in Section 2 of
this ARTICLE IX:
(a) any merger or consolidation of the Corporation or any Subsidiary
(as defined in Section 4 of ARTICLE VIII) with or into any other
corporation, or
(b) any sale, lease or exchange of all or substantially all of the
property and assets of the Corporation or any Subsidiary,
including its goodwill and its corporate franchises, to or with
any other corporation, person or other entity,
shall not be consummated without: (i) the affirmative vote of the holders of at
least two-thirds (66 2/3%) of the combined voting power of the then outstanding
shares of stock of all classes and series of the Corporation entitled to vote
generally in the election of directors ("Voting Stock"); and (ii) the
affirmative vote of a majority of the combined voting power of the then
outstanding shares of Voting Stock held by Disinterested Stockholders (as
defined in Section 4 of ARTICLE VIII).
2. The provisions of this ARTICLE IX shall not apply to any
transaction described in clauses (a) or (b) of Section 1 of this ARTICLE IX if:
(a) such transaction shall have been approved by Continuing Director
Action (as defined in Section 4 of ARTICLE VIII), or
(b) such transaction involves solely the Corporation and a
Subsidiary, none of whose stock is beneficially owned by an
Interested Stockholder (as defined in Section 4 of ARTICLE VIII)
(other than beneficial ownership arising solely because of
control of the Corporation), provided that if the Corporation is
not the surviving company: (i) each stockholder of the
Corporation receives the same type of consideration in such
transaction in proportion to his or her stockholdings; (ii) the
provisions of ARTICLES VII through XII of this Certificate of
Incorporation are continued in effect or adopted by such
surviving company as part of its certificate or articles of
incorporation or association and such certificate or articles
have no provisions inconsistent with
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such provisions; and (iii) the provisions of the Corporation's
Bylaws are continued in effect or adopted by such surviving
company.
3. The Continuing Directors by Continuing Director Action shall have
the power and duty to determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine compliance with this
ARTICLE IX, including, without limitation: (a) whether a person is a
Disinterested Stockholder; (b) the number of shares of Voting Stock beneficially
owned by any person; and (c) whether a transaction described in Section 1 of
this ARTICLE IX is proposed. The good faith determination of a majority of the
Continuing Directors on such matters shall be conclusive and binding for all
purposes of this ARTICLE IX.
4. Nothing contained in this ARTICLE IX shall be construed to
relieve any beneficial owner of shares of the Corporation from any fiduciary
obligation imposed by law.
ARTICLE X
In discharging the duties of their respective positions, the Board of
Directors and/or a committee or committees of the Board and/or individual
Directors (collectively or individually, as the case may be, a "Director or
Directors") when evaluating any Acquisition Proposal (as defined below) or
presenting any related matter to the stockholders of the Corporation, shall, in
connection with the exercise of such Directors' judgment in determining what is
in the best interests of the Corporation as a whole, be authorized to give due
consideration to such factors as the Directors determine to be relevant,
including without limitation:
(a) the consideration being offered in the Acquisition Proposal in
relation to such Directors' estimate of: (i) the current value of
the Corporation and/or its equity securities (or relevant portion
of such equity securities) and/or its assets (or relevant portion
of its assets) in a freely negotiated or independent transaction,
whether in the form of a merger, consolidation, sale of assets or
securities, reorganization, recapitalization, or any combination
of the foregoing; (ii) the current value of the Corporation
and/or its equity securities (or relevant portion of such equity
securities) and/or its assets (or relevant portion of its assets)
if orderly liquidated in a complete or partial liquidation; (iii)
the future value of the Corporation and/or its equity securities
(or relevant portion of such equity securities) and/or its assets
(or relevant portion of its assets) over a period of years if the
Corporation remained an independent entity, in each case
discounted to current value at a discount rate reflective of the
relevant risk or risks involved; (iv) premiums over market prices
for the equity securities of other corporations in similar
transactions; (v) the future prospects of the Corporation, the
earnings potential and growth in asset value of the Corporation
over a period of years, the Corporation's short-term and/or long-
term plans and/or the likelihood of increasing or enhancing any
or all of the foregoing if such short-term and/or long-term plans
are achieved;
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(vi) other alternatives that may be available to the Corporation
for increasing the current or future value of the Corporation
and/or its equity securities (or relevant portion of its equity
securities) and/or its assets (or relevant portion of its
assets); and (vii) opinions or advice rendered by investment
bankers, appraisers and other valuation professionals retained by
the Corporation with respect to such of the matters set forth in
(i)-(vi) above as may be relevant;
(b) then existing political, economic and other factors bearing on
security prices or asset values generally or the current market
value of the Corporation's securities or assets in particular;
(c) whether the Acquisition Proposal might violate federal, state or
local laws;
(d) social, legal and economic effects on any or all groups affected,
including, without limitation, stockholders, employees,
suppliers, customers, creditors and others having similar
relationships with the Corporation, and the communities in which
the Corporation conducts its businesses;
(e) the financial condition and earning prospects of the Person (as
defined below) making the Acquisition Proposal including such
Person's ability to service its debts and other existing or
likely financial obligations;
(f) the competence, experience, integrity, intent and conduct (past,
stated and potential) of the Person (as defined below) making the
Acquisition Proposal;
(g) the short-term and long-term interests of the Corporation,
including without limitation benefits that may accrue to the
Corporation from its short-term and/or long-term plans and the
possibility that these interests may be best served by the
continued independence of the Corporation; and
(h) all other pertinent factors.
In considering the foregoing factors, including any other pertinent
factors not listed above, such Directors shall not be required, in considering
the best interests of the Corporation, to regard any corporate interest or the
interest of any particular group affected by such action, including, without
limitation, the interests of stockholders of the Corporation, as a dominant or
controlling interest or factor.
For the purposes of this ARTICLE X, the term "Acquisition Proposal"
shall mean a proposal or offer of any Person (it being understood that a
"Person" shall mean any individual, firm, corporation or other entity): (a) to
make a tender offer, exchange offer or other comparable offer for any equity
security of the Corporation; (b) to effect a merger, consolidation,
reorganization or recapitalization with or involving another Person (as defined
above); (c) to effect any purchase, sale,
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lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) of all or substantially all of the
assets or equity securities of the Corporation with or involving another Person
(as defined above); (d) to effect a complete or partial liquidation or
dissolution of the Corporation; or (e) to effect a "business combination" (as
defined in Section 203(c)(3) of the General Corporation Law of Delaware, as
amended from time to time).
ARTICLE XI
No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such Director as a Director; provided, however, that this ARTICLE XI
shall not eliminate or limit the liability of a Director to the extent provided
by applicable law: (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the General Corporation Law of Delaware; or (iv) for any
transaction from which the Director derived an improper personal benefit. No
amendment to or repeal of this ARTICLE XI shall apply to or have any effect on
the liability or alleged liability of any Director of the Corporation for or
with respect to any acts or omissions of such Director occurring prior to such
amendment or repeal.
ARTICLE XII
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code (relating to the
General Corporation Law of the State of Delaware) or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
(relating to the General Corporation Law of the State of Delaware) order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, to be summoned in
such manner as such court directs. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, such compromise
or arrangement and such reorganization shall, if sanctioned by the court to
which such application has been made, be binding on all the creditors or class
of creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
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ARTICLE XIII
1. In addition to any requirements of any other provisions of this
Certificate of Incorporation (and notwithstanding the fact that a lesser
percentage may be specified by law or this Certificate of Incorporation), the
affirmative vote, at an annual or special meeting of the stockholders, of the
holders of two-thirds (66 2/3%) or more of the combined voting power of the then
outstanding shares of Voting Stock (as defined in Section 1 of ARTICLE VIII),
voting together as a single class shall be required to amend, alter or repeal,
or adopt any provision inconsistent with, ARTICLES V, VII and X.
2. In addition to any requirements of any other provisions of this
Certificate of Incorporation (and notwithstanding the fact that a lesser
percentage may be specified by law or this Certificate of Incorporation), the
affirmative vote, at an annual or special meeting of the stockholders, of the
holders of 80% or more of the combined voting power of the then outstanding
shares of Voting Stock, voting together as a single class, shall be required to
amend, alter or repeal, or adopt any provision inconsistent with, ARTICLE VIII
unless such action is approved by Continuing Director Action (as defined in
Section 4 of ARTICLE VIII), in which case the affirmative vote of the holders of
a majority of the combined voting power is sufficient to approve such action;
provided however, that the affirmative vote of a majority of the combined voting
power of the then outstanding shares of Voting Stock held by the Disinterested
Stockholders (as defined in Section 4 of ARTICLE VIII), voting together as a
single class, shall also be required to amend, alter or repeal, or adopt any
provision inconsistent with, ARTICLE VIII.
3. In addition to any requirements of any other provisions of this
Certificate of Incorporation (and notwithstanding the fact that a lesser
percentage may be specified by law or this Certificate of Incorporation or any
such resolution or resolutions), the affirmative vote, at an annual or special
meeting of the stockholders, of the holders of two-thirds (66 2/3%) or more of
the combined voting power of the then outstanding shares of Voting Stock, voting
together as a single class, shall be required to amend, alter or repeal, or
adopt any provision inconsistent with, ARTICLE IX unless such action is approved
by Continuing Director Action, in which case the affirmative vote of the holders
of a majority of the combined voting power is sufficient to approve such action;
provided however, that the affirmative vote of a majority of the combined voting
power of the then outstanding shares of Voting Stock held by the Disinterested
Stockholders (as defined in Section 4 of ARTICLE VIII) voting together as a
single class, shall also be required to amend, alter or repeal, or adopt any
provision inconsistent with, ARTICLE IX.
4. In addition to any requirements of any other provisions of this
Certificate of Incorporation (and notwithstanding the fact that a lesser
percentage may be specified by law or this Certificate of Incorporation), the
affirmative vote, at an annual or special meeting of the stockholders, of the
holders of two-thirds (66 2/3%) or more of the combined voting power of the then
outstanding shares of Voting Stock voting together as a single class shall be
required to amend, alter or repeal, or adopt any provision in this Certificate
of Incorporation inconsistent with the Bylaws of the Corporation.
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5. In addition to any requirements of any other provisions of this
Certificate of Incorporation (and notwithstanding the fact that a lesser
percentage may be specified by law or this Certificate of Incorporation), none
of Sections 1, 2, 3 or 4 or this ARTICLE XIII may be amended, altered or
repealed, nor may any provision inconsistent therewith be adopted, unless the
respective percentage or more of the combined voting power specified therein of
the outstanding shares of Voting Stock (as defined in Section 1 of ARTICLE VIII)
voting together as a single class, votes in favor thereof, nor may this Section
5 of this ARTICLE XIII be amended, altered or repealed, nor may any provision
inconsistent herewith be adopted unless the holders of 80% or more of the
combined voting power of the then outstanding shares of Voting Stock, voting
together as a single class, vote in favor thereof.
IV. Thereafter, pursuant to such resolutions of the Board of Directors,
this Amended and Restated Certificate of Incorporation was duly adopted by
unanimous consent in lieu of a special meeting of the stockholders of the
Corporation dated June 15, 1998, all in accordance with the Bylaws of the
Corporation and the laws of the State of Delaware.
V. This amendment and restatement has been duly adopted in accordance
with the provisions of Sections 242 and 245 of the General Corporation Law of
the State of Delaware, as amended.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been executed on behalf of the Corporation by its President and attested by
its Secretary as of June 15, 1998, and each of them does hereby affirm and
acknowledge that this Amended and Restated Certificate of Incorporation is the
act and deed of the Corporation and that the facts stated herein are true.
/s/ Frank R. Clark /s/ Frederick C. Green IV
- - ------------------------------- ----------------------------------
Frank R. Clark, Secretary Frederick C. Green IV, President
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Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
NATIONWIDE ELECTRIC, INC.
ARTICLE I
Name and Location
SECTION 1. Name. The name of the Corporation shall be the name set
forth in the Amended and Restated Certificate of Incorporation.
SECTION 2. Principal Office. The principal office of the Corporation is
located at 1201 Walnut, Suite 1300, Kansas City, Missouri 64106.
SECTION 3. Additional Offices. Other offices for the transaction of
business of the Corporation may be located at such place or places as the Board
of Directors may from time to time determine.
ARTICLE II
Capital Stock
SECTION 1. Stock Certificates. All certificates of stock shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and the Secretary or an Assistant Secretary, and sealed with the
corporate seal.
SECTION 2. Stock Transfers. Transfers of stock shall be made on the
books of the Corporation upon the surrender of the old certificate properly
endorsed, and such old certificate shall be canceled before a new certificate is
issued.
SECTION 3. Lost or Destroyed Stock Certificates. A new certificate of
stock may be issued in the place of any certificate theretofore issued, alleged
to have been lost or destroyed, and the Corporation may, in its discretion,
require the owner of the lost or destroyed certificate, or its legal
representative, to give a bond sufficient to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss of any
certificate.
SECTION 4. Preemptive Rights Denied. No holder of shares of any class
of the Corporation, or holder of any securities or obligations convertible into
shares of any class of the Corporation, shall have any preemptive right
whatsoever to subscribe for, purchase or otherwise acquire shares of the
Corporation of any class, whether now or hereafter authorized; provided,
however, that nothing in this Section 4 shall prohibit the Corporation from
granting, contractually or otherwise, to any such holder, the right to purchase
additional securities of the Corporation.
<PAGE>
ARTICLE III
Stockholders' Meetings
SECTION 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held, either within or without the State of Delaware,
on such date and at such time as may from time to time be determined by the
Board of Directors. At such meeting the stockholders shall elect directors in
the manner provided in the Amended and Restated Certificate of Incorporation of
the Corporation. The stockholders may transact such other business at such
annual meetings as may properly come before the meeting.
SECTION 2. Special Meeting. A special meeting of the holders of any one
or more classes of the capital stock of the Corporation entitled to vote as a
class or classes with respect to any matter, as required by law or as provided
by the Amended and Restated Certificate of Incorporation, may be called at any
time and place, either within or without the state of Delaware, only by the
Chairman of the Board, the President or the Board of Directors.
SECTION 3. Notice. Notice of the time and place of all annual meetings
and of the time, place and purpose of all special meetings shall be mailed by
the Secretary to each stockholder at his or her last known post office address
as it appears on the records of the Corporation at least 10 days before the date
set for such meeting.
SECTION 4. Nomination of Directors. Nomination of persons for election
to the Board of Directors of the Corporation at a meeting of the stockholders
may be made by or at the direction of the Board of Directors or may be made at a
meeting of stockholders by any stockholder of the Corporation entitled to vote
for the election of Directors at the meeting in compliance with the notice
procedures set forth in this Section 4 of ARTICLE III. Such nomination, other
than those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event less
than 65 days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be so
received no later than the close of business on the 15th day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary shall set forth: (a) as to each person whom the stockholder proposes
to nominate for election or re-election as a Director, (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the person, and
(iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of Directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and (b) as to the stockholder giving the notice; (i) the name
and record address of the stockholder; and (ii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such
<PAGE>
proposed nominee to serve as a Director of the Corporation. No person shall be
eligible for election as a Director of the Corporation at a meeting of the
stockholders unless such person has been nominated in accordance with the
procedures set forth herein. If the facts warrant, the Chairman of the meeting
shall determine and declare to the meeting that a nomination does not satisfy
the requirements set forth in the preceding sentence and the defective
nomination shall be disregarded. Nothing in this Section 4 shall be construed to
affect the requirements for proxy statements of the Corporation under Regulation
14A of the Exchange Act.
SECTION 5. Presentation of Business at Stockholders' Meetings. At any
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before a
meeting, business must be: (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before a meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event less than 65 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received no later than the close of
business on the 15th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever first
occurs. Such stockholder's notice to the Secretary shall set forth: (a) as to
each matter the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, and (b) as to the
stockholder giving the notice, (i) the name and record address of the
stockholder, (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder and (iii) any
material interest of the stockholder in such business. No business shall be
conducted at a meeting of the stockholders unless proposed in accordance with
the procedures set forth herein. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the foregoing procedure and such
business shall not be transacted. To the extent this Section 5 shall be deemed
by the Board of Directors or the Securities and Exchange Commission, or finally
adjudged by a court of competent jurisdiction, to be inconsistent with the right
of stockholders to request inclusion of a proposal in the Corporation's proxy
statement pursuant to Rule 14a-8 promulgated under the Exchange Act, such rule
shall prevail.
SECTION 6. Presiding Officials. The Chairman of the Board of Directors,
or in his or her absence or inability to act, the President, or in his or her
absence or inability to act, any Vice President, shall preside at all
stockholders' meetings.
SECTION 7. Voting. Except as otherwise provided in the Amended and
Restated Certificate of Incorporation of the Corporation, at each meeting of the
stockholders, each stockholder shall be entitled to cast one vote for each share
of voting stock standing of record on the books of
<PAGE>
the Corporation, in his or her name, and may cast such vote either in person or
by proxy. All proxies shall be in writing and filed with the Secretary of the
meeting.
SECTION 8. Quorum; Adjournment. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of at
least a majority of the then outstanding voting shares of the Corporation shall
be required and be sufficient to constitute a quorum for the election of
directors. At a meeting held for any purpose other than the election of
directors, shares representing a majority of the votes entitled to be cast on
such matter, present in person or represented by proxy, shall constitute a
quorum. In the absence of the required quorum at any meeting of stockholders, a
majority of such holders present in person or by proxy shall have the power to
adjourn the meeting, from time to time, without notice (except as required by
law) other than an announcement at the meeting, until a quorum shall be present.
SECTION 9. Annual Statement of Business. At each of the annual
stockholders' meetings, one of the executive officers of the Corporation shall
submit a statement of the business done during the preceding year, together with
a report of the general financial condition of the Corporation.
ARTICLE IV
Directors
SECTION 1. Powers of the Board. The business and property of the
Corporation shall be managed by a Board consisting of such number of Directors
as is determined from time to time in accordance with the provisions of the
Amended and Restated Certificate of Incorporation of the Corporation. The Board
of Directors may elect one of their number to act as Chairman of the Board.
SECTION 2. Qualification. Each Director upon his or her election shall
qualify by filing his or her written acceptance with the Secretary or an
Assistant Secretary and by fulfilling any prerequisite to qualification that may
be set forth in the Amended and Restated Certificate of Incorporation of the
Corporation.
SECTION 3. Annual Meetings. The annual meeting of the Board of
Directors shall be held immediately after the adjournment of each annual meeting
of the stockholders and in the event a quorum is not present, such meeting shall
be held within 10 days after adjournment upon proper notice by the Chairman of
the Board of Directors, the President or a Vice President.
SECTION 4. Special Meetings. Special meetings of the Board of Directors
may be called at any time or place by the Chairman of the Board or by the
President, and in the absence or inability of either of them to act, by any Vice
President, and may also be called by any two members of the Board of Directors.
By unanimous consent of the Directors, special meetings of the Board may be held
without notice, at any time and place.
SECTION 5. Notice; Telephonic Attendance; Unanimous Consent. Notice of
all regular and special meetings of the Board of Directors or the Executive
Committee or any committee
<PAGE>
established pursuant to this ARTICLE IV (an "Other Committee") shall be sent to
each Director or member of such committee, as the case may be, by the Secretary
or any Assistant Secretary, by a means reasonably calculated to be received at
least 7 days prior to the time fixed for such meeting, or notice of special
meetings of the Board of Directors or the Executive Committee or any Other
Committee may be given by telephone, telegraph, telefax or telex to each
Director or member of such committee, as the case may be, at least 24 hours
prior to the time fixed for such meeting, or on such shorter notice as the
person or persons calling the meeting may reasonably deem necessary or
appropriate in the circumstances. To the extent provided in the notice of the
meeting or as otherwise determined by the Chairman of the Board or the Board of
Directors, Directors may participate in any regular or special meeting by means
of conference telephone, videoconference or similar communications equipment
which allows all persons participating in such meeting to hear each other, and
participation in such meeting by means of such a device shall constitute
presence in person at such meeting. Attendance of a director at any meeting
shall constitute a waiver of notice of such meeting except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
If all the directors shall severally or collectively consent in writing
to any action to be taken by the directors, such consents shall have the same
force and effect as a unanimous vote of the directors at a meeting duly held.
The Secretary shall file such consents with the minutes of the meetings of the
Board of Directors.
SECTION 6. Quorum; Adjournment. Except as otherwise provided in the
Amended and Restated Certificate of Incorporation of the Corporation, a quorum
for the transaction of business at any meeting of the directors shall consist of
a majority of the members of the Board, but the directors present, although less
than a quorum, shall have the power to adjourn the meeting from time to time or
to some future date.
SECTION 7. Election of Officers. The directors shall elect the officers
of the Corporation and fix their salaries and other compensation. Such election
shall be made at the Directors' meeting following each annual stockholders'
meeting.
SECTION 8. Advisers to the Board of Directors. The Board of Directors
from time to time, as they may deem proper, shall have authority to appoint a
general manager, counsel or attorneys and other employees for such length of
time and upon such terms and conditions and at such salaries and other
compensation as they may deem necessary and/or advisable.
SECTION 9. Compensation; Reimbursement of Expenses. The members of the
Board of Directors shall receive compensation for their services in such amount
as may be reasonable and proper and consistent with the time and service
rendered. The members of the Board of Directors shall receive the reasonable
expenses necessarily incurred in the attendance of meetings and in the
transaction of business for the Corporation.
<PAGE>
SECTION 10. Indemnification; Insurance.
(a) Indemnification.
(1) Actions Other than Those by or in the Right of the Corporation.
To the extent permitted by Delaware law from time to time in effect and
subject to the provisions of paragraph (c) of this Section 10, the
Corporation shall 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 such 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 such person in connection
with such action, suit or proceeding if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation (or such other corporation or
organization), and, with respect to any criminal action or proceeding, had
no reasonable cause to believe such 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 such 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
such person's conduct was unlawful.
(2) Action by or in the Right of the Corporation. To the extent
permitted by Delaware law from time to time in effect and subject to the
provisions of paragraph (c) of this Section 10, the Corporation shall
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 such 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 such person
in connection with the defense or settlement of such action or suit if such
person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation (or such
other corporation or organization) 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 (or such other
corporation or organization) unless and only to the extent that the court
in which such action or suit was brought shall determine 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 such court shall deem proper.
<PAGE>
(3) Successful Defense of Action. Notwithstanding, and without
limitation of, any other provision of this Section 10, to the extent that a
director, officer, employee or agent of the Corporation has been successful
on the merits or otherwise in defense of any action, suit or proceeding
referred to in sub-paragraph (1) or (2) of this paragraph (a), or in
defense of any claim, issue or matter therein, such director, officer,
employee or agent shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
(4) Determination Required. Any indemnification under sub-paragraph
(1) or (2) of this paragraph (a) (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 director, officer, employee or
agent is proper in the circumstances because such director, officer,
employee or agent has met the applicable standard of conduct set forth in
such sub-paragraph. Such determination shall be made: (i) by the Board of
Directors by a majority vote of a quorum consisting of directors who were
not parties to the particular action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders.
(b) Insurance. The Corporation may, when authorized by the Board of
Directors, 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 him against such liability
under the provisions of this Section 10. The risks insured under any insurance
policies purchased and maintained on behalf of any person as aforesaid or on
behalf of the Corporation shall not be limited in any way by the terms of this
Section 10 and to the extent compatible with the provisions of such policies,
the risks insured shall extend to the fullest extent permitted by law, common or
statutory.
(c) Advancement of Expenses; Nonexclusivity; Duration. Expenses (including
attorneys' fees) incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall 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 officer or
director 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
this Section 10. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid by the Corporation upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The
indemnifications, advancement of expenses and rights provided by, or granted
pursuant to, this Section 10 shall not be deemed exclusive of any other
indemnifications, advancement of expenses, rights or limitations of liability to
which any person seeking indemnification or advancement of expenses may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise, either as to action in such person's official capacity
or as to action in another capacity while holding office, and they shall
<PAGE>
continue although such person has ceased to be a director, officer, employee or
agent and shall inure to the benefit of such person's heirs, executors and
administrators. The authorization to purchase and maintain insurance set forth
in paragraph (b) shall likewise not be deemed exclusive.
SECTION 11. Committees.
(a) The Board of Directors may, by resolution or resolutions adopted by a
majority of the whole Board, designate two or more directors of the Corporation
to constitute one or more committees in addition to those committees required by
SECTIONS 12, 13 and 14 of this ARTICLE IV. Each such committee, to the extent
provided in such resolution or resolutions, shall have and may exercise all of
the authority of the Board in the management of the Corporation; provided,
however, that the designation of each such committee and the delegation thereto
of authority shall not operate to relieve the Board, or any member thereof, of
any responsibility imposed upon it or such member by law.
(b) Notwithstanding any other provision of these Bylaws, no committee of
the Board of Directors shall have the power or authority of the Board with
respect to (i) amending the Certificate of Incorporation, (ii) approving or
recommending to stockholders any type or form of "business combination" (as
defined in Section 203 of the General Corporation Law of Delaware as in effect
on January 1, 1996), (iii) approving or recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, (iv) amending
these Bylaws, (v) declaring a dividend or making any other distribution to the
stockholders, (vi) authorizing the issuance of stock otherwise than pursuant to
the grant or exercise of a stock option under employee stock options of the
Corporation or in connection with a public offering of securities registered
under the Securities Act of 1933, as amended, or (vii) appointing any member of
any committee of the Board.
(c) Each such committee shall keep regular minutes of its proceedings,
which minutes shall be recorded in the minute book of the Corporation. The
Secretary or an Assistant Secretary of the Corporation may act as Secretary for
each such committee if the committee so requests.
SECTION 12. Executive Committee. The Chief Executive Officer of the
Corporation, together with no more than five additional Directors selected by
the Board shall constitute an Executive Committee of the Board of Directors. The
Executive Committee between regular meetings of the Board of Directors shall
manage the business and property of the Corporation and shall have the same
power and authority as the Board of Directors; provided, however, the Executive
Committee shall not act (other than to make a recommendation) in those cases
where it is provided by law or by the Amended and Restated Certificate of
Incorporation of the Corporation that any vote or action in order to bind the
Corporation shall be taken by the Directors. Members of the Executive Committee
may participate in any meeting of the Executive Committee by means of conference
telephone or videoconference or similar communications equipment which allows
all persons participating in the meeting to hear each other, and participation
in a meeting by means of such a device shall constitute presence in person at
such meeting.
<PAGE>
The Executive Committee shall keep a record of its proceedings and may
hold meetings upon one day's written notice or upon waiver of notice signed by
the members either before or after such Executive Committee meeting.
A majority of the Executive Committee shall constitute a quorum for the
transaction of business at any meeting for which notice has been given to all
members in accordance with ARTICLE IV, Section 5 hereof or for which notice has
been waived by all members.
The Executive Committee or any Other Committee may act by unanimous
written consent as provided in ARTICLE IV, SECTION 5.
SECTION 13. Audit Committee. The Board of Directors at the annual or any
regular or special meeting of the directors shall, by resolution adopted by a
majority of the whole Board, designate two or more directors to constitute an
Audit Committee and appoint one of the directors so designated as the chairman
of the Audit Committee. Membership on the Audit Committee shall be restricted to
those directors who are independent of the management of the Corporation and are
free from any relationship that, in the opinion of the Board, would interfere
with the exercise of independent judgment as a member of the committee.
Vacancies in the committee may be filled by the Board at any meeting thereof.
Each member of the committee shall hold office until such committee member's
successor has been duly elected and qualified, or until such committee member's
resignation or removal from the Audit Committee by the Board, or until such
committee member otherwise ceases to be a director. Any member of the Audit
Committee may be removed from the committee by resolution adopted by a majority
of the whole Board. The compensation, if any, of members of the committee shall
be established by resolution of the Board.
The Audit Committee shall be responsible for: recommending to the Board
the appointment or discharge of independent auditors; reviewing with the
management and the independent auditors the terms of engagement of independent
auditors, including the fees, scope and timing of the audit and any other
services rendered by the independent auditors; reviewing with the independent
auditors and management the Corporation's policies and procedures with respect
to internal auditing, accounting and financial controls; reviewing with the
management the independent statements, audit results and reports and the
recommendations made by any of the auditors with respect to changes in
accounting procedures and internal controls; reviewing the results of studies of
the Corporation's system of internal accounting controls; and performing any
other duties or functions deemed appropriate by the Board. The Audit Committee
shall have the powers and rights necessary or desirable to fulfill these
responsibilities, including the power and right to consult with legal counsel
and to rely upon the opinion of legal counsel. The Audit Committee is authorized
to communicate directly with the Corporation's financial officers and employees,
internal auditors and independent auditors as it deems desirable and to have the
internal auditors or independent auditors perform any additional procedures as
it deems appropriate.
All actions of the Audit Committee shall be reported to the Board at the
next meeting of the Board. The minute books of the Audit Committee shall at all
times be open to the inspection of any director.
<PAGE>
The Audit Committee shall meet at the call of its chairman or of any two
members of the Audit Committee (or if there shall be only one other member, then
at the call of that member). A majority of the Audit Committee shall constitute
a quorum for the transaction of business (or if there shall only be two members,
then both must be present), and the act of a majority of those present at any
meeting at which a quorum is present (or if there shall be only two members,
then they must act unanimously) shall constitute the act of the Audit Committee.
SECTION 14. Compensation Committee. The Board of Directors at the annual
or any regular or special meeting shall, by resolution adopted by a majority of
the whole Board, designate two or more directors to constitute a Compensation
Committee. Membership on the Compensation Committee shall be restricted to
disinterested persons which for this purpose shall mean any director who, during
the time such director is a member of the Compensation Committee is not
eligible, and has not at any time within one year prior thereto been eligible,
for selection to participate (other than in a manner as to which the
Compensation Committee has no discretion) in any of the compensation plans
administered by the Compensation Committee. Vacancies in the committee may be
filled by the Board at any meeting. Each member of the committee shall hold
office until such committee member's successor has been duly elected and
qualified, or until such committee member's resignation or removal from the
Compensation Committee by the Board, or until such committee member otherwise
ceases to be a director or a disinterested person. Any member of the
Compensation Committee may be removed by resolution adopted by a majority of the
whole Board. The compensation, if any, of the members of the Compensation
Committee shall be established by resolution of the Board.
The Compensation Committee shall, from time to time, recommend to the
Board the compensation and benefits of the executive officers of the
Corporation. The Compensation Committee shall have the power and authority
vested in the Board by any benefit plan of the Corporation. The Compensation
Committee shall also make recommendations to the Board with regard to the
compensation of the Board and its committees, with the exception of the
Compensation Committee.
All actions of the Compensation Committee shall be reported to the Board
at the next meeting of the Board. The minute books of the Compensation Committee
shall at all times be open to the inspection of any director.
The Compensation Committee shall meet at the call of the chairman of the
Compensation Committee or of any two members of the Compensation Committee (or
if there shall be only one other member, then at the call of that member). A
majority of the Compensation Committee shall constitute a quorum for the
transaction of business (or if there shall be only two members, then both must
be present), and the act of a majority of those present at any meeting at which
a quorum is present (or if there shall be only two members, then they must act
unanimously) shall be the act of the Compensation Committee.
SECTION 15. Alternate Committee Members. The Board of Directors, by
resolution adopted by a majority of the whole Board, may designate one or more
additional directors as alternate
<PAGE>
members of any committee to replace any absent or disqualified member at any
meeting of that committee, and at any time may change the membership of any
committee or amend or rescind the resolution designating the committee. In the
absence or disqualification of a member or alternate member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not the member or members constitute a quorum, may
unanimously appoint another director to act at the meeting in the place of any
such absent or disqualified member, provided that the director so appointed
meets any qualifications stated in these Bylaws or the resolution designating
the committee or any amendment thereto.
SECTION 16. Committee Procedures. Unless otherwise provided in these
Bylaws or in the resolution designating any committee, any committee may fix its
rules or procedures, fix the time and place of its meetings and specify what
notice of meetings, if any, shall be given.
ARTICLE V
Officers
SECTION 1. Designations. The officers of this Corporation shall be a
Chairman of the Board of Directors, a President, as many Vice Presidents as the
Board of Directors may from time to time deem advisable and one or more of which
may be designated Executive Vice President or Senior Vice President, a
Secretary, a Treasurer, and such Assistant Secretaries and Assistant Treasurers
as the Board of Directors may from time to time deem advisable, and such other
officers as the Board of Directors may from time to time deem advisable and
designate. The Chairman of the Board of Directors shall be a member of and be
elected by the Board of Directors. All other officers shall be elected by the
Board of Directors. All officers shall hold office until their respective
successors are elected and shall have qualified. Any two offices may be held by
one person except the office of President and Vice President.
SECTION 2. Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the Directors and stockholders at which he or
she is present and shall have such other duties, power and authority as may be
prescribed by the Board of Directors from time to time or elsewhere in these
Bylaws. The Board of Directors may designate the Chairman of the Board as the
Chief Executive Officer of the Corporation with all of the powers otherwise
conferred upon the President of the Corporation under these Bylaws, or it may,
from time to time, divide the responsibilities, duties and authority for the
general control and management of the Corporation's business and affairs between
the Chairman of the Board and the President.
SECTION 3. President and Chief Executive Officer. Unless the Board of
Directors otherwise provides, the President shall be the Chief Executive Officer
of the Corporation with such general executive powers and duties of supervision
and management as are usually vested in such office and shall perform such other
duties as are authorized by the Board of Directors. The Chairman of the Board or
the President shall sign contracts, certificates and other instruments of the
Corporation as authorized by the Board of Directors. If the Chairman of the
Board is designated as the Chief Executive Officer of the Corporation, the
President shall perform such duties as may be delegated to him or her by the
Board of Directors and as are conferred by law exclusively upon such
<PAGE>
office. Unless the Board of Directors otherwise provides, the President, or any
person designated in writing by the President, shall have full power and
authority on behalf of the Corporation to: (i) attend and to vote or take action
at any meeting of the holders of securities of corporations in which the
Corporation may hold securities, and at such meetings shall possess and may
exercise any and all rights and powers incident to being a holder of such
securities, and (ii) execute and deliver waivers of notice and proxies for and
in the name of this Corporation with respect to securities of any such
corporation held by this Corporation.
SECTION 4. Vice Presidents. A Vice President shall have the right and
power to perform all duties and exercise all authority of the President, in case
of the absence of the President or upon vacancy in the office of President or
delegation by the Board of Directors, until the Board of Directors otherwise
provides, and shall have all power and authority usually enjoyed by a person
holding the office of Vice President.
SECTION 5. Secretary and Assistant Secretaries. The Secretary shall issue
notices of all directors' and stockholders' meetings, and shall attend and keep
the minutes of the same; shall have charge of all corporate books, records and
papers; shall be custodian of the corporate seal; shall attest with his or her
signature, which may be a facsimile signature if authorized by the Board of
Directors, and impress with the corporate seal, all stock certificates and
written contracts of the Corporation; and shall perform all other duties as are
incident to his or her office. Any Assistant Secretary, in the absence or
inability of the Secretary, shall perform all duties of the Secretary and such
other duties as may be required.
SECTION 6. Treasurer and Assistant Treasurers. The Treasurer shall have
custody of all money and securities of the Corporation and shall give bond in
such sum and with such sureties as the directors may specify, conditioned upon
the faithful performance of the duties of his or her office. He or she shall
keep regular books of account and shall submit them, together with all of his or
her records and other papers, to the directors for their examination and
approval annually; and quarterly or as and when directed by the Board of
Directors, he or she shall submit to each director a statement of the condition
of the business and accounts of the Corporation; and shall perform all such
other duties as are incident to his or her office. An Assistant Treasurer, in
the absence or inability of the Treasurer, shall perform all the duties of the
Treasurer and such other duties as may be required.
SECTION 7. Bonding. Any officer or employee of the Corporation shall give
such bond for the faithful performance of his or her duties in such sum, as and
when the Board of Directors may direct.
ARTICLE VI
Dividends
SECTION 1. Dividends shall be paid out of the net income or earned
surplus of the Corporation, determined after making proper provision for
required sinking fund deposits for debt obligations and proper provisions for
working capital and such reserves as may be required by good
<PAGE>
and generally accepted accounting practice, when declared from time to time by
resolution of the Board of Directors. No such dividends shall be declared or
paid which will impair the capital of the Corporation.
ARTICLE VII
Amendments
SECTION 1. Except as otherwise provided in the Amended and Restated
Certificate of Incorporation of the Corporation, these Bylaws may be amended,
altered or repealed by the affirmative vote of a majority of the Board of
Directors.
ARTICLE VIII
Corporate Seal
SECTION 1. The corporate seal of this Corporation shall have inscribed
thereon the name of the Corporation and its state of incorporation.
/s/ Frank R. Clark
-----------------------------------------
Secretary
<PAGE>
Exhibit 3.3
NATIONWIDE ELECTRIC, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A NONVOTING CONVERTIBLE PREFERRED STOCK
---------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
---------------------
Nationwide Electric, Inc. (the "Corporation"), certifies that pursuant to
the authority contained in Article FOURTH of its Certificate of Incorporation,
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, its Board of Directors has adopted the following
resolution creating a series of the Preferred Stock, $.01 par value, designated
as Series A Nonvoting Convertible Preferred Stock:
RESOLVED, that a series of the class of Preferred Stock, $.01 par value, of
the Corporation be hereby created, and that the designation and amount thereof
and the voting powers, preferences, and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are set forth in this Certificate of
Designation, Preferences and Rights of Series A Nonvoting Convertible Preferred
Stock (the "Certificate of Designation") as follows:
1. Designation and Amount. Preferred Stock of the Corporation created and
authorized for issuance hereby shall be designated as "Series A Nonvoting
Convertible Preferred Stock" (herein referred to as "Series A Preferred Stock"),
having a par value per share equal to $.01, and the number of shares
constituting such series shall be 6,000. The Corporation shall only originally
issue shares of Series A Preferred Stock to KLT Energy Services, Inc., a
Missouri corporation ("KLT") pursuant to that certain Agreement and Plan of
Merger among the Corporation, Galt Financial, Inc., KLT and Reardon Capital,
LLC, dated May 23, 1998.
2. Powers, Preferences and Rights of Series A Preferred Stock
(a) The Series A Preferred Stock shall have no voting rights. The
holders of Series A Preferred Stock shall be entitled to receive, out of
funds legally available for that purpose, cash dividends at the rate of
$75.00 per annum per share, and no more. Such dividends shall be cumulative
from February 27, 1998, the date that 6,000 shares of Nonvoting Preferred
Stock were issued by Galt Financial, Inc. to KLT, (the "Issue Date") and
shall be payable in arrears, when and as declared by the Board of
Directors, on the last day of each month (each such date being referred to
as a "Dividend Payment Date"), commencing October 1998; provided, however,
that the dividends cumulated between the Issue Date and the first Dividend
Payment Date shall not be payable until the associated shares of Series A
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:00 PM 06/11/1998
981226772 - 2859741
<PAGE>
Preferred Stock are redeemed by the Corporation, as set forth below. The monthly
period between consecutive Dividend Payment Dates shall be referred to as a
"Dividend Period." Each such dividend shall be paid to the holders of record of
the Series A Preferred Stock as their names appear on the share register of the
Corporation on the corresponding Record Date. As used above, the term "Record
Date" means the fifteenth day of the month in which such dividend is payable, or
such other record date designated by the Board of Directors of the Corporation
with respect to the dividend payable on such respective Dividend Payment Date.
Dividends on account of arrears for any past Dividend Periods may be declared
and paid at any time, without reference to any Dividend Payment Date, to holders
of record on such date, not exceeding 50 days preceding the payment date
thereof, as may be fixed by the Board of Directors.
(b) In the event that full cash dividends are not paid or made available
to the holders of all outstanding shares of Series A Preferred Stock and funds
available shall be insufficient to permit payment in full in cash to all such
holders of the preferential amounts to which they are then entitled, the entire
amount available for payment of cash dividends shall be distributed among the
holders of the Series A Preferred Stock ratably in proportion to the full amount
to which they would otherwise be respectively entitled, and any remainder not
paid in cash to the holders of the Series A Preferred Stock shall cumulate as
provided in paragraph 2(c) below.
(c) If, on any Dividend Payment Date, the holders of the Series A
Preferred Stock shall not have received the full dividends provided for in the
other provisions of this paragraph 2, then such dividends shall cumulate,
whether or not earned or declared, with additional dividends thereon for each
succeeding full Dividend Period during which such dividends shall remain unpaid.
Unpaid dividends for any period less than a full Dividend Period shall cumulate
on a day-to-day basis and shall be computed on the basis of a 360 day year.
(d) So long as any shares of Series A Preferred Stock shall be
outstanding, the corporation shall not declare or pay on any Junior Stock
(defined as the Common Stock, the Class A Nonvoting Common Stock and any other
class or series of stock of the Corporation not entitled to receive any
dividends in any Dividend Period unless all dividends required to have been paid
or declared and set apart for payment on the Series A Preferred Stock shall have
been so paid or declared and set apart for payment) any dividend whatsoever,
whether in cash, property or otherwise (other than dividends payable in shares
of the class or series upon which such dividends are declared or paid, or
payable in shares of Common Stock with respect to Junior Stock other than Common
Stock, together with cash in lieu of fractional shares), nor shall the
Corporation make any distribution on any Junior Stock, nor shall any Junior
Stock be purchased or redeemed by the Corporation or any Subsidiary, nor shall
any monies be paid or made available for a sinking fund for the purchase or
redemption of any Junior Stock, unless all dividends to which the holders of
Series A Preferred Stock shall have
2
<PAGE>
been entitled for all previous Dividend Periods shall have been paid or
declared and a sum of money sufficient for the payment thereof set apart.
(e) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation, before any
distribution or payment shall be made to the holders of Junior Stock, the
holders of the Series A Preferred Stock shall be entitled to be paid the
Subscription Price (defined to be $1,000 per share) of all outstanding shares of
Series A Preferred Stock as of the date of such liquidation or dissolution or
such other winding up, plus any accrued and unpaid dividends thereon to such
date, and no more, in cash or in property taken at its fair value as determined
by the Board of Directors, or both, at the election of the Board of Directors.
If such payment shall have been made in full to the holders of the Series A
Preferred Stock, the remaining assets and funds of the Corporation shall be
distributed among the holders of Junior Stock, according to their respective
shares and priorities. If, upon any such liquidation, dissolution or other
winding up of the affairs of the Corporation, the net assets of the Corporation
distributable among the holders of all outstanding shares of the Series A
Preferred Stock and of any stock having preferential rights to dividends or to
assets of the Corporation on dissolution, liquidation or winding up, which are
on a parity with those of the Series A Preferred Stock, shall be insufficient to
permit the payment in full to such holders of the preferential amounts to which
they are entitled, then the entire net assets of the Corporation shall be
distributed among the holders of the Series A Preferred Stock ratably in
proportion to the full amounts to which they would otherwise be respectfully
entitled. Neither the consolidation or merger of the Corporation into or with
another corporation or corporations, nor the sale of all or substantially all of
the assets of the Corporation to another corporation or corporations shall be
deemed a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this paragraph e.
3. Mandatory Redemption. The Series A Preferred Stock shall be subject to
mandatory redemption as follows:
(a) The Corporation shall each month redeem one-thirty sixth (1/36)
of the number of shares of Series A Preferred Stock outstanding as of the end of
February, 1999 (rounded to the nearest whole share), commencing with the last
day of March, 1999 and continuing until all outstanding shares of Series A
Preferred Stock are redeemed, at a cash amount per share equal to the
Subscription Price, together with any accrued but unpaid dividends thereon to
and including the date of redemption (such price referred to as the "Redemption
Price"). The Corporation may redeem all or any part of the Series A Preferred
Stock at any time, at its sole election, at a cash amount per share equal to the
Redemption Price. If less than all of the outstanding shares of Series A
Preferred Stock are to be redeemed, such shares shall be redeemed pro rata or by
lot as determined by the Board of Directors in its sole discretion.
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<PAGE>
(b) The Corporation shall redeem all outstanding shares of Series A
Preferred Stock, at the Redemption Price, upon any closing of the sale or
other disposition of a majority of the Corporation's assets.
(c) Notice of every redemption of Series A Preferred Stock shall be
sent by or on behalf of the Corporation, by first class mail, postage
prepaid, to the holders of record of the shares to be redeemed at their
respective addresses as they shall appear on the records of the
Corporation, not less than ten (10) days nor more than twenty (20) days
prior to the date fixed for redemption (the "Redemption Date") (i)
notifying such holders of the election of the Corporation to redeem such
shares and of the date of redemption, (ii) stating the place or places at
which the shares called for redemption shall, upon presentation and
surrender of the certificates evidencing such shares, be redeemed, and the
Redemption Price therefor, and (iii) stating the name and address of any
redemption agent selected by the Corporation and the name and address of
the Corporation's transfer agent for the Series A Preferred Stock. The
Corporation may act as the transfer agent for the Series A Preferred Stock.
(d) If notice of redemption shall have been given as hereinbefore
provided, and the Corporation shall not default in the payment of the
Redemption Price, then each holder of shares called for redemption shall be
entitled to all preferences and relative and other rights accorded by this
resolution until and including the date prior to the Redemption Date. If
the Corporation shall default in making payment or delivery as aforesaid on
the Redemption Date, then each holder of the shares called for redemption
shall be entitled to all preferences and relative and other rights accorded
by this resolution until and including the date prior to the date (the
"Final Redemption Date") when the Corporation makes payment or delivery as
aforesaid to the holders of the Series A Preferred Stock. From and after
the Redemption Date or, if the Corporation shall default in making payment
or delivery as aforesaid, the Final Redemption Date, the shares called for
redemption shall no longer be deemed to be outstanding, and all rights of
the holders of such shares shall cease and terminate, except the right of
the holders of such shares, upon surrender of certificates therefor, to
receive amounts to be paid hereunder. The deposit of monies in trust with
any redemption agent shall be irrevocable except that the Corporation shall
be entitled to receive from the redemption agent the interest or other
earnings, if any, earned on any monies so deposited in trust, and the
holders of any shares redeemed shall have no claim to such interest or
other earnings, and any balance of monies so deposited by the Corporation
and unclaimed by the holders of the Series A Preferred Stock entitled
thereto at the expiration of two (2) years from the Redemption Date (or the
Final Redemption Date, as applicable) shall be repaid, together with any
interest or other earnings thereon, to the Corporation, and after any such
repayment, the holders of the shares entitled to the funds so repaid to the
Corporation shall look only to the Corporation for such payment, without
interest.
4. Conversion into Common Stock. The Series A Preferred Stock shall be
convertible into Common Stock as follows:
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<PAGE>
(a) Subject to and upon compliance with the provisions of this
paragraph 4, the holder of any shares of Series A Preferred Stock shall
have the right at such holder's option, at any time or from time to time on
and after August 1, 1999, to convert any of such shares of Series A
Preferred Stock into fully paid and nonassessable shares of Common Stock,
on a conversion ratio equal to the Redemption Price at the time of such
election divided by $1,000 and then multiplied by 3000, upon the terms
hereinafter set forth. In case any share of Series A Preferred Stock is
called for redemption, such right of conversion shall terminate at the
close of business on the fifth day prior to the Redemption Date or, if the
Corporation shall default in the payment of the Redemption Price, at the
close of business on the fifth day prior to the Final Redemption Date.
(b) The holder of any shares of Series A Preferred Stock may exercise
the conversion right specified in subparagraph 4(a) by surrendering to the
Corporation or any transfer agent of the Corporation the certificate or
certificates for the shares to be converted, accompanied by written notice
specifying the number of shares to be converted. Conversion shall be deemed
to have been effected on the date when notice of an election to convert and
certificates for the shares to be converted are delivered (the "Conversion
Date"). As promptly as practicable thereafter, the Corporation shall issue
and deliver to or upon the written order of such holder a certificate or
certificates for the number of full shares of Common Stock to which such
holder is entitled and a check or cash with respect to any fractional
interest in a shares of Common Stock (valued at $1,000 per share).
5. No Impairment. As long as any Series A Preferred Stock of this
Corporation is outstanding, this Corporation shall not without the consent of
the holders of at least two-thirds of that outstanding Series A Preferred Stock,
given in person or by proxy at a meeting of the holders of the Series A
Preferred Stock called for that purpose, or given in writing:
(a) Amend or repeal any provision of the Certificate of Incorporation
of this Corporation or any amendment thereto or add any provision to the
certificate, if such action would alter the preferences, special rights or
powers of the Series A Preferred Stock so as to affect that stock
adversely; or
(b) Authorize or create, or increase the authorized amount of, any
stock (hereafter called "Prior Preference Stock") having preferential
rights (to dividends or to assets on the dissolution, liquidation or
winding up of this Corporation) which are prior to those of the Series A
Preferred Stock; or
(c) Authorize or create any stock, security, debt or obligation
convertible into or exchangeable for Prior Preference Stock or evidencing
the right to purchase Prior Preference Stock, or
(d) Increase the authorized amount of Series A Preferred Stock; or
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<PAGE>
(e) Reclassify any shares of Common Stock or any shares of junior
stock that may hereafter be created into Prior Preference Stock, Series A
Preferred Stock, or any stock having preferential rights to dividends or to
assets of this Corporation on dissolution, liquidation or winding up, which
are on a parity with those of the Series A Preferred Stock; or
(f) By voluntary action dissolve, liquidate or wind up the
Corporation, or sell, lease or convey all or substantially all of the
assets of the Corporation (but, the execution and delivery of a mortgage,
deed of trust or instrument of pledge, covering all or substantially all of
the assets of the Corporation shall not be considered a sale or conveyance
thereof); or
(g) Effect the merger or consolidation of the Corporation; unless: (i)
the surviving or resulting corporation (which may be this Corporation or
another corporation) will have, immediately after the merger or
consolidation, no stock either authorized or outstanding ranking prior to
or on a parity with the Series A Preferred Stock as to dividends or as to
assets upon dissolution, liquidation or winding up of the surviving or
resulting corporation, except the same or a lesser number of shares of
stock having such priority or parity with the same or lesser rights,
preferences and powers as the stock of this Corporation authorized and
outstanding immediately before the merger or consolidation; and (ii) each
holder of Series A Preferred Stock immediately before the merger or
consolidation shall be entitled to retain or receive the same number of
shares (with the same rights, preferences and powers) of the resulting
corporation.
6. Severability. If any right, preference or limitation of the Series A
Preferred Stock set forth in this Certificate of Designation (as such
Certificate may be amended from time to time) is invalid, unlawful or incapable
of being enforced by reason of any rule of law or public policy, all other
rights, preferences and limitations set forth in this Certificate of Designation
(as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be deemed dependent upon any other such right, preference or limitation
unless so expressed herein.
6
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused the foregoing certificate to
be signed and attested as of May 31, 1998.
NATIONWIDE ELECTRIC, INC.
By: /s/ Frederick C. Green IV
------------------------------------
Frederick C. Green IV, President
(CORPORATE SEAL)
ATTEST:
By: /s/ Mark G. English
------------------------------
Mark G. English, Secretary
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<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of June 12, 1998, by Eagle
Electric Holdings, Inc., a Minnesota corporation with its principal place of
business at 250 Marquette Avenue South, Minneapolis, Minnesota 55401-2188, FAX
(612) 371-8036 ("Eagle"), and Stephen L. Howell, an individual whose office is
at ______________________________, FAX (____) __________ ("Employee").
RECITALS
--------
Eagle desires to employ Employee as President of the Division (as
hereinafter defined), and Employee desires to be employed by Eagle in such
capacity, on the terms and conditions contained herein. In consideration of the
mutual covenants and promises contained herein, the parties agree as follows:
1. Term of Employment. The initial term (the "Initial Term") of this
Agreement shall commence on the date hereof (the "Commencement Date") and,
unless sooner terminated as provided herein, shall end on August 31, 2001. At
the expiration of the Initial Term, this Agreement shall be automatically
renewed for successive periods of one year each (each, a "Renewal Term") unless
either party gives written notice of nonrenewal to the other not later than 90
days prior to the expiration of the Initial Term or any such Renewal Term.
Unless this Agreement is sooner terminated in accordance with Section 4, the
Initial Term and each Renewal Term during which this Agreement shall be in
effect shall be collectively referred to as the "Employment Period."
2. Title; Capacity. The corporation which was formerly named Eagle
Electrical Systems, Inc. is now a division of Eagle Electric Holdings, Inc.,
which is a wholly-owned subsidiary of Nationwide Electric, Inc. ("NEI"),
pursuant to an Agreement and Plan of Merger between NEI and Henderson Electric
Company, Inc. and its shareholders (the "Merger Agreement"). For purposes of
this Agreement, Eagle Electric Holdings, Inc. shall be referred to as the
"Company" and the Eagle Division shall be referred to as the "Division."
Employee shall serve as President of the Division and in such other management
position(s) as the Board of Directors of the Company (the "Board") or the
President of NEI, reasonably and in good faith, may determine from time to time,
not inconsistent with the duties of similar officers. Employee shall be subject
to the supervision of, and shall have such specific authority as is delegated to
him by, the Board and/or the President of NEI.
Employee 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 the President of NEI shall from time to time
reasonably assign to him. Employee shall perform his
<PAGE>
duties primarily at the principal place of business of the Division currently
located at ______________________________________, subject to reasonable travel
requirements. Employee agrees to devote his entire business time, attention and
energies, during reasonable business hours, to the business and interests of the
Division during the Employment Period, except for vacation and absence due to
illness or injury and reasonable time devoted to the fulfillment of civic and
non-competitive personal responsibilities and activities. Employee agrees to
abide by the rules, regulations, instructions, personnel practices and policies
(collectively, the "Policies") applicable to the Division and reasonably
promulgated by the Board or the President of NEI, as amended or modified from
time to time and communicated in advance to Employee.
3. Compensation and Benefits.
a. Salary. The Company shall pay Employee, in semi-monthly installments,
an annual base salary of $87,000 for the one-year period commencing on the
Commencement Date. Employee's salary shall be subject to such increases as
determined by the Board or the President of NEI in their good faith discretion.
In addition, Employee shall be entitled to participate in the Company's
discretionary bonus and stock ownership plans as determined by the Board or the
President of NEI. Discretionary bonuses shall be up to 5% of the pre-tax income
of the Eagle Division.
b. Fringe Benefits. At all times during the Employment Period, Employee
shall be entitled to participate in all benefit programs that NEI establishes
and makes available to the management employees of its other operating
subsidiaries and divisions, to the extent Employee's position, tenure, salary,
age, health and other qualifications make him eligible to participate. Such
benefits shall include, without limitation, those set forth on SCHEDULE A
attached hereto.
c. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable travel, entertainment and other expenses incurred or paid by
Employee in connection with the performance of his duties under this Agreement,
upon presentation by Employee of such documentation as the Company may
reasonably request. The amount generally available for travel, entertainment
and other expenses may be fixed in advance by the Board or the President of NEI.
Upon prior approval by the Board, the Company shall reimburse Employee, or
directly pay for, dues and membership fees for organizations relevant to
Employee's duties.
4. Employment Termination. Employee's employment by the Company shall
terminate upon the occurrence of any of the following:
a. Expiration of the Employment Period, as defined in Section 1;
b. At the election of the Company, for "cause," immediately upon
receipt of written notice by the Company to Employee specifying in reasonable
detail such cause and, in the case of Section 4.b.ii, the nature of the injury
incurred. "Cause" for termination shall mean any of the following:
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<PAGE>
i. Dishonesty of Employee with respect to the Company or NEI;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the tendency or effect of injuring, in any material respect,
the reputation, business or business relationships of the Company, the Division
or NEI or their respective officers, directors or employees;
iii. Upon a charge by a governmental entity against Employee of
any crime involving moral turpitude (other than minor traffic offenses) or which
could, in the reasonable, good faith judgment of the Board or the President of
NEI, reflect unfavorably upon the Company or NEI; upon the filing of any civil
action against Employee involving a charge of embezzlement, theft, fraud or
other similar act; or any other serious job-related conduct which the Board or
the President of NEI, reasonably and in good faith, determines is materially and
substantially detrimental to the Company or NEI or relations with customers,
suppliers, employees, shareholders or the investment community;
iv. Employee's willful or prolonged absence from work (other
than by reason of disability due to physical or mental illness) or willful
failure, neglect or refusal by Employee to perform his material duties and
responsibilities, unless corrected within 10 days after receipt of written
notice from the Company;
v. Employee's failure to meet any performance standards agreed
upon by Employee and the Company or NEI, unless due to factors beyond Employee's
control; or
vi. Breach by Employee of any of the other material covenants
contained in this Agreement, unless corrected within 10 days after receipt of
written notice from the Company.
c. Immediately upon the death or disability of Employee. As used in
this Agreement, the term "disability" shall mean the inability of 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, in all material respects, the
services contemplated under this Agreement. A determination of disability shall
be made by a qualified physician reasonably satisfactory to the Company and
Employee. If the Company and Employee (or his personal representative) are
unable to reasonably agree on the identity of a qualified physician, each shall
designate a physician and the two physicians so designated shall select a third
physician whose determination of disability shall be binding on the parties.
d. At the election of the Company or Employee, with or without cause,
upon 90 days written notice by one party to the other.
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<PAGE>
5. Effect of Termination.
a. Termination for Cause. If Employee's employment is terminated for
cause pursuant to Section 4.b., the Company shall pay to Employee the salary and
benefits (but not any incentive compensation) payable to him under Section 3
through the last day of his actual employment by the Company. Notwithstanding
the foregoing, if Employee's employment is terminated pursuant to Section
4.b.v., Employee shall be paid any incentive compensation to which he would
otherwise be entitled, adjusted to reflect the portion of the fiscal year in
which Employee was employed by the Company.
b. Elective Termination.
i. If Employee's employment is terminated by the Company
pursuant to Section 4.d., the Company shall pay to Employee the salary and
benefits (but not incentive compensation) payable to him under Section 3 for a
period of six months from the last day of his actual employment by the Company.
ii. If Employee's employment is terminated by Employee pursuant
to Section 4.d., the Company shall pay to Employee the salary and benefits
payable to him under Section 3 through the last day of his actual employment by
the Company.
iii. If this Agreement is terminated by either party pursuant to
Section 4.d., within 30 days after the last day of Employee's actual employment
by the Company, Employee shall be paid any incentive compensation to which he
was otherwise entitled, adjusted to reflect the portion of the fiscal year in
which Employee was employed by the Company.
c. Termination for Death or Disability. If Employee's employment is
terminated by death or because of disability pursuant to Section 4.c., the
Company shall pay to Employee or his estate, as the case may be, the salary
pursuant to Section 3 which would otherwise be payable to Employee through the
end of the month in which the termination of his employment because of death or
disability occurs; plus any incentive compensation to which he would otherwise
be entitled, prorated for the portion of the fiscal year in which Employee was
employed by the Company.
6. Non-Compete.
a. During the Employment Period and for a period of two years after
the expiration or termination for any reason of this Agreement, Employee shall
not directly or indirectly, anywhere in a territory comprised of the continental
United States:
i. as an individual proprietor, partner, stockholder, member,
officer, employee, director, joint venturer, consultant, investor, lender, or in
any other capacity whatsoever (other than as the holder of not more than 5% of
the total outstanding stock of a publicly held company), engage in or assist any
other entity in engaging in the business of developing, providing,
4
<PAGE>
marketing or selling products or services (including but not limited to
commercial and electrical contracting services) of the kind developed, provided,
marketed or sold by the Division while Employee was employed by the Company; or
ii. recruit, solicit or induce, or attempt to induce, any
employee(s) of the Company or NEI or its operating subsidiaries or divisions to
terminate their employment; 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 or any
other operating subsidiaries or divisions of NEI which were contacted, solicited
or serviced by Employee while employed by the Company.
b. If any restriction set forth in this Section 6 is found by a 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.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-how, whether in
oral, written, electronic or other medium, 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
shall include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, strategies, research
data, clinical data, analyses, financial data, personnel data, computer
programs, customer and supplier lists, bids, pricing information, cost
information, contractual relations, business contacts and trade secrets.
Employee shall not disclose any Proprietary Information to others outside the
Company (except as required in the performance of his duties on behalf of the
Company) or use the same for any purpose other than the performance of his
duties hereunder 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 the fault of Employee.
ii. Employee agrees that all files, letters, memoranda, notes,
abstracts, reports, records, data, sketches, drawings, laboratory notebooks,
program listings and other written, photographic, electronic or other tangible
material containing or prepared on the basis of Proprietary Information, whether
created by 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 Employee
only in the performance of his duties for the Company.
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<PAGE>
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 similar types of information, know-how, records and
disclosures of customers of the Company or suppliers to the Company or other
third parties identified as being confidential or proprietary and which may have
been disclosed or entrusted to the Company or to Employee in the course of the
Company's business.
b. Developments.
i. Employee shall make full and prompt disclosure to the Board 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 Employee or under his direction or jointly with others
during his employment by the Company and relating to the business 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, rights to patent, copyrights and copyright applications. However,
this Section 7.b.ii. shall not apply to Developments which do not relate to the
present or planned business or research or developments of the Company and which
are made and conceived by Employee at times other than normal working hours, not
on the Company's premises and without use of any tools, devices, equipment or
Proprietary Information of the Company.
iii. Employee agrees to cooperate fully with the Company, at the
Company's expense and as the Company may reasonably request, 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, assignments of
proprietary rights, and powers of attorney, which the Company may reasonably
deem necessary or desirable in order to protect its rights and interests in any
Developments.
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.
6
<PAGE>
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 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 Employee of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if 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 offset against, and
retain as liquidated damages, any sums otherwise owed but not paid by the
Company to Employee.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery, confirmed
facsimile transmission or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the other party at
the address or facsimile number shown above, or at such other address or
facsimile number 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 with regard to the subject matter hereof 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 Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Ohio, 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
Cincinnati, Ohio, and by execution and delivery of this Agreement, the parties
irrevocably and unconditionally subject themselves 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
7
<PAGE>
which or into which the Company or Division may be merged or consolidated, or
which may succeed to its assets or business, provided, however, that such
successor or assignee shall expressly assume the Company's obligations
hereunder; and provided further that the obligations of Employee are personal
and may 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 counterparts, each of
which 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.
22. Indemnification. The Company agrees that it will indemnify and hold
Employee harmless to the fullest extent permitted by applicable law or the
Articles of Incorporation or Bylaws of the Company, from and against all
liabilities, costs, claims, expenses, actions and causes of action to which
Employee may be subject or exposed and arising from his service as an employee,
including, without limitation, all costs and expenses incurred in the defense of
any litigation, arbitration or other proceedings of any nature, including the
reasonable attorneys' fees incurred by Employee in connection therewith, except
to the extent a court of competent jurisdiction determines that any such claim
arose as a result of Employee's breach of this Agreement or the gross negligence
or willful misconduct of Employee in the performance of his duties as an
employee of the Company.
23. Survival. The relevant provisions of Sections 5, 6, 7.a., 7.b.iii, 8,
22 and 24 shall survive expiration or termination of this Agreement for the
periods recited therein or, if no period is recited, for such period as required
to implement the terms thereof.
8
<PAGE>
24. Enforcement. The covenants contained in Sections 6 and 7 are
necessary for the protection of the business and goodwill of the Company and are
considered by Employee to be reasonable for such purpose. Employee agrees that
any breach of his covenants in Section 6 or 7 will cause the Company substantial
and irrevocable injury which would not be fully compensable in damages.
Accordingly, 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/or injunctive relief, without the necessity of posting bond (to
the extent permitted under applicable law) or proving lack of an adequate remedy
at law. The prevailing party in a legal proceeding to remedy a breach under
this Agreement shall be entitled to receive its reasonable attorneys' fees,
expert witness fees and out-of-pocket costs incurred in connection with such
proceeding, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
EAGLE ELECTRIC HOLDINGS, INC.
By _______________________________________
Name:
Title:
The "Company"
EMPLOYEE:
__________________________________________
Stephen L. Howell
9
<PAGE>
SCHEDULE A
Benefits
Benefits Plans consistent with those currently received by Employee as
President of Eagle Electric.
<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of June 12, 1998, by Parsons
Electric Co., a Minnesota corporation with its principal place of business at
250 Marquette Avenue South, Minneapolis, Minnesota 55401-2188, FAX (612) 371-
8036 ("Parsons"), and Rodney J. Henderson, an individual whose office is at 4502
Poplar Level Road, Louisville, Kentucky 40213, FAX (502) 452-1308 ("Executive").
RECITALS
--------
Parsons desires to employ Executive as CEO of the Division (as hereinafter
defined), and Executive desires to be employed by Parsons in such capacity, on
the terms and conditions contained herein. In consideration of the mutual
covenants and promises contained herein, the parties agree as follows:
1. Term of Employment. The initial term (the "Initial Term") of this
Agreement shall commence on the date hereof (the "Commencement Date") and,
unless sooner terminated as provided herein, shall end on August 31, 2001. At
the expiration of the Initial Term, this Agreement shall be automatically
renewed for successive periods of one year each (each, a "Renewal Term") unless
either party gives written notice of nonrenewal to the other not later than 90
days prior to the expiration of the Initial Term or any such Renewal Term.
Unless this Agreement is sooner terminated in accordance with Section 4, the
Initial Term and each Renewal Term during which this Agreement shall be in
effect shall be collectively referred to as the "Employment Period."
2. Title; Capacity. The corporation which formerly was named Henderson
Electric Company, Inc. ("Henderson") is now a division of Parsons, which is a
wholly-owned subsidiary of Nationwide Electric, Inc. ("NEI"), pursuant to an
Agreement and Plan of Merger between NEI and Henderson and its shareholders (the
"Merger Agreement"). For purposes of this Agreement, Parsons shall be referred
to as the "Company" and Henderson shall be referred to as the "Division."
Executive shall serve as CEO of the Division and in such other management
position(s) as the Board of Directors of the Company (the "Board") or the
President of NEI, reasonably and in good faith, may determine from time to time,
not inconsistent with an executive officer's duties. Executive shall be subject
to the supervision of, and shall have such specific authority as is delegated to
him by, the Board and/or the President of NEI.
Executive 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 the President of NEI shall from time to time
reasonably assign to him. Executive shall perform his
<PAGE>
duties primarily at the principal place of business of the Division currently
located at 4502 Poplar Level Road, Louisville, Kentucky, subject to reasonable
travel requirements. Executive agrees to devote his entire business time,
attention and energies, during reasonable business hours, to the business and
interests of the Division during the Employment Period, except for vacation and
absence due to illness or injury and reasonable time devoted to the fulfillment
of civic and non-competitive personal responsibilities and activities and his
activities on behalf of Henderson Properties, Inc. Executive agrees to abide by
the rules, regulations, instructions, personnel practices and policies
(collectively, the "Policies") applicable to the Division and reasonably
promulgated by the Board or the President of NEI, as amended or modified from
time to time and communicated in advance to Executive.
3. Compensation and Benefits.
a. Salary. The Company shall pay Executive, in semi-monthly installments,
an annual base salary of $150,000 for the one-year period commencing on the
Commencement Date. Executive's salary shall be subject to such increases as
determined by the Board or the President of NEI in their good faith discretion.
b. Fringe Benefits. At all times during the Employment Period, Executive
shall be entitled to participate in all benefit programs that NEI establishes
and makes available to the management executives of its other operating
subsidiaries and divisions, to the extent Executive's position, tenure, salary,
age, health and other qualifications make him eligible to participate. Such
benefits shall include, without limitation, those set forth on SCHEDULE A
attached hereto.
c. Reimbursement of Expenses. The Company shall reimburse Executive for
all reasonable travel, entertainment and other expenses incurred or paid by
Executive in connection with the performance of his duties under this Agreement,
upon presentation by Executive of such documentation as the Company may
reasonably request. The amount generally available for travel, entertainment
and other expenses may be fixed in advance by the Board or the President of NEI.
Upon prior approval by the Board, the Company shall reimburse Executive, or
directly pay for, dues and membership fees for organizations relevant to
Executive's duties.
d. Incentive Compensation. Executive shall be entitled to an incentive
bonus in the amount of 6% of the pre-tax net income contributed by the Division
to NEI (the "Incentive Base") each fiscal year during the Employment Period.
Such bonus shall be payable quarterly and reconciled annually. The Incentive
Base shall be determined by NEI, which determination shall be final and binding
for all purposes. Notwithstanding the foregoing, no incentive compensation shall
be paid for any fiscal year in which this Agreement is terminated by the Company
pursuant to Section 4.b. For purposes of the Incentive Base, the pre-tax net
income contribution of the Division: (i) shall include the pre-tax net income
contributed by the entity formerly known as Eagle Electrical Systems, Inc.; and
(ii) shall not include any home office corporate charge or home office overhead.
At Executive's option, Executive may elect to receive, in lieu of the base
salary provided for in
2
<PAGE>
Section 3.a. and the incentive compensation provided above in this Section
3.d., a base salary of $170,000 and a bonus equal to 5% of the Incentive Base.
Check below:
[_] I elect to receive a base [_] I elect to receive a base
salary of $150,000 and salary of $170,000 and
a 6% bonus. a 5% bonus.
4. Employment Termination. Executive's employment by the Company shall
terminate upon the occurrence of any of the following:
a. Expiration of the Employment Period, as defined in Section 1;
b. At the election of the Company, for "cause," immediately upon
receipt of written notice by the Company to Executive specifying in reasonable
detail such cause and, in the case of Section 4.b.ii, the nature of the injury
incurred. "Cause" for termination shall mean any of the following:
i. Dishonesty of Executive with respect to the Company or NEI;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the tendency or effect of injuring, in any material respect,
the reputation, business or business relationships of the Company, the Division
or NEI or their respective officers, directors or employees;
iii. Upon a charge by a governmental entity against Executive of
any crime involving moral turpitude (other than minor traffic offenses) or which
could, in the reasonable, good faith judgment of the Board or the President of
NEI, reflect unfavorably upon the Company or NEI; upon the filing of any civil
action against Executive involving a charge of embezzlement, theft, fraud or
other similar act; or any other serious job-related conduct which the Board or
the President of NEI, reasonably and in good faith, determines is materially and
substantially detrimental to the Company or NEI or relations with customers,
suppliers, employees, shareholders or the investment community;
iv. Executive's willful or prolonged absence from work (other
than by reason of disability due to physical or mental illness) or willful
failure, neglect or refusal by Executive to perform his material duties and
responsibilities, unless corrected within 10 days after receipt of written
notice from the Company;
v. Executive's failure to meet any performance standards agreed
upon by Executive and the Company or NEI, unless due to factors beyond
Executive's control; or
3
<PAGE>
vi. Breach by Executive of any of the other material covenants
contained in this Agreement, unless corrected within 10 days after receipt of
written notice from the Company.
c. Immediately upon the death or disability of Executive. As used
in this Agreement, the term "disability" shall mean the inability of Executive,
due to a physical or mental disability, for a period of 90 days, whether or not
consecutive, during any 360 day period to perform, in all material respects, the
services contemplated under this Agreement. A determination of disability shall
be made by a qualified physician reasonably satisfactory to the Company and
Executive. If the Company and Executive (or his personal representative) are
unable to reasonably agree on the identity of a qualified physician, each shall
designate a physician and the two physicians so designated shall select a third
physician whose determination of disability shall be binding on the parties.
d. At the election of the Company or Executive, with or without
cause, upon 90 days written notice by one party to the other.
5. Effect of Termination.
a. Termination for Cause. If Executive's employment is terminated
for cause pursuant to Section 4.b., the Company shall pay to Executive the
salary and benefits (but not any incentive compensation) payable to him under
Section 3 through the last day of his actual employment by the Company.
Notwithstanding the foregoing, if Executive's employment is terminated pursuant
to Section 4.b.v., Executive shall be paid any incentive compensation to which
he would otherwise be entitled, adjusted to reflect the portion of the fiscal
year in which Executive was employed by the Company.
b. Elective Termination. If Executive's employment is terminated by
either party under Section 4.d., the Company shall pay to Executive the salary
and benefits payable to him under Section 3 through the last day of his actual
employment by the Company. In addition, within 30 days after the last day of
Executive's actual employment by the Company, Executive shall be paid any
incentive compensation to which he would otherwise be entitled, adjusted to
reflect the portion of the fiscal year in which Executive was employed by the
Company.
c. Termination for Death or Disability. If Executive's employment
is terminated by death or because of disability pursuant to Section 4.c., the
Company shall pay to Executive or his estate, as the case may be, the salary
pursuant to Section 3 which would otherwise be payable to Executive through the
end of the month in which the termination of his employment because of death or
disability occurs; plus any incentive compensation to which he would otherwise
be entitled, prorated for the portion of the fiscal year in which Executive was
employed by the Company.
6. Non-Compete.
4
<PAGE>
a. During the Employment Period and for a period of five years after
the expiration or termination for any reason of this Agreement, Executive shall
not directly or indirectly, anywhere in a territory comprised of the continental
United States:
i. as an individual proprietor, partner, stockholder, member,
officer, Executive, director, joint venturer, consultant, investor, lender, or
in any other capacity whatsoever (other than as the holder of not more than 5%
of the total outstanding stock of a publicly held company), engage in or assist
any other entity in engaging in the business of developing, providing, marketing
or selling products or services (including, but not limited to, commercial and
electrical contracting services) of the kind developed, provided, marketed or
sold by the Division while Executive was employed by the Company; or
ii. recruit, solicit or induce, or attempt to induce, any
employee(s) of the Company or NEI or its operating subsidiaries or divisions to
terminate their employment; 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 or any
other operating subsidiaries or divisions of NEI which were contacted, solicited
or serviced by Executive while employed by the Company.
b. If any restriction set forth in this Section 6 is found by a
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.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Executive agrees that all information and know-how, whether in
oral, written, electronic or other medium, 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
shall include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, strategies, research
data, clinical data, analyses, financial data, personnel data, computer
programs, customer and supplier lists, bids, pricing information, cost
information, contractual relations, business contacts and trade secrets.
Executive shall not disclose any Proprietary Information to others outside the
Company (except as required in the performance of his duties on behalf of the
Company) or use the same for any purpose other than the performance of his
duties hereunder 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 the fault of Executive.
5
<PAGE>
ii. Executive agrees that all files, letters, memoranda, notes,
abstracts, reports, records, data, sketches, drawings, laboratory notebooks,
program listings and other written, photographic, electronic or other tangible
material containing or prepared on the basis of Proprietary Information, whether
created by Executive or others, which shall come into his custody or possession,
shall be and are the exclusive property of the Company to be used by Executive
only in the performance of his duties for the Company.
iii. Executive 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 similar types of information, know-how, records and
disclosures of customers of the Company or suppliers to the Company or other
third parties identified as being confidential or proprietary and which may have
been disclosed or entrusted to the Company or to Executive in the course of the
Company's business.
b. Developments.
i. Executive shall make full and prompt disclosure to the Board 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 Executive or under his direction or jointly
with others during his employment by the Company and relating to the business of
the Company (all of which are collectively referred to in this Agreement as
"Developments").
ii. Executive 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, rights to patent, copyrights and copyright applications. However,
this Section 7.b.ii. shall not apply to Developments which do not relate to the
present or planned business or research or developments of the Company and which
are made and conceived by Executive at times other than normal working hours,
not on the Company's premises and without use of any tools, devices, equipment
or Proprietary Information of the Company.
iii. Executive agrees to cooperate fully with the Company, at the
Company's expense and as the Company may reasonably request, 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. Executive shall sign all
papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignments of
proprietary rights, and powers of attorney, which the Company may reasonably
deem necessary or desirable in order to protect its rights and interests in any
Developments.
c. Other Agreements. Executive 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
6
<PAGE>
Company or to refrain from competing, directly or indirectly, with the business
of such previous employer or any other party. Executive further represents that
his performance of all the terms of this Agreement and as an Executive 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 Executive
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 Executive of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if Executive 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 offset against, and
retain as liquidated damages, any sums otherwise owed but not paid by the
Company to Executive.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery, confirmed
facsimile transmission or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the other party at
the address or facsimile number shown above, or at such other address or
facsimile number 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 with regard to the subject matter hereof 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 Executive.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Kentucky, 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
Louisville, Kentucky, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject themselves to the jurisdiction
(both subject matter and personal) of each such court and irrevocably and
7
<PAGE>
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 or
Division may be merged or consolidated, or which may succeed to its assets or
business, provided, however, that such successor or assignee shall expressly
assume the Company's obligations hereunder; and provided further that the
obligations of Executive are personal and may 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 counterparts, each of
which 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.
22. Indemnification. The Company agrees that it will indemnify and hold
Executive harmless to the fullest extent permitted by applicable law or the
Articles of Incorporation or Bylaws of the Company, from and against all
liabilities, costs, claims, expenses, actions and causes of action to which
Executive may be subject or exposed and arising from his service as an
Executive, including, without limitation, all costs and expenses incurred in the
defense of any litigation, arbitration or other proceedings of any nature,
including the reasonable attorneys' fees incurred by Executive in connection
therewith, except to the extent a court of competent jurisdiction determines
that any such claim arose as a result of Executive's breach of this Agreement or
the gross negligence or willful misconduct of Executive in the performance of
his duties as an Executive of the Company.
8
<PAGE>
23. Survival. The relevant provisions of Sections 5, 6, 7.a., 7.b.iii, 8,
22 and 24 shall survive expiration or termination of this Agreement for the
periods recited therein or, if no period is recited, for such period as required
to implement the terms thereof.
24. Enforcement. The covenants contained in Sections 6 and 7 are
necessary for the protection of the business and goodwill of the Company and are
considered by Executive to be reasonable for such purpose. Executive agrees
that any breach of his covenants in Section 6 or 7 will cause the Company
substantial and irrevocable injury which would not be fully compensable in
damages. Accordingly, 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/or injunctive relief, without the necessity of posting
bond (to the extent permitted under applicable law) or proving lack of an
adequate remedy at law. The prevailing party in a legal proceeding to remedy a
breach under this Agreement shall be entitled to receive its reasonable
attorneys' fees, expert witness fees and out-of-pocket costs incurred in
connection with such proceeding, in addition to any other relief to which it may
be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
PARSONS ELECTRIC CO.
By _______________________________________
Name:
Title:
The "Company"
EXECUTIVE:
__________________________________________
Rodney J. Henderson
9
<PAGE>
SCHEDULE A
Benefits
Benefit Plans consistent with those currently received by Executive as
CEO of Henderson Electric Company, Inc.
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of June 12, 1998, by Parsons
Electric Co., a Minnesota corporation with its principal place of business at
250 Marquette Avenue South, Minneapolis, Minnesota 55401-2188, FAX (612) 371-
8036 ("Parsons"), and Bruce M. Henderson, an individual whose office is at 4502
Poplar Level Road, Louisville, Kentucky 40213, FAX (502) 452-1308 ("Executive").
RECITALS
--------
Parsons desires to employ Executive as President of the Division (as
hereinafter defined), and Executive desires to be employed by Parsons in such
capacity, on the terms and conditions contained herein. In consideration of the
mutual covenants and promises contained herein, the parties agree as follows:
1. Term of Employment. The initial term (the "Initial Term") of this
Agreement shall commence on the date hereof (the "Commencement Date") and,
unless sooner terminated as provided herein, shall end on August 31, 2001. At
the expiration of the Initial Term, this Agreement shall be automatically
renewed for successive periods of one year each (each, a "Renewal Term") unless
either party gives written notice of nonrenewal to the other not later than 90
days prior to the expiration of the Initial Term or any such Renewal Term.
Unless this Agreement is sooner terminated in accordance with Section 4, the
Initial Term and each Renewal Term during which this Agreement shall be in
effect shall be collectively referred to as the "Employment Period."
2. Title; Capacity. The corporation which formerly was known as
Henderson Electric Company, Inc. ("Henderson") is now a division of Parsons,
which is a wholly-owned subsidiary of Nationwide Electric, Inc. ("NEI"),
pursuant to an Agreement and Plan of Merger between NEI and Henderson and its
shareholders (the "Merger Agreement"). For purposes of this Agreement, Parsons
shall be referred to as the "Company" and Henderson shall be referred to as the
"Division." Executive shall serve as President of the Division and in such other
management position(s) as the Board of Directors of the Company (the "Board") or
the President of NEI, reasonably and in good faith, may determine from time to
time, not inconsistent with an executive officer's duties. Executive shall be
subject to the supervision of, and shall have such specific authority as is
delegated to him by, the Board and/or the President of NEI.
Executive 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 the President of NEI shall from time to time
reasonably assign to him. Executive shall perform his
<PAGE>
duties primarily at the principal place of business of the Division currently
located at 4502 Poplar Level Road, Louisville, Kentucky, subject to reasonable
travel requirements. Executive agrees to devote his entire business time,
attention and energies, during reasonable business hours, to the business and
interests of the Division during the Employment Period, except for vacation and
absence due to illness or injury and reasonable time devoted to the fulfillment
of civic and non-competitive personal responsibilities and activities and
activities of Executive on behalf of Henderson Properties, Inc. Executive
agrees to abide by the rules, regulations, instructions, personnel practices and
policies (collectively, the "Policies") applicable to the Division and
reasonably promulgated by the Board or the President of NEI, as amended or
modified from time to time and communicated in advance to Executive.
3. Compensation and Benefits.
a. Salary. The Company shall pay Executive, in semi-monthly installments,
an annual base salary of $158,400 for the one-year period commencing on the
Commencement Date. Executive's salary shall be subject to such increases as
determined by the Board or the President of NEI in their good faith discretion.
b. Fringe Benefits. At all times during the Employment Period, Executive
shall be entitled to participate in all benefit programs that NEI establishes
and makes available to the management executives of its other operating
subsidiaries and divisions, to the extent Executive's position, tenure, salary,
age, health and other qualifications make him eligible to participate. Such
benefits shall include, without limitation, those set forth on SCHEDULE A
attached hereto.
c. Reimbursement of Expenses. The Company shall reimburse Executive for
all reasonable travel, entertainment and other expenses incurred or paid by
Executive in connection with the performance of his duties under this Agreement,
upon presentation by Executive of such documentation as the Company may
reasonably request. The amount generally available for travel, entertainment
and other expenses may be fixed in advance by the Board or the President of NEI.
Upon prior approval by the Board, the Company shall reimburse Executive, or
directly pay for, dues and membership fees for organizations relevant to
Executive's duties.
d. Incentive Compensation. Executive shall be entitled to an incentive
bonus in the amount of 6% of the pre-tax net income contributed by the Division
to NEI (the "Incentive Base") each fiscal year during the Employment Period.
Such bonus shall be payable quarterly and reconciled annually. The Incentive
Base shall be determined by NEI, which determination shall be final and binding
for all purposes. Notwithstanding the foregoing, no incentive compensation shall
be paid for any fiscal year in which this Agreement is terminated by the Company
pursuant to Section 4.b. For purposes of the Incentive Base, the pre-tax net
income contribution of the Division: (i) shall include the pre-tax net income
contributed by the entity formerly known as Eagle Electrical Systems, Inc.; and
(ii) shall not include any home office corporate charge or home office overhead.
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At Executive's option, Executive may elect to receive, in lieu of the base
salary provided for in Section 3 and the incentive compensation provided above
in this Section 3.d., a base salary of $178,400 and a bonus equal to 5% of the
Incentive Base. Check below:
[_] I elect to receive a base [_] I elect to receive a base
salary of $158,400 and salary of $178,400 and
a 6% bonus. a 5% bonus.
4. Employment Termination. Executive's employment by the Company shall
terminate upon the occurrence of any of the following:
a. Expiration of the Employment Period, as defined in Section 1;
b. At the election of the Company, for "cause," immediately upon
receipt of written notice by the Company to Executive specifying in reasonable
detail such cause and, in the case of Section 4.b.ii, the nature of the injury
incurred. "Cause" for termination shall mean any of the following:
i. Dishonesty of Executive with respect to the Company or NEI;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the tendency or effect of injuring, in any material respect,
the reputation, business or business relationships of the Company, the Division
or NEI or their respective officers, directors or employees;
iii. Upon a charge by a governmental entity against Executive of
any crime involving moral turpitude (other than minor traffic offenses) or which
could, in the reasonable, good faith judgment of the Board or the President of
NEI, reflect unfavorably upon the Company or NEI; upon the filing of any civil
action against Executive involving a charge of embezzlement, theft, fraud or
other similar act; or any other serious job-related conduct which the Board or
the President of NEI, reasonably and in good faith, determines is materially and
substantially detrimental to the Company or NEI or relations with customers,
suppliers, employees, shareholders or the investment community;
iv. Executive's willful or prolonged absence from work (other
than by reason of disability due to physical or mental illness) or willful
failure, neglect or refusal by Executive to perform his material duties and
responsibilities, unless corrected within 10 days after receipt of written
notice from the Company;
v. Executive's failure to meet any performance standards agreed
upon by Executive and the Company or NEI, unless due to factors beyond
Executive's control; or
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<PAGE>
vi. Breach by Executive of any of the other material covenants
contained in this Agreement, unless corrected within 10 days after receipt of
written notice from the Company.
c. Immediately upon the death or disability of Executive. As used
in this Agreement, the term "disability" shall mean the inability of Executive,
due to a physical or mental disability, for a period of 90 days, whether or not
consecutive, during any 360 day period to perform, in all material respects, the
services contemplated under this Agreement. A determination of disability shall
be made by a qualified physician reasonably satisfactory to the Company and
Executive. If the Company and Executive (or his personal representative) are
unable to reasonably agree on the identity of a qualified physician, each shall
designate a physician and the two physicians so designated shall select a third
physician whose determination of disability shall be binding on the parties.
d. At the election of the Company or Executive, with or without
cause, upon 90 days written notice by one party to the other.
5. Effect of Termination.
a. Termination for Cause. If Executive's employment is terminated
for cause pursuant to Section 4.b., the Company shall pay to Executive the
salary and benefits (but not any incentive compensation) payable to him under
Section 3 through the last day of his actual employment by the Company.
Notwithstanding the foregoing, if Executive's employment is terminated pursuant
to Section 4.b.v., Executive shall be paid any incentive compensation to which
he would otherwise be entitled, adjusted to reflect the portion of the fiscal
year in which Executive was employed by the Company.
b. Elective Termination. If Executive's employment is terminated by
either party under Section 4.d., the Company shall pay to Executive the salary
and benefits payable to him under Section 3 through the last day of his actual
employment by the Company. In addition, within 30 days after the last day of
Executive's actual employment by the Company, Executive shall be paid any
incentive compensation to which he would otherwise be entitled, adjusted to
reflect the portion of the fiscal year in which Executive was employed by the
Company.
c. Termination for Death or Disability. If Executive's employment
is terminated by death or because of disability pursuant to Section 4.c., the
Company shall pay to Executive or his estate, as the case may be, the salary
pursuant to Section 3 which would otherwise be payable to Executive through the
end of the month in which the termination of his employment because of death or
disability occurs; plus any incentive compensation to which he would otherwise
be entitled, prorated for the portion of the fiscal year in which Executive was
employed by the Company.
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<PAGE>
6. Non-Compete.
a. During the Employment Period and for a period of five years after
the expiration or termination for any reason of this Agreement, Executive shall
not directly or indirectly, anywhere in a territory comprised of the continental
United States:
i. as an individual proprietor, partner, stockholder, member,
officer, Executive, director, joint venturer, consultant, investor, lender, or
in any other capacity whatsoever (other than as the holder of not more than 5%
of the total outstanding stock of a publicly held company), engage in or assist
any other entity in engaging in the business of developing, providing, marketing
or selling products or services (including but not limited to commercial and
electrical contracting services) of the kind developed, provided, marketed or
sold by the Division while Executive was employed by the Company; or
ii. recruit, solicit or induce, or attempt to induce, any
employee(s) of the Company or NEI or its operating subsidiaries or divisions to
terminate their employment; 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 or any
other operating subsidiaries or divisions of NEI which were contacted, solicited
or serviced by Executive while employed by the Company.
b. If any restriction set forth in this Section 6 is found by a
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.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Executive agrees that all information and know-how, whether in
oral, written, electronic or other medium, 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
shall include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, strategies, research
data, clinical data, analyses, financial data, personnel data, computer
programs, customer and supplier lists, bids, pricing information, cost
information, contractual relations, business contacts and trade secrets.
Executive shall not disclose any Proprietary Information to others outside the
Company (except as required in the performance of his duties on behalf of the
Company) or use the same for any purpose other than the performance of his
duties hereunder without written approval by an officer of the Company, either
during or after
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<PAGE>
his employment, unless and until such Proprietary Information has become public
knowledge without the fault of Executive.
ii. Executive agrees that all files, letters, memoranda, notes,
abstracts, reports, records, data, sketches, drawings, laboratory notebooks,
program listings and other written, photographic, electronic or other tangible
material containing or prepared on the basis of Proprietary Information, whether
created by Executive or others, which shall come into his custody or possession,
shall be and are the exclusive property of the Company to be used by Executive
only in the performance of his duties for the Company.
iii. Executive 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 similar types of information, know-how, records and
disclosures of customers of the Company or suppliers to the Company or other
third parties identified as being confidential or proprietary and which may have
been disclosed or entrusted to the Company or to Executive in the course of the
Company's business.
b. Developments.
i. Executive shall make full and prompt disclosure to the Board 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 Executive or under his direction or jointly
with others during his employment by the Company and relating to the business of
the Company (all of which are collectively referred to in this Agreement as
"Developments").
ii. Executive 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, rights to patent, copyrights and copyright applications. However,
this Section 7.b.ii. shall not apply to Developments which do not relate to the
present or planned business or research or developments of the Company and which
are made and conceived by Executive at times other than normal working hours,
not on the Company's premises and without use of any tools, devices, equipment
or Proprietary Information of the Company.
iii. Executive agrees to cooperate fully with the Company, at the
Company's expense and as the Company may reasonably request, 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. Executive shall sign all
papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignments of
proprietary rights, and powers of attorney, which the Company may reasonably
deem necessary or desirable in order to protect its rights and interests in any
Developments.
6
<PAGE>
c. Other Agreements. Executive 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. Executive further represents that his performance of all
the terms of this Agreement and as an Executive 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 Executive
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 Executive of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if Executive 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 offset against, and
retain as liquidated damages, any sums otherwise owed but not paid by the
Company to Executive.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery, confirmed
facsimile transmission or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the other party at
the address or facsimile number shown above, or at such other address or
facsimile number 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 with regard to the subject matter hereof 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 Executive.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Kentucky, without giving
effect to that State's conflict of laws provisions.
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<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
Louisville, Kentucky, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject themselves 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 or
Division may be merged or consolidated, or which may succeed to its assets or
business, provided, however, that such successor or assignee shall expressly
assume the Company's obligations hereunder; and provided further that the
obligations of Executive are personal and may 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 counterparts, each of
which 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.
22. Indemnification. The Company agrees that it will indemnify and hold
Executive harmless to the fullest extent permitted by applicable law or the
Articles of Incorporation or Bylaws of the Company, from and against all
liabilities, costs, claims, expenses, actions and causes of action to which
Executive may be subject or exposed and arising from his service as an
Executive, including, without limitation, all costs and expenses incurred in the
defense of any litigation,
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arbitration or other proceedings of any nature, including the reasonable
attorneys' fees incurred by Executive in connection therewith, except to the
extent a court of competent jurisdiction determines that any such claim arose as
a result of Executive's breach of this Agreement or the gross negligence or
willful misconduct of Executive in the performance of his duties as an Executive
of the Company.
23. Survival. The relevant provisions of Sections 5, 6, 7.a., 7.b.iii, 8,
22 and 24 shall survive expiration or termination of this Agreement for the
periods recited therein or, if no period is recited, for such period as required
to implement the terms thereof.
24. Enforcement. The covenants contained in Sections 6 and 7 are
necessary for the protection of the business and goodwill of the Company and are
considered by Executive to be reasonable for such purpose. Executive agrees
that any breach of his covenants in Section 6 or 7 will cause the Company
substantial and irrevocable injury which would not be fully compensable in
damages. Accordingly, 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/or injunctive relief, without the necessity of posting
bond (to the extent permitted under applicable law) or proving lack of an
adequate remedy at law. The prevailing party in a legal proceeding to remedy a
breach under this Agreement shall be entitled to receive its reasonable
attorneys' fees, expert witness fees and out-of-pocket costs incurred in
connection with such proceeding, in addition to any other relief to which it may
be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
PARSONS ELECTRIC CO.
By _______________________________________
Name:
Title:
The "Company"
EXECUTIVE:
__________________________________________
Bruce M. Henderson
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SCHEDULE A
Benefits
Benefit Plans consistent with those currently received by Executive as
President of Henderson Electric Company, Inc.
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of June 12, 1998, by Parsons
Electric Co., a Minnesota corporation with its principal place of business at
250 Marquette Avenue South, Minneapolis, Minnesota 55401-2188, FAX (612) 371-
8036 ("Parsons"), and Michael W. Masterson, an individual whose office is at
___________________Lexington, Kentucky ______, FAX (____) ___________
("Employee").
RECITALS
--------
Parsons desires to employ Employee as Executive Vice President of the
Division (as hereinafter defined), and Employee desires to be employed by
Parsons in such capacity, on the terms and conditions contained herein. In
consideration of the mutual covenants and promises contained herein, the parties
agree as follows:
1. Term of Employment. The initial term (the "Initial Term") of this
Agreement shall commence on the date hereof (the "Commencement Date") and,
unless sooner terminated as provided herein, shall end on August 31, 2001. At
the expiration of the Initial Term, this Agreement shall be automatically
renewed for successive periods of one year each (each, a "Renewal Term") unless
either party gives written notice of nonrenewal to the other not later than 90
days prior to the expiration of the Initial Term or any such Renewal Term.
Unless this Agreement is sooner terminated in accordance with Section 4, the
Initial Term and each Renewal Term during which this Agreement shall be in
effect shall be collectively referred to as the "Employment Period."
2. Title; Capacity. The corporation which formerly was named Henderson
Electric Company, Inc. ("Henderson") is now a division of Parsons, which is a
wholly-owned subsidiary of Nationwide Electric, Inc. ("NEI"), pursuant to an
Agreement and Plan of Merger between NEI and Henderson and its shareholders (the
"Merger Agreement"). For purposes of this Agreement, Parsons shall be referred
to as the "Company" and Henderson shall be referred to as the "Division."
Employee shall serve as Executive Vice President of the Division and in such
other management position(s) as the CEO or President of the Division, reasonably
and in good faith, may determine from time to time, not inconsistent with the
duties of similar officers. Employee shall be subject to the supervision of, and
shall have such specific authority as is delegated to him by, the CEO and/or the
President of the Division.
Employee accepts such employment and agrees to undertake the duties
and responsibilities inherent in such position and such other duties and
responsibilities as the CEO or President of the Division shall from time to time
reasonably assign to him. Employee shall perform
<PAGE>
his duties primarily at the Lexington, Kentucky office of the Division, subject
to reasonable travel requirements. Employee agrees to devote his entire
business time, attention and energies, during reasonable business hours, to the
business and interests of the Division during the Employment Period, except for
vacation and absence due to illness or injury and reasonable time devoted to the
fulfillment of civic and non-competitive personal responsibilities and
activities. Employee agrees to abide by the rules, regulations, instructions,
personnel practices and policies (collectively, the "Policies") applicable to
the Division and reasonably promulgated by the CEO or President of the Division,
as amended or modified from time to time and communicated in advance to
Employee.
3. Compensation and Benefits.
a. Salary. The Company shall pay Employee, in semi-monthly installments,
an annual base salary of $106,848 for the one-year period commencing on the
Commencement Date. Employee's salary shall be subject to such increases as
determined by the CEO or President of the Division in his good faith discretion.
In addition, Employee shall be entitled to participate in the Division's
discretionary bonus plans and the Company's stock ownership plans as determined
by the management of NEI and the Division.
b. Fringe Benefits. At all times during the Employment Period, Employee
shall be entitled to participate in all benefit programs that NEI establishes
and makes available to the management employees of its other operating
subsidiaries and divisions, to the extent Employee's position, tenure, salary,
age, health and other qualifications make him eligible to participate. Such
benefits shall include, without limitation, those set forth on SCHEDULE A
attached hereto.
c. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable travel, entertainment and other expenses incurred or paid by
Employee in connection with the performance of his duties under this Agreement,
upon presentation by Employee of such documentation as the Company may
reasonably request. The amount generally available for travel, entertainment
and other expenses may be fixed in advance by the CEO or President of the
Division. Upon prior approval by the CEO or President of the Division, the
Company shall reimburse Employee, or directly pay for, dues and membership fees
for organizations relevant to Employee's duties.
4. Employment Termination. Employee's employment by the Company shall
terminate upon the occurrence of any of the following:
a. Expiration of the Employment Period, as defined in Section 1;
b. At the election of the Company, for "cause," immediately upon
receipt of written notice by the Company to Employee specifying in reasonable
detail such cause and, in the case of Section 4.b.ii, the nature of the injury
incurred. "Cause" for termination shall mean any of the following:
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i. Dishonesty of Employee with respect to the Company or NEI;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the tendency or effect of injuring, in any material respect,
the reputation, business or business relationships of the Company, the Division
or NEI or their respective officers, directors or employees;
iii. Upon a charge by a governmental entity against Employee of
any crime involving moral turpitude (other than minor traffic offenses) or which
could, in the reasonable, good faith judgment of the CEO or President of the
Division, reflect unfavorably upon the Company or NEI; upon the filing of any
civil action against Employee involving a charge of embezzlement, theft, fraud
or other similar act; or any other serious job-related conduct which the CEO or
President of the Division, reasonably and in good faith, determines is
materially and substantially detrimental to the Company or NEI or relations with
customers, suppliers, employees, shareholders or the investment community;
iv. Employee's willful or prolonged absence from work (other
than by reason of disability due to physical or mental illness) or willful
failure, neglect or refusal by Employee to perform his material duties and
responsibilities, unless corrected within 10 days after receipt of written
notice from the Company;
v. Employee's failure to meet any performance standards agreed
upon by Employee and the CEO or President of the Division, unless due to factors
beyond Employee's control; or
vi. Breach by Employee of any of the other material covenants
contained in this Agreement, unless corrected within 10 days after receipt of
written notice from the Company.
c. Immediately upon the death or disability of Employee. As used in
this Agreement, the term "disability" shall mean the inability of 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, in all material respects, the
services contemplated under this Agreement. A determination of disability shall
be made by a qualified physician reasonably satisfactory to the Company and
Employee. If the Company and Employee (or his personal representative) are
unable to reasonably agree on the identity of a qualified physician, each shall
designate a physician and the two physicians so designated shall select a third
physician whose determination of disability shall be binding on the parties.
d. At the election of the Company or Employee, with or without cause,
upon 90 days written notice by one party to the other.
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<PAGE>
5. Effect of Termination.
a. Termination for Cause. If Employee's employment is terminated for
cause pursuant to Section 4.b., the Company shall pay to Employee the salary and
benefits (but not any incentive compensation) payable to him under Section 3
through the last day of his actual employment by the Company. Notwithstanding
the foregoing, if Employee's employment is terminated pursuant to Section
4.b.v., Employee shall be paid any incentive compensation to which he would
otherwise be entitled, adjusted to reflect the portion of the fiscal year in
which Employee was employed by the Company.
b. Elective Termination.
i. If Employee's employment is terminated by the Company
pursuant to Section 4.d., the Company shall pay to Employee the salary and
benefits (but not incentive compensation) payable to him under Section 3 for a
period of six months from the last day of his actual employment by the Company.
ii. If Employee's employment is terminated by Employee pursuant
to Section 4.d, the Company shall pay to Employee the salary and benefits
payable to him under Section 3 through the last day of his actual employment by
the Company.
iii. If this Agreement is terminated by either party pursuant to
Section 4.d, within 30 days after the last day of Employee's actual employment
by the Company, Employee shall be paid any incentive compensation to which he
would otherwise be entitled, adjusted to reflect the portion of the fiscal year
in which Employee was employed by the Company.
c. Termination for Death or Disability. If Employee's employment is
terminated by death or because of disability pursuant to Section 4.c., the
Company shall pay to Employee or his estate, as the case may be, the salary
pursuant to Section 3 which would otherwise be payable to Employee through the
end of the month in which the termination of his employment because of death or
disability occurs; plus any incentive compensation to which he would otherwise
be entitled, prorated for the portion of the fiscal year in which Employee was
employed by the Company.
6. Non-Compete.
a. During the Employment Period and for a period of two years after
the expiration or termination for any reason of this Agreement, Employee shall
not directly or indirectly, anywhere in a territory comprised of the continental
United States:
i. as an individual proprietor, partner, stockholder, member,
officer, employee, director, joint venturer, consultant, investor, lender, or in
any other capacity whatsoever (other than as the holder of not more than 5% of
the total outstanding stock of a publicly held company), engage in or assist any
other entity in engaging in the business of developing, providing,
4
<PAGE>
marketing or selling products or services (including but not limited to
commercial and electrical contracting services) of the kind developed, provided,
marketed or sold by the Division while Employee was employed by the Company; or
ii. recruit, solicit or induce, or attempt to induce, any
employee(s) of the Company or NEI or its operating subsidiaries or divisions to
terminate their employment; 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 or any
other operating subsidiaries or divisions of NEI which were contacted, solicited
or serviced by Employee while employed by the Company.
b. If any restriction set forth in this Section 6 is found by a 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.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-how, whether in
oral, written, electronic or other medium, 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
shall include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, strategies, research
data, clinical data, analyses, financial data, personnel data, computer
programs, customer and supplier lists, bids, pricing information, cost
information, contractual relations, business contacts and trade secrets.
Employee shall not disclose any Proprietary Information to others outside the
Company (except as required in the performance of his duties on behalf of the
Company) or use the same for any purpose other than the performance of his
duties hereunder 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 the fault of Employee.
ii. Employee agrees that all files, letters, memoranda, notes,
abstracts, reports, records, data, sketches, drawings, laboratory notebooks,
program listings and other written, photographic, electronic or other tangible
material containing or prepared on the basis of Proprietary Information, whether
created by 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 Employee
only in the performance of his duties for the Company.
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<PAGE>
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 similar types of information, know-how, records and
disclosures of customers of the Company or suppliers to the Company or other
third parties identified as being confidential or proprietary and which may have
been disclosed or entrusted to the Company or to Employee in the course of the
Company's business.
b. Developments.
i. Employee shall make full and prompt disclosure to the CEO or
President of the Division 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 Employee or under his
direction or jointly with others during his employment by the Company and
relating to the business 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, rights to patent, copyrights and copyright applications. However,
this Section 7.b.ii. shall not apply to Developments which do not relate to the
present or planned business or research or developments of the Company and which
are made and conceived by Employee at times other than normal working hours, not
on the Company's premises and without use of any tools, devices, equipment or
Proprietary Information of the Company.
iii. Employee agrees to cooperate fully with the Company, at the
Company's expense and as the Company may reasonably request, 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, assignments of proprietary rights, and
powers of attorney, which the Company may reasonably deem necessary or desirable
in order to protect its rights and interests in any Developments.
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.
6
<PAGE>
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 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 Employee of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if 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 offset against, and
retain as liquidated damages, any sums otherwise owed but not paid by the
Company to Employee.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery, confirmed
facsimile transmission or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the other party at
the address or facsimile number shown above, or at such other address or
facsimile number 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 with regard to the subject matter hereof 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 Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Kentucky, 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
Louisville, Kentucky, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject themselves 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
7
<PAGE>
which or into which the Company or Division may be merged or consolidated, or
which may succeed to its assets or business, provided, however, that such
successor or assignee shall expressly assume the Company's obligations
hereunder; and provided further that the obligations of Employee are personal
and may 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 counterparts, each of
which 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.
22. Indemnification. The Company agrees that it will indemnify and hold
Employee harmless to the fullest extent permitted by applicable law or the
Articles of Incorporation or Bylaws of the Company, from and against all
liabilities, costs, claims, expenses, actions and causes of action to which
Employee may be subject or exposed and arising from his service as an employee,
including, without limitation, all costs and expenses incurred in the defense of
any litigation, arbitration or other proceedings of any nature, including the
reasonable attorneys' fees incurred by Employee in connection therewith, except
to the extent a court of competent jurisdiction determines that any such claim
arose as a result of Employee's breach of this Agreement or the gross negligence
or willful misconduct of Employee in the performance of his duties as an
employee of the Company.
23. Survival. The relevant provisions of Sections 5, 6, 7.a., 7.b.iii, 8,
22 and 24 shall survive expiration or termination of this Agreement for the
periods recited therein or, if no period is recited, for such period as required
to implement the terms thereof.
8
<PAGE>
24. Enforcement. The covenants contained in Sections 6 and 7 are
necessary for the protection of the business and goodwill of the Company and are
considered by Employee to be reasonable for such purpose. Employee agrees that
any breach of his covenants in Section 6 or 7 will cause the Company substantial
and irrevocable injury which would not be fully compensable in damages.
Accordingly, 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/or injunctive relief, without the necessity of posting bond (to
the extent permitted under applicable law) or proving lack of an adequate remedy
at law. The prevailing party in a legal proceeding to remedy a breach under
this Agreement shall be entitled to receive its reasonable attorneys' fees,
expert witness fees and out-of-pocket costs incurred in connection with such
proceeding, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
PARSONS ELECTRIC CO.
By _________________________________________
Name:
Title:
The "Company"
EMPLOYEE:
____________________________________________
Michael W. Masterson
9
<PAGE>
SCHEDULE A
Benefits
Benefit Plans consistent with those currently received by Employee as
Vice President of Henderson Electric Company, Inc.
<PAGE>
Exhibit 10.9
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of June 12, 1998, by Parsons
Electric Co., a Minnesota corporation with its principal place of business at
250 Marquette Avenue South, Minneapolis, Minnesota 55401-2188, FAX (612) 371-
8036 ("Parsons"), and David Cartwright, an individual officing at 2284 Marietta
Boulevard, N.W., Atlanta, Georgia 30318, FAX (404) 350-1065 ("Employee").
RECITALS
--------
Parsons desires to employ Employee as a Vice-President of its Allison-Smith
Division, and Employee desires to be employed by Parsons in such capacity, on
the terms and conditions contained herein. In consideration of the mutual
covenants and promises contained herein, the parties agree as follows:
1. Term of Employment. The initial term (the "Initial Term") of this
Agreement shall commence on the date hereof (the "Commencement Date") and,
unless sooner terminated as provided herein, shall end on August 31, 2001. At
the expiration of the Initial Term, this Agreement shall be automatically
renewed for successive periods of one year each (each, a "Renewal Term") unless
either party gives written notice of nonrenewal to the other not later than 90
days prior to the expiration of the Initial Term or any such Renewal Term.
Unless this Agreement is sooner terminated in accordance with Section 4, the
Initial Term and each Renewal Term during which this Agreement shall be in
effect shall be collectively referred to as the "Employment Period."
2. Title; Capacity. Allison-Smith is a division of Parsons, which is a
wholly-owned subsidiary of Nationwide Electric, Inc. ("NEI"), pursuant to a
Stock Purchase Agreement among NEI, Allison-Smith Electric Company, Inc. and The
Allison Company and its shareholders (the "Purchase Agreement"). For purposes
of this Agreement, Parsons shall be referred to as the "Company" and Allison-
Smith shall be referred to as the "Division." Employee shall serve as a Vice-
President of the Division and in such other management position(s) as the
President of the Division, reasonably and in good faith, may determine from time
to time. Employee shall be subject to the supervision of, and shall have such
specific authority as is delegated to him by the President of the Division.
Employee accepts such employment and agrees to undertake the duties
and responsibilities inherent in such position and such other duties and
responsibilities as the President of the Division shall from time to time
reasonably assign to him. Employee shall perform his duties primarily at the
principal place of business of the Division currently located at 2284 Marietta
<PAGE>
Boulevard, N.W., Atlanta, Georgia 30318, subject to reasonable travel
requirements. Employee agrees to devote his entire business time, attention and
energies, during reasonable business hours, to the business and interests of the
Division during the Employment Period, except for vacation and absence due to
illness or injury and reasonable time devoted to the fulfillment of civic and
non-competitive personal responsibilities and activities. Employee agrees to
abide by the rules, regulations, instructions, personnel practices and policies
(collectively, the "Policies") applicable to the Division and reasonably
promulgated by the President of the Division, as amended or modified from time
to time and communicated in advance to Employee.
3. Compensation and Benefits.
a. Salary. The Company shall pay Employee, in semi-monthly installments,
an annual base salary of $100,000 for the one-year period commencing on the
Commencement Date. Employee's salary shall be subject to such increases as
determined by the President of the Division in his good faith discretion.
b. Fringe Benefits. At all times during the Employment Period, Employee
shall be entitled to participate in all benefit programs that NEI establishes
and makes available to the management employees of its other operating
subsidiaries and divisions, to the extent Employee's position, tenure, salary,
age, health and other qualifications make him eligible to participate. Such
benefits shall include, without limitation, those set forth on SCHEDULE A
attached hereto.
c. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable travel, entertainment and other expenses incurred or paid by
Employee in connection with the performance of his duties under this Agreement,
upon presentation by Employee of such documentation as the Company may
reasonably request. The amount generally available for travel, entertainment
and other expenses may be fixed in advance by the President of the Division.
Upon prior approval by the President, the Company shall reimburse Employee, or
directly pay for, dues and membership fees for organizations relevant to
Employee's duties.
d. Incentive Compensation. Employee shall be entitled to an incentive
bonus in the amount of 5% of Division EBIT, calculated in the manner described
in SCHEDULE 2.2 to the Purchase Agreement (the "Incentive Base") each fiscal
year during the Employment Period. Such bonus shall be payable quarterly and
reconciled annually. The Incentive Base shall be determined by NEI, which
determination shall be final and binding for all purposes.
4. Employment Termination. Employee's employment by the Company shall
terminate upon the occurrence of any of the following:
a. Expiration of the Employment Period, as defined in Section 1;
b. At the election of the Company, for "cause," immediately upon
receipt of written notice by the Company to Employee specifying in reasonable
detail such cause and, in the
2
<PAGE>
case of Section 4.b.ii, the nature of the injury incurred. "Cause" for
termination shall mean the following:
i. Dishonesty of Employee with respect to the Company or NEI;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the tendency or effect of injuring, in any material respect,
the reputation, business or business relationships of the Company, the Division
or NEI or their respective officers, directors or employees;
iii. Upon a charge by a governmental entity against Employee of
any crime involving moral turpitude (other than minor traffic offenses) or which
could, in the reasonable, good faith judgment of the President of the Division,
reflect unfavorably upon the Company or NEI; upon the filing of any civil action
against Employee involving a charge of embezzlement, theft, fraud or other
similar act; or any other serious job-related conduct which the President of the
Division, reasonably and in good faith, determines is materially and
substantially detrimental to the Company or NEI or relations with customers,
suppliers, employees, shareholders or the investment community;
iv. Employee's willful or prolonged absence from work (other
than by reason of disability due to physical or mental illness) or willful
failure, neglect or refusal by Employee to perform his material duties and
responsibilities, unless corrected within 10 days after receipt of written
notice from the Company;
v. Employee's failure to meet any performance standards agreed
upon by Employee and the President of the Division, unless due to factors beyond
Employee's control; or
vi. Breach by Employee of any of the other material covenants
contained in this Agreement, unless corrected within 10 days after receipt of
written notice from the Company.
c. Immediately upon the death or disability of Employee. As used in
this Agreement, the term "disability" shall mean the inability of 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, in all material respects, the
services contemplated under this Agreement. A determination of disability shall
be made by a qualified physician reasonably satisfactory to the Company and
Employee. If the Company and Employee (or his personal representative) are
unable to reasonably agree on the identity of a qualified physician, each shall
designate a physician and the two physicians so designated shall select a third
physician whose determination of disability shall be binding on the parties.
d. At the election of the Company or Employee, with or without cause,
upon 90 days written notice by one party to the other.
3
<PAGE>
5. Effect of Termination.
a. Termination for Cause. If Employee's employment is terminated for
cause pursuant to Section 4.b., the Company shall pay to Employee the salary and
benefits (but not incentive compensation) otherwise payable to him under Section
3 through the last day of his actual employment by the Company.
b. Elective Termination.
i. If Employee's employment is terminated by the Company
pursuant to Section 4.d., the Company shall pay to Employee the salary and
benefits (but not incentive compensation) otherwise payable to him under Section
3 for a period of six months from the last day of his actual employment by the
Company.
ii. If Employee's employment is terminated by Employee pursuant
to Section 4.d., the Company shall pay to Employee the salary and benefits
payable to him under Section 3 through the last day of his employment by the
Company.
iii. If this Agreement is terminated by either party pursuant to
Section 4.d., within 30 days after the last day of Employee's actual employment
by the Company, Employee shall be paid incentive compensation, calculated in
accordance with Section 3.d. and adjusted to reflect the portion of the fiscal
year in which Employee was employed by the Company.
c. Termination for Death or Disability. If Employee's employment is
terminated by death or because of disability pursuant to Section 4.c., the
Company shall pay to Employee or his estate, as the case may be, the salary
pursuant to Section 3.a. which would otherwise be payable to Employee through
the end of the month in which the termination of his employment because of death
or disability occurs; plus any incentive compensation to which he would
otherwise be entitled, prorated for the portion of the fiscal year in which
Employee was employed by the Company.
6. Non-Compete.
a. During the Employment Period and for a period of two years after
the expiration or termination for any reason of this Agreement, Employee shall
not directly or indirectly, anywhere in a territory comprised of the continental
United States:
i. as an individual proprietor, partner, stockholder, member,
officer, employee, director, joint venturer, consultant, investor, lender, or in
any other capacity whatsoever (other than as the holder of not more than 5% of
the total outstanding stock of a publicly held company), engage in or assist any
other entity in engaging in the business of developing, providing, marketing or
selling products or services (including but not limited to commercial and
electrical
4
<PAGE>
contracting services) of the kind developed, provided, marketed or sold by the
Company or NEI or its operating subsidiaries or divisions while Employee was
employed by the Company; or
ii. recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company or NEI or its operating subsidiaries or
divisions to terminate their employment; 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 or any
other operating subsidiaries or divisions of NEI which were contacted, solicited
or serviced by Employee while employed by the Company.
b. If any restriction set forth in this Section 6 is found by a 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.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-how, whether in
oral, written, electronic or other medium, 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
shall include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, strategies, research
data, clinical data, analyses, financial data, personnel data, computer
programs, customer and supplier lists, bids, pricing information, cost
information, contractual relations, business contacts and trade secrets.
Employee shall not disclose any Proprietary Information to others outside the
Company (except as required in the performance of his duties on behalf of the
Company) or use the same for any purpose other than the performance of his
duties hereunder 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 the fault of Employee.
ii. Employee agrees that all files, letters, memoranda, notes,
abstracts, reports, records, data, sketches, drawings, laboratory notebooks,
program listings and other written, photographic, electronic or other tangible
material containing or prepared on the basis of Proprietary Information, whether
created by 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 Employee
only in the performance of his duties for the Company.
5
<PAGE>
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 similar types of information, know-how, records and
disclosures of customers of the Company or suppliers to the Company or other
third parties identified as being confidential or proprietary and which may have
been disclosed or entrusted to the Company or to Employee in the course of the
Company's business.
b. Developments.
i. Employee shall make full and prompt disclosure to the President of
the Division 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 Employee or under his
direction or jointly with others during his employment by the Company and
relating to the business 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, rights to patent, copyrights and copyright applications. However,
this Section 7.b.ii. shall not apply to Developments which do not relate to the
present or planned business or research or developments of the Company and which
are made and conceived by Employee at times other than normal working hours, not
on the Company's premises and without use of any tools, devices, equipment or
Proprietary Information of the Company.
iii. Employee agrees to cooperate fully with the Company, at the
Company's expense and as the Company may reasonably request, 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, assignments 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 Developments.
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.
6
<PAGE>
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 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 Employee of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if 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 offset against, and
retain as liquidated damages, any sums otherwise owed but not paid by the
Company to Employee.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery, facsimile
transmission or upon deposit in the United States Post Office, by registered or
certified mail, postage prepaid, addressed to the other party at the address or
facsimile number shown above, or at such other address or facsimile number 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 with regard to the subject matter hereof 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 Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Georgia, 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
Fulton County, Georgia, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject themselves 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
7
<PAGE>
which or into which the Company or Division may be merged or consolidated, or
which may succeed to its assets or business, provided, however, that such
successor or assignee shall expressly assume the Company's obligations
hereunder; and provided further that the obligations of Employee are personal
and may 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 counterparts, each of
which 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.
22. Indemnification. The Company agrees that it will indemnify and hold
Employee harmless to the fullest extent permitted by applicable law or the
Articles of Incorporation or Bylaws of the Company, from and against all
liabilities, costs, claims, expenses, actions and causes of action to which
Employee may be subject or exposed and arising from his service as an employee,
including, without limitation, all costs and expenses incurred in the defense of
any litigation, arbitration or other proceedings of any nature, including the
reasonable attorneys' fees incurred by Employee in connection therewith, except
to the extent a court of competent jurisdiction determines that any such claim
arose as a result of Employee's breach of this Agreement or the gross negligence
or willful misconduct of Employee in the performance of his duties as an
employee of the Company.
23. Survival. The relevant provisions of Sections 5, 6, 7.a., 7.b.iii, 8,
22 and 24 shall survive expiration or termination of this Agreement for the
periods recited therein or, if no period is recited, for such period as required
to implement the terms thereof.
8
<PAGE>
24. Enforcement. The covenants contained in Sections 6 and 7 are
necessary for the protection of the business and goodwill of the Company and are
considered by Employee to be reasonable for such purpose. Employee agrees that
any breach of his covenants in Section 6 or 7 will cause the Company substantial
and irrevocable injury which would not be fully compensable in damages.
Accordingly, 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/or injunctive relief, without the necessity of posting bond (to
the extent permitted under applicable law) or proving lack of an adequate remedy
at law. The prevailing party in a legal proceeding to remedy a breach under
this Agreement shall be entitled to receive its reasonable attorneys' fees,
expert witness fees and out-of-pocket costs incurred in connection with such
proceeding, in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
PARSONS ELECTRIC CO.
By __________________________________________
Name:
Title:
The "Company"
EMPLOYEE:
_____________________________________________
David Cartwright
9
<PAGE>
SCHEDULE A
Benefits
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of June 12, 1998, by Parsons
Electric Co., a Minnesota corporation with its principal place of business at
250 Marquette Avenue South, Minneapolis, Minnesota 55401-2188, FAX (612) 371-
8036 ("Parsons"), and Lanny Thomas, an individual officing at 2284 Marietta
Boulevard, N.W., Atlanta, Georgia 30318, FAX (404) 350-1065 ("Employee").
RECITALS
--------
Parsons desires to employ Employee as a Vice-President of its Allison-
Smith Division, and Employee desires to be employed by Parsons in such capacity,
on the terms and conditions contained herein. In consideration of the mutual
covenants and promises contained herein, the parties agree as follows:
1. Term of Employment. The initial term (the "Initial Term") of this
Agreement shall commence on the date hereof (the "Commencement Date") and,
unless sooner terminated as provided herein, shall end on August 31, 2001. At
the expiration of the Initial Term, this Agreement shall be automatically
renewed for successive periods of one year each (each, a "Renewal Term") unless
either party gives written notice of nonrenewal to the other not later than 90
days prior to the expiration of the Initial Term or any such Renewal Term.
Unless this Agreement is sooner terminated in accordance with Section 4, the
Initial Term and each Renewal Term during which this Agreement shall be in
effect shall be collectively referred to as the "Employment Period."
2. Title; Capacity. Allison-Smith is a division of Parsons, which is a
wholly-owned subsidiary of Nationwide Electric, Inc. ("NEI"), pursuant to a
Stock Purchase Agreement among NEI, Allison-Smith Electric Company, Inc. and The
Allison Company and its shareholders (the "Purchase Agreement"). For purposes
of this Agreement, Parsons shall be referred to as the "Company" and Allison-
Smith shall be referred to as the "Division." Employee shall serve as a Vice-
President of the Division and in such other management position(s) as the
President of the Division, reasonably and in good faith, may determine from time
to time. Employee shall be subject to the supervision of, and shall have such
specific authority as is delegated to him by the President of the Division.
Employee accepts such employment and agrees to undertake the duties
and responsibilities inherent in such position and such other duties and
responsibilities as the President of the Division shall from time to time
reasonably assign to him. Employee shall perform his duties primarily at the
principal place of business of the Division currently located at 2284 Marietta
<PAGE>
Boulevard, Atlanta, Georgia 30318, subject to reasonable travel requirements.
Employee agrees to devote his entire business time, attention and energies,
during reasonable business hours, to the business and interests of the Division
during the Employment Period, except for vacation and absence due to illness or
injury and reasonable time devoted to the fulfillment of civic and non-
competitive personal responsibilities and activities. Employee agrees to abide
by the rules, regulations, instructions, personnel practices and policies
(collectively, the "Policies") applicable to the Division and reasonably
promulgated by the President of the Division, as amended or modified from time
to time and communicated in advance to Employee.
3. Compensation and Benefits.
a. Salary. The Company shall pay Employee, in semi-monthly installments,
an annual base salary of $100,000 for the one-year period commencing on the
Commencement Date. Employee's salary shall be subject to such increases as
determined by the President of the Division in his good faith discretion.
b. Fringe Benefits. At all times during the Employment Period, Employee
shall be entitled to participate in all benefit programs that NEI establishes
and makes available to the management employees of its other operating
subsidiaries and divisions, to the extent Employee's position, tenure, salary,
age, health and other qualifications make him eligible to participate. Such
benefits shall include, without limitation, those set forth on SCHEDULE A
attached hereto.
c. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable travel, entertainment and other expenses incurred or paid by
Employee in connection with the performance of his duties under this Agreement,
upon presentation by Employee of such documentation as the Company may
reasonably request. The amount generally available for travel, entertainment
and other expenses may be fixed in advance by the President of the Division.
Upon prior approval by the President, the Company shall reimburse Employee, or
directly pay for, dues and membership fees for organizations relevant to
Employee's duties.
d. Incentive Compensation. Employee shall be entitled to an incentive
bonus in the amount of 5% of Division EBIT, calculated in the manner described
in SCHEDULE 2.2 to the Purchase Agreement (the "Incentive Base") each fiscal
year during the Employment Period. Such bonus shall be payable quarterly and
reconciled annually. The Incentive Base shall be determined by NEI, which
determination shall be final and binding for all purposes.
4. Employment Termination. Employee's employment by the Company shall
terminate upon the occurrence of any of the following:
a. Expiration of the Employment Period, as defined in Section 1;
b. At the election of the Company, for "cause," immediately upon
receipt of written notice by the Company to Employee specifying in reasonable
detail such cause and, in the
2
<PAGE>
case of Section 4.b.ii, the nature of the injury incurred. "Cause" for
termination shall mean the following:
i. Dishonesty of Employee with respect to the Company or NEI;
ii. Willful misfeasance or nonfeasance of duty intended to
injure or having the tendency or effect of injuring, in any material respect,
the reputation, business or business relationships of the Company, the Division
or NEI or their respective officers, directors or employees;
iii. Upon a charge by a governmental entity against Employee of
any crime involving moral turpitude (other than minor traffic offenses) or which
could, in the reasonable, good faith judgment of the President of the Division,
reflect unfavorably upon the Company or NEI; upon the filing of any civil action
against Employee involving a charge of embezzlement, theft, fraud or other
similar act; or any other serious job-related conduct which the President of the
Division, reasonably and in good faith, determines is materially and
substantially detrimental to the Company or NEI or relations with customers,
suppliers, employees, shareholders or the investment community;
iv. Employee's willful or prolonged absence from work (other
than by reason of disability due to physical or mental illness) or willful
failure, neglect or refusal by Employee to perform his material duties and
responsibilities, unless corrected within 10 days after receipt of written
notice from the Company;
v. Employee's failure to meet any performance standards agreed
upon by Employee and the President of the Division, unless due to factors beyond
Employee's control; or
vi. Breach by Employee of any of the other material covenants
contained in this Agreement, unless corrected within 10 days after receipt of
written notice from the Company.
c. Immediately upon the death or disability of Employee. As used in
this Agreement, the term "disability" shall mean the inability of 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, in all material respects, the
services contemplated under this Agreement. A determination of disability shall
be made by a qualified physician reasonably satisfactory to the Company and
Employee. If the Company and Employee (or his personal representative) are
unable to reasonably agree on the identity of a qualified physician, each shall
designate a physician and the two physicians so designated shall select a third
physician whose determination of disability shall be binding on the parties.
d. At the election of the Company or Employee, with or without cause,
upon 90 days written notice by one party to the other.
3
<PAGE>
5. Effect of Termination.
a. Termination for Cause. If Employee's employment is terminated for
cause pursuant to Section 4.b., the Company shall pay to Employee the salary and
benefits (but not any incentive compensation) payable to him under Section 3
through the last day of his actual employment by the Company.
b. Elective Termination.
i. If Employee's employment is terminated by the Company
pursuant to Section 4.d., the Company shall pay to Employee the salary and
benefits (but not incentive compensation) otherwise payable to him under Section
3 for a period of six months from the last day of his actual employment by the
Company.
ii. If Employee's employment is terminated by Employee pursuant
to Section 4.d., the Company shall pay to Employee the salary and benefits
payable to him under Section 3 through the last day of his actual employment by
the Company.
iii. If this Agreement is terminated by either party pursuant to
Section 4.d., within 30 days after the last day of Employee's actual employment
by the Company, Employee shall be paid incentive compensation, calculated in
accordance with Section 3.d. and adjusted to reflect the portion of the fiscal
year in which Employee was employed by the Company.
c. Termination for Death or Disability. If Employee's employment is
terminated by death or because of disability pursuant to Section 4.c., the
Company shall pay to Employee or his estate, as the case may be, the salary
pursuant to Section 3.a. which would otherwise be payable to Employee through
the end of the month in which the termination of his employment because of death
or disability occurs; plus any incentive compensation to which he would
otherwise be entitled, prorated for the portion of the fiscal year in which
Employee was employed by the Company.
6. Non-Compete.
a. During the Employment Period and for a period of two years after
the expiration or termination for any reason of this Agreement, Employee shall
not directly or indirectly, anywhere in a territory comprised of the continental
United States:
i. as an individual proprietor, partner, stockholder, member,
officer, employee, director, joint venturer, consultant, investor, lender, or in
any other capacity whatsoever (other than as the holder of not more than 5% of
the total outstanding stock of a publicly held company), engage in or assist any
other entity in engaging in the business of developing, providing, marketing or
selling products or services (including but not limited to commercial and
electrical contracting services) of the kind developed, provided, marketed or
sold by the Company or NEI or its operating subsidiaries or divisions while
Employee was employed by the Company; or
4
<PAGE>
ii. recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company or NEI or its operating subsidiaries or
divisions to terminate their employment; 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 or any
other operating subsidiaries or divisions of NEI which were contacted, solicited
or serviced by Employee while employed by the Company.
b. If any restriction set forth in this Section 6 is found by a 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.
7. Proprietary Information and Developments
a. Proprietary Information.
i. Employee agrees that all information and know-how, whether in
oral, written, electronic or other medium, 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
shall include inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, strategies, research
data, clinical data, analyses, financial data, personnel data, computer
programs, customer and supplier lists, bids, pricing information, cost
information, contractual relations, business contacts and trade secrets.
Employee shall not disclose any Proprietary Information to others outside the
Company (except as required in the performance of his duties on behalf of the
Company) or use the same for any purpose other than the performance of his
duties hereunder 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 the fault of Employee.
ii. Employee agrees that all files, letters, memoranda, notes,
abstracts, reports, records, data, sketches, drawings, laboratory notebooks,
program listings and other written, photographic, electronic or other tangible
material containing or prepared on the basis of Proprietary Information, whether
created by 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 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 similar types of information, know-how, records and
disclosures of customers of the Company or suppliers to the
5
<PAGE>
Company or other third parties identified as being confidential or proprietary
and which may have been disclosed or entrusted to the Company or to Employee in
the course of the Company's business.
b. Developments.
i. Employee shall make full and prompt disclosure to the President of
the Division 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 Employee or under his
direction or jointly with others during his employment by the Company and
relating to the business 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, rights to patent, copyrights and copyright applications. However,
this Section 7.b.ii. shall not apply to Developments which do not relate to the
present or planned business or research or developments of the Company and which
are made and conceived by Employee at times other than normal working hours, not
on the Company's premises and without use of any tools, devices, equipment or
Proprietary Information of the Company.
iii. Employee agrees to cooperate fully with the Company, at the
Company's expense and as the Company may reasonably request, 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, assignments 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 Developments.
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
6
<PAGE>
subsequent employer of 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 Employee of the provisions of this Agreement are
difficult to calculate, the parties hereto agree that if 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 offset against, and
retain as liquidated damages, any sums otherwise owed but not paid by the
Company to Employee.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery, facsimile
transmission or upon deposit in the United States Post Office, by registered or
certified mail, postage prepaid, addressed to the other party at the address or
facsimile number shown above, or at such other address or facsimile number 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 with regard to the subject matter hereof 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 Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Georgia, 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
Fulton County, Georgia, and by execution and delivery of this Agreement, the
parties irrevocably and unconditionally subject themselves 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 or
Division may be merged or consolidated, or which may succeed to its assets or
business, provided, however, that such successor or assignee shall expressly
7
<PAGE>
assume the Company's obligations hereunder; and provided further that the
obligations of Employee are personal and may 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 counterparts, each of
which 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.
22. Indemnification. The Company agrees that it will indemnify and hold
Employee harmless to the fullest extent permitted by applicable law or the
Articles of Incorporation or Bylaws of the Company, from and against all
liabilities, costs, claims, expenses, actions and causes of action to which
Employee may be subject or exposed and arising from his service as an employee,
including, without limitation, all costs and expenses incurred in the defense of
any litigation, arbitration or other proceedings of any nature, including the
reasonable attorneys' fees incurred by Employee in connection therewith, except
to the extent a court of competent jurisdiction determines that any such claim
arose as a result of Employee's breach of this Agreement or the gross negligence
or willful misconduct of Employee in the performance of his duties as an
employee of the Company.
23. Survival. The relevant provisions of Sections 5, 6, 7.a., 7.b.iii, 8,
22 and 24 shall survive expiration or termination of this Agreement for the
periods recited therein or, if no period is recited, for such period as required
to implement the terms thereof.
24. Enforcement. The covenants contained in Sections 6 and 7 are
necessary for the protection of the business and goodwill of the Company and are
considered by Employee to be reasonable for such purpose. Employee agrees that
any breach of his covenants in Section 6 or 7 will
8
<PAGE>
cause the Company substantial and irrevocable injury which would not be fully
compensable in damages. Accordingly, 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/or injunctive relief, without the
necessity of posting bond (to the extent permitted under applicable law) or
proving lack of an adequate remedy at law. The prevailing party in a legal
proceeding to remedy a breach under this Agreement shall be entitled to receive
its reasonable attorneys' fees, expert witness fees and out-of-pocket costs
incurred in connection with such proceeding, in addition to any other relief to
which it may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
PARSONS ELECTRIC CO.
By ________________________________________
Name:
Title:
The "Company"
EMPLOYEE:
___________________________________________
Lanny Thomas
9
<PAGE>
SCHEDULE A
Benefits
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and effective this 1st
day of March, 1998, by and between Parsons Electric, Co. a corporation with its
principal place of business at 5960 Main Street NE, Minneapolis, MN 55432, (the
"Company"), and Joel Moryn, an individual residing at 6673 Timberwolf Trail,
Lino Lakes, MN 55038 (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 March 1st, 1998 (the "Commencement Date") and, subject to the
further provisions of this Agreement, shall end on the 1st 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 of the
Company until he is made President of the Company, which shall occur no later
than March 1, 1999. As Vice President, he shall be subject to the supervision
of, and shall have such authority as is delegated to him by the Board and
President of the Company. As President, he shall be subject to the supervision
of, and shall have such authority as is delegated to him by the Board 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. His duties as Vice President will include overall
company operation, including but not limited to responsibility for purchasing,
tele/data division, service coordinator, field superintendents and safety
director. His duties as President will include but not be limited to the overall
direction of the Company, including all day-to-day operational and financial
aspects; he will be responsible for maintaining the corporate relationship with
customers, and the bonding and banking community. 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.
<PAGE>
3. Compensation and Benefits.
a. Salary. The Company shall pay the employee, in semi-monthly
installments, an annual base salary of $115,000.00 commencing on the
Commencement Date and continuing until the Employee becomes President,
at which time Employee's base salary will be adjusted by mutual
consent of the Company and Employee. Such salary shall be subject to
merit increases on an annual basis as determined by the Board and the
Employee.
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.
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 Manager. 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. Bonus. The parties agree that a performance-based bonus plan will be
paid to Employee, providing for a percentage of the annual earnings of
the Company. The bonus shall be based on Company Net Income Before
Taxes ("NIBT"), after certain adjustments. The adjustments (add backs)
to Net Income Before Taxes are: (1) interest expense; (2) employee
bonuses; and (3) holding company allocations, administration charges,
goodwill amortization and chairman compensation. Profit sharing and
pension contributions will have been deducted in arriving at NIBT, and
no adjustment will be made for these items. The amount of the bonus
shall be based on the following schedule:
<TABLE>
<CAPTION>
---------------------------------------------------
NIBT as Adjusted Percentage Bonus
<S> <C>
---------------------------------------------------
$0 - $2,000,000 3.25%
---------------------------------------------------
$2,000,000 - $4,000,000 4.75%
---------------------------------------------------
Over $4,000,000 5.25%
---------------------------------------------------
</TABLE>
Example calculations:
$3,000,000 in NIBT
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
$2,000,000 x 3.25% = $ 65,000
$1,000,000 X 4.75% = $ 47,500
TOTAL $112,500
</TABLE>
Such bonus shall be paid as soon as practicable after the end of each
calendar year but in no event later than March 1 of the year following the
calendar year for which the bonus is issued, commencing with the 1998
calendar year. It is understood and agreed by the Employee that if
Employee's employment is terminated pursuant to Section 4 before the end of
a calendar year, his bonus shall be prorated based on the based upon the
amount of income as defined above earned by the Company through the end of
the month in which the Employee's employment is terminated.
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 or which could
reflect unfavorably upon the Company or upon the filing of
any civil action involving a charge of embezzlement, theft,
fraud, or other similar act;
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
standards without the same being corrected upon thirty (30)
days prior written notice; or
<PAGE>
vi. Breach by the Employee of any of the covenants contained in
this Agreement.
c. Immediately upon the Employee's death or 90 days after inception
of a disability of the Employee that has lasted 90 consecutive
days. As used in this Agreement, the term "disability" shall mean
the inability of the employee, due to a physical or mental
disability, which substantially and materially affects one or
more major life activities, to perform the essential functions of
his job on a permanent basis with or without reasonable
accommodation. A determination of disability shall be made by a
physician mutually agreed upon the Company and the Employee.
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) i, ii, iii, iv, or vi, 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. In the event the Employee's employment is
terminated at the election of the Company pursuant to Section
4(d) or Section 4(b)v, or at the election of the Employee
pursuant to Section 4(d), the Company shall pay to the Employee
the compensation and benefits otherwise payable to him under
Section 3 for twelve months following the last day of his actual
employment by the Company excluding compensation as defined by
Section 3(d) and any profit sharing compensation.
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, 7, 8, 11, 13, 14 and 18
shall survive the termination of this Agreement.
6. Non-Compete.
------------
<PAGE>
a. During the Employment Period and for a period of eighteen (18)
months after the termination or expiration thereof, the Employee
will not directly or indirectly, in the territory comprised by
the continental United States (except for subsection (1), below,
which shall be limited to the State of Minnesota):
(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 five percent (5%) of the total outstanding
stock of, a publicly held company), engage in the business
within the State of Minnesota of electrical contracting and
services as defined by standard industry definitions or
(2) 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
(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 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 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 pay
to the Employee upon
<PAGE>
execution of this Agreement the sum of $100,000.00, and the sum
of $75,000.00 on March 2nd, 1999, and the sum of $50,000 on March
2nd, 2000. Any sums due and remaining shall be paid to Employee's
estate within 21 days of Employee's death. Termination of the
Employee's employment with the Company for any reason shall not
affect the payment of any amounts under this Section 6.d., except
as provided for in Section 8.
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.
------------
<PAGE>
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.
d. 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.
e. 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
<PAGE>
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 the terms of Sections 6 or 7 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.
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
<PAGE>
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.
____________________________
____________________________
Greg Orman
Chairman of the Board
EMPLOYEE:
____________________________
Joel Moryn
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Nationwide Electric,
Inc. on Form S-1 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 Registration Statement of The Allison Company on
Form S-1 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 Registration Statement of the consolidated
financial statements of Henderson Electric Co., Inc. and Subsidiaries on Form
S-1 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
June 16, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-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.
/s/ McGladrey & Pullen, LLP
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
June 16, 1998
