e424b3
Filed pursuant to Rule 424(b)(3)
Registration No. 333-142279
JOINT
PROXY STATEMENT/PROSPECTUS
To the Stockholders of Quanta Services, Inc. and the
Stockholders of InfraSource Services, Inc.:
The boards of directors of Quanta Services, Inc., referred to as
Quanta, and InfraSource Services, Inc., referred to as
InfraSource, have each approved an agreement and plan of merger
pursuant to which InfraSource will merge with and into Quanta MS
Acquisition, Inc., a wholly owned subsidiary of Quanta referred
to as Merger Sub. As a result of the merger, InfraSource will
become a wholly owned subsidiary of Quanta. Pursuant to the
merger agreement, Quanta will issue to InfraSource’s
stockholders 1.223 shares of Quanta common stock for each
share of InfraSource common stock, or approximately
50.6 million shares of Quanta common stock (based on the
number of outstanding shares of InfraSource common stock on
July 26, 2007 and assuming the exercise of all outstanding
options to purchase shares of InfraSource common stock that are
vested or will vest as a result of the consummation of the
merger). The Agreement and Plan of Merger, dated as of
March 18, 2007, among Quanta, Merger Sub, and InfraSource,
which is referred to as the merger agreement, is attached as
Annex A to this joint proxy statement/prospectus and is
incorporated into this joint proxy statement/prospectus by
reference.
Quanta and InfraSource will each hold a special meeting of its
stockholders in connection with the proposed merger. At the
Quanta special meeting, Quanta stockholders will be asked to
consider and vote on a proposal to approve the issuance of
shares of Quanta common stock in the merger. At the InfraSource
special meeting, InfraSource stockholders will be asked to adopt
the merger agreement.
Shares of Quanta common stock trade on the New York Stock
Exchange under the symbol “PWR.” We estimate that,
based on the outstanding shares of InfraSource common stock on
July 26, 2007, immediately after the effective time of the
merger, former InfraSource stockholders will hold shares of
Quanta common stock representing approximately 25% of the
then-outstanding shares of Quanta common stock on a fully
diluted basis (including shares issuable pursuant to outstanding
options and convertible securities).
The merger cannot be completed unless (i) Quanta
stockholders approve the issuance of shares of Quanta common
stock in the merger by the affirmative vote of the holders of at
least a majority of the votes cast at a meeting at which at
least a majority of the outstanding shares of Quanta common
stock and Quanta limited vote common stock in the aggregate are
present and voting and (ii) InfraSource’s stockholders
adopt the merger agreement by the affirmative vote of the
holders of at least a majority of the shares of InfraSource
common stock outstanding on July 26, 2007, the record date
for the InfraSource special meeting.
The Quanta board of directors has unanimously approved the
merger agreement and the transactions contemplated by the merger
agreement and unanimously recommends that Quanta stockholders
vote FOR the proposal to issue shares of Quanta common
stock in the merger pursuant to the merger agreement. The
InfraSource board of directors has unanimously approved the
merger agreement and the transactions contemplated by the merger
agreement and unanimously recommends that InfraSource
stockholders vote FOR the proposal to adopt the merger
agreement.
In considering the recommendation of the InfraSource board of
directors, stockholders of InfraSource should be aware that
members of the board of directors and executive officers of
InfraSource have agreements and arrangements that result in
their interests in the merger being different from, or in
addition to, those of other InfraSource stockholders. See
“The Merger — Interests of the InfraSource
Directors and Executive Officers in the Merger.”
The accompanying joint proxy statement/prospectus contains
important information about the merger, the merger agreement and
the special meetings. This document is also a prospectus for the
shares of Quanta common stock that will be issued pursuant to
the merger. We encourage Quanta stockholders and InfraSource
stockholders to read this joint proxy statement/prospectus
carefully before voting, including the section entitled
“Risk Factors” beginning on page 24.
Your vote is very important. Whether or not you plan to
attend the Quanta special meeting or the InfraSource special
meeting, please take the time to submit your proxy by completing
and mailing the enclosed proxy card or, if the option is
available to you, by granting your proxy electronically over the
Internet or by telephone. If your shares of Quanta common stock
or InfraSource common stock are held in “street name,”
you must instruct your broker how to vote such shares.
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John R. Colson
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David R. Helwig
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Chairman of the Board and Chief
Executive Officer
Quanta Services, Inc.
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Chairman, Chief Executive Officer
and President
InfraSource Services, Inc.
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Neither the Securities and Exchange Commission, which is
referred to as the SEC, nor any state securities regulatory
authority has approved or disapproved of the merger or the
securities to be issued under this joint proxy
statement/prospectus or has passed upon the adequacy or accuracy
of the disclosure in this joint proxy statement/prospectus. Any
representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated July 26,
2007, and is first being mailed to Quanta stockholders and
InfraSource stockholders on or about July 31, 2007.
Quanta
Services, Inc.
1360 Post Oak Boulevard,
Suite 2100
Houston, TX 77056
(713) 629-7600
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON AUGUST 30,
2007
To the Stockholders of Quanta Services, Inc.:
A special meeting of the stockholders of Quanta Services, Inc.,
a Delaware corporation (“Quanta”), will be held at
1330 Post Oak Boulevard, Level 2, Central Plains Room,
Houston, Texas 77056 on August 30, 2007 at 9:00 a.m.,
local time, for the following purposes:
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to consider and vote on the proposal to approve the issuance of
shares of Quanta common stock pursuant to the Agreement and Plan
of Merger, dated as of March 18, 2007 (which we refer to as
the merger agreement), by and among Quanta, Quanta MS
Acquisition, Inc., a Delaware corporation and a wholly owned
subsidiary of Quanta, and InfraSource Services, Inc.;
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2.
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to consider and vote on any adjournment or postponement of the
special meeting, if necessary, to solicit additional proxies in
favor of the proposal to approve the issuance of shares of
Quanta common stock pursuant to the merger agreement; and
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3.
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to transact any other business that may properly come before the
special meeting or any adjournment or postponement of the
special meeting.
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Only Quanta stockholders of record at the close of business on
July 26, 2007, the record date for the Quanta special
meeting, are entitled to notice of, and to vote at, the Quanta
special meeting and any adjournments or postponements of the
Quanta special meeting.
The Quanta board of directors has unanimously approved the
merger agreement and the transactions contemplated by the merger
agreement and unanimously recommends that you vote FOR the
proposal to approve the issuance of shares of Quanta common
stock in the merger pursuant to the merger agreement and FOR any
adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies, each of which is
described in this joint proxy statement/prospectus.
YOUR VOTE
IS IMPORTANT
Whether or not you plan to attend the special meeting, please
submit a proxy as soon as possible. To submit a proxy,
complete, sign, date and mail your proxy card in the envelope
provided or, if the option is available to you, call the
toll-free telephone number listed on your proxy card or use the
Internet as described in the instructions on the enclosed proxy
card. Submitting a proxy will assure that your vote is counted
at the meeting if you do not attend in person. If your shares of
Quanta common stock are held in “street name” by your
broker or other nominee, only that holder can vote your shares
of Quanta common stock and the vote cannot be cast unless you
provide instructions to your broker on how to vote. You should
follow the directions provided by your broker regarding how to
instruct your broker to vote your shares of Quanta common stock.
You may revoke your proxy at any time before it is voted. Please
review the joint proxy statement/prospectus accompanying this
notice for more complete information regarding the merger and
the Quanta special meeting.
By Order of the Board of Directors of
Quanta Services, Inc.
Vincent A. Mercaldi
Corporate Secretary
Houston, Texas
July 26, 2007
InfraSource
Services, Inc.
100 West Sixth Street
Suite 300
Media, PA 19063
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON AUGUST 30,
2007
To the Stockholders of InfraSource Services, Inc.:
A special meeting of stockholders of InfraSource Services, Inc.,
a Delaware corporation (“InfraSource”), will be held
on August 30, 2007, at 10:00 a.m. (local time), at
1735 Market Street, Suite 4200, Philadelphia, PA 19103, for
the following purposes:
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to consider and vote on the proposal to adopt the Agreement and
Plan of Merger, dated as of March 18, 2007 (which we refer
to as the merger agreement), by and among Quanta Services, Inc.,
Quanta MS Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Quanta, and InfraSource;
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2.
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to consider and vote on any adjournment or postponement of the
special meeting, if necessary, to solicit additional proxies in
favor of the proposal to adopt the merger agreement; and
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3.
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to transact any other business that may properly come before the
special meeting or any adjournment or postponement of the
special meeting.
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Only InfraSource stockholders of record at the close of business
on July 26, 2007, the record date for the InfraSource
special meeting, are entitled to notice of, and to vote at, the
InfraSource special meeting and any adjournments or
postponements of the InfraSource special meeting.
The InfraSource board of directors has unanimously approved
the merger agreement and the transactions contemplated by the
merger agreement and unanimously recommends that you
vote FOR the proposal to adopt the merger agreement and FOR
any adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies, each of which is
described in this joint proxy statement/prospectus.
In considering the recommendation of the InfraSource board of
directors, stockholders of InfraSource should be aware that
members of the board of directors and executive officers of
InfraSource have agreements and arrangements that result in
their interests in the merger being different from, or in
addition to, those of other InfraSource stockholders. See
“The Merger — Interests of the InfraSource
Directors and Executive Officers in the Merger.”
YOUR VOTE
IS IMPORTANT
Whether or not you plan to attend the special meeting, please
submit a proxy as soon as possible. To submit a proxy,
complete, sign, date and mail your proxy card in the envelope
provided or, if the option is available to you, call the
toll-free telephone number listed on your proxy card or use the
Internet as described in the instructions on the enclosed proxy
card. Submitting a proxy will assure that your vote is counted
at the meeting if you do not attend in person. If your shares of
InfraSource common stock are held in “street name” by
your broker or other nominee, only that holder can vote your
shares of InfraSource common stock and the vote cannot be cast
unless you provide instructions to your broker. You should
follow the directions provided by your broker regarding how to
instruct your broker to vote your shares of InfraSource common
stock. You may revoke your proxy at any time before it is voted.
Please review the joint proxy statement/prospectus accompanying
this notice for more complete information regarding the merger
and the InfraSource special meeting.
By Order of the Board of Directors of
InfraSource Services, Inc.
Deborah C. Lofton
Senior Vice President, General Counsel and
Secretary
Media, Pennsylvania
July 26, 2007
ADDITIONAL
INFORMATION
This joint proxy statement/prospectus incorporates by reference
important business and financial information about Quanta and
InfraSource from documents that are not included or delivered
with this joint proxy statement/prospectus. See “Where You
Can Find More Information; Incorporation by Reference.”
Documents incorporated by reference are available to Quanta
stockholders and InfraSource stockholders without charge upon
written or oral request, excluding any exhibits to those
documents, unless the exhibit is specifically incorporated by
reference as an exhibit in this joint proxy
statement/prospectus. You can obtain any of these documents by
requesting it in writing or by telephone from the appropriate
company.
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Quanta Services, Inc.
Attention: Corporate Secretary
1360 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
(713) 629-7600
www.quantaservices.com
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InfraSource Services, Inc.
Attention: Investor Relations
100 West Sixth Street, Suite 300
Media, Pennsylvania 19063
(610) 480-8000
www.infrasourceinc.com
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In order for you to receive timely delivery of the requested
documents in advance of the applicable special meeting, Quanta
or InfraSource, as applicable, should receive your request by no
later than August 20, 2007.
ABOUT
THIS DOCUMENT
This document, which forms part of a registration statement on
Form S-4
filed with the SEC by Quanta (File
No. 333-142279),
constitutes a prospectus of Quanta under Section 5 of the
Securities Act of 1933, as amended, which we refer to as the
Securities Act, with respect to the shares of Quanta common
stock to be issued pursuant to the merger agreement. This
document also constitutes a notice of meeting and a proxy
statement under Section 14(a) of the Securities Exchange
Act of 1934, as amended, which we refer to as the Exchange Act,
with respect to the special meeting of Quanta stockholders, at
which Quanta stockholders will be asked to consider and vote on
a proposal to approve the issuance of shares in the merger
pursuant to the merger agreement and with respect to the special
meeting of InfraSource stockholders, at which InfraSource
stockholders will be asked to consider and vote on a proposal to
adopt the merger agreement.
TABLE OF
CONTENTS
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Page
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7
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Entry into a Written Plan for
Trading of Securities by David R. Helwig
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ii
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Page
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98
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F-1
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Annexes
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A-1
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B-1
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C-1
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iii
QUESTIONS
AND ANSWERS ABOUT THE MERGER
The following are some questions that Quanta stockholders and
InfraSource stockholders may have regarding the proposals being
considered at the Quanta special meeting and the InfraSource
special meeting and brief answers to those questions. Quanta and
InfraSource urge you to read carefully this entire joint proxy
statement/prospectus, including the Annexes, and the other
documents to which this joint proxy statement/prospectus refers
or incorporates by reference because the information in this
section does not provide all the information that might be
important to you. Unless stated otherwise, all references in
this joint proxy statement/prospectus to Quanta are to Quanta
Services, Inc., a Delaware corporation; all references to
InfraSource are to InfraSource Services, Inc., a Delaware
corporation; all references to Merger Sub are to Quanta MS
Acquisition, Inc., a Delaware corporation and a wholly owned
subsidiary of Quanta; and all references to the merger agreement
are to the Agreement and Plan of Merger, dated as of
March 18, 2007, by and among Quanta, Merger Sub and
InfraSource, a copy of which is attached as Annex A to this
joint proxy statement/prospectus and is incorporated herein by
reference.
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What is the proposed transaction? |
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Quanta and InfraSource have entered into a merger agreement
pursuant to which Merger Sub will merge with and into
InfraSource. As a result of the merger, InfraSource will become
a wholly owned subsidiary of Quanta and each share of
InfraSource common stock will be converted into
1.223 shares of Quanta common stock, as described under
“The Merger Agreement — Merger
Consideration.” The ratio of 1.223 shares of Quanta
common stock for each share of InfraSource common stock is
referred to as the exchange ratio. |
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Why are Quanta and InfraSource proposing the merger? |
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The boards of directors of Quanta and InfraSource believe that
the combination of Quanta and InfraSource will create a leading
specialized contracting services company serving the electric
power, natural gas, telecommunications and cable television
industries. To review the reasons for the merger in greater
detail, see “The Merger — Recommendation of the
Quanta Board of Directors and Its Reasons for the Merger,”
and “The Merger — Recommendation of the
InfraSource Board of Directors and Its Reasons for the
Merger.” |
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Why am I receiving this joint proxy statement/prospectus? |
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Quanta stockholders are being asked to approve the issuance of
shares of Quanta common stock in the merger pursuant to the
merger agreement. |
InfraSource stockholders are being asked to adopt the merger
agreement.
The approval by the Quanta stockholders of the issuance of
shares of Quanta common stock and the approval by the
InfraSource stockholders of the adoption of the merger agreement
are required for the consummation of the merger.
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What vote is required to approve the proposals at the Quanta
special meeting and the InfraSource special meeting? |
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Under the rules of the New York Stock Exchange, referred to as
the NYSE, the approval of the issuance of shares of Quanta
common stock in the merger pursuant to the merger agreement
requires the affirmative vote of the holders of at least a
majority of the votes cast at a meeting at which at least a
majority of the outstanding shares of Quanta common stock and
Quanta limited vote common stock in the aggregate are present
and entitled to vote. Under Delaware law, which governs Quanta,
the adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies requires the
affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the special meeting
and entitled to vote. |
Each share of Quanta common stock is entitled to one vote, and
each share of Quanta limited vote common stock is entitled to
one-tenth of one vote, on the issuance of shares of Quanta
common stock in the merger pursuant to the merger agreement and
the adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies. At the Quanta special
meeting, holders of Quanta common stock and Quanta limited vote
common stock will vote together as a single class.
1
Under Delaware law, which governs InfraSource, adoption of the
merger agreement requires the affirmative vote of the holders of
at least a majority of the outstanding shares of InfraSource
common stock entitled to vote and the adjournment or
postponement of the special meeting, if necessary, to solicit
additional proxies requires the affirmative vote of the holders
of a majority of the shares present in person or represented by
proxy at the special meeting and entitled to vote. Each share of
InfraSource common stock is entitled to one vote on the adoption
of the merger agreement and the adjournment or postponement of
the special meeting, if necessary, to solicit additional proxies.
Your vote is very important. You are encouraged to submit a
proxy as soon as possible.
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If my shares of Quanta common stock or InfraSource common
stock are held in “street name” by my broker or other
nominee, will my broker or other nominee vote my shares of
Quanta common stock or InfraSource common stock for me? |
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Unless you instruct your broker how to vote your shares of
Quanta common stock or InfraSource common stock, as applicable,
your shares will NOT be voted. |
In connection with the Quanta special meeting, abstentions and
“broker non-votes” will be considered in determining
the presence of a quorum but will not constitute votes cast and,
accordingly, neither abstentions nor broker
non-votes
will have any effect on the outcome of the vote with respect to
the proposal to approve the issuance of Quanta common stock in
the merger, but abstentions will have the same effect as
votes AGAINST the adjournment or postponement of the
special meeting, if necessary to solicit additional proxies.
In connection with the InfraSource special meeting, abstentions
and “broker non-votes” will be considered in
determining the presence of a quorum but abstentions and broker
non-votes will have the same effect as votes AGAINST the
adoption of the merger agreement. Abstentions will also have the
same effect as votes AGAINST the adjournment or
postponement of the special meeting, if necessary to solicit
additional proxies. You should therefore provide your broker or
other nominee with instructions as to how to vote your shares of
InfraSource common stock.
An abstention occurs when a stockholder abstains from voting
(either in person or by proxy) on one or more of the proposals.
Broker non-votes occur when a bank, broker or other nominee
returns a proxy but does not have authority to vote on a
particular proposal.
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Are there risks associated with the merger that I should
consider in deciding how to vote? |
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Yes. There are a number of risks related to the merger that are
discussed in this joint proxy statement/prospectus and in other
documents incorporated by reference. You should read carefully
the detailed description of the risks associated with the merger
and the operations of Quanta after the merger described in
“Risk Factors” beginning on page 24. |
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If I am an InfraSource stockholder, should I send in my stock
certificates with my proxy card? |
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NO. Please DO NOT send your InfraSource
stock certificates with your proxy card. If the merger is
approved, you will be sent written instructions for exchanging
your stock certificates. |
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What effect will the merger have on options to purchase
InfraSource common stock and other stock-based awards that have
been granted to employees and directors of InfraSource? |
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Upon completion of the merger, each option to purchase shares of
InfraSource common stock granted under the InfraSource stock
plans will be converted into an option to purchase the number of
whole shares of Quanta common stock that is equal to the number
of shares of InfraSource common stock subject to that option
immediately prior to the effective time of the merger multiplied
by 1.223, at an exercise price per share of Quanta common stock
equal to the exercise price for each share of InfraSource common
stock subject to that option immediately prior to the effective
time of the merger divided by 1.223. |
Upon completion of the merger, each share of InfraSource common
stock that is subject to transfer
and/or
forfeiture restrictions under the InfraSource stock plans
immediately prior to the effective time of the merger will, upon
its conversion into the merger consideration, continue to be
subject to the same transfer
and/or
2
forfeiture restrictions. Upon the lapsing of those restrictions,
the holders of such shares will be entitled to elect to have
Quanta withhold shares in an amount equal to any applicable tax
withholding.
InfraSource took action to terminate all purchases of stock
under InfraSource’s 2004 Employee Stock Purchase Plan
effective as of the last “trading day” of the
then-current “offering period” (as each such term is
defined in the InfraSource 2004 Employee Stock Purchase Plan)
that expired in May 2007. InfraSource will terminate the
InfraSource 2004 Employee Stock Purchase Plan in its entirety
immediately prior to the effective time of the merger.
Upon completion of the merger, Quanta will assume the
obligations and succeed to the rights of InfraSource under
InfraSource’s stock plans. InfraSource options and
InfraSource restricted shares will not vest as a result of the
merger (except for options to purchase 88,341 shares and
30,210 shares of restricted stock). Prior to the effective
time of the merger, each of the InfraSource stock plans will be
amended, if and to the extent necessary, to reflect the
transactions contemplated by the merger agreement, including the
conversion of the InfraSource options and InfraSource restricted
shares, and Quanta will be substituted for InfraSource in those
stock plans to the extent appropriate to effectuate the
assumption of the InfraSource stock plans by Quanta.
|
|
|
Q: |
|
What conditions are required to be fulfilled to complete the
merger? |
|
A: |
|
Quanta and InfraSource are not required to complete the merger
unless certain specified conditions are satisfied or waived.
These conditions include approval by Quanta stockholders of the
issuance of the shares of Quanta common stock in the merger
pursuant to the merger agreement, adoption by InfraSource
stockholders of the merger agreement, the effectiveness of the
Form S-4
registration statement, of which this joint proxy
statement/prospectus is a part, and the receipt of required
regulatory approvals. Quanta and InfraSource are seeking
required approvals from regulatory agencies under the antitrust
laws and InfraSource is seeking approval under certain public
utility commission laws. There can be no assurance that these
conditions to complete the merger will be satisfied. For a more
complete summary of the conditions that must be satisfied or
waived prior to the effective time of the merger, see “The
Merger Agreement — Conditions to the Completion of the
Merger” beginning on page 71. |
|
Q: |
|
What are the tax consequences of the merger? |
|
|
|
A: |
|
Assuming the merger is consummated as described in the merger
agreement and this joint proxy statement/prospectus, it is the
opinion of Ballard Spahr Andrews & Ingersoll, LLP that
the merger will be treated as a “reorganization” under
Section 368(a) of the Internal Revenue Code and InfraSource
stockholders will not recognize any gain or loss (except with
respect to cash received in lieu of a fractional share of Quanta
common stock) by reason of the merger, subject to the
limitations described under “Material U.S. Federal
Income Tax Consequences of the Merger.” |
Please review carefully the information under the caption
“The Merger — Material U.S. Federal Income
Tax Consequences of the Merger” beginning on page 62
for a description of the material U.S. federal income tax
consequences of the merger. The tax consequences to you will
depend on your own situation. Please consult your tax advisors
for a full understanding of the tax consequences of the merger
to you.
|
|
|
Q: |
|
When do Quanta and InfraSource expect to complete the
merger? |
|
A: |
|
Quanta and InfraSource are working to complete the merger as
quickly as practicable. We currently expect the merger to be
completed during the third quarter of 2007. However, neither
Quanta nor InfraSource can predict the effective time of the
merger because it is subject to conditions both within and
beyond each company’s control. See “The Merger
Agreement — Conditions to the Completion of the
Merger” beginning on page 71. |
|
Q: |
|
Are InfraSource stockholders or Quanta stockholders entitled
to dissent and require appraisal of their shares? |
|
A: |
|
No. Neither InfraSource’s stockholders nor
Quanta’s stockholders have dissenters’ rights of
appraisal under Delaware law in connection with the merger. |
3
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|
Q: |
|
How does the Quanta board of directors recommend that Quanta
stockholders vote? |
|
A: |
|
The Quanta board of directors has determined that the
execution and delivery of the merger agreement was advisable and
the transactions contemplated by the merger agreement, including
the issuance of shares of Quanta common stock in the merger, are
in the best interests of the Quanta stockholders and unanimously
recommends that Quanta stockholders vote FOR the proposal
to approve the issuance of shares of Quanta common stock in the
merger pursuant to the merger agreement and if presented, FOR
any adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies. For a more
complete description of the recommendation of the Quanta board
of directors, see “The Merger — Recommendation of
the Quanta Board of Directors and Its Reasons for the
Merger” beginning on page 42. |
|
Q: |
|
How does the InfraSource board of directors recommend that
InfraSource stockholders vote? |
|
A: |
|
The InfraSource board of directors has determined that the
execution and delivery of the merger agreement was advisable and
the transactions contemplated by the merger agreement are in the
best interests of the InfraSource stockholders and unanimously
recommends that InfraSource stockholders vote FOR the
proposal to adopt the merger agreement and if presented, FOR any
adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies. For a more
complete description of the recommendation of the InfraSource
board of directors, see “The Merger —
Recommendation of the InfraSource Board of Directors and Its
Reasons for the Merger” beginning on page 44. |
|
Q: |
|
When and where is the special meeting of the Quanta
stockholders? |
|
|
|
A: |
|
The Quanta special meeting will be held on August 30, 2007
at 9:00 a.m., local time, at 1330 Post Oak Boulevard,
Level 2, Central Plains Room, Houston, Texas 77056. |
|
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|
Q: |
|
When and where is the special meeting of the InfraSource
stockholders? |
|
A: |
|
The InfraSource special meeting will be held on August 30,
2007 at 10:00 a.m., local time, at 1735 Market Street,
Suite 4200, Philadelphia, PA 19103. |
|
Q: |
|
Who can vote at the special meetings? |
|
A: |
|
All Quanta stockholders of record as of the close of business on
July 26, 2007, the record date for the Quanta special
meeting, are entitled to receive notice of and to vote at the
Quanta special meeting. |
All InfraSource stockholders of record as of the close of
business on July 26, 2007, the record date for the
InfraSource special meeting, are entitled to receive notice of
and to vote at the InfraSource special meeting.
|
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|
Q: |
|
How will Quanta stockholders be affected by the merger and
share issuance? |
|
A: |
|
After the merger, each Quanta stockholder will have the same
number of shares of Quanta common stock or Quanta limited vote
common stock that the stockholder held immediately prior to the
merger. However, because Quanta will be issuing new shares of
Quanta common stock to InfraSource stockholders in the merger,
each outstanding share of Quanta common stock and Quanta limited
vote common stock immediately prior to the merger will represent
a smaller percentage of the aggregate number of shares of Quanta
capital stock outstanding after the merger. As a result of the
merger, each Quanta stockholder will own shares in a larger
company with more assets. |
|
Q: |
|
What do I need to do now? |
|
A: |
|
After you have carefully read this joint proxy
statement/prospectus, please respond by completing, signing and
dating your proxy card and returning it in the enclosed
postage-paid envelope or, if available, by submitting your proxy
by telephone or through the Internet as soon as possible so that
your shares of Quanta common stock, Quanta limited vote common
stock or InfraSource common stock will be represented and voted
at the Quanta special meeting or InfraSource special meeting, as
applicable. |
Please refer to your proxy card or the information forwarded by
your broker or other nominee to see which voting options are
available to you.
The Internet and telephone proxy submission procedures are
designed to verify your stock holdings and to allow you to
confirm that your instructions have been properly recorded.
4
The method by which you submit a proxy will in no way limit your
right to vote at the Quanta special meeting or the InfraSource
special meeting if you later decide to attend the meeting in
person. If your shares of Quanta common stock or InfraSource
common stock are held in the name of a broker or other nominee,
you must obtain a proxy, executed in your favor, from the holder
of record, to be able to vote at the Quanta special meeting or
the InfraSource special meeting.
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|
|
Q: |
|
How will my proxy be voted? |
|
A: |
|
All shares of Quanta common stock and Quanta limited vote common
stock entitled to vote and represented by properly completed
proxies received prior to the Quanta special meeting, and not
revoked, will be voted at the Quanta special meeting as
instructed on the proxies. If you properly complete, sign and
return a proxy card, but do not indicate how your shares of
Quanta common stock or Quanta limited vote common stock should
be voted on a matter, the shares of Quanta common stock or
Quanta limited vote common stock represented by your proxy will
be voted as the Quanta board of directors recommends and
therefore FOR the approval of the issuance of shares of Quanta
common stock in the merger pursuant to the merger agreement and,
if presented, FOR any adjournment or postponement of the special
meeting, if necessary, to solicit additional proxies. |
All shares of InfraSource common stock entitled to vote and
represented by properly completed proxies received prior to the
InfraSource special meeting, and not revoked, will be voted at
the InfraSource special meeting as instructed on the proxies.
If you properly complete, sign and return a proxy card, but
do not indicate how your shares of InfraSource common stock
should be voted on a matter, the shares of InfraSource common
stock represented by your proxy will be voted as the InfraSource
board of directors recommends and therefore FOR the adoption of
the merger agreement and, if presented, FOR any adjournment or
postponement of the special meeting, if necessary, to solicit
additional proxies.
|
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|
Q: |
|
Can I revoke or change my vote after I have delivered my
proxy? |
|
A: |
|
Yes. You may revoke or change your vote at any time before your
proxy is voted at the Quanta special meeting or the InfraSource
special meeting, as applicable. You can do this in any of the
three following ways: |
|
|
|
|
•
|
by sending a written notice to the Corporate Secretary of Quanta
or the Secretary of InfraSource, as applicable, in time to be
received before the Quanta special meeting or the InfraSource
special meeting stating that you would like to revoke your proxy;
|
|
|
•
|
by completing, signing and dating another proxy card and
returning it by mail in time to be received before the Quanta
special meeting or InfraSource special meeting or, if you
submitted your proxy through the Internet or by telephone, by
submitting a proxy card at a later date, in which case your
later-submitted proxy will be recorded and your earlier proxy
revoked; or
|
|
|
•
|
if you are a holder of record, by attending the special meeting
and voting in person. Simply attending the Quanta special
meeting or InfraSource special meeting without voting will not
revoke your proxy or change your vote.
|
If your shares of Quanta common stock or InfraSource common
stock are held in an account at a broker or other nominee and
you desire to change your vote, you should contact your broker
or other nominee for instructions on how to do so.
|
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|
Q: |
|
What should I do if I receive more than one set of voting
materials for the Quanta special meeting or the InfraSource
special meeting? |
|
A: |
|
You may receive more than one set of voting materials for the
Quanta special meeting or the InfraSource special meeting,
including multiple copies of this joint proxy
statement/prospectus and multiple proxy cards or voting
instruction cards. For example, if you hold your shares of
Quanta common stock or InfraSource common stock in more than one
brokerage account, you will receive a separate voting
instruction card for each brokerage account in which you hold
shares of Quanta common stock or InfraSource common stock. If
you are a holder of record and your shares of Quanta common
stock, Quanta limited vote common stock or |
5
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|
|
|
|
InfraSource common stock are registered in more than one name,
you will receive more than one proxy card. Please complete,
sign, date and return each proxy card and voting instruction
card that you receive. |
|
Q: |
|
What happens if I am a stockholder of both Quanta and
InfraSource? |
|
A: |
|
You will receive separate proxy cards for each company and must
complete, sign and date each proxy card and return each proxy
card in the appropriate postage-paid envelope or, if available,
by submitting a proxy by telephone or through the internet for
each company. |
|
Q: |
|
Who can answer my questions? |
|
A: |
|
If you have any questions about the merger or how to submit your
proxy, or if you need additional copies of this joint proxy
statement/prospectus, the enclosed proxy card or voting
instructions, you should contact: |
|
|
|
If you are a Quanta stockholder:
|
|
If you are an InfraSource
stockholder:
|
Quanta Services, Inc.
Attention: Corporate Secretary
1360 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
(713) 629-7600
|
|
InfraSource Services, Inc.
Attention: General Counsel
100 West Sixth Street, Suite 300
Media, Pennsylvania 19063
(610) 480-8000
|
Both Quanta and InfraSource
stockholders may also contact
the proxy solicitor:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(800) 322-2885
6
SUMMARY
The following is a summary that highlights information
contained in this joint proxy statement/prospectus. This summary
may not contain all of the information that is important to you.
For a more complete description of the merger agreement and the
transactions contemplated by the merger agreement, Quanta and
InfraSource encourage you to read carefully this entire joint
proxy statement/prospectus, including the attached annexes. In
addition, Quanta and InfraSource encourage you to read the
information incorporated by reference into this joint proxy
statement/prospectus, which includes important business and
financial information about Quanta and InfraSource that has been
filed with the SEC. You may obtain the information incorporated
by reference into this joint proxy statement/prospectus without
charge by following the instructions in the section entitled
“Where You Can Find More Information; Incorporation by
Reference.”
The
Companies
Quanta
Services, Inc.
Quanta is a Delaware corporation formed in 1997. Quanta is a
leading provider of specialty contracting services, offering
end-to-end
network solutions to the electric power, gas, telecommunications
and cable television industries, as well as providing various
ancillary services to commercial, industrial and governmental
entities. Quanta provides a comprehensive range of services,
including the design, installation, maintenance and repair of
virtually every type of network infrastructure.
Quanta’s common stock is listed on the NYSE and trades
under the symbol “PWR.”
Quanta’s principal executive offices are located at 1360
Post Oak Boulevard, Suite 2100, Houston, Texas 77056 and
its telephone number is
(713) 629-7600.
Quanta MS Acquisition, Inc, referred to as Merger Sub, is a
Delaware corporation and a wholly owned subsidiary of Quanta,
which was formed for the purpose of entering into the merger
agreement.
InfraSource
Services, Inc.
InfraSource is a Delaware corporation formed in 2003.
InfraSource is a leading specialty contractor servicing
electric, natural gas and telecommunications infrastructure in
the United States. InfraSource’s services include design,
engineering, procurement, construction, testing and maintenance
services for electric, natural gas and telecommunications
infrastructure.
InfraSource operates in two business segments. The
Infrastructure Construction Services (ICS) segment provides
design, engineering, procurement, construction, testing and
maintenance services for utility infrastructure. ICS customers
include electric power utilities, natural gas utilities,
telecommunication customers, government entities and heavy
industrial companies, such as petrochemical, processing and
refining businesses. The InfraSource Telecommunication Services
(TS) segment leases
point-to-point
telecommunications infrastructure in select markets and provides
design, procurement, construction and maintenance services for
telecommunications infrastructure. TS customers include
communication service providers, large industrial and financial
services customers, school districts and other entities with
high bandwidth telecommunication needs. The companies in the TS
segment are regulated as public telecommunication utilities in
various states.
InfraSource’s common stock is listed on the NYSE and trades
under the symbol “IFS.”
InfraSource’s principal executive offices are located at
100 West Sixth Street, Suite 300, Media, Pennsylvania,
and its telephone number is
(610) 480-8000.
The
Merger
Quanta and InfraSource have entered into the merger agreement
pursuant to which Merger Sub will merge with and into
InfraSource. As a result of the merger, InfraSource will become
a wholly owned subsidiary of Quanta and
7
each share of InfraSource common stock will be converted into
1.223 shares of Quanta common stock, as described under
“The Merger Agreement — Merger
Consideration.” On July 26, 2007, Quanta had
outstanding 119,176,424 shares of common stock. Immediately
following the completion of the merger, Quanta expects to have
169,788,773 shares of common stock outstanding (based on
the number of outstanding shares of InfraSource common stock on
July 26, 2007 and assuming the exercise of all outstanding
options to purchase shares of InfraSource common stock that are
vested or will vest as a result of the consummation of the
merger). Quanta’s stockholders and InfraSource’s
stockholders are expected to hold approximately 75% and 25%,
respectively, of the combined company’s common stock
outstanding on a fully diluted basis (including shares issuable
pursuant to outstanding options and convertible securities)
immediately after the merger.
Based on the closing prices of Quanta common stock on
March 16, 2007, the last trading day before the public
announcement of the execution of the merger agreement by Quanta
and InfraSource, and on July 26, 2007, the date of this
joint proxy statement/prospectus, the aggregate value of the
merger consideration to be received by InfraSource stockholders
is approximately $1.24 billion and $1.45 billion,
respectively. The market value of the merger consideration
ultimately received by InfraSource stockholders will depend on
the closing price of Quanta common stock on the day that the
merger is consummated. See “Risk Factors — Risk
Factors Relating to the Merger — Because the exchange
ratio is fixed and the market price of shares of Quanta common
stock will fluctuate, InfraSource stockholders cannot be sure of
the value of the merger consideration they will receive.”
The merger agreement is attached as Annex A to this joint
proxy statement/prospectus and is incorporated by reference.
Quanta and InfraSource encourage you to read the merger
agreement in its entirety because it is the legal document that
governs the merger.
Recommendation
of Quanta’s Board of Directors
The Quanta board of directors has determined unanimously that
the execution and delivery of the merger agreement was advisable
and the transactions contemplated by the merger agreement,
including the issuance of shares of Quanta common stock in the
merger, are in the best interests of the Quanta stockholders,
and has unanimously approved the merger agreement and the
transactions contemplated by the merger agreement. The Quanta
board of directors unanimously recommends that Quanta
stockholders vote FOR the proposal to approve the
issuance of shares of Quanta common stock in the merger pursuant
to the merger agreement and, if presented, FOR any
adjournment or postponement of the special meeting, if necessary
to solicit additional proxies.
Recommendation
of InfraSource’s Board of Directors
The InfraSource board of directors has determined unanimously
that the execution and delivery of the merger agreement was
advisable and the transactions contemplated by the merger
agreement are in the best interests of the InfraSource
stockholders, and has unanimously approved the merger agreement
and the transactions contemplated by the merger agreement. The
InfraSource board of directors unanimously recommends that
InfraSource stockholders vote FOR the proposal to adopt
the merger agreement and, if presented, FOR any
adjournment or postponement of the special meeting, if necessary
to solicit additional proxies.
Stockholders
Entitled to Vote; Vote Required
Quanta
Quanta stockholders who owned shares of Quanta common stock or
shares of Quanta limited vote common stock at the close of
business on July 26, 2007, which is referred to as the
Quanta record date, are entitled to vote at the Quanta special
meeting. On the Quanta record date, there were
119,176,424 shares of Quanta common stock outstanding and
entitled to vote at the Quanta special meeting and
760,171 shares of Quanta limited vote common stock
outstanding and entitled to vote at the Quanta special meeting,
held by approximately 668 and 16 holders of record,
respectively. Each share of Quanta common stock is entitled to
one vote, and each share of limited vote common stock is
entitled to one-tenth of one vote, on each matter to be voted on
at the special meeting. At the
8
special meeting, holders of Quanta common stock and holders of
Quanta limited vote common stock will vote together as a single
class.
At the Quanta special meeting, holders of at least a majority of
the outstanding shares entitled to vote of the Quanta common
stock and Quanta limited vote common stock in the aggregate must
be present, either in person or represented by proxy, to
constitute a quorum. Abstentions and broker non-votes will be
counted in determining whether a quorum is present at the Quanta
special meeting.
Assuming a quorum is present, the approval of the issuance of
shares of Quanta common stock in the merger requires the
affirmative vote of at least the majority of the votes cast in
person or by proxy at the Quanta special meeting and the
adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies requires the
affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the special meeting
and entitled to vote. Neither abstentions nor broker non-votes
will constitute votes cast and, accordingly, will have no effect
on the outcome of the vote with respect to the proposal to
approve the issuance of Quanta common stock in the merger, but
abstentions will have the same effect as votes AGAINST the
adjournment or postponement of the special meeting, if necessary
to solicit additional proxies.
An abstention occurs when a stockholder abstains from voting
(either in person or by proxy) on one or more of the proposals.
Broker non-votes occur when a bank, broker or other nominee
returns a proxy but does not have authority to vote on a
particular proposal.
Your vote is very important. You are encouraged to vote as soon
as possible. If you do not indicate how your shares of Quanta
common stock or Quanta limited vote common stock should be voted
on a matter, the shares of Quanta common stock or Quanta limited
vote common stock represented by your properly completed proxy
will be voted as the Quanta board of directors recommends and
therefore FOR the issuance of shares of Quanta common
stock in the merger and FOR the adjournment or
postponement of the special meeting, if necessary, to solicit
additional proxies.
InfraSource
InfraSource stockholders who owned shares of InfraSource common
stock at the close of business on July 26, 2007, which is
referred to as the InfraSource record date, are entitled to vote
at the InfraSource special meeting. On the InfraSource record
date, there were 41,012,416 shares of InfraSource common
stock outstanding and entitled to vote at the InfraSource
special meeting, held by approximately 44 holders of record.
InfraSource stockholders may cast one vote for each share of
InfraSource common stock owned on the InfraSource record date.
The affirmative vote of the holders of at least a majority of
the shares of InfraSource common stock entitled to vote at the
special meeting as of the InfraSource record date, either in
person or by proxy, is necessary for the adoption of the merger
agreement. Assuming a quorum is present, the adjournment or
postponement of the special meeting, if necessary, to solicit
additional proxies requires the affirmative vote of the holders
of a majority of the shares present in person or represented by
proxy at the special meeting and entitled to vote. The holders
of a majority of the total number of outstanding shares of
InfraSource common stock entitled to vote as of the InfraSource
record date, represented either in person or by proxy, will
constitute a quorum at the InfraSource special meeting for the
conduct of business.
Abstentions and broker non-votes will have the same effect as a
vote AGAINST the adoption of the merger agreement.
Abstentions will also have the same effect as votes AGAINST
any adjournment or postponement of the special meeting, if
necessary to solicit additional proxies.
An abstention occurs when a stockholder abstains from voting
(either in person or by proxy) on one or more of the proposals.
A broker non-vote occurs when a bank, broker or other nominee
returns a proxy but does not have authority to vote on a
particular proposal.
Your vote is very important. You are encouraged to vote as soon
as possible. If you do not indicate how your shares of
InfraSource common stock should be voted on a matter, the shares
of InfraSource common stock
9
represented by your properly completed proxy will be voted as
the InfraSource board of directors recommends and therefore
FOR the adoption of the merger agreement and FOR
any adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies.
Opinions
of Financial Advisors
Opinion
of Quanta’s Financial Advisor
In connection with the merger, Credit Suisse Securities (USA)
LLC, Quanta’s financial advisor and referred to as Credit
Suisse, delivered a written opinion to the Quanta board of
directors, dated March 17, 2007, to the effect that, as of
the date of that opinion and based on and subject to the
factors, assumptions and limitations described in that opinion,
the exchange ratio was fair, from a financial point of view, to
Quanta. The full text of Credit Suisse’s written
opinion, dated March 17, 2007, is attached to this joint
proxy statement/prospectus as Annex B. We encourage you to
read that opinion carefully in its entirety for a description of
the procedures followed, assumptions made, matters considered
and limitations on the review undertaken. Credit Suisse’s
opinion was provided to the Quanta board of directors in
connection with its consideration of the proposed merger, and
should not be viewed as determinative of the views of the Quanta
board of directors or Quanta’s management with respect to
the merger or the exchange ratio and does not constitute a
recommendation to any Quanta stockholder as to how that
stockholder should vote or act on any matter relating to the
merger, including the issuance of the shares of Quanta common
stock in the merger.
Credit Suisse earned (1) a financial advisory fee equal to
$200,000 upon the execution of its engagement letter and
(2) an opinion fee equal to $1,000,000, shortly after it
delivered its opinion to the Quanta board of directors. In
addition, Quanta agreed to pay Credit Suisse a transaction fee
equal to $7,000,000 (less the $1,200,000 paid as described in
(1) and (2)) upon the consummation of the proposed merger.
Quanta also agreed to reimburse Credit Suisse for all reasonable
expenses, including the reasonable fees and expenses of Credit
Suisse’s outside legal counsel, resulting from or arising
out of its engagement, subject to certain limits. In addition,
Quanta agreed to indemnify Credit Suisse and related parties
against certain liabilities and other items, including
liabilities under the federal securities laws, arising out of
Credit Suisse’s engagement.
Opinion
of InfraSource’s Financial Advisor
Citigroup Global Markets Inc., InfraSource’s financial
advisor and referred to as Citigroup, delivered an opinion with
respect to the fairness of the exchange ratio to be received by
holders of InfraSource common stock in the merger. Citigroup
rendered its opinion that, as of March 17, 2007 and based
upon and subject to the factors, assumptions, qualifications and
limitations set forth in that opinion, the exchange ratio of
1.223 Quanta common shares to be received for each share of
InfraSource common stock pursuant to the merger agreement was
fair, from a financial point of view, to the holders of
InfraSource common stock. The full text of the written
opinion of Citigroup is attached to this joint proxy
statement/prospectus as Annex C. You are urged to read the
opinion carefully and in its entirety for a description of the
assumptions made, general procedures followed, matters
considered and limits on the review undertaken. Citigroup’s
opinion was provided to inform and assist InfraSource’s
board of directors in connection with its consideration of the
merger, and the opinion does not constitute a recommendation as
to how any InfraSource stockholder should vote with respect to
the adoption of the merger agreement.
Pursuant to the terms of the engagement letter between
InfraSource and Citigroup, InfraSource agreed to pay Citigroup a
$2,000,000 opinion fee payable upon the earlier of consummation
of the transaction and termination of the transaction.
InfraSource also agreed to pay Citigroup a transaction fee upon
consummation of the merger equal to 0.70% of the aggregate value
of the merger consideration, less any amounts previously paid
relating to the opinion fee. In addition, InfraSource has agreed
to reimburse Citigroup for its reasonable expenses incurred in
connection with its engagement, including reasonable
attorneys’ fees and disbursements, and to indemnify
Citigroup against specific liabilities relating to or arising
out of its engagement, including liabilities under the federal
securities laws.
10
Treatment
of Stock Options, Restricted Stock and the InfraSource Employee
Stock Purchase Plan
Upon completion of the merger, each option to purchase shares of
InfraSource common stock granted under the InfraSource stock
plans will be converted into an option to purchase the number of
whole shares of Quanta common stock that is equal to the number
of shares of InfraSource common stock subject to that option
immediately prior to the effective time of the merger multiplied
by 1.223, at an exercise price per share of Quanta common stock
equal to the exercise price for each share of InfraSource common
stock subject to that option immediately prior to the effective
time of the merger divided by 1.223.
Upon completion of the merger, each share of InfraSource common
stock that is subject to transfer
and/or
forfeiture restrictions under the InfraSource stock plans
immediately prior to the effective time of the merger will, upon
its conversion into the merger consideration, continue to be
subject to the same transfer
and/or
forfeiture restrictions. Upon the lapsing of those restrictions,
the holders of such shares will be entitled to elect to have
Quanta withhold shares in an amount equal to any applicable tax
withholding.
InfraSource took action to terminate all purchases of stock
under InfraSource’s 2004 Employee Stock Purchase Plan
effective as of the last “trading day” of the
then-current “offering period” (as each such term is
defined in the InfraSource 2004 Employee Stock Purchase Plan)
that expired in May 2007. InfraSource will terminate the
InfraSource 2004 Employee Stock Purchase Plan in its entirety
immediately prior to the effective time of the merger.
Upon completion of the merger, Quanta will assume the
obligations and succeed to the rights of InfraSource under
InfraSource’s stock plans. InfraSource options and
InfraSource restricted shares will not vest as a result of the
merger (except for options to purchase 88,341 shares and
30,210 shares of restricted stock). Prior to the effective
time of the merger, each of the InfraSource stock plans will be
amended, if and to the extent necessary, to reflect the
transactions contemplated by the merger agreement, including the
conversion of the InfraSource options and InfraSource restricted
shares, and Quanta will be substituted for InfraSource in those
stock plans to the extent appropriate to effectuate the
assumption of the InfraSource stock plans by Quanta.
Directors
and Executive Officers of Quanta After the Merger
The directors and executive officers of Quanta prior to the
merger will continue as the directors and executive officers of
Quanta after the merger, except that the Quanta board of
directors will appoint three new directors, David R. Helwig, J.
Michal Conaway and Frederick W. Buckman, all of whom are
currently directors of InfraSource.
Ownership
of Quanta After the Merger
Quanta will issue a maximum of approximately 50.6 million
shares of Quanta common stock pursuant to the merger (based on
the number of outstanding shares of InfraSource common stock on
July 26, 2007 and assuming the exercise of all outstanding
options to purchase shares of InfraSource common stock that are
vested or will vest as a result of the consummation of the
merger). After the effective time of the merger and based on the
assumptions in the preceding sentence, InfraSource stockholders
will own approximately 25% of Quanta on a fully diluted basis
(including shares issuable pursuant to outstanding options and
convertible securities) based on the outstanding shares of
Quanta common stock, Quanta limited vote common stock and
InfraSource common stock on July 26, 2007 and the maximum
number of additional shares of InfraSource common stock that may
be issued in accordance with the merger agreement pursuant to
the exercise of outstanding InfraSource stock options that are
vested or will vest as a result of the consummation of the
merger. Consequently, InfraSource stockholders, as a general
matter, will have less influence over the management and
policies of Quanta than they currently exercise over the
management and policies of InfraSource.
Share
Ownership of Directors and Executive Officers of
Quanta
At the close of business on July 26, 2007, the directors
and executive officers of Quanta and their affiliates
beneficially owned and were entitled to vote
2,668,511 shares of Quanta common stock, collectively
representing approximately 2.2% of the shares of Quanta common
stock outstanding and entitled to vote on that date and
11
328,823 shares of Quanta limited vote common stock,
collectively representing approximately 43.3% of the shares of
limited vote common stock outstanding and entitled to vote on
that date. The directors and executive officers of Quanta have
each indicated that they expect to vote FOR the proposal
to approve the issuance of Quanta common stock in the merger and
FOR any adjournment of postponement of the special
meeting, if necessary to solicit additional proxies.
Share
Ownership of Directors and Executive Officers of
InfraSource
At the close of business on July 26, 2007, the directors
and executive officers of InfraSource and their affiliates
beneficially owned and were entitled to vote 544,773 shares
of InfraSource common stock, collectively representing
approximately 1.3% of the shares of InfraSource common stock
outstanding and entitled to vote on that date. The directors and
executive officers of InfraSource have each indicated that they
expect to vote FOR the proposal to adopt the merger
agreement and FOR any adjournment or postponement of the
special meeting, if necessary to solicit additional proxies.
Interests
of the InfraSource Directors and Executive Officers in the
Merger
In considering the recommendation of the InfraSource board of
directors with respect to the adoption of the merger agreement,
InfraSource stockholders should be aware that the merger
agreement includes an agreement that three members of the
InfraSource board of directors be added to the Quanta board of
directors following completion of the merger. At the time the
InfraSource board of directors approved the merger agreement,
the InfraSource board of directors was aware that David R.
Helwig and two independent directors of InfraSource would become
members of Quanta’s board of directors. The Quanta board of
directors has identified J. Michal Conaway and Frederick W.
Buckman as the two independent InfraSource board members to be
appointed to the Quanta board of directors in addition to
Mr. Helwig following completion of the merger. The other
directors of InfraSource will resign effective upon closing of
the merger.
In addition, the terms of the stock option agreements and some
restricted stock award agreements between InfraSource and its
non-employee directors provide that the vesting of all unvested
stock options and the applicable restricted stock will
accelerate upon a change in control transaction. The merger will
constitute a change in control transaction.
Each executive officer of InfraSource, including David R.
Helwig, has a management agreement with InfraSource that
provides for severance payments and the acceleration of the
vesting of existing equity awards if the executive’s
employment with InfraSource is terminated following a change in
control transaction.
InfraSource’s board of directors was aware of these
interests and considered them, among other matters, in approving
the merger agreement and making its recommendation that the
InfraSource stockholders adopt the merger agreement. See
“The Merger — Recommendation of the InfraSource
Board of Directors and Its Reasons for the Merger.”
Listing
of Shares of Quanta Common Stock; Delisting and Deregistration
of Shares of InfraSource Common Stock
Approval of the listing on the NYSE of the shares of Quanta
common stock to be issued in the merger pursuant to the merger
agreement is a condition to each party’s obligation to
complete the merger. Quanta will use commercially reasonable
efforts to cause the shares of Quanta common stock issuable in
the merger to be approved for listing on the NYSE, subject to
official notice of issuance, upon the completion of the merger.
If the merger is completed, shares of InfraSource common stock
will be delisted from the NYSE and deregistered under the
Exchange Act.
12
No
Appraisal Rights in the Merger
Holders of InfraSource’s common stock, Quanta’s common
stock and Quanta’s limited vote common stock are not
entitled to dissenters’ rights of appraisal under Delaware
law in connection with the merger. See “No Appraisal
Rights.”
Conditions
to Completion of the Merger
A number of conditions must be satisfied or waived, where
legally permissible, before the proposed merger can be
consummated. These include, among others:
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•
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the approval by Quanta stockholders of the issuance of the
shares of Quanta common stock in the merger;
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•
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the adoption of the merger agreement by InfraSource stockholders;
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•
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the expiration or termination of the waiting period (and any
extension of the waiting period) applicable to the proposed
transaction under the
Hart-Scott-Rodino
Act, referred to as the HSR Act;
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•
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the effectiveness of the
Form S-4
registration statement, of which this joint proxy
statement/prospectus is a part, and the absence of a stop order
or proceedings for such purpose pending before or threatened by
the SEC;
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•
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the receipt of state public utility commission consents for the
transfer of InfraSource subsidiaries in the dark fiber leasing
and telecommunication business;
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•
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the approval for listing on the NYSE of the shares of Quanta
common stock issuable to the InfraSource stockholders in the
merger pursuant to the merger agreement, subject to official
notice of issuance; and
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•
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the accuracy of the representations and warranties of Quanta,
InfraSource and Merger Sub in the merger agreement, with
specified exceptions.
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Neither Quanta nor InfraSource can give any assurance when or if
all of the conditions to the merger will be either satisfied or
waived or that the merger will occur.
Regulatory
Approvals Required for the Merger
The merger is subject to review by the Antitrust Division of the
U.S. Department of Justice, which is referred to as the
Antitrust Division, and the Federal Trade Commission, which is
referred to as the FTC, under the HSR Act. Quanta and
InfraSource filed the requisite Pre-Merger Notification and
Report Forms under the HSR Act with the Antitrust Division and
the FTC. On May 7, 2007, the FTC notified Quanta and
InfraSource that the FTC was granting early termination of the
statutory waiting period under the HSR Act.
Three InfraSource subsidiaries are regulated by certain state
public utility commissions or hold licenses from the Federal
Communications Commission (FCC). InfraSource must obtain the
necessary approvals or provide appropriate notice filings to
such regulatory agencies. As of June 29, 2007, InfraSource
had received all of the consents and approvals from the
applicable state public utility commissions and the FCC
necessary for the completion of the merger.
The merger may also be subject to the regulatory requirements of
other municipal, state and federal governmental agencies and
authorities.
No
Solicitation
Under the merger agreement, InfraSource has agreed to refrain
from encouraging or negotiating any competing acquisition
proposal. However, before receipt of the requisite approval by
its stockholders, InfraSource may, under certain circumstances,
engage in negotiations with a third party making an unsolicited,
written acquisition proposal.
13
In addition, in response to a superior proposal, the InfraSource
board of directors may, under certain circumstances, withhold,
withdraw, amend or modify its recommendation in favor of the
adoption of the merger agreement, and, in the case of a superior
proposal that is a tender or exchange offer made directly to
InfraSource stockholders, may recommend acceptance, or the
InfraSource board of directors may approve, endorse or recommend
any superior proposal.
For more information regarding the limitations on InfraSource
and its board to consider other proposals, see “The Merger
Agreement — Covenants — No Solicitation
of Alternative Transactions.”
Termination
of the Merger Agreement
The merger agreement may be terminated and the merger may be
abandoned by written notice at any time prior to the effective
time of the merger by the mutual consent of Quanta and
InfraSource. In addition, the merger agreement permits Quanta or
InfraSource to terminate the merger agreement upon the
occurrence of certain events, including the failure to receive
the requisite votes from Quanta or InfraSource stockholders. The
occurrence of certain other events may also give Quanta or
InfraSource the right to terminate the merger agreement.
For more information regarding the rights of Quanta and
InfraSource to terminate the merger agreement, see “The
Merger Agreement — Termination of the Merger
Agreement — General.”
Termination
Fee
Under the merger agreement, Quanta may be required to pay to
InfraSource a termination fee of $43 million if the merger
agreement is terminated under certain circumstances, and
InfraSource may be required to pay Quanta a termination fee of
$43 million if the merger agreement is terminated under
certain circumstances. In addition, Quanta or InfraSource may be
required to pay the other party an expense reimbursement of up
to $5 million if the merger agreement is terminated under
certain circumstances. See “The Merger
Agreement — Termination of the Merger
Agreement — Termination Fees and Expenses.”
Material
U.S. Federal Income Tax Consequences of the
Merger
Assuming the merger is consummated as described in the merger
agreement and this joint proxy statement/prospectus, it is the
opinion of Ballard Spahr Andrews & Ingersoll, LLP that
the merger will be treated as a “reorganization” under
Section 368(a) of the Internal Revenue Code and InfraSource
stockholders will not recognize any gain or loss (except with
respect to cash received in lieu of a fractional share of Quanta
common stock) by reason of the merger, subject to the
limitations described under “Material U.S. Federal
Income Tax Consequences of the Merger.”
Please review carefully the information under the caption
“The Merger — Material U.S. Federal Income
Tax Consequences of the Merger” for a description of the
material U.S. federal income tax consequences of the
merger. The tax consequences to you will depend on your own
situation. Please consult your tax advisors for a full
understanding of the tax consequences of the merger to you.
Accounting
Treatment
Quanta will account for the merger using the purchase method
under U.S. generally accepted accounting principles, which
is referred to herein as GAAP.
14
No
Payment of Dividends
Quanta
Quanta does not currently pay cash dividends on its common stock
or its limited vote common stock. Quanta’s present or
future ability to pay dividends is governed by (1) the
provisions of Delaware law and (2) Quanta’s bank
credit facility. In addition, the future payment of cash
dividends, if any, on Quanta’s common stock or limited vote
common stock is within the discretion of the Quanta board of
directors and will depend on Quanta’s earnings, capital
requirements, financial condition and other relevant factors.
InfraSource
InfraSource does not currently pay cash dividends on its common
stock. The merger agreement provides that InfraSource may not
declare, set aside or pay any dividend prior to the completion
of the merger or the termination of the merger agreement,
without the prior consent of Quanta.
15
SELECTED
HISTORICAL FINANCIAL DATA OF QUANTA
The following tables show Quanta’s selected historical
consolidated financial data as of and for each of the years
ended December 31, 2002, 2003, 2004, 2005 and 2006 and as
of March 31, 2007 and for the three months ended
March 31, 2006 and 2007 and are derived from Quanta’s
financial statements. You should read the following data in
connection with “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and the
consolidated financial statements and the related notes thereto
set forth in Quanta’s Annual Report on
Form 10-K
for the year ended December 31, 2006 and in Quanta’s
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007, which are
incorporated herein by reference. See also the pro forma
information set forth elsewhere in this joint proxy
statement/prospectus regarding the proposed merger with
InfraSource. Quanta’s historical results are not
necessarily indicative of results to be expected in future
periods.
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Three Months
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Ended
|
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Year Ended December 31,
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March 31,
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2002
|
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|
2003
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|
|
2004
|
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2005
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2006
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2006
|
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2007
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(In thousands, except per share data)
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Consolidated Statement of
Operations Data:
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Revenues
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$
|
1,750,713
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$
|
1,642,853
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$
|
1,626,510
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|
|
$
|
1,858,626
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|
|
$
|
2,131,038
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|
|
$
|
496,494
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|
|
$
|
574,880
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|
Cost of services (including
depreciation)
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1,513,940
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|
|
1,442,958
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|
1,445,119
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|
|
|
1,601,878
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|
|
|
1,815,222
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|
|
|
437,046
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|
|
|
496,474
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|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
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|
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|
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Gross profit
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236,773
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|
199,895
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|
181,391
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|
|
|
256,748
|
|
|
|
315,816
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|
59,448
|
|
|
|
78,406
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|
Selling, general and administrative
expenses
|
|
|
229,191
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|
|
|
177,956
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|
171,274
|
|
|
|
187,940
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|
|
|
182,739
|
|
|
|
42,184
|
|
|
|
49,232
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|
Amortization of intangible assets
|
|
|
263
|
|
|
|
263
|
|
|
|
263
|
|
|
|
263
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|
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|
263
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|
91
|
|
|
|
772
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|
Goodwill impairment
|
|
|
166,580
|
(a)
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|
|
6,452
|
(d)
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|
|
—
|
|
|
|
—
|
|
|
|
56,812
|
(f)
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|
|
—
|
|
|
|
—
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|
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|
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|
|
|
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|
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Income (loss) from operations
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|
|
(159,261
|
)
|
|
|
15,224
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|
|
|
9,854
|
|
|
|
68,545
|
|
|
|
76,002
|
|
|
|
17,173
|
|
|
|
28,402
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|
Interest expense
|
|
|
(35,866
|
)
|
|
|
(31,822
|
)
|
|
|
(25,067
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)
|
|
|
(23,949
|
)
|
|
|
(26,823
|
)
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|
|
(5,884
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)
|
|
|
(5,552
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)
|
Interest income
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|
|
1,709
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|
|
|
1,065
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|
|
|
2,551
|
|
|
|
7,416
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|
|
|
13,924
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|
|
|
2,979
|
|
|
|
4,298
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|
Gain (loss) on early extinguishment
of debt, net
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—
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|
(35,055
|
)(e)
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|
—
|
|
|
|
—
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|
1,598
|
(g)
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|
—
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|
|
|
—
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Other income (expense), net
|
|
|
(426
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)
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|
|
(2,481
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)
|
|
|
17
|
|
|
|
235
|
|
|
|
425
|
|
|
|
148
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|
|
|
29
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Income (loss) before income taxes
and cumulative effect of change in accounting principle
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(193,844
|
)
|
|
|
(53,069
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)
|
|
|
(12,645
|
)
|
|
|
52,247
|
|
|
|
65,126
|
|
|
|
14,416
|
|
|
|
27,177
|
|
Provision (benefit) for income taxes
|
|
|
(19,710
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)
|
|
|
(18,080
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)
|
|
|
(3,451
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)
|
|
|
22,690
|
|
|
|
47,643
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|
|
|
6,558
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|
|
|
(4,027
|
)(h)
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|
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|
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Income (loss) before cumulative
effect of change in accounting principle
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(174,134
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)
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|
|
(34,989
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)
|
|
|
(9,194
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)
|
|
|
29,557
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|
|
|
17,483
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|
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|
7,858
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|
|
|
31,204
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Cumulative effect of change in
accounting principle, net of tax
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445,422
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(b)
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|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
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|
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|
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|
|
|
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|
Net income (loss)
|
|
|
(619,556
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)
|
|
|
(34,989
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)
|
|
|
(9,194
|
)
|
|
|
29,557
|
|
|
|
17,483
|
|
|
|
7,858
|
|
|
|
31,204
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|
Dividends on preferred stock, net
of forfeitures
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|
|
(11
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)
|
|
|
(2,109
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)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Non-cash beneficial conversion
charge
|
|
|
8,508
|
(c)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to
common stock
|
|
$
|
(628,053
|
)
|
|
$
|
(32,880
|
)
|
|
$
|
(9,194
|
)
|
|
$
|
29,557
|
|
|
$
|
17,483
|
|
|
$
|
7,588
|
|
|
$
|
31,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Basic earnings (loss) per share
|
|
$
|
(9.98
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
0.26
|
|
|
$
|
0.15
|
|
|
$
|
0.07
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
|
|
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|
Diluted earnings (loss) per share
|
|
$
|
(9.98
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
0.25
|
|
|
$
|
0.15
|
|
|
$
|
0.07
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
(a) |
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During the year ended December 31, 2002, Quanta recognized
an interim SFAS No. 142 non-cash goodwill impairment
charge of $166.6 million. Impairment adjustments recognized
after the adoption of SFAS No. 142 are required to be
recognized as operating expenses. |
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(b) |
|
Based on the transitional impairment test performed upon
adoption of SFAS No. 142, Quanta recognized a
$488.5 million non-cash charge ($445.4 million, net of
tax) to reduce the carrying value of goodwill to the |
16
|
|
|
|
|
implied fair value of its reporting units. Basic and diluted
earnings per share before cumulative effect of change in
accounting principle were a loss of $2.90 per share. |
|
(c) |
|
The original as-converted share price negotiated with First
Reserve Fund IX, L.P. (First Reserve) for Quanta
Series E Preferred Stock on October 15, 2002 was
$3.00 per share, which was an above market price. On
December 20, 2002, the date First Reserve purchased the
Series E Preferred Stock, Quanta stock closed at
$3.35 per share. Accordingly, Quanta recorded a non-cash
beneficial conversion charge of $8.5 million based on the
$0.35 per share differential. The non-cash beneficial
conversion charge was recognized as a deemed dividend to the
Series E preferred stockholder and was recorded as a
decrease in net income attributable to common stock and an
increase in additional paid-in capital. The non-cash beneficial
conversion charge had no effect on operating income, cash flows
or stockholders’ equity at December 31, 2002. |
|
(d) |
|
As part of the 2003 annual goodwill test for impairment,
goodwill of $6.5 million was written off as a non-cash
operating expense associated with the closure of one of our
telecommunications businesses. |
|
(e) |
|
In the fourth quarter of 2003, Quanta recorded a
$35.1 million loss on early extinguishment of debt
comprised of make-whole prepayment premiums, the write-off of
certain unamortized debt issuance costs and other related costs
due to the retirement of senior secured notes and termination of
a then existing credit facility. |
|
(f) |
|
As part of the 2006 annual goodwill test for impairment,
goodwill of $56.8 million was written off as a non-cash
operating expense associated with a decrease in the expected
future demand for the services of one of Quanta’s
businesses, which has historically served the cable television
industry. |
|
(g) |
|
In the second quarter of 2006, Quanta recorded a
$1.6 million gain on early extinguishment of debt comprised
of the gain from repurchasing a portion of its 4.0% notes,
partially offset by costs associated with the related tender
offer for such notes. |
|
(h) |
|
During the three months ended March 31, 2007, Quanta
recorded $15.3 million in tax benefits primarily due to a
decrease in reserves for uncertain tax positions resulting from
the settlement of a multi-year Internal Revenue Service audit. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
As of December 31,
|
|
|
March 31,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
317,356
|
|
|
$
|
476,703
|
|
|
$
|
478,978
|
|
|
$
|
572,939
|
|
|
$
|
656,173
|
|
|
$
|
674,099
|
|
Total assets
|
|
|
1,364,812
|
|
|
|
1,466,435
|
|
|
|
1,459,997
|
|
|
|
1,554,785
|
|
|
|
1,639,157
|
|
|
|
1,662,766
|
|
Long-term debt, net of current
maturities
|
|
|
213,167
|
|
|
|
58,051
|
|
|
|
21,863
|
|
|
|
7,591
|
|
|
|
—
|
|
|
|
—
|
|
Convertible subordinated notes, net
of current maturities
|
|
|
172,500
|
|
|
|
442,500
|
|
|
|
442,500
|
|
|
|
442,500
|
|
|
|
413,750
|
|
|
|
413,750
|
|
Redeemable common stock
|
|
|
72,922
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total stockholders’ equity
|
|
|
611,671
|
|
|
|
663,132
|
|
|
|
663,247
|
|
|
|
703,738
|
|
|
|
729,083
|
|
|
|
775,436
|
|
17
SELECTED
HISTORICAL FINANCIAL DATA OF INFRASOURCE
The following tables show InfraSource’s selected historical
consolidated financial data for the last five fiscal years. The
consolidated statement of operations data for the years ended
December 31, 2002, the period January 1, 2003 to
September 23, 2003, the period May 30, 2003 to
December 31, 2003, and for the years ended
December 31, 2004, 2005 and 2006 and the consolidated
balance sheet data at December 31, 2002, 2003, 2004, 2005,
2006 have been derived from InfraSource’s audited
consolidated financial statements, which include the results of
InfraSource’s predecessor entity, InfraSource Incorporated,
as of and for the years ended December 31, 2002, and for
the period January 1, 2003 to September 23, 2003, and
its results for the period May 30, 2003 (date of inception)
to December 31, 2003, and for the years ended
December 31, 2004, 2005, and 2006 and at December 31,
2003, 2004, 2005 and 2006. InfraSource had no operating activity
prior to September 24, 2003, the date of completion of the
acquisition of the predecessor entity. The selected historical
consolidated financial data as of March 31, 2007 and for
the three months ended March 31, 2006 and 2007 were derived
from InfraSource’s unaudited consolidated financial
statements. You should read the following data in connection
with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the
consolidated financial statements and the related notes thereto
set forth in InfraSource’s Annual Report on
Form 10-K
for the year ended December 31, 2006, as amended by
Form 10-K/A, and in InfraSource’s Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007, which are
incorporated herein by reference. See also the pro forma
information set forth elsewhere in this joint proxy
statement/prospectus regarding the proposed merger with Quanta.
InfraSource’s historical results are not necessarily
indicative of results to be expected in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
January 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 23,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor
|
|
|
(Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entity —
|
|
|
Entity —
|
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
|
InfraSource
|
|
|
InfraSource
|
|
|
|
Period
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
Three Months
|
|
|
|
Incorporated
|
|
|
Incorporated
|
|
|
|
May 30 to
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
and
|
|
|
and
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
Subsidiaries)
|
|
|
Subsidiaries)
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
Consolidated Statements of
Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
566,469
|
|
|
$
|
382,627
|
|
|
|
$
|
132,445
|
|
|
$
|
632,604
|
|
|
$
|
853,076
|
|
|
$
|
992,305
|
|
|
$
|
214,275
|
|
|
$
|
203,804
|
|
Cost of revenues
|
|
|
459,652
|
|
|
|
339,480
|
|
|
|
|
110,103
|
|
|
|
531,632
|
|
|
|
750,248
|
|
|
|
846,646
|
|
|
|
185,424
|
|
|
|
175,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
106,817
|
|
|
|
43,147
|
|
|
|
|
22,342
|
|
|
|
100,972
|
|
|
|
102,828
|
|
|
|
145,659
|
|
|
|
28,851
|
|
|
|
28,395
|
|
Selling, general and administrative
expenses
|
|
|
62,078
|
|
|
|
41,407
|
|
|
|
|
13,933
|
|
|
|
63,210
|
|
|
|
73,737
|
|
|
|
94,787
|
|
|
|
22,693
|
|
|
|
25,608
|
|
Merger-related costs(a)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,574
|
|
Exelon transaction related costs(b)
|
|
|
—
|
|
|
|
16,242
|
|
|
|
|
—
|
|
|
|
(228
|
)
|
|
|
218
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Provision (recoveries) for
uncollectible accounts
|
|
|
7,964
|
|
|
|
236
|
|
|
|
|
178
|
|
|
|
(299
|
)
|
|
|
156
|
|
|
|
1,500
|
|
|
|
(10
|
)
|
|
|
163
|
|
Amortization of intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
|
2,600
|
|
|
|
12,350
|
|
|
|
4,911
|
|
|
|
1,004
|
|
|
|
257
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations(c)(d)
|
|
|
36,775
|
|
|
|
(14,738
|
)
|
|
|
|
5,631
|
|
|
|
25,939
|
|
|
|
23,806
|
|
|
|
48,368
|
|
|
|
5,911
|
|
|
|
(1,010
|
)
|
Interest income
|
|
|
1,438
|
|
|
|
1,376
|
|
|
|
|
60
|
|
|
|
513
|
|
|
|
388
|
|
|
|
953
|
|
|
|
236
|
|
|
|
328
|
|
Interest expense and amortization
of debt discount
|
|
|
(388
|
)
|
|
|
(27
|
)
|
|
|
|
(3,966
|
)
|
|
|
(10,178
|
)
|
|
|
(8,157
|
)
|
|
|
(6,908
|
)
|
|
|
(2,111
|
)
|
|
|
(1,043
|
)
|
Loss on early extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(4,444
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Write-off of deferred financing
costs
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,296
|
)
|
|
|
—
|
|
|
|
—
|
|
Other income (expense)
|
|
|
6,976
|
|
|
|
(3,053
|
)
|
|
|
|
(88
|
)
|
|
|
2,366
|
|
|
|
6,663
|
|
|
|
4,144
|
|
|
|
97
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
January 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 23,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor
|
|
|
(Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entity —
|
|
|
Entity —
|
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
|
InfraSource
|
|
|
InfraSource
|
|
|
|
Period
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
Three Months
|
|
|
|
Incorporated
|
|
|
Incorporated
|
|
|
|
May 30 to
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
and
|
|
|
and
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
Subsidiaries)
|
|
|
Subsidiaries)
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
Income (loss) before income taxes,
discontinued operations, cumulative effect of a change in
accounting principle and extraordinary item
|
|
|
44,801
|
|
|
|
(16,442
|
)
|
|
|
|
1,637
|
|
|
|
14,196
|
|
|
|
22,700
|
|
|
|
42,261
|
|
|
|
4,133
|
|
|
|
(1,612
|
)
|
Income tax expense (benefit)
|
|
|
14,564
|
|
|
|
(5,240
|
)
|
|
|
|
683
|
|
|
|
5,796
|
|
|
|
9,734
|
|
|
|
16,391
|
|
|
|
1,666
|
|
|
|
(623
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing
operations
|
|
|
30,237
|
|
|
|
(11,202
|
)
|
|
|
|
954
|
|
|
|
8,400
|
|
|
|
12,966
|
|
|
|
25,870
|
|
|
|
2,467
|
|
|
|
(989
|
)
|
Income (loss) from discontinued
operations, net of tax
|
|
|
(1,574
|
)
|
|
|
(12,316
|
)
|
|
|
|
305
|
|
|
|
580
|
|
|
|
(1,069
|
)
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
(17
|
)
|
Gain on disposition of discontinued
operations, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
596
|
|
|
|
1,832
|
|
|
|
273
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before extraordinary
item and cumulative effect of a change in accounting principle,
net of tax
|
|
|
28,663
|
|
|
|
(23,518
|
)
|
|
|
|
1,259
|
|
|
|
9,576
|
|
|
|
13,729
|
|
|
|
26,145
|
|
|
|
2,466
|
|
|
|
(1,006
|
)
|
Extraordinary item, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
|
76
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cumulative effect of a change in
accounting principle, net of tax(e)
|
|
|
(204,100
|
)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(175,437
|
)
|
|
$
|
(23,518
|
)
|
|
|
$
|
1,335
|
|
|
$
|
9,576
|
|
|
$
|
13,729
|
|
|
$
|
26,145
|
|
|
$
|
2,466
|
|
|
$
|
(1,006
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic common
shares outstanding
|
|
|
48,086
|
|
|
|
47,585
|
|
|
|
|
10,782
|
|
|
|
35,172
|
|
|
|
39,129
|
|
|
|
39,757
|
|
|
|
39,515
|
|
|
|
40,279
|
|
Basic income (loss) per
share — continuing operations
|
|
$
|
0.62
|
|
|
$
|
(0.24
|
)
|
|
|
$
|
0.09
|
|
|
$
|
0.24
|
|
|
$
|
0.33
|
|
|
$
|
0.65
|
|
|
$
|
0.06
|
|
|
$
|
(0.02
|
)
|
Basic income (loss) per
share — discontinued operations
|
|
|
(0.03
|
)
|
|
|
(0.26
|
)
|
|
|
|
0.02
|
|
|
|
0.01
|
|
|
|
(0.03
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Basic income per share —
gain on disposition of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
0.02
|
|
|
|
0.05
|
|
|
|
0.01
|
|
|
|
—
|
|
|
|
—
|
|
Basic income per share —
extraordinary item
|
|
|
—
|
|
|
|
—
|
|
|
|
|
0.01
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Basic loss per share —
cumulative effect of a change in accounting principle, net of tax
|
|
|
(4.24
|
)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3.65
|
)
|
|
$
|
(0.50
|
)
|
|
|
$
|
0.12
|
|
|
$
|
0.27
|
|
|
$
|
0.35
|
|
|
$
|
0.66
|
|
|
$
|
0.06
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted common
shares outstanding
|
|
|
48,086
|
|
|
|
47,585
|
|
|
|
|
11,031
|
|
|
|
36,139
|
|
|
|
39,943
|
|
|
|
40,364
|
|
|
|
40,116
|
|
|
|
40,279
|
|
Diluted income (loss) per
share — continuing operations
|
|
$
|
0.62
|
|
|
$
|
(0.24
|
)
|
|
|
$
|
0.09
|
|
|
$
|
0.23
|
|
|
$
|
0.32
|
|
|
$
|
0.64
|
|
|
$
|
0.06
|
|
|
$
|
(0.02
|
)
|
Diluted income (loss) per
share — discontinued operations
|
|
|
(0.03
|
)
|
|
|
(0.26
|
)
|
|
|
|
0.02
|
|
|
|
0.01
|
|
|
|
(0.03
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted income per
share — gain on disposition of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
0.02
|
|
|
|
0.05
|
|
|
|
0.01
|
|
|
|
—
|
|
|
|
—
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
January 1 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 23,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor
|
|
|
(Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entity —
|
|
|
Entity —
|
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
|
InfraSource
|
|
|
InfraSource
|
|
|
|
Period
|
|
|
Year
|
|
|
Year
|
|
|
Year
|
|
|
Three Months
|
|
|
|
Incorporated
|
|
|
Incorporated
|
|
|
|
May 30 to
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
and
|
|
|
and
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
Subsidiaries)
|
|
|
Subsidiaries)
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
Diluted income per
share — extraordinary item
|
|
|
—
|
|
|
|
—
|
|
|
|
|
0.01
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted loss per share —
cumulative effect of a change in accounting principle, net of tax
|
|
|
(4.24
|
)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3.65
|
)
|
|
$
|
(0.50
|
)
|
|
|
$
|
0.12
|
|
|
$
|
0.26
|
|
|
$
|
0.34
|
|
|
$
|
0.65
|
|
|
$
|
0.06
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entity —
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InfraSource
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
Incorporated and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Subsidiaries)
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Working capital
|
|
$
|
156,379
|
|
|
|
$
|
62,268
|
|
|
$
|
97,026
|
|
|
$
|
115,534
|
|
|
$
|
107,363
|
|
|
$
|
100,062
|
|
Total assets
|
|
|
509,266
|
|
|
|
|
370,033
|
|
|
|
524,422
|
|
|
|
569,389
|
|
|
|
581,232
|
|
|
|
550,117
|
|
Total debt
|
|
|
439
|
|
|
|
|
163,490
|
|
|
|
85,764
|
|
|
|
83,908
|
|
|
|
51,133
|
|
|
|
50,047
|
|
Total stockholders’ equity
|
|
|
373,721
|
|
|
|
|
92,849
|
|
|
|
283,983
|
|
|
|
301,856
|
|
|
|
339,185
|
|
|
|
340,299
|
|
|
|
|
(a) |
|
Represents merger related transaction costs, primarily
investment banking fees, legal fees and due diligence costs
necessary as part of the merger with Quanta. |
|
(b) |
|
Represents fees and expenses related to the formation of
InfraSource by two investment funds managed by GFI Energy
Ventures LLC and Oaktree Capital Management and the acquisition
of InfraSource Incorporated from Exelon Enterprises Company, LLC
by InfraSource in May 2003, including severance and retention
costs and professional service fees. |
|
(c) |
|
For the year ended December 31, 2005, amounts include a
$10.1 million loss, after giving effect to assumed claims
collections, relating to one underground utility construction
project. |
|
(d) |
|
For the year ended December 31, 2006, amounts include an
$8.9 million loss, which assumes collection of a portion of
current and projected claims, related to one electric
transmission project. |
|
(e) |
|
Effective January 1, 2002, pursuant to
SFAS No. 142 goodwill recorded was no longer subject
to amortization. Upon adoption of SFAS No. 142, we
recorded a non-cash charge of $204.1 million (net of tax)
to reduce the carrying amount of goodwill and other intangibles
to their implied fair value. |
20
SELECTED
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined statement of
operations data of Quanta for the year ended December 31,
2006 and for the three months ended March 31, 2007 have
been prepared to give effect to the merger as if the merger had
occurred on January 1, 2006. The unaudited pro forma
combined balance sheet data as of March 31, 2007 of Quanta
has been prepared to give effect to the merger as if the merger
had occurred on March 31, 2007.
The following selected unaudited pro forma combined financial
information is not necessarily indicative of the results that
might have occurred had the merger taken place on
January 1, 2006 for statement of operations purposes, and
on March 31, 2007 for balance sheet purposes, and is not
intended to be a projection of future results. Future results
may vary significantly from the results reflected because of
various factors, including those discussed in “Risk
Factors.” The following selected unaudited pro forma
combined financial information should be read in conjunction
with the “Unaudited Pro Forma Combined Financial
Statements” and related notes included elsewhere in this
joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Three Months Ended
|
|
|
|
December 31, 2006
|
|
|
March 31, 2007
|
|
|
|
(In thousands, except
|
|
|
|
per share data)
|
|
|
Pro Forma Combined Statement of
Operations Data:
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,123,343
|
|
|
$
|
778,684
|
|
Cost of services
|
|
|
2,661,868
|
|
|
|
671,883
|
|
Gross profit
|
|
|
461,475
|
|
|
|
106,801
|
|
Income from operations
|
|
|
102,960
|
|
|
|
27,311
|
|
Income from continuing operations
|
|
$
|
35,033
|
|
|
$
|
30,402
|
|
Diluted earnings per share from
continuing operations
|
|
$
|
0.21
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
March 31, 2007
|
|
|
Balance Sheet Data:
|
|
|
|
|
Working capital
|
|
$
|
695,538
|
|
Total assets
|
|
|
3,126,633
|
|
Long-term debt (net of current
maturities) and convertible subordinated notes
|
|
|
413,796
|
|
Stockholders’ equity
|
|
|
2,016,964
|
|
21
COMPARATIVE
PER SHARE DATA
The following table summarizes earnings per share data for
Quanta and InfraSource on a historical basis and on a pro forma
combined basis giving effect to the merger. It has been assumed
for purposes of the pro forma combined financial information
provided below that the merger was completed on January 1,
2006 for statement of operations purposes, and on March 31,
2007 for balance sheet purposes. The following information
should be read in conjunction with the “Unaudited Pro Forma
Combined Financial Statements” and related notes included
elsewhere in this joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quanta
|
|
InfraSource
|
|
InfraSource
|
|
Pro Forma
|
|
|
Historical
|
|
Historical
|
|
Pro Forma (equivalent)(1)
|
|
Combined
|
|
|
For the Year Ended December 31, 2006
|
|
Basic earnings per share from
continuing operations
|
|
$
|
0.15
|
|
|
$
|
0.65
|
|
|
$
|
0.26
|
|
|
$
|
0.21
|
|
Diluted earnings per share from
continuing operations
|
|
|
0.15
|
|
|
|
0.64
|
|
|
|
0.26
|
|
|
|
0.21
|
|
Dividends declared
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
For the Three Months Ended
March 31, 2007
|
Basic earnings (loss) per share
from continuing operations
|
|
$
|
0.26
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.22
|
|
|
$
|
0.18
|
|
Diluted earnings (loss) per share
from continuing operations
|
|
|
0.23
|
|
|
|
(0.02
|
)
|
|
|
0.21
|
|
|
|
0.17
|
|
Dividends declared
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
As of March 31,
2007
|
Book value per share(2)
|
|
$
|
6.57
|
|
|
$
|
8.45
|
|
|
$
|
14.75
|
|
|
$
|
12.06
|
|
|
|
|
(1) |
|
Pro Forma (equivalent) is calculated by multiplying the Pro
Forma Combined amounts by the exchange ratio of 1.223. |
|
(2) |
|
Book value per share is calculated by dividing
stockholders’ equity by the number of common shares
outstanding as of March 31, 2007. |
22
COMPARATIVE
QUANTA AND INFRASOURCE MARKET PRICE DATA
Quanta’s common stock is listed on the NYSE under the
symbol “PWR.” Quanta’s Limited Vote Common Stock
is not listed on any securities exchange or traded in any
trading market. InfraSource’s common stock is listed on the
NYSE under the symbol “IFS.” The following table
presents closing prices for shares of Quanta common stock and
InfraSource common stock on March 16, 2007, the last
trading day before the public announcement of the execution of
the merger agreement by Quanta and InfraSource, and
July 26, 2007, the date of this joint proxy
statement/prospectus. This table also presents the equivalent
market value per share of InfraSource common stock on
March 16, 2007 and July 26, 2007, as determined by
multiplying the closing prices of shares of Quanta common stock
on those dates by the exchange ratio of 1.223. Although the
exchange ratio is fixed, the market prices of Quanta common
stock and InfraSource common stock will fluctuate before the
special meetings and before the merger is completed and the
market value of the merger consideration ultimately received by
InfraSource stockholders will depend on the closing price of
Quanta common stock on the day the merger is consummated. See
“Risk Factors — Risks Relating to the
Merger — Because the exchange ratio is fixed and the
market price of shares of Quanta common stock will fluctuate,
InfraSource stockholders cannot be sure of the value of the
merger consideration they will receive.”
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InfraSource
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Equivalent
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Per Share
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Quanta
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InfraSource
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Common
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Common Stock
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Common Stock
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Stock
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March 16, 2007
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$
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24.64
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$
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25.66
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$
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30.13
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July 26, 2007
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$
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28.74
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$
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34.81
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$
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35.15
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The table below sets forth, for the calendar quarters indicated,
the high and low sale prices per share of Quanta common stock
and per share of InfraSource common stock on the NYSE. Neither
Quanta nor InfraSource has ever declared a cash dividend with
respect to its common stock.
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Quanta
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InfraSource
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Common Stock
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Common Stock
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Calendar Year
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High
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Low
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High
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Low
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2004
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First Quarter(1)
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$
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9.52
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$
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6.50
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$
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—
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$
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—
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Second Quarter
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$
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7.24
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$
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4.83
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$
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13.14
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$
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11.50
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Third Quarter
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$
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7.45
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$
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5.27
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$
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12.59
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$
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7.66
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Fourth Quarter
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$
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8.29
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$
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5.70
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$
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14.98
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$
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10.10
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2005
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First Quarter
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$
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8.65
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$
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7.23
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$
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13.11
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$
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11.00
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Second Quarter
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$
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9.62
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$
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7.50
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$
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13.47
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$
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9.53
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Third Quarter
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$
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13.02
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$
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8.79
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$
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15.66
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$
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10.25
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Fourth Quarter
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$
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14.95
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$
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10.91
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$
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14.86
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$
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10.76
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2006
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First Quarter
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$
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16.09
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$
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12.24
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$
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19.17
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$
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12.52
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Second Quarter
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$
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18.92
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$
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14.47
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$
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20.29
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$
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16.23
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Third Quarter
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$
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18.02
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$
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14.40
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$
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19.32
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$
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16.40
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Fourth Quarter
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$
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20.05
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$
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16.32
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$
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23.73
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$
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17.35
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2007
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First Quarter
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$
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26.04
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$
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18.66
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$
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31.91
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$
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19.88
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Second Quarter
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$
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32.11
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$
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25.27
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$
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38.96
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$
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30.54
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Third Quarter (through
July 26, 2007)
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$
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32.58
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$
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28.20
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$
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39.59
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$
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34.13
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(1) |
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InfraSource completed its initial public offering in May 2004. |
Quanta and InfraSource urge Quanta stockholders and InfraSource
stockholders to obtain current market quotations for shares of
Quanta common stock and InfraSource common stock before making
any decision regarding the issuance of shares of Quanta common
stock in the merger or the adoption of the merger agreement, as
applicable.
23
RISK
FACTORS
In addition to the other information included or incorporated
by reference in this joint proxy statement/prospectus, including
the matters addressed under “Cautionary Statement
Concerning Forward-Looking Statements,” Quanta stockholders
and InfraSource stockholders should carefully consider the
following risks before deciding how to vote. You should also
consider the other information in this joint proxy
statement/prospectus and the other documents incorporated by
reference in this joint proxy statement/prospectus. See
“Where You Can Find More Information; Incorporation by
Reference.”
Risk
Factors Relating to the Merger
Because
the exchange ratio is fixed and the market price of shares of
Quanta common stock will fluctuate, InfraSource stockholders
cannot be sure of the value of the merger consideration they
will receive.
Upon consummation of the merger, each outstanding share of
InfraSource common stock will be converted into
1.223 shares of Quanta common stock. The number of shares
of Quanta common stock to be issued in the merger pursuant to
the merger agreement for each share of InfraSource common stock
is fixed and will not change to reflect changes in the market
price of Quanta common stock. The market price of Quanta common
stock at the time of the merger may vary significantly from the
market prices of Quanta common stock on the date the merger
agreement was executed, the date of this joint proxy
statement/prospectus and the date on which Quanta or InfraSource
stockholders vote on the merger.
In addition, the merger may not be completed until a significant
period of time has passed after the special meetings. Because
the exchange ratio will not be adjusted to reflect any changes
in the market value of Quanta common stock or InfraSource common
stock, the market value of the Quanta common stock issued in the
merger and the InfraSource common stock surrendered in the
merger may be higher or lower than the values of those shares on
those earlier dates. Stock price changes may result from a
variety of factors that are beyond the control of Quanta and
InfraSource, including:
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market reaction to the announcement of the merger and market
assessment of the likelihood of the merger being consummated;
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•
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changes in the respective businesses, operations or prospects of
Quanta or InfraSource, including Quanta’s and
InfraSource’s ability to meet earnings estimates;
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governmental or litigation developments or regulatory
considerations affecting Quanta or InfraSource or the utility
industry; and
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general business, market, industry or economic conditions.
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Many of these factors are beyond the control of Quanta and
InfraSource.
Neither party is permitted to “walk away” from the
merger, terminate the merger agreement or resolicit the vote of
its stockholders solely because of changes in the market price
of either party’s common stock.
Many
of the anticipated benefits of combining Quanta and InfraSource
may not be realized.
Quanta and InfraSource entered into the merger agreement with
the expectation that the merger would result in various benefits
including, among other things, synergies (including enhanced
resource base, service offerings and geographic presence,
expanded customer base and additional cross-selling
opportunities), cost savings and operating efficiencies. The
success of the merger will depend, in part, on our ability to
realize these anticipated benefits and cost savings from
combining the businesses of Quanta and InfraSource. However, to
realize these anticipated benefits and cost savings, we must
successfully combine the businesses of Quanta and InfraSource.
If we are not able to achieve these objectives, the anticipated
benefits and cost savings of the merger may not be realized
fully or at all or may take longer to realize than expected.
Quanta and InfraSource have operated and, until the completion
of the merger, will continue to operate independently. It is
possible that the integration process could take longer than
anticipated and could result in the loss of valuable employees
or the disruption of each company’s ongoing businesses or
inconsistencies in standards, controls, procedures, practices,
policies and compensation arrangements, which could adversely
affect our ability to achieve the anticipated benefits of the
merger. The combined company’s results of operations could
also be adversely affected by any issues attributable to either
company’s operations that arise or are based on events or
24
actions that occur prior to the closing of the merger. Further,
the size of the merger may make integration difficult, expensive
and disruptive, adversely affecting Quanta’s revenues after
the merger. Quanta may have difficulty coordinating the
operations and personnel of two geographically separated
companies and addressing possible differences in corporate
cultures and management philosophies. Integration efforts
between the two companies will also divert management attention
and resources. These integration activities could have an
adverse effect on the businesses of both Quanta and InfraSource
during the transition period. The integration process is subject
to a number of uncertainties. Although Quanta’s plans for
integration are focused on minimizing those uncertainties to
help achieve the anticipated benefits, no assurance can be given
that these benefits will be realized or, if realized, the timing
of their realization. Failure to achieve these anticipated
benefits could result in increased costs or decreases in the
amount of expected revenues and could adversely affect
Quanta’s future business, financial condition, operating
results and prospects. In addition, we may not be able to
eliminate duplicative costs or realize other efficiencies from
integrating the businesses to offset part or all of the
transaction and merger-related costs incurred by Quanta and
InfraSource.
Any
delay in completing the merger may substantially reduce the
benefits expected to be obtained from the merger.
In addition to obtaining the required regulatory clearances and
approvals, the merger is subject to a number of other conditions
beyond the control of InfraSource and Quanta that may prevent,
delay or otherwise materially adversely affect its completion.
See “The Merger Agreement — Conditions to the
Completion of the Merger.” Quanta and InfraSource cannot
predict whether or when the conditions required to complete the
merger will be satisfied. The requirements for obtaining the
required clearances and approvals could delay the effective time
of the merger for a significant period of time or prevent it
from occurring. Any delay in completing the merger may
materially adversely affect the synergies and other benefits
that Quanta and InfraSource expect to achieve if the merger and
the integration of their respective businesses are completed
within the expected timeframe.
Failure
to complete the merger could negatively affect the stock prices
and the future business and financial results of Quanta and
InfraSource.
Completion of the merger is not assured and is subject to risks,
including the risks that approval of the transaction by
stockholders of both Quanta and InfraSource or by regulatory
agencies is not obtained or that certain other closing
conditions are not satisfied. If the merger is not completed,
the ongoing businesses of Quanta or InfraSource may be adversely
affected and Quanta and InfraSource will be subject to several
risks, including the following:
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•
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having to pay certain significant costs relating to the merger
without receiving the benefits of the merger;
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•
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the attention of management of Quanta and InfraSource will have
been diverted to the merger instead of on each company’s
own operations and pursuit of other opportunities that could
have been beneficial to that company; and
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resulting negative customer perception could adversely affect
the ability of Quanta and InfraSource to compete for, or to win,
new and renewal business in the marketplace.
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Quanta’s
results of operations could be adversely affected as a result of
goodwill impairment.
When Quanta acquires a business, it records an asset called
“goodwill” equal to the excess amount it pays for the
business, including liabilities assumed, over the fair value of
the tangible and intangible assets of the business it acquires.
Quanta expects that the merger will result in the recognition of
approximately $1.0 billion in goodwill as of March 31, 2007
based on the application of purchase accounting principles.
Statement of Financial Accounting Standards (SFAS) No. 142
requires that goodwill and other intangible assets that have
indefinite useful lives not be amortized, but instead be tested
at least annually for impairment, and that intangible assets
that have finite useful lives continue to be amortized over
their useful lives. SFAS No. 142 provides specific
guidance for testing goodwill and other
non-amortized
intangible assets for impairment. SFAS No. 142
requires Quanta’s management to make certain estimates and
assumptions when allocating goodwill to reporting units and
determining the fair value of reporting unit net assets and
liabilities, including, among other things, an assessment of
market conditions, projected cash flows, investment rates, cost
of capital and growth rates, which could significantly impact
the reported value of goodwill and other intangible assets. Fair
value is determined using a combination of the discounted cash
flow, market multiple and market capitalization valuation
approaches. Absent any impairment indicators, Quanta performs
its impairment tests annually during the fourth quarter. In each
of 2002, 2003 and 2006,
25
Quanta recognized goodwill impairment charges pursuant to
SFAS No. 142. Any future impairments would negatively
impact Quanta’s results of operations for the period in
which the impairment is recognized.
Quanta
and InfraSource will incur substantial transaction and
merger-related costs in connection with the
merger.
Quanta and InfraSource expect to incur a number of non-recurring
transaction and merger-related costs associated with completing
the merger, combining the operations of the two companies and
achieving desired synergies. These fees and costs will be
substantial. Additional unanticipated costs may be incurred in
the integration of the businesses of Quanta and InfraSource.
Although we expect that the elimination of certain duplicative
costs, as well as the realization of other efficiencies related
to the integration of the two businesses, will offset the
incremental transaction and merger-related costs over time, this
net benefit may not be achieved in the near term, or at all.
The
fairness opinions obtained by Quanta and InfraSource from their
respective financial advisors will not reflect changes in
circumstances between signing the merger agreement and the
completion of the merger.
Neither Quanta nor InfraSource has obtained updated opinions as
of the date of this joint proxy statement/prospectus from Credit
Suisse or Citigroup, respectively. Changes in the operations and
prospects of Quanta or InfraSource, general market and economic
conditions and other factors which may be beyond the control of
Quanta or InfraSource, and on which the fairness opinions were
based, may alter the value of Quanta or InfraSource or the
prices of their common stock by the time the merger is
completed. Each fairness opinion is based on the information in
existence on the date of the opinion and will not be updated as
of the time the merger will be completed. Because Quanta and
InfraSource currently do not anticipate asking their respective
financial advisors to update their opinions, the written
opinions dated March 17, 2007 do not address the fairness
of the exchange ratio, from a financial point of view, at the
time the special meetings are to be held or at the time the
merger is to be completed. For a description of the opinions
that Quanta and InfraSource received from their respective
financial advisors, please refer to “The Merger —
Opinion of Quanta’s Financial Advisor” and “The
Merger — Opinion of InfraSource’s Financial
Advisor.
Directors
and executive officers of InfraSource have certain interests
that are different from those of InfraSource stockholders
generally.
Executive officers of InfraSource negotiated the terms of the
merger agreement and the InfraSource board of directors
unanimously approved the merger agreement and unanimously
recommends that InfraSource stockholders vote in favor of the
proposal to adopt the merger agreement. Each executive officer
of InfraSource has a management agreement with InfraSource that
provides for severance payments and the acceleration of existing
equity awards if the executive officer’s employment with
InfraSource is terminated following a change in control
transaction. The merger will constitute a change in control
transaction. Following completion of the merger, David R.
Helwig, J. Michal Conaway and Frederick W. Buckman, each of whom
is currently a member of the InfraSource board of directors,
will become members of the Quanta board of directors. In
addition, certain equity awards held by directors of InfraSource
will vest upon completion of the merger. These severance
arrangements, directorship positions and equity awards are
different from or in addition to the interests of InfraSource
stockholders in the company. InfraSource stockholders should
take into account such interests when they consider the
InfraSource board of directors’ recommendation that the
InfraSource stockholders vote for adoption of the merger
agreement. For a discussion of the interests of directors and
executive officers in the merger, see “The
Merger — Interests of the InfraSource Directors and
Executive Officers in the Merger.”
In
certain circumstances, the merger agreement requires payment of
a termination fee of $43 million by Quanta or InfraSource
to the other and, under certain circumstances, InfraSource must
allow Quanta five business days to match any alternative
acquisition proposal prior to any change in the InfraSource
board’s recommendation. These terms could affect the
decisions of a third party proposing an alternative transaction
to the merger, or the likelihood that such a proposal would be
made at all.
Under the merger agreement, Quanta or InfraSource may be
required to pay to the other a termination fee of
$43 million if the merger agreement is terminated under
certain circumstances. Should the merger agreement be terminated
in circumstances under which such a termination fee is payable,
the payment of this fee could have material and adverse
consequences to the financial condition and operations of the
company making such payment.
26
Additionally, under the merger agreement, in the event of a
potential change by the InfraSource board of directors of its
recommendation with respect to the merger, InfraSource must
allow Quanta five business days to make a revised proposal,
prior to which the InfraSource board of directors may not change
its recommendation with respect to the merger agreement. These
terms could affect the structure, pricing and terms proposed by
other parties seeking to acquire or merge with InfraSource, and
could make it more difficult for another party to make a
superior acquisition proposal for InfraSource. For a description
of the termination rights of each party and the termination fee
payable by InfraSource under the merger agreement, see “The
Merger Agreement — Termination of the Merger
Agreement.”
Quanta’s
and InfraSource’s stockholders will be diluted by the
merger.
The merger will dilute the ownership position of the current
stockholders of Quanta. Quanta will issue approximately
50.6 million shares of Quanta common stock (based on the
number of outstanding shares of InfraSource common stock on
July 26, 2007 and assuming the exercise of all outstanding
options to purchase shares of InfraSource common stock that are
vested or will vest as a result of the consummation of the
merger) to InfraSource stockholders in the merger. As a result,
Quanta’s stockholders and InfraSource’s stockholders
are expected to hold approximately 75% and 25%, respectively, of
the combined company’s common stock outstanding on a fully
diluted basis (including shares issuable pursuant to outstanding
options and convertible securities) immediately following the
completion of the merger.
The
date that InfraSource stockholders will receive their merger
consideration is uncertain.
The completion of the merger is subject to the stockholder and
regulatory approvals described in this joint proxy
statement/prospectus and the satisfaction or waiver of certain
other conditions. While we currently expect to complete the
merger during the third quarter of 2007, such date could be
later than expected due to delays in receiving such approvals.
Accordingly, we cannot provide InfraSource stockholders with a
definitive date on which they will receive the merger
consideration.
Quanta
and InfraSource may be unable to obtain the regulatory approvals
required to complete the merger or, in order to do so, Quanta
and InfraSource may be required to comply with material
restrictions or conditions.
The merger is subject to review by the Antitrust Division and
the FTC under the HSR Act. Even though Quanta and InfraSource
received notice of early termination of the statutory waiting
period under the HSR Act on May 7, 2007, and even after
completion of the merger, governmental authorities may still
seek to block or challenge the merger as they deem necessary or
desirable in the public interest. In addition, in some
jurisdictions, a competitor, customer or other third party could
initiate a private action under the antitrust laws challenging
or seeking to enjoin the merger, before or after it is
completed. Quanta or InfraSource may not prevail, or may incur
significant costs, in defending or settling any action under the
antitrust laws.
Certain
provisions of Quanta’s corporate documents could make a
future acquisition of Quanta more difficult.
The existence of some provisions in Quanta’s certificate of
incorporation and by-laws, as currently in effect, as well as
its stockholders’ rights plan described below, could
discourage potential proposals to acquire Quanta, delay or
prevent a change in control of Quanta or limit the price that
investors may be willing to pay in the future for shares of
Quanta common stock. As Quanta stockholders, former InfraSource
stockholders will be subject to the provisions of Quanta’s
corporate governing documents which could make it more difficult
to effect a change of control of Quanta, including:
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ability of Quanta’s board of directors to issue and set the
terms of preferred stock without the approval of Quanta’s
stockholders;
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•
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ability of Quanta’s board of directors to adopt, amend or
repeal Quanta’s bylaws;
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•
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restrictions on the rights of stockholders to nominate directors
and to submit proposals to be considered at stockholders’
meetings; and
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•
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restrictions on the right of stockholders to call a special
meeting of stockholders and to act by written consent.
|
On March 8, 2000, Quanta’s board of directors adopted
an amended and restated rights agreement, which, as amended and
restated as of October 24, 2002, we refer to as the Rights
Agreement. The Rights Agreement provides for the distribution of
uncertificated stock purchase rights to Quanta stockholders at a
rate of one preferred share
27
purchase right for each share of Quanta common stock. The Rights
Agreement may impede a takeover of Quanta not supported by
Quanta’s board of directors, including a takeover that may
be desired by a majority of Quanta’s stockholders or
involving a premium over the prevailing stock price. InfraSource
stockholders, who are not currently subject to a rights plan,
will become subject to the Rights Agreement after the merger. In
addition, the Rights Plan could be triggered by the actions of a
third party, which event would adversely affect Quanta’s
and InfraSource’s ability to close the merger.
Risk
Factors Relating to Quanta Following the Merger
The existing businesses of Quanta and InfraSource are both
subject to significant risks. The risks affecting Quanta’s
current business are described in Item 1.A of its
Form 10-K
for the year ended December 31, 2006, which is incorporated
herein by reference. The risks affecting InfraSource’s
business are described in Item 1.A of its
Form 10-K
for the year ended December 31, 2006, as amended by
Form 10-K/A, and Form 10-Q for the quarter ended
March 31, 2007 which are incorporated herein by reference.
We anticipate that these risks will continue to apply to
Quanta’s and InfraSource’s businesses following the
merger. In addition, the future business and operations of
Quanta may be affected by the following additional risks.
Quanta’s
and InfraSource’s dependence upon fixed price contracts
could adversely affect Quanta’s business after the
merger.
Both Quanta and InfraSource currently generate, and, after the
merger, Quanta expects to continue to generate, a portion of
their revenues under fixed price contracts. A fixed price
contract requires an estimate of the costs of completing a
particular project to bid for fixed price contracts. The actual
cost of labor and materials, however, may vary from the costs
originally estimated. These variations, along with other risks
inherent in performing fixed price contracts, may cause actual
revenue and gross profits for a project to differ from those
originally estimated and could result in reduced profitability
or losses on projects. Depending upon the size of a particular
project, variations from the estimated contract costs could have
a significant impact on Quanta’s operating results after
the merger for any fiscal quarter or year.
Quanta’s
business growth could outpace the capability of its corporate
management infrastructure.
Quanta cannot be certain that its infrastructure will be
adequate to support its operations as it expands. Future growth
after the merger also could impose significant additional
demands on Quanta’s infrastructure, resulting in additional
responsibilities on members of Quanta’s senior management,
including the need to recruit and integrate new senior level
managers and executives. Quanta cannot be certain that it will
be able to recruit and retain such additional managers and
executives. To the extent that Quanta is unable to manage its
growth effectively, or is unable to attract and retain
additional qualified management, Quanta may not be able to
expand its operations or execute its business plan.
Business
issues currently faced by one company may be imputed to the
operations of the other company.
To the extent that either Quanta or InfraSource currently has or
is perceived by customers to have operational challenges, such
as on-time performance, safety issues or workforce issues, those
challenges may raise concerns by existing customers of the other
company following the merger which may limit or impede
Quanta’s future ability to obtain additional work from
those customers.
Failure
to retain key employees could adversely affect Quanta following
the merger.
Quanta’s performance following the merger could be
adversely affected if it is unable to retain certain key
employees of InfraSource. The loss of the services of one or
more of these key employees could adversely affect Quanta’s
future operating results because of their experience and
knowledge of InfraSource’s business. In addition, current
and prospective employees of Quanta and InfraSource may
experience uncertainty about their future roles with the company
until after the merger is completed. This may adversely affect
the ability of Quanta and InfraSource to attract and retain key
personnel.
Skilled
labor shortages and increased labor costs that could negatively
affect Quanta’s ability to compete for new projects may
also negatively affect its profitability and results of
operation.
After the merger, Quanta may be affected to a greater extent by
the skilled labor shortages of certain types of qualified
personnel, including engineers, project managers, field
supervisors and linemen, which both Quanta and InfraSource have
from time-to-time experienced. These shortages have also
negatively impacted, and may continue to negatively impact, the
productivity and profitability of certain projects. The
inability of Quanta to bid on new and
28
attractive projects, or maintain productivity and profitability
on existing projects, due to the limited supply of skilled
workers may negatively affect its profitability and results of
operation.
Quanta
may be unable to compete for or work on certain projects if it
is unable to obtain the necessary surety bonds due to changes in
its operating and financial risk resulting from the
merger.
Surety market conditions currently are difficult as a result of
significant losses incurred by many sureties in recent periods,
both in the construction industry as well as in certain larger
corporate bankruptcies. Under standard terms in the surety
market, sureties issue bonds on a
project-by-project
basis and can decline to issue bonds at any time or require the
posting of additional collateral as a condition to issuing or
renewing any bonds. Quanta’s surety providers may on short
notice decline to issue or renew, or substantially reduce the
amount of, bonds for Quanta’s work and could increase
Quanta’s bonding cost as a result of a change in their
assessment of Quanta’s operating and financial risk after
the merger. If Quanta’s surety providers were to limit or
eliminate Quanta’s access to bonding, Quanta’s
alternatives would include seeking bonding capacity from other
sureties, finding more business that does not require bonds and
posting other forms of collateral for project performance.
Quanta may be unable to secure these alternatives in a timely
manner, on acceptable terms or at all. Accordingly, if Quanta
were to experience an interruption or reduction in the
availability of bonding capacity, Quanta may be unable to
compete for or work on certain projects. In addition, after the
merger, Quanta will be a larger company and may, in some
instances, have more difficulty in obtaining adequate surety
bonds due to the expansion of its business resulting from the
merger.
The
increased employee base of Quanta following the merger may
affect Quanta’s ability to maintain effective safety
programs and an adequate safety record, which may cause Quanta
to be ineligible to bid on certain projects, to be terminated
from existing projects or to have difficulty procuring adequate
insurance.
Quanta’s operations are subject to extensive laws and
regulations relating to the maintenance of safe conditions in
the workplace. While Quanta has invested, and will continue to
invest, substantial resources in its occupational health and
safety programs, the increase in Quanta’s employee base
following the merger may negatively impact the programs’
effectiveness. The increased employee base may also cause the
number of workplace injuries and fatalities to rise, resulting
in substantial costs and liabilities. If Quanta’s safety
record were to substantially deteriorate over time, Quanta may
be ineligible to bid on certain projects and could be terminated
from existing projects. Furthermore, an increase in insurance
claims may result in reductions of coverage or increased
collateral requirements that Quanta may not be able to meet.
An
increase in Quanta’s unionized workforce after the merger
could adversely affect its operations if a work stoppage were to
occur. In addition, Quanta and InfraSource currently contribute
to multiemployer plans that could result in liabilities to
Quanta after the merger.
As of December 31, 2006, approximately 50% of Quanta’s
employees and a significant percentage of InfraSource’s
employees were covered by collective bargaining agreements. The
increase in Quanta’s unionized workforce would magnify the
adverse effects that a potential strike or work stoppage could
have on Quanta. Strikes or work stoppages could adversely impact
Quanta’s relationships with its customers and could cause
Quanta to lose business and revenues.
Both Quanta and InfraSource currently contribute to several
multiemployer pension plans for employees covered by collective
bargaining agreements, which plans Quanta will continue to
contribute to after the merger. These plans are not administered
by Quanta or InfraSource, and contributions are determined in
accordance with provisions of negotiated labor contracts. The
Employee Retirement Income Security Act of 1974, or ERISA,
imposes certain liabilities upon employers who are contributors
to a multiemployer plan in the event of the employer’s
withdrawal from, or upon termination of, such plan. Neither
Quanta nor InfraSource has information on the net assets and
actuarial present value of the multiemployer pension plans’
unfunded vested benefits allocable to it, if any, or the
amounts, if any, for which Quanta may be liable if Quanta or
InfraSource were to withdraw from any of these plans.
As a
result of the merger, the profitability and financial operations
of Quanta may be negatively affected by changes in, or
interpretations of, existing state or federal telecommunications
regulations or new regulations that could adversely affect the
dark fiber business of InfraSource.
Many of InfraSource’s telecommunications customers benefit
from the Universal Service
“E-rate”
program, which was established by Congress in the 1996
Telecommunications Act and is administered by the Universal
29
Service Administrative Company (the USAC) under the oversight of
the FCC. Under the
E-rate
program, schools, libraries and certain health-care facilities
may receive subsidies for certain approved telecommunications
services, internet access and internal connections. From time to
time, bills have been introduced in Congress that would
eliminate or curtail the
E-rate
program. Passage of such actions by the FCC or USAC to further
limit E-rate
subsidies could decrease the demand for telecommunications
infrastructure service by certain customers.
The telecommunications services InfraSource provides through its
dark fiber business are subject to regulation by the FCC, to the
extent that they are interstate telecommunications services and,
by states, when wholly within a particular state. To remain
eligible to provide services under the
E-rate
program, InfraSource must maintain telecommunications
authorizations in every state where it operates. Changes in
federal or state regulations could reduce the profitability of
InfraSource’s telecommunications business. InfraSource
could be subject to fines if the FCC or a state regulatory
agency were to determine that any of its activities or positions
is not in compliance. If InfraSource’s profitability in the
telecommunications business were to decline, or if InfraSource
were to become subject to fines, Quanta’s profitability and
results of operations could also be adversely affected.
Quanta’s
sales after the merger could decrease if parties who are
currently customers of both Quanta and InfraSource elect to
reduce their reliance on the combined company after the
merger.
Quanta and InfraSource currently have some customer overlap. If
any of these customers in common decrease their amount of
business with either company following the merger to reduce
their reliance on a single company, such decrease in business
could adversely impact the sales and profitability of Quanta
following the merger.
Pending
litigation against InfraSource may adversely affect
Quanta’s business, financial condition or results of
operations following the merger.
InfraSource, certain of its officers and directors and various
other parties, including David R. Helwig, who will become a
director of Quanta after completion of the merger, are
defendants in a lawsuit seeking unspecified damages filed in the
State District Court in Harris County, Texas. The plaintiffs
allege that the defendants violated their fiduciary duties and
committed constructive fraud by failing to maximize shareholder
value in connection with certain acquisitions that closed in
1999 and 2000 and the acquisition of InfraSource Incorporated
and committed other acts of misconduct following the filing of
the petition. If this litigation is not completed or settled by
the time the merger closes, the continuing defense of this
InfraSource lawsuit could result in substantial costs and a
diversion of the attention and resources of management.
Furthermore, if the plaintiffs are successful in their lawsuit,
Quanta’s business, financial condition or results of
operations may be adversely affected by the damages InfraSource
may be required to pay. An unsuccessful defense or a settlement
on adverse terms by InfraSource prior to the time the merger
closes may also have an adverse effect on Quanta’s stock
price.
From time to time, InfraSource is a party to various other
lawsuits and claims. These lawsuits and claims may seek, among
other things, compensation for alleged personal injury, breach
of contract, property damage, punitive damages, civil penalties
or other losses, or injunctive or declaratory relief. The
defense or settlement of any lawsuit or claim that remains
unresolved at the time the merger closes may adversely affect
Quanta’s business, financial condition or results of
operation.
Risk
Factors Relating to Quanta’s Common Stock Following the
Merger
The
market value of Quanta’s common stock could decline if
large amounts of its common stock are sold following the
merger.
Following the merger, stockholders of Quanta and former
stockholders InfraSource will own interests in a combined
company operating an expanded business with more assets and a
different mix of liabilities. Current stockholders of Quanta and
InfraSource may not wish to continue to invest in the additional
operations of the combined company, or for other reasons may
wish to dispose of some or all of their interests in the
combined company. If, following the merger, large amounts of
Quanta’s common stock are sold, the price of its common
stock could decline.
Quanta
has never paid cash dividends on its common stock or limited
vote common stock.
Quanta has not previously paid any cash dividends on its common
stock or limited vote common stock and Quanta does not
anticipate paying cash dividends on its common stock or limited
vote common stock following the merger. Quanta intends to
reinvest all available funds for the development and growth of
its business.
30
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus, including information
included or incorporated by reference in this joint proxy
statement/prospectus, may contain certain forward-looking
statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Generally, the words
“expects,” “anticipates,”
“targets,” “goals,” “projects,”
“intends,” “plans,” “believes,”
“seeks,” “estimates,” variations of such
words and similar expressions identify forward-looking
statements and any statements regarding the benefits of the
merger, or Quanta’s or InfraSource’s future financial
condition, results of operations and business are also
forward-looking statements. Without limiting the generality of
the preceding sentence, certain statements contained in the
sections “The Merger — Background of the
Merger,” “The Merger — Recommendation of the
Quanta Board of Directors and Its Reasons for the Merger”
and “The Merger — Recommendation of the
InfraSource Board of Directors and Its Reasons for the
Merger” constitute forward-looking statements.
These forward-looking statements appear in a number of places
and include statements with respect to, among other things:
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projected operating or financial results;
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the ability to integrate the operations of Quanta and
InfraSource;
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the amount and timing of any cost savings synergies or other
efficiencies expected to result from the merger;
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the effects of competition in our markets;
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the benefits of the Energy Policy Act of 2005;
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the current economic condition and expected trends in the
industries we serve;
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the amount, nature and timing of capital expenditures, including
future development costs, and availability of capital resources
to fund capital expenditures;
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the various risks and other factors considered by the respective
boards of Quanta and InfraSource as described under “The
Merger — Recommendation of the Quanta Board of
Directors and Its Reasons for the Merger” and under
“The Merger — Recommendation of the InfraSource
Board of Directors and Its Reasons for the Merger”;
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the impact of political and regulatory developments;
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future and pro forma financial condition or results of
operations and future revenues and expenses; and
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business strategy and other plans and objectives for future
operations.
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These forward-looking statements are subject to a number of
risks, uncertainties and assumptions, most of which are
difficult to predict and many of which are beyond Quanta’s
and InfraSource’s control. These include, but are not
limited to, quarterly variations in operating results, adverse
changes in economic conditions in the markets served by Quanta
or InfraSource or by their customers, the ability to effectively
compete for new projects, estimates and assumptions in
determining financial results, and the other risks described
under the caption “Risk Factors” in Quanta’s
Annual Report on
Form 10-K
for the year ended December 31, 2006 and Quarterly Report
on
Form 10-Q
for the quarter ended March 31, 2007 and in
InfraSource’s Annual Report on
Form 10-K
for the year ended December 31, 2006, as amended by
Form 10-K/A, and Quarterly Report on Form 10-Q for the
quarter ended March 31, 2007.
Factors that could cause actual results to differ materially
from those contemplated by the forward-looking statements
include, among others, the following factors:
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the ability to consummate the merger;
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difficulties and delays in obtaining regulatory approvals for
the merger;
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difficulties and delays in achieving synergies and cost savings;
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potential difficulties in meeting conditions set forth in the
merger agreement; and
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failure to satisfy the conditions required for closing the
merger.
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Should one or more of the risks or uncertainties described above
or elsewhere in Quanta’s Annual Report on
Form 10-K
for the year ended December 31, 2006 and Quarterly Report
on Form 10-Q for the quarter ended March 31, 2007 or
in InfraSource’s Annual Report on
Form 10-K
for the year ended December 31, 2006, as amended by
Form 10-K/A, and Quarterly Report on Form 10-Q for the
quarter ended March 31, 2007 occur, or should underlying
assumptions prove incorrect, actual results and plans could
differ materially from those expressed in any forward-looking
statements.
All forward-looking statements, expressed or implied, included
in this joint proxy statement/prospectus are expressly qualified
in their entirety by this cautionary statement. This cautionary
statement should also be considered in connection with any
subsequent written or oral forward-looking statements that
Quanta, InfraSource or persons acting on their behalf may issue.
Except as otherwise required by applicable law, Quanta and
InfraSource disclaim any duty to update any forward-looking
statements, all of which are expressly qualified by the
statements in this section. See also “Where You Can Find
More Information; Incorporation by Reference.”
32
THE
MERGER
The following is a description of the material aspects of the
merger. While Quanta and InfraSource believe that the following
description covers the material terms of the merger, the
description may not contain all of the information that is
important to Quanta stockholders and InfraSource stockholders.
Quanta and InfraSource encourage Quanta stockholders and
InfraSource stockholders to carefully read this entire joint
proxy statement/prospectus, including the merger agreement
attached to this joint proxy statement/prospectus as
Annex A and incorporated herein by reference, for a more
complete understanding of the merger.
General
Each of the Quanta and InfraSource board of directors has
unanimously approved the merger agreement and the transactions
contemplated by the merger agreement. In the merger, Merger Sub
will merge with and into InfraSource, and InfraSource will
become a wholly owned subsidiary of Quanta. Quanta will issue to
InfraSource stockholders 1.223 shares of Quanta common
stock for each share of InfraSource common stock. See “The
Merger Agreement — Merger Consideration.”
Background
of the Merger
InfraSource was acquired from Exelon Enterprises LLC on
September 24, 2003 by OCM/GFI Power Opportunities Fund,
L.P. and OCM Principal Opportunities Fund II, L.P. (funds
managed by Oaktree Capital Management, LLC and GFI Energy
Ventures LLC, referred to as the “principal
stockholders”) and management of InfraSource. On
May 12, 2004, InfraSource completed its initial public
offering. At that time, the principal stockholders held
approximately 61% of its outstanding common stock.
During the period from September 2003 through December 2006,
InfraSource grew its business organically as well as by
acquisition transactions and divested some non-core business
assets.
In August 2005, the principal stockholders of InfraSource, who
then owned approximately 61% of the InfraSource common stock,
indicated their desire to reduce their investment in InfraSource
or to exit as private equity sponsors of InfraSource. In
connection with the initial public offering by InfraSource, the
principal stockholders were granted rights allowing them to
require InfraSource to file a registration statement for the
secondary sale of the principal stockholders’ common stock.
At the request of the principal stockholders, InfraSource
retained Citigroup Global Markets Inc. (Citigroup) to assist
InfraSource in an evaluation of its strategic alternatives. The
InfraSource board of directors considered both the initiation of
a secondary public offering and the potential to sell the
company to strategic or financial buyers. The InfraSource board
retained Citigroup specifically to pursue a limited sale
process, in which Citigroup would contact potential buyers.
During September through November 2005, Citigroup contacted 12
to 15 U.S. and European buyers, including Quanta. The principal
stockholders had expressed a preference for an all-cash
transaction.
In September and November of 2005, John R. Colson, Chairman of
the Board and Chief Executive Officer of Quanta, and James H.
Haddox, Chief Financial Officer of Quanta, met with
representatives of Credit Suisse Securities (USA) LLC (Credit
Suisse), to discuss, among other things, strategic acquisition
opportunities that would allow Quanta to broaden its customer
base, expand Quanta’s geographic area of operation and grow
its portfolio of services. The list of potential attractive
acquisition opportunities included InfraSource.
In November 2005, Messrs. Colson and Haddox and a representative
of the principal stockholders met to discuss a possible
acquisition of InfraSource, although neither party made any
specific acquisition proposal. The meeting was facilitated by
Credit Suisse.
On December 8, 2005, Quanta’s board of directors, in a
regularly scheduled board meeting, discussed the November
meeting with the representative of the principal stockholders
and whether Quanta should consider a possible acquisition of
InfraSource. Mr. Colson described InfraSource’s
business to the Quanta board and discussed in general terms the
possible synergies between Quanta’s and InfraSource’s
businesses, but no specific synergies or transaction parameters,
such as possible valuations or transaction structures, were
discussed other than the possibility of using Quanta common
stock as a portion of the consideration. Following discussion by
the board
33
of the potential transaction, the board directed Quanta’s
management to explore a possible transaction with InfraSource,
although the board did not authorize Quanta to make a specific
acquisition proposal.
In December 2005, InfraSource entered into confidentiality
agreements with four potentially interested parties, including
one with Quanta dated December 23, 2005. In January 2006,
InfraSource provided potentially interested buyers that had
entered into confidentiality agreements with access to an
electronic data room for due diligence purposes. Due diligence
reviews were conducted by potentially interested buyers,
including Quanta, during January and early February 2006.
On December 26, 2005, Quanta’s board of directors
established, by unanimous written consent, a special committee
(Special Committee) of the board of directors (consisting of
Messrs. Colson, Vincent D. Foster and Bruce Ranck) to
review and evaluate the possible acquisition by Quanta of
InfraSource. There were no perceived conflicts of interest among
Quanta’s directors and InfraSource that required the
formation of the Special Committee.
In late January 2006, Messrs. Colson and Haddox met several
times with representatives of Credit Suisse to discuss
Quanta’s business model, capital structure and refinancing
alternatives, as well as various strategic acquisition
opportunities, including a possible acquisition of InfraSource.
On January 31, 2006, Mr. Colson met with David R.
Helwig, InfraSource’s Chief Executive Officer and
President, in Houston to discuss generally the potential
acquisition of InfraSource by Quanta. Messrs Helwig and Colson
did not discuss any specific terms of a possible transaction.
On February 1, 2006, during a regularly scheduled meeting
of Quanta’s board of directors, Mr. Colson informed
the Quanta board of directors that InfraSource had requested a
response by February 6 with respect to Quanta’s interest in
the potential acquisition of InfraSource. Mr. Colson
informed the Quanta board of directors that he anticipated
responding that Quanta was interested in a potential transaction
but such response would be non-binding and would not include
pricing parameters. The board discussed the potential
transaction, and determined to delegate to the Special Committee
authority to determine whether Quanta should continue to pursue
a transaction with InfraSource.
On February 3, 2006, Quanta’s Special Committee held a
telephonic meeting to discuss a response to the inquiry
regarding the potential acquisition of InfraSource. Also present
at this meeting were Mr. Haddox and representatives of
Credit Suisse. The Special Committee, Mr. Haddox and
representatives of Credit Suisse discussed the possible
acquisition of InfraSource, the potential synergies of a
transaction and the two companies’ current stock prices. In
light of, among other things, the recent increase in
InfraSource’s stock price and the principal
stockholders’ preference for an all-cash transaction, the
Special Committee determined not to pursue the potential
acquisition of InfraSource at that time.
On February 6, 2006, Quanta informed InfraSource and its
financial advisors in writing that Quanta had determined not to
pursue the acquisition of InfraSource at that time. By
February 6, 2006, all other preliminary indications of
interest in the acquisition of InfraSource were withdrawn by
potential buyers for a variety of reasons, including: (i) the
inability to finance the transaction; (ii) the concern over the
InfraSource valuation; and (iii) the determination that they did
not want to enter this line of business. As a result, no terms
were proposed by any potential buyer for the acquisition of
InfraSource.
The InfraSource board of directors and management continued to
assess the strategic alternatives available to the company but
did not engage in any significant discussions with alternative
acquirors after February 2006. In February 2006, the principal
stockholders exercised their rights under their existing
registration rights agreement to have InfraSource register
shares for sale by the principal stockholders in an underwritten
secondary public offering. The secondary offering, for which
Credit Suisse acted as a joint book-running manager, was
commenced in March 2006 and completed in April 2006, and
resulted in a reduction of the principal stockholders’
ownership to approximately 32% of the outstanding common stock.
On April 4, 2006, Messrs. Colson and Helwig discussed
again by telephone the possible acquisition of InfraSource by
Quanta. Their discussion, however, focused on the fact that
while such a transaction could be
34
attractive, the parties could not reach mutual agreement in the
current stock price environment. No further discussions or
meetings regarding a possible transaction between the two
companies occurred until the fall of 2006.
After the initial secondary offering, the principal stockholders
determined that they wanted to sell their remaining ownership
interests in InfraSource. An additional public offering of such
shares, for which Credit Suisse acted as a joint book-running
manager, closed on September 1, 2006. Credit Suisse
received customary fees in connection with its role as a joint
book-running manager for the two secondary offerings of
InfraSource common stock that were completed in April and
September 2006. The principal stockholders reduced their
ownership of InfraSource common stock to approximately 2% as a
result of the second offering and sold all of their remaining
shares of InfraSource common stock by the end of 2006.
In mid-September 2006, on behalf of Quanta, representatives of
Credit Suisse met with InfraSource management and discussed a
possible transaction with Quanta. On September 20, 2006,
Mr. Helwig and Terence R. Montgomery, InfraSource’s
Senior Vice President and Chief Financial Officer, had a dinner
meeting with Messrs. Colson and Haddox at an industry
conference in San Francisco, California.
Messrs. Helwig and Montgomery met with representatives of
Credit Suisse on September 21, 2006 also in
San Francisco. The purpose of both meetings was to discuss
potential strategic alternatives for InfraSource, which might
facilitate a transaction between InfraSource and Quanta.
In late September 2006, InfraSource contacted Citigroup about
re-engaging in merger discussions with Quanta. On
October 2, 2006, Citigroup presented its preliminary
valuation and combination analysis on a proposed merger to
InfraSource’s management.
On October 5, 2006, Deborah C. Lofton, Senior Vice
President and General Counsel of InfraSource, and Tana L. Pool,
Vice President and General Counsel of Quanta, agreed that any
information exchanged in the renewed discussions between
InfraSource and Quanta would be subject to the confidentiality
agreement between the parties dated December 23, 2005 and
that there would be no exchange of any customer specific
information.
On October 5, 2006, Messrs. Haddox and Montgomery met
in Houston, Texas with representatives of Credit Suisse and
Citigroup to discuss general business matters with respect to
both companies.
On October 10, 2006, Mr. Haddox wrote to
Mr. Helwig expressing Quanta’s interest in pursuing
further discussions with InfraSource. InfraSource then contacted
representatives of Citigroup.
On October 12, 2006, the Quanta board of directors met in
special session and discussed the status of the potential
acquisition of InfraSource. Messrs. Haddox and Colson
reported to the board that preliminary meetings with InfraSource
management had been held on October 5, and that following
the meetings, Quanta had indicated to InfraSource its interest
in continuing discussions regarding a possible transaction. In
addition, the board was updated on the ongoing due diligence
process, and provided with preliminary financial information
prepared by Credit Suisse. The board also established a special
committee (Special Committee) consisting of Messrs. Colson,
Foster and Ranck to review and evaluate the possible acquisition
of InfraSource and to make a recommendation to the board.
On October 26, 2006, the board and management of
InfraSource discussed the range of strategic options available
to InfraSource, including continued growth of the company
organically and through smaller acquisitions, the acquisition of
other industry participants of significant scale and the
acquisition of InfraSource by an existing industry participant,
a new entrant or a financial buyer. The discussion included an
assessment of the resources and time required to pursue each
option, the potential of each option to increase shareholder
value and the risks of each option. Also, at the meeting,
Mr. Helwig advised the board that Quanta had expressed
interest in pursuing discussions with InfraSource for a possible
transaction.
On November 1, 2006, the InfraSource’s board of
directors met telephonically and Mr. Helwig reiterated
Quanta’s interest in pursuing a potential transaction. The
board also discussed the potential transaction frameworks. The
board of directors discussed an updated accretion/dilution
analysis, prepared by Citigroup, and regulatory clearances
related to the potential transaction.
35
On November 14, 2006, the Quanta Special Committee met with
Quanta management to discuss the possible acquisition of
InfraSource and a draft of a non-binding letter of interest
proposed to be sent by Quanta to InfraSource.
On November 15, 2006, Mr. Colson sent a non-binding
letter of interest to Mr. Helwig that included a proposal
setting forth certain terms upon which Quanta would acquire
InfraSource in a transaction, subject to negotiation of a
definitive agreement, due diligence and board approval. The
terms proposed by Quanta management were the exchange of each
share of InfraSource common stock for consideration of $23 to
$25 per share, payable in shares of Quanta common stock and
possibly partially in cash, subject to consideration of an
appropriate collar to protect both parties.
On November 16, 2006, senior management of InfraSource met
with Citigroup representatives to discuss strategic
alternatives, including the Quanta proposal. Management
considered a number of strategic alternatives, including
continuing with organic business growth and smaller
acquisitions, making significant acquisitions to grow the
business more rapidly and pursuing a sale of the company to
Quanta. Citigroup provided financial analyses on several
acquisition opportunities, and management considered the pros
and the cons of each of these potential targets. Other
considerations included the potential benefits and risks for
each of these strategies and the availability of both financial
and management resources needed to achieve them.
On November 17, 2006, the InfraSource board of directors
met via telephone with management and representatives of
Citigroup and Ballard Spahr Andrews & Ingersoll, LLP,
InfraSource’s outside legal counsel (Ballard Spahr), to
discuss Quanta’s preliminary non-binding letter of interest
and strategic alternatives available to InfraSource. Given the
risks and uncertainties associated with the other strategic
alternatives, the InfraSource board believed the combination
with Quanta provided the best opportunity for the InfraSource
business, its stockholders and its employees. The board
concluded that an all-stock transaction would allow stockholders
to both participate in the anticipated growth in the industry
and share in the benefit from synergies with Quanta. The board
also concluded that the Quanta transaction would have
potentially less execution risk than the other alternatives and
stockholders could benefit from the potential upside in a
shorter time frame.
On November 17, 2006, representatives of Credit Suisse and
Citigroup discussed Quanta’s preliminary non-binding letter
of interest and next steps for a possible transaction.
Between November 17 and 21, 2006, there were also a number
of telephone conversations and exchanges of correspondence
between Mr. Colson and Mr. Helwig regarding
Quanta’s non-binding letter of interest. Discussions were
focused on the valuation of the transaction, the form of
consideration and representation on the Quanta board of
directors.
As a result of these conversations, on November 21, 2006,
Mr. Colson sent a revised non-binding letter of interest to
Mr. Helwig, reflecting a proposal by Quanta for an
all-stock transaction, whereby InfraSource common stock would be
exchanged for that number of shares of Quanta common stock that
would result in consideration of $23 to $25 per InfraSource
common share, subject to an appropriate collar mechanism to
protect both parties and subject to due diligence, definitive
documentation and board approval. The letter also included a
provision regarding representation on the Quanta board of
directors.
On November 21 and 22, 2006, several discussions were held
by and among representatives of each of Quanta, Credit Suisse,
InfraSource and Citigroup regarding Quanta’s revised
non-binding letter of interest. Messrs. Colson and Helwig
also discussed the terms of Quanta’s November 21, 2006
non-binding letter of interest. Discussions were focused on the
valuation of the transaction, including the proposal of a
preliminary fixed exchange ratio, the timing of due diligence,
execution of definitive documentation and announcement of the
transaction and an exclusive 60-day negotiation period.
On November 22, 2006, Mr. Colson sent Mr. Helwig
a further revised non-binding letter of interest that included
Quanta’s proposal to acquire InfraSource in an all-stock
transaction whereby InfraSource stockholders would receive
between 1.3 and 1.4 shares of Quanta common stock, subject
to further consideration of an appropriate collar or other
mechanisms to protect both parties and subject to due diligence,
definitive documentation and board approval. The preliminary
range for the exchange ratio had an implied value of between
$23.50 and $25.50 per share of InfraSource common stock and
represented an 11 to 19% premium based on the closing stock
36
prices as of November 21, 2006. Quanta also proposed that
the parties work toward the execution of definitive
documentation and announcement of the transaction by
January 15, 2007, and that InfraSource agree to negotiate
exclusively with Quanta through January 15, 2007. Quanta
continued to propose representation on the Quanta board of
directors following the merger.
On November 22, 2006 and resuming again on November 27
and 28, 2006, several discussions were held by and among
representatives of each of Quanta, Credit Suisse and Citigroup
regarding Quanta’s revised non-binding letter of interest.
Discussions were focused on the valuation of the transaction and
the preliminary fixed exchange ratio.
On November 28, 2006, Mr. Colson sent another
non-binding letter of interest to Mr. Helwig, which
consisted of a proposal for an all-stock merger transaction at a
preliminary fixed exchange ratio of 1.4 shares of Quanta common
stock for each share of InfraSource common stock (subject to
re-evaluation by the parties during negotiations and diligence
in the event that the preliminary ratio resulted in a premium of
less than 17% or more than 27%), post-merger board
representation for InfraSource directors on the Quanta board and
parameters for the transaction process, including mutual due
diligence, negotiation of a mutually acceptable definitive
agreement and board approval. After the delivery of this
non-binding letter of intent, the parties did not further
negotiate the exchange ratio until March 2007 when the parties
had discussed business, legal and accounting issues.
On December 1, 2006, during a regularly scheduled board
meeting, the Quanta board of directors was updated on the status
of discussions between Quanta and InfraSource regarding the
proposed transaction, including the terms of the November 28,
2006 non-binding letter of interest sent to Mr. Helwig. The
board of directors also discussed the financial impact of the
proposed acquisition on Quanta, as well as the regulatory
clearances that would be required to close the transaction. Also
present at this meeting were Mr. Haddox, Mr. Kenneth
W. Trawick, President-Telecommunications and Cable Television
Division, Mr. Vincent A. Mercaldi, Associate General
Counsel and Corporate Secretary, and Ms. Pool.
On December 5, 2006, Quanta and InfraSource signed a mutual
non-disclosure agreement providing that the companies and their
representatives would maintain the confidentiality of evaluation
material provided and discussed in connection with a possible
transaction. On December 6, 2006, Messrs. Helwig and
Montgomery, Mrs. Lofton, Messrs. Colson and Haddox,
Ms. Pool and representatives of each of Akin Gump Strauss
Hauer & Feld, LLP, Quanta’s outside legal counsel
(Akin Gump), Ballard Spahr, Citigroup and Credit Suisse met in
Chicago for an organizational meeting at which the due diligence
process was discussed and a preliminary timeline was developed.
From December 5 until December 29, 2006, the parties
exchanged due diligence lists and discussed matters with respect
to due diligence and potential transaction timing.
On December 12, 2006, the InfraSource board of directors
met in person in Phoenix, Arizona at a regularly scheduled
meeting with members of InfraSource’s management to
discuss, among other things, the due diligence process, key
diligence items and valuation and premium analysis based on
recent InfraSource and Quanta stock performance. Also present at
the meeting were Mr. Montgomery, Mrs. Lofton and
representatives of Citigroup (via telephone) and Ballard Spahr
(via telephone). Representatives of Citigroup and Ballard Spahr
discussed the non-binding letter of interest from Quanta, the
financial terms of the proposed transaction and regulatory
clearances related to the transaction.
On December 14, 2006, InfraSource opened to representatives
of Quanta and its advisors an electronic data room. Due
diligence by Quanta, including in-person sessions, continued
through December 2006 at InfraSource’s offices in Media,
Pennsylvania and Ballard Spahr’s offices in Philadelphia,
Pennsylvania. The parties executed a separate non-disclosure
agreement with respect to the dark fiber business of InfraSource
on December 29, 2006.
On December 29, 2006, the InfraSource board met
telephonically to discuss the status of discussions between
Quanta and InfraSource. The board reviewed materials with
representatives of Ballard Spahr regarding the board’s
processes for considering an acquisition proposal and the duties
of the directors related thereto.
On January 2, 2007, representatives of senior management of
InfraSource, including Mr. Helwig, met with representatives
of Quanta, including Mr. Colson, to provide management
presentations regarding the InfraSource telecom business,
including the dark fiber leasing business. Representatives of
Credit Suisse were also in attendance at such management
presentations. Quanta opened an electronic data room to
InfraSource representatives and advisors on that date.
37
From January 3 through 10, 2007, representatives of
InfraSource and its advisors performed in-person due diligence
reviews at Quanta’s and Akin Gump’s offices in
Houston, Texas.
On January 8, 2007, the InfraSource board of directors met
telephonically with InfraSource’s management and
representatives of Citigroup and Ballard Spahr to discuss the
transaction status.
On January 9 and 10, 2007, senior management of InfraSource
made management presentations to representatives of Quanta
management with respect to the underground services and
electrical infrastructure businesses of InfraSource.
Representatives of Credit Suisse were also in attendance at such
management presentations.
From January 3 through 10, 2007, Quanta discussed with its
advisors and the Special Committee the contents of a draft
merger agreement for the potential acquisition. On
January 10, 2007, Quanta delivered a first draft of a
merger agreement to InfraSource.
On January 15, 2007, the InfraSource board of directors met
telephonically with InfraSource’s management and
representatives of Citigroup and Ballard Spahr to discuss the
proposed transaction with Quanta. Also present at this meeting
were Mr. Montgomery and Mrs. Lofton. Mr. Helwig
summarized recent relative stock performance of the companies.
Mr. Helwig also discussed the potential benefits of the
transaction to InfraSource and its stockholders, other strategic
alternatives available to InfraSource and the potential risks of
a proposed transaction with Quanta and the other strategic
alternatives. Mr. Montgomery and Mrs. Lofton provided
the board with an update on the status of the financial and
legal due diligence. The board of directors also discussed the
valuation and premium analysis prepared by Citigroup, regulatory
clearances and merger agreement terms. Also on January 15,
2007, InfraSource representatives provided initial comments to
the merger agreement draft to Quanta. In addition to technical
comments and comments regarding representations and warranties
and human resource matters, InfraSource requested that the
proposed limitations of its activities prior to closing be
broadened and that the termination provisions be narrowed and be
mutual, including the payment of break-up fees and expenses.
On January 15 and 16, 2007, representatives of InfraSource
and Citigroup and the InfraSource financial due diligence
advisors attended management presentations by Quanta’s
senior management in Houston. Representatives of Credit Suisse
were also in attendance. Such presentations were followed by
discussions of budgets and financial information and continued
due diligence review. At the January 15, 2006 meeting, Mr.
Colson advised Mr. Helwig that, due to the relative movement of
the companies’s stock prices, the premium exceeded the
upper limit of the range specified in the November 28, 2006
non-binding letter of intent and that Quanta expected to
negotiate the exchange ratio as part of the final negotiation of
the definitive agreement.
Also on January 16, 2007, the Quanta Special Committee met
to discuss the status of the proposed acquisition of
InfraSource. Also present at this meeting were
Messrs. Haddox and Mercaldi, Ms. Pool and
representatives of Credit Suisse, Akin Gump, and
Abrams & Laster LLP, Quanta’s Delaware legal
counsel (Abrams & Laster). Mr. Colson provided
the Special Committee with an update on the status of the due
diligence review and management’s recommendation to
continue discussions with InfraSource. Ms. Pool provided
the Special Committee with an update on the status of the draft
merger agreement and legal due diligence. Following a question
and answer period involving all aspects of the potential
transaction, the Special Committee authorized management to
continue to pursue a potential transaction, although such
transaction, if any, would be subject to board review. Quanta
and Credit Suisse executed an engagement letter formally
engaging Credit Suisse as the exclusive financial advisor to
Quanta with respect to the proposed acquisition of InfraSource.
On January 18, 2007, Mr. Helwig spoke with
Mr. Colson to discuss an updated timeline for proceeding
with a possible transaction.
Also on January 18, 2007, the InfraSource board of
directors met telephonically with InfraSource’s management
and representatives of Citigroup and Ballard Spahr. The board
received a summary of the meetings with Quanta management on
January 15 and 16, 2007, due diligence progress, updated
timeline and the open items, including the potential financial
terms of the transaction and the proposed terms in the draft of
the merger agreement, including conditions to closing,
termination rights and fees and human resource issues.
Representatives of Citigroup discussed recent relative changes
in the stock prices of the companies.
On January 19, 2007, Mr. Helwig again spoke with
Mr. Colson to discuss specific transaction terms and open
items under the draft merger agreement, including Quanta and
InfraSource representations and warranties,
38
restrictions on interim operations between the time of execution
and closing of the merger, human resource issues, continuation
of director and officer insurance coverage for
InfraSource’s directors and officers following the closing
of the proposed merger, provisions relating to fiduciary duties
and related rights and termination rights and related fees and
expenses payable upon termination of the merger by either Quanta
or InfraSource.
On January 22, 2007, Quanta provided an updated merger
agreement draft to InfraSource. InfraSource also entered into a
revised engagement letter with Citigroup.
On January 23, 2007, representatives of InfraSource, Quanta
and their respective legal representatives met telephonically to
negotiate the draft merger agreement. The issues discussed
included InfraSource’s request for tax, ERISA and labor
representations and warranties from Quanta, InfraSource’s
request to increase dollar thresholds on certain representations
and warranties, human resource issues and particularly,
continuation of the InfraSource benefits plans, provisions
relating to fiduciary duties and related rights,
InfraSource’s request for termination rights with respect
to antitrust issues and any Quanta change in control
transaction, and InfraSource and Quanta proposals relating to
termination fees and expenses.
On January 24, 2007, Quanta and InfraSource management and
their respective financial advisors participated in a conference
call discussion of due diligence findings and updated financial
information relating to the telecom and dark fiber leasing
business.
On January 25, 2007, the InfraSource board of directors met
telephonically with representatives of management and
InfraSource’s advisors to review recent negotiations and
strategies for transaction completion. On January 26, 2007,
a revised draft of the merger agreement was provided by Quanta
to InfraSource.
On January 29, 2007, the InfraSource board of directors met
telephonically with InfraSource’s management and
representatives of Citigroup and Ballard Spahr to discuss the
open items under the merger agreement (including the financial
terms, representations and warranties, covenants, and
termination rights), due diligence findings and a preliminary
communications plan being created for communication to
employees, customers and vendors if a definitive transaction
were to be announced.
On January 29, 2007, Quanta’s board of directors met
during a regularly scheduled session. Also present at this
meeting were Messrs. Colson, Haddox, Mercaldi and
Ms. Pool and representatives of each of Akin Gump,
Abrams & Laster, Credit Suisse and
PricewaterhouseCoopers, Quanta’s independent registered
public accounting firm. Abrams & Laster reviewed the
fiduciary duties of the Quanta board of directors and Akin Gump
reviewed the terms and conditions of the merger agreement under
negotiation. Credit Suisse also presented to the board a
preliminary financial analysis of the proposed transaction.
Mr. Colson then discussed the various aspects of the
proposed transaction, including its potential benefits and
synergies, as well as the possible addition of InfraSource
directors to the Quanta board. The board then discussed the
process and related merger agreement provisions and reviewed
potential assumed liabilities. The board of directors discussed
with Quanta’s outside advisers and management the legal,
strategic and financial issues related to the proposed
acquisition of InfraSource and were advised that no proposal had
been made on the financial terms, including the exchange ratio.
On January 30, 2007, representatives of Quanta and
InfraSource and their respective legal advisors participated in
a conference call to negotiate various provisions of the merger
agreement, including termination rights and fees, rights of each
party’s board of directors to change its recommendation to
the stockholders regarding the proposed merger, including in
connection with its fiduciary duties, continuation of director
and officer insurance coverage for InfraSource’s directors
and officers following the closing of the proposed merger,
restrictions on interim operations between the time of execution
and closing of the merger and human resource issues. Over the
next two days the parties, Akin Gump, Abrams & Laster
and Ballard Spahr participated in multiple conference calls to
negotiate various aspects of the merger agreement, including
open issues on certain representations and warranties of
InfraSource and Quanta, InfraSource’s request to carve out
certain exceptions from the restrictions on interim operations
between the time of execution and closing of the merger
(including the sale of real property, the ability to provide
merit bonuses to officers and the ability to enter into
contracts in the ordinary course of business), for Quanta board
representation for current InfraSource directors, and for the
continuation of director and officer insurance coverage for
InfraSource’s directors and officers following the closing
of the proposed merger, Quanta’s request for additional
termination rights relating to a material adverse effect on
InfraSource, and both
39
Quanta’s and InfraSource’s requests for additional
termination rights and related expenses payable upon the
termination of the merger, as well as discussions regarding
disclosure schedules of both parties.
On February 1, 2007, Quanta’s Special Committee met
with Messrs. Colson, Haddox and Mercaldi, Mr. John R.
Wilson, President-Electric Power and Gas Division for Quanta,
Mr. Derrick Jensen, Vice President, Controller and Chief
Accounting Officer for Quanta, and Ms. Pool, and
representatives of each of Credit Suisse, Akin Gump and
Abrams & Laster, to discuss various financial and
legal issues related to the proposed transaction.
Mr. Colson updated the Special Committee on various
financial due diligence issues, and Ms. Pool updated the
Committee on the status of the negotiations and open issues in
the merger agreement.
On February 1, 2007, the InfraSource board of directors met
telephonically with InfraSource’s management and
representatives of Citigroup and Ballard Spahr. During the
meeting, presentations were made to the board regarding the
status of negotiations of the merger agreement, including
unresolved issues, premium analysis, potential exchange ratios,
the results of the due diligence reviews and human resource
matters. The board also discussed and evaluated
InfraSource’s strategic alternatives to the proposed
transaction, including continued growth organically and through
smaller acquisitions or a significant acquisition.
On February 2, 2007, Mr. Helwig discussed with
Messrs. Colson, Haddox, Wilson and Trawick the recent
increased activity in trading of InfraSource shares and the
increase in InfraSource’s stock price. Also, the
InfraSource board held a telephonic board meeting to discuss
recent events.
Also on February 2, 2007, the Quanta Special Committee met
with Messrs. Haddox, Colson, Jensen, Mercaldi,
Ms. Pool, and representatives of each of Credit Suisse,
Akin Gump and Abrams & Laster to discuss
InfraSource’s recent stock price increase, as well as
various due diligence and financial issues related to the
proposed transaction and the status of negotiations regarding
the merger agreement.
On February 3, 2007, a revised draft of the merger
agreement was circulated by Quanta.
On February 3, 2007, Quanta’s Special Committee met to
discuss various financial issues related to the proposed
acquisition. Also present were Messrs. Haddox, Wilson,
Trawick, Mercaldi and Ms. Pool and representatives of Akin
Gump. Mr. Colson and other members of Quanta management
updated the Special Committee on the status of certain due
diligence issues. Management recommended, and the Special
Committee agreed, that progress and resolution of open due
diligence issues must occur before any negotiations continued on
the terms of the proposed transaction.
On February 8, 2007, Messrs. Helwig, Conaway and Watts
and Messrs. Colson, Haddox and Wilson Yancey, Quanta’s
Director of Corporate Safety, discussed operational due
diligence items by telephone conference. Additional negotiations
by the legal advisors for the parties proceeded with respect to
the merger agreement, resulting in the circulation of revised
drafts on February 7, 2007 and February 16, 2007.
The InfraSource board of directors held telephonic meetings on
February 8, 2007, February 14, 2007 and
February 19, 2007 to receive updates on the status of the
proposed transaction. At the February 8, 2007 meeting, the
board reviewed a preliminary transaction analysis, including
historical stock and financial performance, the premiums paid
for stock transactions in 2006 and the premium valuation
analysis prepared by Citigroup, and discussed the interactions
of the respective boards regarding due diligence matters. Also
at the February 8, 2007 meeting, Mr. Conaway updated
the board on the telephone conversation regarding operational
due diligence that occurred on February 8, 2007. The board
of directors also discussed open issues in the merger agreement
and the revised transaction timeline.
On February 9, 2007, Messrs. Colson, Haddox and Jensen
met with Mr. Montgomery by telephone conference to discuss
due diligence issues.
On February 12, 2007, Quanta’s Special Committee met
to discuss the status of the transaction and various outstanding
issues. Also present were Messrs. Haddox, Wilson, Trawick,
Jensen and Mercaldi and Ms. Pool. After discussion of the
open issues in the merger agreement and the due diligence
issues, the Special Committee instructed management to
discontinue the negotiations regarding the terms of the proposed
transaction. After the meeting, Mr. Colson so advised
Mr. Helwig.
40
At the February 19, 2007 InfraSource telephonic board
meeting, Mr. Helwig advised the board that the parties had
determined to discontinue further negotiations regarding terms
of the proposed transaction.
On February 26, 2007, the InfraSource board met
telephonically to discuss the revised draft merger agreement,
including unresolved issues in the draft merger agreement, and a
revised premium analysis was distributed by Citigroup and
reviewed by the board. Representatives of Citigroup and Ballard
Spahr participated by telephone.
On March 1, 2007, the InfraSource board met telephonically
to review a revised premium analysis, which was distributed by
Citigroup. Representatives of Citigroup and Ballard Spahr
participated by telephone.
On March 6 and 7, 2007, the InfraSource board held its
regularly scheduled in-person board and committee meetings in
Houston, Texas. The status of potential merger-related
activities was reviewed and discussed.
On March 8, 2007, management representatives and financial
advisors of the parties held a conference call to discuss
preliminary first quarter 2007 results and 2007 outlook,
including updated financial information for the InfraSource
telecom and dark fiber leasing business. On March 9, 2007,
Messrs. Helwig and Colson spoke and provided updates to
each other; however, no agreements to negotiate a transaction
were reached and no offer was made during any such discussions.
On March 12, 2007, the InfraSource board of directors met
telephonically with InfraSource’s management and
representatives of Citigroup and Ballard Spahr to discuss a
potential transaction, including possible financial terms and
operational and personnel matters. Representatives from
Citigroup reviewed a premium analysis and potential exchange
ratios with the board of directors.
On March 13, 2007, Quanta’s Special Committee met to
discuss the status of due diligence, open issues related to the
merger agreement and potential financial terms for purposes of
reconsidering a proposed transaction. Also present were
Messrs. Haddox, Wilson, Trawick, Mercaldi, Ms. Pool
and representatives of each of Akin Gump, Abrams &
Laster and Credit Suisse. Based on such discussions, the Special
Committee authorized management to pursue a potential
transaction.
On March 13, 2007, there were a number of telephone
conversations between representatives of each of Citigroup and
Credit Suisse, and between Messrs. Helwig and Colson
regarding the potential exchange ratio and other transaction
terms. Given the movement in the stock prices since the
November 28, 2006 non-binding letter of interest, the
preliminary fixed exchange ratio of 1.4 would have resulted in a
premium in excess of the 27% upper limit set forth in the
November 28 letter. Quanta initially proposed a 1.17
exchange ratio, which represented a 15% premium to the five-day
volume weighted average closing price for InfraSource common
stock (or a 16% premium based on the closing stock prices of
both parties on March 13, 2007), which premium was below
the lower end of the 17% lower limit set forth in the
November 28 letter. After further negotiations, Quanta
increased the proposed exchange ratio to 1.19, which
represented a 17% premium to the five-day volume weighted
average closing price (or an 18% premium based on the closing
stock prices of both parties on March 13, 2007).
Terms of the transaction, including the exchange ratio of 1.19
proposed by Quanta, were communicated to the InfraSource
directors on March 13, 2006 by Mr. Helwig. On
March 14, 2007, the InfraSource board met to discuss the
terms proposed by Quanta. The discussion included a preliminary
assessment from Citigroup on the fairness of the Quanta proposal
and an update by Ballard Spahr on regulatory approval issues.
The board agreed on negotiating parameters and directed
Mr. Helwig to continue negotiations with Quanta, subject to
those parameters.
On March 14 through 16, 2007, the legal advisors to the
parties participated in a number of conference calls to discuss
the various provisions of the merger agreement.
Messrs. Helwig and Colson talked by telephone again during
the evening of March 15, 2007, and reached tentative
agreement on a fixed exchange ratio of 1.223 shares of
Quanta stock for each InfraSource share, subject to resolution
of the remaining open issues on due diligence and the merger
agreement and approval by the respective boards of directors.
The 1.223 exchange ratio represented a 17% premium to the
five-day
volume weighted average closing price for InfraSource common
stock and an 18% premium based on closing stock prices of both
parties as of March 15, 2007. Additional negotiation
sessions were held on March 16, 2007 to resolve the
outstanding issues of the merger agreement, including open items
related to representations and warranties, human resource
issues, continuation of director and officer insurance coverage
for InfraSource’s directors and officers following the
closing of the proposed merger, open issues concerning
restrictions on activities between signing and closing,
fiduciary duty provisions relating to board responsibilities and
related rights, and termination fees and expenses including
InfraSource’s request for a termination right upon a
41
threatened action under the HSR Act and resolution on mutual
termination fees payable upon termination of the merger for
certain events.
On March 16, 2007, Quanta’s Special Committee met to
discuss the status of the proposed transaction. Also present
were Messrs. Haddox, Wilson, Trawick, Mercaldi and
Ms. Pool and representatives of each of Akin Gump,
Abrams & Laster and Credit Suisse. At the meeting, the
discussion included the proposed exchange ratio of
1.223 shares of Quanta stock for each share of InfraSource
stock, regulatory clearances related to the transaction and the
status of resolution of open items under the merger agreement.
Representatives of Credit Suisse discussed with the Special
Committee its financial analyses with respect to the proposed
transaction. At the conclusion of the meeting, the Special
Committee voted to recommend to Quanta’s board of directors
that the merger agreement and proposed acquisition of
InfraSource be approved based on the terms discussed.
On March 17, 2007, beginning at 10:00 a.m. EDT,
the InfraSource board of directors held a telephonic board
meeting attended by all members of the board, as well as members
of management and representatives of Citigroup and Ballard
Spahr. Management and the advisors provided the board with
updated due diligence summaries and a description of the final
terms of the merger agreement. Citigroup provided the board with
a summary of its fairness opinion procedures, reviewed the
analysis performed and delivered a verbal fairness opinion, for
which materials were previously provided to the board. See
“Opinion of InfraSource Financial Advisor.” The board
of directors discussed regulatory clearances related to the
transaction and reviewed the material terms of the merger
agreement. After receiving such reports and asking questions of
management and the advisors, the InfraSource board unanimously
approved the merger agreement, subject to receipt of
confirmation that the Quanta board of directors had also
approved the merger agreement.
Also on March 17, 2007, beginning at
9:00 a.m. CDT, Quanta’s board of directors met to
consider the proposed acquisition of InfraSource. Also present
at this meeting were Messrs. Haddox, Trawick and Mercaldi,
Mr. Joseph A. Avila, Executive Vice President —
Strategic Operations and Process, Ms. Pool and
representatives of each of Akin Gump, Abrams & Laster
and Credit Suisse. Representatives of Credit Suisse provided an
overview of the financial terms and structure of the
transaction, reviewed its financial analyses with respect to the
proposed transaction and delivered a verbal fairness opinion to
the effect that, as of such date and based on and subject to the
factors, limitations and assumptions described by Credit Suisse,
the exchange ratio was fair, from a financial point of view, to
Quanta. See “Opinion of Quanta Financial Advisor.”
Mr. Colson reviewed the final pricing negotiations and
discussed integration matters (including Quanta’s
obligation to add three InfraSource directors to Quanta’s
board after the merger). Ms. Pool reviewed the material
terms of the merger agreement with the board, a copy and summary
of which had been previously provided to the board, and provided
the board with the expected timing of the transaction, if
approved. The Special Committee made its report to the board of
directors in which it recommended approval of the proposed
transaction and discussed various other financial and regulatory
issues. After due consideration and further discussion, the
board of directors unanimously approved the merger agreement.
The merger agreement was executed by the parties on
March 18, 2007. Senior management of Quanta and InfraSource
issued a joint press release announcing the transaction and held
a joint conference call on March 19, 2007. Various
communications and the merger agreement were filed with the SEC
on March 19 and 20, 2007.
Recommendation
of the Quanta Board of Directors and Its Reasons for the
Merger
By unanimous vote at a meeting held on March 17, 2007,
Quanta’s board of directors determined that the merger
agreement and the transactions contemplated by it are advisable
and in the best interests of Quanta and its stockholders and
approved and adopted the merger agreement and approved the
issuance of shares of Quanta common stock in connection with the
merger. The Quanta board of directors unanimously recommends
that Quanta stockholders vote FOR approval of the issuance
of Quanta common stock in connection with the merger.
In deciding to approve the merger agreement and to recommend
that Quanta’s stockholders vote to approve the issuance of
Quanta common stock to InfraSource stockholders pursuant to the
merger agreement, the Quanta board of directors consulted with
Quanta’s management and legal and financial advisors and
considered several factors.
42
Many of the factors considered favored the conclusion of
Quanta’s board of directors that the merger is advisable
and in the best interests of Quanta and its stockholders,
including the following:
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that the merger will enhance Quanta’s resource base and
service offerings in growing end markets and broadens
Quanta’s geographic footprint;
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that Quanta management expects the merger to result in
meaningful cost savings and operational synergies, including
approximately $20 million in 2008, and to result in
opportunities for cross selling and to exchange best practices;
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the written opinion of Credit Suisse to the Quanta board of
directors, dated March 17, 2007, to the effect that, as of
the date thereof and based on and subject to the factors,
assumptions and limitations described therein, the exchange
ratio is fair, from a financial point of view, to Quanta, as
more fully described below under the caption
“— Opinion of Quanta’s Financial
Advisor;”
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the terms of the merger agreement, the structure of the
transaction, which involves an all-stock transaction (other than
cash paid in lieu of the issuance of fractional shares of Quanta
common stock) and does not require Quanta to make any borrowings
for the payment of the merger consideration, and the conditions
to each party’s obligation to complete the merger, which
are reciprocal in nature;
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that the merger agreement provides that InfraSource could be
required to pay a termination fee of $43 million to Quanta
or to reimburse Quanta for its expenses actually incurred in
connection with the merger in an amount not to exceed
$5 million, in each case, in certain circumstances;
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the ability of Quanta and InfraSource to complete the merger,
including their ability to obtain the necessary regulatory
approvals and their obligations in connection with obtaining
those approvals; and
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the merger’s structure, which is expected to constitute a
reorganization under section 368(a) of the Internal Revenue
Code.
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The Quanta board of directors considered a number of additional
factors concerning the merger. The Quanta board of directors
considered these factors as a whole and without assigning
relative weights to each such factor, and overall considered the
relevant factors to be favorable to, and in support of, its
determinations and recommendations. These factors included:
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•
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information concerning the financial condition, results of
operations, prospects and businesses of Quanta and InfraSource
provided by management of the companies, including the
respective companies’ cash flows from operations, recent
performance of common stock and the ratio of Quanta’s
common stock price to InfraSource’s common stock price over
various periods, as well as current industry, economic and
market conditions;
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•
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the net asset value and earnings per share of the common stock,
as well as earnings before interest, taxes, depreciation and
amortization (EBITDA) and other market factors of both Quanta
and InfraSource; and
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•
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the results of Quanta’s business, legal and financial due
diligence review regarding InfraSource.
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Quanta’s board of directors also considered a variety of
risks and other potentially negative factors concerning the
merger agreement and the transactions contemplated by it,
including the merger. These factors included:
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that there are significant risks inherent in combining and
integrating two companies, including that the companies may not
be successfully integrated or that the expected synergies from
combining the two companies may not be realized, and that
successful integration of the companies will require the
dedication of significant management resources, which will
temporarily detract attention from the
day-to-day
businesses of the combined company in addition to expansion into
the dark fiber business;
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•
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the effects on net asset value, cash flows from operations and
other financial measures under various modeling assumptions, and
the uncertainties in timing with respect to the anticipated
benefits of the merger;
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•
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that the merger agreement provides that Quanta could be required
to pay a termination fee of $43 million to InfraSource or
to reimburse InfraSource for its expenses actually incurred in
connection with the merger in an amount not to exceed
$5 million, in each case, in certain circumstances;
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•
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that the merger might not be completed as a result of a failure
to satisfy the conditions contained in the merger agreement,
including failure to receive necessary regulatory approvals such
as under the HSR Act;
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•
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the possibility of customer overlap; and
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•
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other matters described under the caption “Risk
Factors.”
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This discussion of the information and factors considered by the
Quanta board of directors in reaching its conclusion and
recommendations includes all of the material factors considered
by the board but is not intended to be exhaustive. In view of
the wide variety of factors considered by the Quanta board of
directors in evaluating the merger agreement and the
transactions contemplated by it, including the merger, and the
complexity of these matters, the Quanta board of directors did
not find it practicable to, and did not attempt to, quantify,
rank or otherwise assign relative weight to those factors. In
addition, different members of the Quanta board of directors may
have given different weight to different factors.
It should be noted that this explanation of the reasoning of the
Quanta board of directors and all other information presented in
this section is forward-looking in nature and, therefore, should
be read in light of the factors discussed under the heading
“Cautionary Statement Concerning Forward-Looking
Statements.”
Recommendation
of the InfraSource Board of Directors and Its Reasons for the
Merger
By unanimous vote, the InfraSource board of directors, at a
meeting held on March 17, 2007, determined that the
execution and delivery of the merger agreement was advisable and
the transactions contemplated by the merger agreement were in
the best interest of the InfraSource stockholders and approved
the merger agreement and the transactions contemplated thereby,
including the merger. The InfraSource board of directors
unanimously recommends that the InfraSource stockholders
vote FOR the proposal to adopt the merger agreement at the
InfraSource special meeting.
Since its formation, InfraSource has assessed, from time to
time, its strategic alternatives with a view toward growing its
business and competencies and gaining value for its
stockholders. InfraSource evaluated a possible sale of the
company in December 2005 to February 2006. At that time, the
then-existing principal stockholders desired to exit their
investment in InfraSource through an all-cash transaction. The
increase in InfraSource common stock trading price led to a
situation where such a transaction could not be accomplished.
Following two underwritten secondary public offerings in 2006 in
which the principal stockholders sold their interests in
InfraSource, the InfraSource management again assessed the
strategic alternatives available to the company to maximize
stockholder value. The strategic alternatives included
continuing with organic business growth and modest acquisitions,
making significant acquisitions to grow the business more
rapidly and the sale of the company. The InfraSource board of
directors assessed the potential benefits and risks of each of
these strategies and the availability of resources, including
both financial and management resources, needed to achieve them.
InfraSource believes the combination with Quanta provides the
best opportunity for the InfraSource business, its stockholders
and its employees. In reaching its unanimous decision to approve
the merger agreement and recommend adoption of the merger
agreement by the InfraSource stockholders, the InfraSource board
of directors met frequently with InfraSource management and
their financial and legal advisors, and considered a number of
factors. The following is a summary of the positive factors
considered by the InfraSource board.
Strategic
and Financial Factors
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Complementary businesses — The capacities and
experience of Quanta and InfraSource should enable Quanta to
better meet the demands of its customers in the utility
infrastructure business. InfraSource’s businesses
complement and enhance Quanta’s capabilities in the areas
of:
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transmission and distribution installation and maintenance
capabilities;
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substation engineering capabilities;
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gas distribution capabilities;
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unique dark fiber leasing business; and
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industrial service offerings in the Gulf of Mexico region.
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Access to Quanta service offerings — After the
completion of the merger, InfraSource customers will have access
to Quanta’s capabilities and services including:
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nationwide transmission and distribution services;
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emergency restoration resources;
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Quanta’s exclusive and proprietary robotic arm
technology; and
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nationwide telecommunications installation and maintenance
capabilities.
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•
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Reduction in operating costs; synergies — Both
companies expect that Quanta will be able to achieve significant
operational savings after the completion of the merger as it
works to integrate the operations of Quanta.
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•
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Stronger financial position — Quanta will have
greater scale and financial resources, which should support its
ability to bid for large transmission projects, provide service
offerings to the combined customer base and obtain insurance and
bonding for such activities.
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•
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Historical operating results — The InfraSource
board of directors assessed the historical information regarding
Quanta’s and InfraSource’s businesses, financial
performance and condition and operations.
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•
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Other strategic alternatives — The InfraSource
board of directors considered other strategic alternatives
available to it, including continuing to operate on a
stand-alone basis.
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Management of the business — The InfraSource
board of directors considered the challenges inherent in
recruiting and retaining executive management to maintain and
grow the InfraSource businesses organically and through
acquisitions.
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Industry
Factors
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Current regulatory environment — The passage of
the Energy Policy Act of 2005 creates incentives for increased
spending in the areas of transmission and distribution of
electrical power and natural gas.
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Aging utility infrastructure — The
U.S. utility infrastructure is aging and overloaded.
InfraSource anticipates further growth in infrastructure
projects as utilities work to upgrade and update their
infrastructure capabilities.
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•
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Increased outsourcing activities by utilities —
Due to cost considerations and shortages of qualified and
experienced personnel, utilities are increasingly outsourcing
their infrastructure building and maintenance needs to companies
such as Quanta and InfraSource, which trend is expected to
continue.
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•
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Telecommunications industry growth — The
increasing demand for voice, video and data services is creating
additional demand for broadband access and Quanta will be
positioned to provide such access, including the point to point
fiber to premises capabilities and dark fiber leasing assets.
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Demand for new services and technologies —
Quanta will be positioned to participate in the provision of
services relating to new energy and telecommunications
technologies.
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Transaction
Factors
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Merger transaction and all-stock consideration with a fixed
exchange ratio — The stockholders of each of
Quanta and InfraSource will share in the benefits expected from
the synergies and cost savings. The fixed
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exchange ratio aspect of the merger consideration provides
certainty as to the number of shares that will be issued to
InfraSource stockholders.
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Board representation — Three members of the
current InfraSource board of directors will become members of
the Quanta board of directors after completion of the merger,
including the current CEO of InfraSource, which will allow for
continuity and access to individuals with experience managing
the business assets and opportunities.
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Fiduciary duty provisions — The InfraSource
board of directors has the contractual ability to consider an
unsolicited superior proposal
and/or to
change its recommendation,
and/or to
terminate the merger agreement, if, in the furtherance of its
fiduciary duties, it determines that an event that may occur
prior to the completion of the merger requires such
consideration or action.
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Termination rights — Under the merger agreement
InfraSource has termination rights that will help to limit the
adverse impact on InfraSource of transaction results other than
completion of the merger.
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Termination fees — The merger agreement
provides for reciprocal rights to change board recommendations
or to terminate the merger agreement if either company’s
board believes it must take such action in furtherance of its
fiduciary duties. In such event, the non-terminating party may
receive a termination fee of $43 million. Such reciprocal
termination fees were negotiated to provide protection to the
parties in the event the negotiated transaction does not occur
for reasons beyond the control of the non-terminating party.
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Other
Positive Factors
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Due diligence findings — The consistency of the
results of the InfraSource due diligence review of Quanta’s
business, operations and financial condition with the publicly
available information about Quanta.
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Fairness opinion — The receipt of a written
opinion of Citigroup that the exchange ratio was fair, from a
financial point of view, to the InfraSource stockholders.
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The InfraSource board of directors also identified and
considered a number of potential risks or negative factors in
its consideration of the merger, including:
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the risk that the potential benefits of the merger, including
possible synergies, might not be realized;
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the possibility that the consummation of the merger may be
delayed, or not occur;
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the incurrence of substantial expenses related to the merger,
including transaction expenses and integration costs;
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the potential loss of key employees; and
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•
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the other risks about the merger and the business of Quanta
following the merger as described under the heading “Risk
Factors” in this joint proxy statement/prospectus.
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This list of considered factors is not exhaustive and is not
provided in any specific order or ranking. The individual
members of the InfraSource board of directors may have
considered additional factors, and given different weight to the
factors considered in determining to vote in favor of the merger
and the merger agreement.
It should be noted that this explanation of the reasoning of the
InfraSource board of directors and all other information
presented in this section is forward-looking in nature and,
therefore, should be read in light of the factors discussed
under the heading “Cautionary Statement Concerning
Forward-Looking Statements.”
Opinion
of Quanta’s Financial Advisor
Quanta retained Credit Suisse, to act as its exclusive financial
advisor in connection with the merger. In connection with Credit
Suisse’s engagement, Quanta requested that Credit Suisse
evaluate the fairness, from a financial point of view, to Quanta
of the exchange ratio set forth in the merger agreement. On
March 17, 2007, in a telephonic meeting of the Quanta board
of directors held to evaluate the merger, Credit Suisse rendered
to the Quanta board of directors an oral opinion, subsequently
confirmed in writing and dated March 17, 2007, to the
46
effect that, as of that date and based on and subject to the
factors, assumptions and limitations described in Credit
Suisse’s written opinion, the exchange ratio was fair, from
a financial point of view, to Quanta.
The full text of Credit Suisse’s written opinion, dated
March 17, 2007, to the Quanta board of directors, which
sets forth, among other things, the procedures followed,
assumptions made, matters considered and limitations on the
scope of the review undertaken by Credit Suisse in rendering its
opinion, is attached as Annex B hereto and is incorporated
herein by reference in its entirety. Quanta stockholders are
urged to read this opinion carefully in its entirety. Credit
Suisse’s opinion was provided to the Quanta board of
directors in connection with its consideration of the merger and
addresses only the fairness, from a financial point of view, to
Quanta of the exchange ratio set forth in the merger agreement
and does not address any other aspect or implication of the
merger or any other agreement, arrangement or understanding
entered into in connection with the merger or otherwise and does
not constitute a recommendation to any stockholder as to how
such stockholder should vote or act on any matter relating to
the merger, including the issuance of shares of Quanta common
stock in connection therewith. This summary of Credit
Suisse’s opinion is qualified in its entirety by reference
to the full text of the opinion, attached as Annex B
hereto.
In arriving at its opinion, Credit Suisse reviewed the
March 17, 2007 draft of the merger agreement, referred to
as the Draft Merger Agreement, and certain publicly available
business and financial information relating to Quanta and
InfraSource. Credit Suisse also reviewed certain other
information and data relating to Quanta and InfraSource,
including financial forecasts relating to InfraSource as
provided to and discussed with Credit Suisse by the management
of InfraSource, and adjustments thereto as provided to and
discussed with Credit Suisse by the management of Quanta, and
financial forecasts relating to Quanta as provided to and
discussed with Credit Suisse by the management of Quanta, and
Credit Suisse met with the managements of InfraSource and Quanta
to discuss the business and prospects of InfraSource and Quanta.
Credit Suisse also reviewed certain estimates of cost savings,
synergies and other benefits expected to result from the merger,
as prepared and provided to Credit Suisse by the management of
Quanta. Credit Suisse also considered certain financial and
stock market data of InfraSource and Quanta, and Credit Suisse
compared that data with similar data for other publicly held
companies in businesses it deemed similar to those of
InfraSource and Quanta. Credit Suisse also considered such other
information, financial studies, analyses and investigations and
financial, economic and market criteria that it deemed relevant.
In connection with Credit Suisse’s review, Credit Suisse
did not assume any responsibility for independent verification
of any of the foregoing information and relied on such
information being complete and accurate in all material
respects. With respect to the financial forecasts for
InfraSource that Credit Suisse reviewed, the management of
InfraSource advised Credit Suisse, and Credit Suisse assumed,
that such forecasts were reasonably prepared on bases reflecting
the best currently available estimates and judgments of the
management of InfraSource as to the future financial performance
of InfraSource, and with respect to adjustments to the
InfraSource forecasts and the financial forecasts for Quanta
that Credit Suisse reviewed, the management of Quanta advised
Credit Suisse, and Credit Suisse assumed, that such adjustments
and forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the
management of Quanta as to the future financial performance of
InfraSource and Quanta. Credit Suisse based its assumption that
the financial forecasts for InfraSource provided by the
management of InfraSource were reasonably prepared upon the
discussions it had with the InfraSouce management team
responsible for preparing the financial forecasts. Credit Suisse
based its assumption that the financial forecasts for Quanta and
the adjustments to the financial forecasts for InfraSource
provided by the management of Quanta were reasonably prepared
upon the discussions it had with the Quanta management team
responsible for preparing Quanta’s financial forecasts and
conducting financial due diligence on InfraSource. In addition,
Credit Suisse also relied on the fact that the financial
forecasts provided by each of InfraSource and Quanta, had been
previously reviewed by and discussed with each respective board
of directors. With respect to the estimates provided to Credit
Suisse by the management of Quanta with respect to the cost
savings, synergies and other benefits expected to result from
the merger, Credit Suisse was advised by the management of
Quanta, and Credit Suisse assumed, that such estimates were
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of Quanta as
to such cost savings, synergies and other benefits, and would be
realized in the amounts and the times indicated thereby. Quanta
also informed Credit Suisse, and Credit Suisse assumed, that the
merger would be treated as a tax-free reorganization for federal
income tax purposes.
47
In addition, Credit Suisse assumed, with the consent of the
Quanta board of directors, that the final executed merger
agreement would conform to the Draft Merger Agreement reviewed
by Credit Suisse in all respects material to its analyses.
Credit Suisse also assumed, with the consent of the Quanta board
of directors, that, in the course of obtaining any regulatory or
third party consents, approvals or agreements in connection with
the merger, no delay, limitation, restriction or condition would
be imposed that would have an adverse effect on Quanta,
InfraSource or the contemplated benefits of the merger and that
the merger would be consummated in accordance with the terms of
the Draft Merger Agreement without waiver, modification or
amendment of any material term, condition or agreement thereof.
In addition, Credit Suisse was not requested to make, and did
not make, an independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of Quanta or
InfraSource, nor was Credit Suisse furnished with any such
evaluations or appraisals. Credit Suisse’s opinion
addressed only the fairness, from a financial point of view, to
Quanta of the exchange ratio and did not address any other
aspect or implication of the merger or any other agreement,
arrangement or understanding entered into in connection with the
merger or otherwise. Credit Suisse did not express any opinion
as to what the value of shares of Quanta’s common stock
actually will be when issued to the holders of
InfraSource’s common stock pursuant to the merger or the
prices at which shares of Quanta’s common stock will trade
at any time. Credit Suisse’s opinion is necessarily based
upon information made available to it as of the date of the
opinion and financial, economic, market and other conditions as
they existed and could be evaluated on the date thereof. Credit
Suisse’s opinion did not address the relative merits of the
merger as compared to alternative transactions or strategies
that might be available to Quanta, nor did it address the
underlying business decision of Quanta to proceed with the
merger.
Financial
Analyses
In preparing its opinion, Credit Suisse performed a variety of
financial and comparative analyses, including those described
below. The summary of Credit Suisse’s analyses described
below is not a complete description of the analyses underlying
Credit Suisse’s opinion. The preparation of a fairness
opinion is a complex process involving various determinations as
to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily
susceptible to partial analysis or summary description. In
arriving at its opinion, Credit Suisse made qualitative
judgments with respect to the analyses and factors that it
considered. Credit Suisse arrived at its ultimate opinion based
on the results of all analyses undertaken by it and assessed as
a whole and did not draw, in isolation, conclusions from or with
regard to any one factor or method of analysis. Accordingly,
Credit Suisse believes that its analyses must be considered as a
whole and that selecting portions of its analyses and factors or
focusing on information presented in tabular format, without
considering all analyses and factors or the narrative
description of the analyses, could create a misleading or
incomplete view of the processes underlying its analyses and
opinion.
In its analyses, Credit Suisse considered industry performance,
general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Quanta or
InfraSource. No company, transaction or business used in Credit
Suisse’s analyses as a comparison is identical to Quanta or
InfraSource or the proposed merger, and an evaluation of the
results of those analyses is not entirely mathematical. Rather,
the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other
factors that could affect the acquisition, public trading or
other values of the companies, business segments or transactions
analyzed. The estimates contained in Credit Suisse’s
analyses and the ranges of valuations resulting from any
particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by the
analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually
may be sold. Accordingly, the estimates used in, and the results
derived from, Credit Suisse’s analyses are inherently
subject to substantial uncertainty.
Credit Suisse was not requested to, and it did not, recommend
the specific consideration payable in the proposed merger, which
consideration was determined between Quanta and InfraSource, and
the decision to enter into the merger agreement was solely that
of the Quanta board of directors. Credit Suisse’s opinion
was only one of many factors considered by the Quanta board of
directors in its evaluation of the proposed merger and should
not be viewed as determinative of the views of the Quanta board
of directors or Quanta’s management with respect to the
48
merger or the exchange ratio and does not constitute a
recommendation to any Quanta stockholder as to how such
stockholder should vote or act on any matter relating to the
merger, including the issuance of shares of Quanta common stock
to the InfraSource stockholders.
The following is a summary of the material financial analyses
reviewed with the Quanta board of directors in connection with
Credit Suisse’s written opinion dated March 17, 2007.
The financial analyses summarized below include information
presented in tabular format. In order to fully understand Credit
Suisse’s financial analyses, the tables must be read
together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses.
Considering the data in the tables below without considering the
full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Credit Suisse’s
financial analyses.
Discounted
Cash Flows Analyses
InfraSource Discounted Cash Flows
Analysis. Credit Suisse performed a
sum-of-the-parts
analysis to calculate the implied value of the
InfraSource’s shares based on the sum of the implied
valuations for each of InfraSource’s principal business
segments on a stand-alone basis calculated in each case using a
discounted cash flows analysis described below.
Credit Suisse performed a discounted cash flow analysis to
calculate the estimated present value of the unlevered,
after-tax free cash flows that each of InfraSource’s
principal business segments could generate from fiscal years
2007 through 2011, both before and after giving effect to
potential cost savings and synergies anticipated by
Quanta’s management to result from the proposed merger.
Credit Suisse calculated the unlevered, after-tax free cash
flows by calculating estimated earnings before interest, taxes,
depreciation and amortization, referred to as EBITDA, for each
of fiscal years 2007 through 2011 and adjusting estimated EBITDA
for cash taxes, capital expenditures and changes in working
capital. The estimated fiscal years 2007 through 2011 financial
data of InfraSource were based on estimates of
InfraSource’s management as adjusted by Quanta’s
management. Credit Suisse calculated the terminal value of
InfraSource by applying to InfraSource’s fiscal year 2012
estimated unlevered, after-tax free cash flow for its
infrastructure construction services business segment a range of
forward terminal EBITDA multiples of 9.5x to 12.0x and for its
telecommunication services business segment a range of forward
terminal EBITDA multiples of 8.0x to 10.5x. The present value of
the cash flows and the terminal value of InfraSource on a per
share basis were calculated using discount rates ranging from
11.5% to 15.5%. The range of terminal EBITDA multiples of 9.5x
to 12.0x used in connection with the infrastructure construction
services business segment, and of 8.0x to 10.5x used in
connection with the telecommunications services business
segment, were selected based on a review of InfraSource’s
and other companies’ current and historical trading
multiples reviewed in connection with the companies identified
under the caption “Selected Companies Analysis,” as
well as Quanta, while the discount rates ranging from 11.5% to
15.5% were selected based on a review of weighted average cost
of capital for InfraSource which factored in the unlevered betas
for similar companies identified below under the caption
“Selected Company Analysis,” including Quanta, and
other factors.
Quanta Discounted Cash Flows Analysis. Credit
Suisse performed a discounted cash flow analysis to calculate
the estimated present value of the unlevered, after-tax free
cash flows that Quanta’s business could generate from
fiscal years 2007 through 2011. Credit Suisse calculated the
unlevered, after-tax free cash flows by calculating EBITDA for
each of fiscal years 2007 through 2011 and adjusting estimated
EBITDA for cash taxes, capital expenditures and changes in
working capital. The estimated fiscal years 2007 through 2011
financial data of Quanta were based on estimates of
Quanta’s management. Credit Suisse calculated the terminal
value of Quanta by applying to Quanta’s fiscal year 2012
estimated unlevered, after-tax free cash flow a range of forward
terminal EBITDA multiples of 11.0x to 13.5x. The present value
of the cash flows and the terminal value of Quanta on a per
share basis were calculated using discount rates ranging from
11.5% to 15.5%. The range of terminal EBITDA multiples of 11.0x
to 13.5x were selected based on a review of Quanta’s and
other companies’ current and historical trading multiples
reviewed in connection with the companies identified under the
caption “Selected Companies Analysis,” while the
discount rates ranging from 11.5% to 15.5% were selected based
on a review of weighted average cost of capital for Quanta which
factored in the unlevered betas for similar companies identified
below under the caption “Selected Company Analysis”,
including InfraSource, and other factors.
49
Credit Suisse calculated the estimated range of exchange ratios,
implied by the implied estimated per share equity reference
ranges derived from the discounted cash flow analysis for
InfraSource and the discounted cash flow analysis for Quanta,
before and after giving effect to potential cost savings
(without synergies), and cost savings and synergies anticipated
by Quanta’s management to result from the proposed merger.
This analysis indicated the following implied estimated exchange
ratio reference ranges of shares of Quanta common stock to
shares of InfraSource common stock:
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Implied Exchange Ratio Reference Ranges
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Without Cost
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With Cost Savings
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Savings and
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and Without
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With Cost Savings
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Exchange Ratio
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Synergies
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Synergies
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and Synergies
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in Merger
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0.758x-1.546x
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0.879x-1.779x
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1.033-2.078x
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1.223x
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Selected
Company Analysis
Credit Suisse reviewed financial and stock market information of
InfraSource, Quanta, and the following three selected publicly
traded companies in the specialty contractor services industry:
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MasTec Inc.;
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Dycom Industries Inc.; and
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Pike Electric Corporation.
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These three companies were chosen because they are publicly
traded companies in the U.S. that operate in a similar industry
to InfraSource and Quanta and have similar lines of business to
them. Additionally, each has a market value of between
approximately $550 million to $1.1 billion. Credit
Suisse determined using its professional judgment that these
three companies were the most appropriate for purposes of this
analysis and Credit Suisse did not specifically identify any
other companies for this purpose.
Credit Suisse reviewed, among other things, enterprise values of
the selected companies as a multiple of calendar year 2006
actual earnings before interest, taxes, depreciation and
amortization, referred to as EBITDA, and calendar years, 2007
and 2008 estimated EBITDA. Credit Suisse also reviewed per share
stock prices of the selected companies as a multiple of calendar
year 2006 actual earnings per share, and calendar years 2007 and
2008 estimated earnings per share. In addition, Credit Suisse
reviewed the EBITDA margin for the last twelve months, the
estimated EBITDA margin for 2007 and the revenue growth rate for
2007 through 2008, of the selected companies. Credit Suisse then
applied a range of selected multiples derived from the selected
companies to corresponding financial data of InfraSource, based
on InfraSource’s management estimates as adjusted by
Quanta’s management, and Quanta, based on Quanta’s
management estimates, in order to derive implied estimated
aggregate enterprise value reference ranges and implied
estimated equity value per share reference ranges, and compared
them to the implied estimated reference ranges for InfraSource
and Quanta based on research analysts’ estimates. All
multiples were based on closing stock prices on March 14,
2007 and publicly available information and research
analysts’ estimates.
Credit Suisse calculated the implied estimated range of exchange
ratios based on the implied estimated per share ranges
calculated in the selected company analyses. This analysis
indicated the following implied estimated exchange ratio
reference ranges of shares of Quanta common stock to shares of
InfraSource common stock:
|
|
|
|
|
Implied Exchange Ratio Reference Ranges
|
|
|
Based on
|
|
Based on Research
|
|
Exchange Ratio
|
Management Estimates
|
|
Analysts’ Estimates
|
|
in Merger
|
|
0.864x-1.404x
|
|
0.853x-1.330x
|
|
1.223x
|
Contribution
Analysis
Credit Suisse analyzed the relative contributions of Quanta and
InfraSource to the pro forma total revenues, earnings before
interest, taxes, depreciation and amortization, referred to as
EBITDA, earnings before interest and taxes, referred to as EBIT,
and net income and market capitalization of the combined
company, based on calendar years 2005 and 2006 financial data
for Quanta and InfraSource and forecasts for Quanta and
InfraSource for
50
calendar years 2007 and 2008. The calendar year 2005 and 2006
financial data for Quanta and InfraSource were based on
information included in filings made by Quanta and InfraSource
with the SEC. The 2007 and 2008 forecasts for InfraSource were
based on the internal forecasts of InfraSource management as
adjusted by Quanta management, and for Quanta were based on the
internal forecasts of Quanta management. Credit Suisse derived,
among other things, the reference range of exchange ratios
implied by such relative contributions based on the Quanta
common stock closing share price on March 14, 2007. This
analysis indicated the following reference range of implied
exchange ratios of shares of Quanta common stock to shares of
InfraSource common stock using financial data for calendar years
2005 and 2006 and estimates for calendar years 2007 and 2008:
|
|
|
Implied Exchange
|
|
Exchange Ratio
|
Ratio Reference Range
|
|
in Merger
|
|
1.103x-1.664x
|
|
1.223x
|
Other
Factors
In rendering its opinion, Credit Suisse also reviewed and
considered certain pro forma effects estimated to result from
the proposed merger, including among other things, the estimated
effect of the merger on the estimated earnings per share for the
combined company for calendar years 2007 and 2008.
Miscellaneous
Quanta selected Credit Suisse based on Credit Suisse’s
qualifications, experience and reputation, and its familiarity
with Quanta and its business. Credit Suisse is an
internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
From time to time, Credit Suisse and its affiliates have in the
past provided, and in the future may provide, investment banking
and other financial services to Quanta and InfraSource, for
which Credit Suisse and its affiliates have received, and would
expect to receive, compensation. Credit Suisse acted as an
underwriter for which it received customary fees in connection
with two offerings of InfraSource common stock completed in
April and September of 2006 in which former stockholders of
InfraSource sold shares of InfraSource common stock. Credit
Suisse is a full service securities firm engaged in securities
trading and brokerage activities as well as providing investment
banking and other financial services. In the ordinary course of
business, Credit Suisse and its affiliates may acquire, hold or
sell, for its and its affiliates own accounts and the accounts
of customers, equity, debt and other securities and financial
instruments (including bank loans and other obligations) of
InfraSource, Quanta and any other company that may be involved
in the merger, as well as provide investment banking and other
financial services to such companies.
Credit Suisse earned (1) a financial advisory fee equal to
$200,000 upon the execution of its engagement letter and (2) an
opinion fee equal to $1,000,000, shortly after it delivered its
opinion to the Quanta board of directors. In addition, Quanta
agreed to pay Credit Suisse a transaction fee equal to
$7,000,000 (less the $1,200,000 paid as described in (1) and
(2)) upon the consummation of the proposed merger. In addition,
Quanta also agreed to reimburse Credit Suisse for all reasonable
expenses, including the reasonable fees and expenses of Credit
Suisse’s outside legal counsel, resulting from or arising
out of its engagement, subject to certain limits. In addition,
Quanta agreed to indemnify Credit Suisse and related parties
against certain liabilities and other items, including
liabilities under the federal securities laws, arising out of
Credit Suisse’s engagement.
Opinion
of InfraSource’s Financial Advisor
Citigroup was retained to act as financial advisor to
InfraSource in connection with the merger. Pursuant to
Citigroup’s engagement letter with InfraSource, dated as of
September 15, 2006, Citigroup rendered its oral opinion,
confirmed in writing, to the InfraSource board of directors on
March 17, 2007, to the effect that, as of the date of the
opinion and based upon and subject to the considerations and
limitations set forth in the opinion, its work described below
and other factors it deemed relevant, the exchange ratio of
1.223 Quanta common shares to be
51
received for each share of InfraSource common stock pursuant to
the merger agreement was fair, from a financial point of view,
to the holders of InfraSource common stock.
The full text of Citigroup’s written opinion, which sets
forth the assumptions made, general procedures followed, matters
considered and limits on the review undertaken, is included as
Annex C to this joint proxy statement/prospectus and is
incorporated herein by reference in its entirety. The summary of
Citigroup’s opinion set forth below is qualified in its
entirety by reference to the full text of the opinion.
Holders of InfraSource common stock are urged to read the
Citigroup opinion carefully and in its entirety.
Citigroup’s opinion was limited solely to the fairness
of the exchange ratio from a financial point of view as of the
date of the opinion. Neither Citigroup’s opinion nor the
related analyses constituted a recommendation of the proposed
merger to the InfraSource board of directors. Citigroup makes no
recommendation to any stockholder regarding how such stockholder
should vote with respect to the merger.
In arriving at its opinion, Citigroup reviewed a draft dated
March 17, 2007 of the merger agreement and held discussions
with certain senior officers, directors and other
representatives and advisors of InfraSource and certain senior
officers and other representatives and advisors of Quanta
concerning the businesses, operations and prospects of
InfraSource and Quanta. Citigroup examined certain publicly
available business and financial information relating to
InfraSource and Quanta as well as certain financial forecasts
and other information and data relating to InfraSource and
Quanta which were provided to or discussed with Citigroup by the
respective managements of InfraSource and Quanta, including
information relating to the potential strategic implications and
operational benefits (including the amount, timing and
achievability thereof) anticipated by the managements of
InfraSource and Quanta to result from the merger. Citigroup
reviewed the financial terms of the merger as set forth in the
merger agreement in relation to, among other things: current and
historical market prices and trading volumes of InfraSource
common stock and Quanta common stock; the historical and
projected earnings and other operating data of InfraSource and
Quanta; and the capitalization and financial condition of
InfraSource and Quanta. Citigroup considered, to the extent
publicly available, the financial terms of certain other
transactions which Citigroup considered relevant in evaluating
the merger and analyzed certain financial, stock market and
other publicly available information relating to the businesses
of other companies whose operations Citigroup considered
relevant in evaluating those of InfraSource and Quanta.
Citigroup also evaluated certain potential pro forma financial
effects of the merger on Quanta. In addition to the foregoing,
Citigroup conducted such other analyses and examinations and
considered such other information and financial, economic and
market criteria as Citigroup deemed appropriate in arriving at
its opinion.
In rendering its opinion, Citigroup has assumed and relied,
without assuming any responsibility for independent
verification, upon the accuracy and completeness of all
financial and other information and data publicly available or
provided to or otherwise reviewed by or discussed with Citigroup
and upon the assurances of the managements of InfraSource and
Quanta that they are not aware of any relevant information that
has been omitted or that remains undisclosed to Citigroup. With
respect to financial forecasts and other information and data
relating to InfraSource and Quanta provided to or otherwise
reviewed by or discussed with Citigroup, Citigroup has been
advised by the respective managements of InfraSource and Quanta
that such forecasts and other information and data were
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of
InfraSource and Quanta as to the future financial performance of
InfraSource and Quanta, the potential strategic implications and
operational benefits (including the amount, timing and
achievability thereof) anticipated to result from the merger and
the other matters covered thereby. Citigroup based its
assumption that the financial forecasts for InfraSource provided
by the management of InfraSource were reasonably prepared upon
the discussions it had with the InfraSource management team
responsible for preparing the financial forecasts. Citigroup
based its assumption that the financial forecasts for Quanta
were reasonably prepared upon the discussions it had with the
Quanta management team responsible for preparing Quanta’s
financial forecasts. In addition, Citigroup also relied on the
fact that the financial forecasts provided by each of
InfraSource and Quanta had been previously reviewed by and
discussed with each respective board of directors. Citigroup has
assumed, with the consent of InfraSource, that the merger will
be consummated in accordance with its terms, without waiver,
modification or amendment of any material term, condition or
agreement and that, in the course of obtaining the necessary
regulatory or third party approvals, consents and releases for
the merger, no delay, limitation, restriction or condition will
be imposed that would have an adverse effect on InfraSource,
Quanta or the contemplated benefits
52
of the merger. Representatives of InfraSource have advised
Citigroup, and Citigroup further has assumed, that the final
terms of the merger agreement would not vary materially from
those set forth in the draft reviewed by Citigroup. Citigroup
assumed, with the consent of InfraSource, that the merger will
be treated as a tax-free reorganization for federal income tax
purposes. Citigroup’s opinion, as set forth herein, relates
to the relative values of InfraSource and Quanta. Citigroup is
not expressing any opinion as to what the value of the Quanta
common stock actually will be when issued pursuant to the merger
or the price at which the Quanta common stock will trade at any
time. Citigroup did not make and was not provided with an
independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of InfraSource or Quanta nor has
Citigroup made any physical inspection of the properties or
assets of InfraSource or Quanta. Citigroup was not requested to,
and Citigroup did not, solicit third party indications of
interest in the possible acquisition of all or a part of
InfraSource, nor was Citigroup requested to consider, and its
opinion did not address, the relative merits of the merger as
compared to any alternative business strategies that might exist
for InfraSource or the effect of any other transaction in which
InfraSource might engage. Citigroup’s opinion was
necessarily based upon information available to it, and
financial, stock market and other conditions and circumstances
existing, as of the date of its opinion.
In connection with rendering its opinion, Citigroup made a
presentation to the InfraSource board of directors on
March 17, 2007, with respect to the material analyses
performed by Citigroup in evaluating the fairness of the
exchange ratio. The following is a summary of that presentation.
The summary includes information presented in tabular format. In
order to understand fully the financial analyses used by
Citigroup, these tables must be read together with the text of
each summary. The tables alone do not constitute a complete
description of the financial analyses. The following
quantitative information, to the extent it is based on market
data, is, except as otherwise indicated, based on market data as
it existed at or prior to March 17, 2007, and is not
necessarily indicative of current or future market conditions.
Analysis
of InfraSource
Historical
Trading Performance
Citigroup reviewed the historical trading prices for InfraSource
common stock separately and in relation to Quanta common stock.
This review indicated that during the
52-week
period ending March 14, 2007, InfraSource common stock
closed as low as $16.50 per share and as high as
$26.00 per share. These trading prices compared to the
closing price of InfraSource common stock on March 14, 2007
of $26.00 and the implied consideration value of $29.74.
Premiums
Paid Analysis
Citigroup also reviewed publicly available information for 20
relevant merger and acquisition transactions announced since the
beginning of calendar year 2005 that had all-stock consideration
with transaction values in excess of $500 million.
Citigroup excluded financial services companies from its
analysis due to the unique transaction characteristics of the
industry. The selected transactions reviewed by Citigroup were:
|
|
|
|
•
|
LSI Logic Corp. / Agere Systems Inc.
|
|
|
•
|
Goldcorp Inc. / Glamis Gold Ltd.
|
|
|
•
|
Brocade Communication Systems, Inc. / McDATA Corp.
|
|
|
•
|
SanDisk Corp. / M-Systems Flash Disk Pioneers
|
|
|
•
|
Sirius Satellite Radio / XM Satellite Radio Holdings Inc.
|
|
|
•
|
Thermo Electron Corp. / Fisher Scientific International Inc.
|
|
|
•
|
Alcatel SA / Lucent Technologies Inc.
|
|
|
•
|
AT&T Inc. / BellSouth Corp.
|
|
|
•
|
Glamis Gold Ltd. / Western Silver Corp.
|
|
|
•
|
Walt Disney Co. / Pixar Inc.
|
53
|
|
|
|
•
|
Viisage Technology Inc. / Identix Inc.
|
|
|
•
|
Seagate Technology / Maxtor Corp.
|
|
|
•
|
Public Storage Inc. / Shurgard Storage Centers Inc.
|
|
|
•
|
Duke Energy Corp. / Cinergy Corp.
|
|
|
•
|
American Tower Corp. / SpectraSite Inc.
|
|
|
•
|
Adobe Systems Inc. / Macromedia Inc.
|
|
|
•
|
IAC/Interactive Corp. / Ask Jeeves Inc.
|
|
|
•
|
Crompton Corp. / Great Lakes Chemical Corp.
|
|
|
•
|
SBC Communications Inc. / AT&T Corp.
|
|
|
•
|
Proctor & Gamble Co. / Gillette Co.
|
Citigroup reviewed the precedent transactions’ acquisition
premiums based on the percentage premium paid over each
target’s stock price
1-day,
1-week and
30 trading days prior to public announcement of the applicable
transaction for the precedent transactions identified above.
Based on this analysis, Citigroup derived a reference range of
such premiums of 17% to 25%. The reference range was applied to
the closing price of InfraSource on March 13, 2007 and the
30-day
trading average as of March 14, 2007. This analysis implies
a reference range of share prices of approximately $28 to $30.
Citigroup also noted that the March 14, 2007 price was not
used as the
1-day
reference point given the 7.4% increase in share value on the
afternoon of March 14th.
Research
Analyst Price Targets
Citigroup reviewed the most recent Wall Street research equity
analyst per share target prices for InfraSource common stock,
which ranged from $24.00 to $31.00, compared to the closing
price of InfraSource common stock on March 14, 2007 of
$26.00 and the implied consideration value of $29.74.
Comparable
Public Companies Analysis
Using publicly available information, Citigroup compared certain
financial and operating information and ratios for InfraSource
with corresponding financial and operating information and
ratios for the following five engineering and construction
companies, including InfraSource:
|
|
|
|
•
|
Granite Construction Inc.;
|
|
|
•
|
EMCOR Group;
|
|
|
•
|
Dycom Industries Inc.;
|
|
|
•
|
Pike Electric Corp.; and
|
|
|
•
|
InfraSource Services, Inc.
|
Although none of the selected companies was directly comparable
to InfraSource, the companies included were chosen because they
are publicly traded specialty contractors with similar sized
businesses and operations that, for purposes of this analysis,
may be considered similar to certain businesses and operations
of InfraSource. Citigroup determined using its professional
judgment that these companies were the most appropriate for
purposes of this analysis and Citigroup did not specifically
identify any other companies for this purpose. Quanta was
excluded from the analysis due to its significantly larger size
and market leading position. Using publicly available
information and research analyst estimates, Citigroup reviewed
for each of these companies:
|
|
|
|
•
|
stock price as a multiple of estimated earnings per share for
calendar year 2007, which is referred to below as “2007E
P/E”; and
|
|
|
•
|
the enterprise value as a multiple of estimated earnings before
interest, taxes, depreciation and amortization, or EBITDA, for
calendar year 2007, which is referred to below as “EV / 07E
EBITDA”.
|
54
Based on this analysis, Citigroup derived the following
reference ranges:
|
|
|
|
|
|
|
|
|
InfraSource Comparable Public Companies Analysis Range
|
|
Metric
|
|
Low
|
|
|
High
|
|
|
2007E P/E
|
|
|
21.0x
|
|
|
|
27.5x
|
|
EV / 2007E EBITDA
|
|
|
9.0x
|
|
|
|
11.0x
|
|
Applying the aforementioned reference range to both the
financial forecasts provided by InfraSource management, which
are referred to as the “InfraSource Management Case”,
and the research consensus earnings per share estimates for
2007, Citigroup estimated the implied share price of
InfraSource. The analysis showed the following reference range
of share prices:
|
|
|
|
|
|
|
|
|
|
|
InfraSource Implied Share Price Range
|
|
Metric
|
|
Forecast
|
|
Low
|
|
|
High
|
|
|
2007E P/E
|
|
Management
|
|
$
|
19
|
|
|
$
|
25
|
|
2007E P/E
|
|
Consensus
|
|
$
|
18
|
|
|
$
|
24
|
|
EV / 2007E EBITDA
|
|
Management
|
|
$
|
19
|
|
|
$
|
23
|
|
Discounted
Cash Flow Analysis
Citigroup performed a discounted cash flow, or DCF, analysis for
InfraSource, valuing InfraSource by estimating the present value
of the unlevered, after-tax free cash flows that the business
could produce over the fiscal years 2007 to 2011 on a
stand-alone basis. Citigroup used financial projections provided
by InfraSource management.
The range of terminal values was derived by applying a range of
multiples to fiscal year 2011 estimated EBITDA. In order to
derive implied equity value per share ranges for InfraSource,
Citigroup discounted the free cash flows and terminal values to
present value using a range of discount rates (or weighted
average cost of capital (or WACC)) and then subtracted net debt.
Citigroup used a WACC range of 9.0% to 11.0% and a terminal
2011E EBITDA multiple range of 9.0x to 11.0x. The WACC range was
derived based on the asset beta methodology of comparable
companies. For the analysis, Citigroup assumed an equity market
risk premium range of 4.0%-6.0%. The terminal multiple range of
9.0x to 11.0x was based on the historical and current range of
multiples for the companies referenced in the “Comparable
Public Companies Analysis;” in this case, Granite
Construction, EMCOR, Dycom Industries, Pike Electric and
InfraSource.
This analysis indicated an implied equity value per share range
of InfraSource common stock from approximately $33 to $43,
compared to the closing price of InfraSource common stock on
March 14, 2007 of $26.00 and the implied consideration
value of $29.74.
Analysis
of Quanta
Historical
Trading Performance
Citigroup reviewed the historical trading prices for Quanta
common stock. This review indicated that during the
52-week
period ending March 14, 2007, Quanta common stock closed as
low as $14.37 per share and as high as $24.46 per
share. These trading prices compared to the closing price of
Quanta common stock on March 14, 2007 of $24.32.
Research
Analyst Price Targets
Citigroup reviewed the most recent Wall Street research equity
analyst per share target prices for Quanta common stock, which
ranged from $24.00 to $30.00, compared to the closing price of
Quanta common stock on March 14, 2007 of $24.32.
55
Comparable
Public Companies Analysis
Using publicly available information, Citigroup compared certain
financial and operating information and ratios for Quanta with
corresponding financial and operating information and ratios for
the peer group. Unlike the broader set of comparable companies
used in the analysis of InfraSource, Citigroup determined that
due to Quanta’s unique growth characteristics, operations
profile and end markets served, only InfraSource and Quanta
should be used in the analysis. InfraSource and Quanta are two
public companies of comparable size serving both the high growth
electrical transmission and the distribution end markets. As a
result of its size, liquidity and focus on higher growth niche
end markets, Quanta has consistently traded at a premium to the
other specialty contractors. The other specialty contractors
(Granite Construction, EMCOR, Dycom Industries and Pike
Electric) were excluded from this analysis given either their
smaller size and/or different, less attractive end markets
served. Thus, the lack of true comparables other than the
parties to the transaction resulted in less reliance on the
comparable public companies analysis as compared to the other
valuation methodologies utilized.
Using publicly available information and research analyst
estimates, Citigroup reviewed for these companies:
|
|
|
|
•
|
stock price as a multiple of estimated earnings per share for
calendar year 2007, which is referred to below as “2007E
P/E”; and
|
|
|
•
|
the enterprise value as a multiple of estimated EBITDA for
calendar year 2007, which is referred to below as “EV / 07E
EBITDA”.
|
Based on this analysis, Citigroup derived the following
reference ranges:
|
|
|
|
|
|
|
|
|
Quanta Comparable Public Companies Analysis Range
|
|
Metric
|
|
Low
|
|
|
High
|
|
|
2007E P/E
|
|
|
27.0x
|
|
|
|
32.0x
|
|
EV / 2007E EBITDA
|
|
|
11.0x
|
|
|
|
13.5x
|
|
Applying the aforementioned reference range to both the
financial forecasts provided by Quanta management, which are
referred to as the “Quanta Management Case”, and the
research consensus earnings per share estimates for 2007,
Citigroup estimated the implied share price of Quanta. The
analysis showed the following reference range of share prices:
|
|
|
|
|
|
|
|
|
|
|
Quanta Implied Share Price Range
|
|
Metric
|
|
Forecast
|
|
Low
|
|
|
High
|
|
|
2007E P/E
|
|
Management
|
|
$
|
19
|
|
|
$
|
22
|
|
2007E P/E
|
|
Consensus
|
|
$
|
21
|
|
|
$
|
24
|
|
EV / 2007E EBITDA
|
|
Management
|
|
$
|
18
|
|
|
$
|
21
|
|
Discounted
Cash Flow Analysis
Citigroup performed a DCF analysis for Quanta, valuing Quanta by
estimating the present value of the unlevered, after-tax free
cash flows that the business could produce over the fiscal years
2007 to 2011 on a stand-alone basis. Citigroup used financial
projections provided by Quanta management. The DCF analysis did
not take into account any anticipated cost savings, revenue
enhancements, one-time costs, or other potential effects of the
merger.
The range of terminal values was derived by applying a range of
multiples to fiscal year 2011 estimated EBITDA. In order to
derive implied equity value per share ranges for Quanta,
Citigroup discounted the free cash flows and terminal values to
present value using a range of discount rates and then
subtracted net debt. Citigroup used a WACC range of 9.0% to
11.0% and a terminal 2011E EBITDA multiple range of 11.5x to
13.5x.
The WACC range was derived based on the asset beta methodology
of comparable companies in the industry. For this analysis,
Citigroup assumed an equity market risk premium range of
4.0%-6.0%. The terminal multiple range of 11.5x to 13.5x was
based on the historical and current range of multiples for the
companies referenced in the “Comparable Public Companies
Analysis;” in this case, InfraSource and Quanta.
56
This analysis indicated an implied equity value per share range
of Quanta common stock from approximately $24 to $30, compared
to the closing price of Quanta common stock on March 14,
2007 of $24.32.
Exchange
Ratio Analysis
Historical
Implied Exchange Ratio Trading Analysis
Citigroup reviewed the per share daily closing trading prices
for the InfraSource common stock and the Quanta common stock for
the one-year period ending March 14, 2007, and calculated
the historical implied exchange ratios by dividing the daily
closing prices of InfraSource common stock by those of Quanta
common stock. As of March 14, 2007, the current exchange
ratio was 1.07x. This historical analysis showed the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical Exchange Ratios
|
|
|
|
Low
|
|
|
Mean
|
|
|
High
|
|
|
Last 30 Trading Days
|
|
|
1.01x
|
|
|
|
1.07x
|
|
|
|
1.12x
|
|
Last 6 Months
|
|
|
0.95x
|
|
|
|
1.09x
|
|
|
|
1.22x
|
|
Last 12 Months
|
|
|
0.95x
|
|
|
|
1.10x
|
|
|
|
1.32x
|
|
This analysis indicated a historical
1-year
average exchange ratio of 1.10x, compared to the merger exchange
ratio of 1.223x.
Relative
Analyst Price Targets
Based upon the implied equity values per share of Quanta common
stock and InfraSource common stock that were estimated using the
relative analyst price targets, Citigroup calculated a range of
implied exchange ratios of a share of InfraSource common stock
to a share of Quanta common stock, based upon the research
analyst price targets for InfraSource and Quanta.
This analysis yielded the following implied exchange ratios:
|
|
|
|
|
|
|
|
|
|
|
Range of Implied Exchange Ratio
|
|
|
|
Low to High*
|
|
|
High to Low**
|
|
|
Analyst Price Targets
|
|
|
0.80x
|
|
|
|
1.29x
|
|
|
|
|
* |
|
Calculated by dividing the low estimated price target of
InfraSource common stock by the high estimated price target of
Quanta common stock. |
|
** |
|
Calculated by dividing the high estimated price target of
InfraSource common stock by the low estimated price target of
Quanta common stock. |
Relative
Comparable Public Companies Analysis
Based upon the implied equity values per share of Quanta common
stock and InfraSource common stock that were estimated using the
comparable public companies analyses described above, Citigroup
calculated a range of implied exchange ratios of a share of
InfraSource common stock to a share of Quanta common stock,
based upon the InfraSource Management Case, the Quanta
Management Case and equity research consensus estimates for
earnings per share.
57
This analysis yielded the following implied exchange ratios,
compared to the InfraSource exchange ratio:
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Range of Implied Exchange Ratio
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Low to High*
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High to Low**
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07E P/E (Management)
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0.87x
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1.35x
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07E P/E (Consensus)
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0.76x
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1.18x
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07E EV/EBITDA (Management)
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0.90x
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1.32x
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* |
|
Calculated by dividing the low estimated valuation of
InfraSource common stock by the high estimated valuation of
Quanta common stock. |
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** |
|
Calculated by dividing the high estimated valuation of
InfraSource common stock by the low estimated valuation of
Quanta common stock. |
Relative
DCF Analysis
Based upon the implied equity values per share of Quanta common
stock and InfraSource common stock that were estimated using the
DCF methodologies described above, Citigroup calculated a range
of implied exchange ratios of a share of InfraSource common
stock to a share of Quanta common stock, based upon the
InfraSource Management Case DCF and the Quanta Management Case
DCF. This analysis yielded the following implied exchange ratios:
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Range of Implied Exchange Ratio
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Low to High*
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High to Low**
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Relative DCF Analysis
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1.12x
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1.80x
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* |
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Calculated by dividing the low estimated valuation of
InfraSource common stock by the high estimated valuation of
Quanta common stock. |
|
** |
|
Calculated by dividing the high estimated valuation of
InfraSource common stock by the low estimated valuation of
Quanta common stock. |
Relative
Contribution Analysis
Citigroup calculated the relative contributions of InfraSource
and Quanta to the combined company of EBITDA, earnings before
interest and taxes (or EBIT) and net income for calendar years
2006 and 2007, based upon the InfraSource Management Case and
the Quanta Management Case before giving effect to any
anticipated cost savings, revenue enhancements, one-time costs,
or other potential effects of the merger. Citigroup also
calculated the relative contribution for net income for calendar
year 2007 based on equity research consensus estimates for
earnings per share.
This analysis yielded the following implied exchange ratios:
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Range of Implied Exchange Ratio
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Low
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High
|
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Contribution Analysis
|
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1.14
|
x
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1.38x
|
|
Pro Forma
Analysis
Citigroup analyzed the potential pro forma effect of the merger
on InfraSource stockholders for the years 2007 and 2008 using
the InfraSource Management Case and the Quanta Management Case
projections. These projections assumed, among other factors,
estimates of retained synergies and intangible asset
write-ups
estimated by InfraSource management. The pro forma impact was
found to be accretive to earnings in 2007 and accretive to
earnings in 2008 to Quanta stockholders.
58
General
Citigroup’s advisory services and opinion were provided for
the information of the InfraSource board of directors in its
evaluation of the merger and did not constitute a recommendation
of the merger to InfraSource or a recommendation to any holder
of InfraSource common stock as to how that stockholder should
vote or act on any matters relating to the merger.
The preceding discussion is a summary of the material financial
analyses furnished by Citigroup to the InfraSource board of
directors, but it does not purport to be a complete description
of the analyses performed by Citigroup or of its presentations
to the InfraSource board of directors. The preparation of
financial analyses and fairness opinions is a complex process
involving subjective judgments and is not necessarily
susceptible to partial analysis or summary description.
Citigroup made no attempt to assign specific weights to
particular analyses or factors considered, but rather made
qualitative judgments as to the significance and relevance of
all the analyses and factors considered and determined to give
its fairness opinion as described above. Accordingly, Citigroup
believes that its analyses, and the summary set forth above,
must be considered as a whole and that selecting portions of the
analyses and of the factors considered by Citigroup, without
considering all of the analyses and factors, could create a
misleading or incomplete view of the processes underlying the
analyses conducted by Citigroup and its opinion. With regard to
the precedent premiums paid transactions analyses summarized
above, Citigroup selected precedent transactions on the basis of
various factors, including size and merger consideration of the
constituent companies as compared to InfraSource and Quanta;
however, no transaction utilized as a comparison in these
analyses is identical to the merger. As a result, these analyses
are not purely mathematical, but also take into account
differences in financial and operating characteristics of the
subject companies and other factors that could affect the
transaction to which the merger is being compared.
In its analyses, Citigroup made numerous assumptions with
respect to InfraSource, Quanta, industry performance, general
business, economic, market and financial conditions and other
matters, many of which are beyond the control of InfraSource and
Quanta. Any estimates contained in Citigroup’s analyses are
not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or
less favorable than those suggested by these analyses. Estimates
of values of companies do not purport to be appraisals or
necessarily to reflect the prices at which companies may
actually be sold. Because these estimates are inherently subject
to uncertainty, none of InfraSource, Quanta, the InfraSource
board of directors, Citigroup or any other person assumes
responsibility if future results or actual values differ
materially from the estimates.
Citigroup’s analyses were prepared solely as part of
Citigroup’s analysis of the fairness of the exchange ratio
in the merger and were provided to the InfraSource board of
directors in that connection. The opinion of Citigroup was only
one of the factors taken into consideration by the InfraSource
board of directors in making its determination to approve the
merger agreement and the merger. See “The
Merger — Recommendation of the InfraSource Board of
Directors and Its Reasons for the Merger.”
Citigroup is an internationally recognized investment banking
firm engaged in, among other things, the valuation of businesses
and their securities in connection with mergers and
acquisitions, restructurings, leveraged buyouts, negotiated
underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. InfraSource
selected Citigroup to act as its financial advisor on the basis
of Citigroup’s international reputation and
Citigroup’s familiarity with InfraSource. In the ordinary
course of business, Citigroup and its affiliates may actively
trade or hold the securities of InfraSource and Quanta for their
own account or for the account of their customers and,
accordingly, may at any time hold a long or short position in
such securities. In addition, Citigroup and its affiliates
(including Citigroup Inc. and its affiliates) may maintain
relationships with InfraSource, Quanta and their respective
affiliates, including providing financing and related services
to Quanta following the transaction.
InfraSource agreed to pay Citigroup a customary fee in
connection with its engagement, a significant portion of which
is contingent upon the consummation of the proposed merger.
Pursuant to the terms of the engagement letter between
InfraSource and Citigroup, InfraSource agreed to pay Citigroup a
$2,000,000 opinion fee payable upon the earlier of consummation
of the transaction and termination of the transaction.
InfraSource also agreed to pay Citigroup a transaction fee upon
consummation of the merger equal to 0.70% of the aggregate value
of the merger consideration, less any amounts previously paid
relating to the opinion fee. In addition, InfraSource has
59
agreed to reimburse Citigroup for its reasonable expenses
incurred in connection with its engagement, including reasonable
attorneys’ fees and disbursements, and to indemnify
Citigroup against specific liabilities relating to or arising
out of its engagement, including liabilities under the federal
securities laws.
The exchange ratio was determined by arms-length negotiations
between InfraSource and Quanta, in consultation with their
respective financial advisors and other representatives, and was
not established by such financial advisors.
Interests
of the InfraSource Directors and Executive Officers in the
Merger
In considering the recommendation of the InfraSource board of
directors with respect to the adoption of the merger agreement,
InfraSource stockholders should be aware that the merger
agreement includes an agreement that three members of the
InfraSource board of directors be added to the Quanta board of
directors following completion of the merger. At the time the
InfraSource board of directors approved the merger agreement,
the InfraSource board of directors was aware that David R.
Helwig and two independent directors of InfraSource would become
members of Quanta’s board of directors. The Quanta board of
directors has identified Frederick W. Buckman and J. Michal
Conaway as the two independent InfraSource board members to be
appointed to the Quanta board of directors in addition to
Mr. Helwig following completion of the merger. The other
directors of InfraSource will resign effective upon closing of
the merger. InfraSource’s non-employee directors are
compensated through an annual restricted stock award and an
annual cash retainer, including additional cash retainers for
serving as lead director, the chair of a committee or on a
committee. Quanta’s non-employee directors are compensated
through fees for attending meetings and an annual restricted
stock award. Since the compensation arrangements for
non-employee directors of InfraSource and Quanta are different,
the aggregate annual compensation of Messrs. Buckman and Conaway
for serving as directors of Quanta may be higher or lower than
their InfraSource director compensation. Mr. Helwig does not
receive compensation for serving as a director on
InfraSource’s board; therefore his annual director
compensation for serving as a non-employee director of Quanta
will be significantly more.
In addition, the terms of the stock option agreements and some
restricted stock award agreements between InfraSource and its
non-employee directors provide that the vesting of all unvested
stock options and the applicable restricted stock will
accelerate upon a change in control transaction. The merger will
constitute a change in control transaction. The InfraSource
non-employee directors currently hold 88,341 unvested stock
options. If the merger had occurred on July 26, 2007, the
aggregate value of such accelerated stock options would have
been $1,776,309.
Each executive officer of InfraSource, including David R.
Helwig, has a management agreement with InfraSource that
provides for severance payments and the acceleration of the
vesting of existing equity awards if the executive’s
employment with InfraSource is terminated not for cause or if
the executive has “good reason” (as defined in each
executive’s management agreement) to terminate his or her
employment within two years following a change in control
transaction (the merger will constitute a change in control
transaction under each management agreement). If an
executive’s employment is terminated during such two-year
period and such rights under the management agreement are
triggered, the severance payments for each executive officer
would be paid in a lump sum and would equal, for Messrs. Helwig,
Montgomery, Daily, Coleman, and Ms. Lofton, an amount equal in
the aggregate to two times the sum of the executive’s base
salary and target bonus for the year in which the termination
occurs, for Mr. Walier, an amount equal to two times his base
salary, and for Mr. Sauder, an amount equal in the aggregate to
the sum of his base salary and target bonus for the year in
which the termination occurs. All executive officers receive a
prorated bonus for the portion of the year completed prior to
termination. Each executive would also continue to receive
health insurance benefits for not more than twenty-four months
(twelve months for Mr. Sauder) following such termination. In
addition, all unvested stock options, restricted stock and any
other equity awards held by any of the executives become vested
and are exercisable or free of forfeiture restrictions. If the
merger had occurred, and any of the executives had been
terminated from their InfraSource employment as of July 26,
2007, they would have received the following compensation,
consisting of severance, prorated bonus, the value attributable
to health insurance benefits and the value attributable to the
acceleration of unvested equity awards, under their respective
management agreements: Mr. Helwig, $8,328,514; Mr. Montgomery,
$3,605,797; Mr. Daily, $3,204,635; Mr. Coleman, $1,774,269; Mr.
Walier, $1,597,175, Mr. Sauder, $806,354 and Ms. Lofton,
$1,533,203.
60
InfraSource’s board of directors was aware of these
interests and considered them, among other matters, in approving
the merger agreement and making its recommendation that the
InfraSource stockholders adopt the merger agreement. See
“The Merger — Recommendation of the InfraSource
Board of Directors and Its Reasons for the Merger.”
Following is a brief biography of each InfraSource director who
will become a director of Quanta after completion of the merger:
Frederick W. Buckman became a member of InfraSource’s board
of directors in September 2006 and serves as a member of its
Compensation Committee and Nominating and Corporate Governance
Committee. Mr. Buckman currently is lead director of
StanCorp Financial Group, a NYSE-listed company. He recently
concluded a term of eight years as Chairman of the Board of
Oregon Health and Science University. A founder of Trans-Elect,
the nation’s first independent transmission company, he
served as its Chairman and Chief Executive Officer from 1999
until April 2005. Former leadership positions included President
and Chief Executive Officer of Pacific Corp. from 1994 to 1998
and executive positions with Consumers Power Company, the
utility subsidiary of CMS Energy.
J. Michal Conaway became a member of InfraSource’s
board of directors in February 2006, has served as its Lead
Independent Director since October 2006, serves as the Chairman
of the Audit Committee of InfraSource’s board and serves on
the Nominating and Corporate Governance Committee of
InfraSource’s board. Since 2000, Mr. Conaway has
provided private consulting services. In 2002, he founded
Peregrine Group LLC, an executive consulting firm. Prior to
2000, he held many management, executive and director positions
in the industry, including chief financial officer of Fluor
Corporation and fifteen years as chief financial officer and
principal financial officer of several major SEC registrant
companies.
David R. Helwig has been the Chief Executive Officer of
InfraSource since September 2003 (following the acquisition of
the InfraSource business from Exelon Enterprises, LLC), became a
member of the InfraSource board of directors in October 2003 and
became Chairman in October 2006. Prior to joining InfraSource,
Mr. Helwig served as President and as Chief Operating
Officer of InfraSource Incorporated, the predecessor company to
InfraSource, from April 2002 to September 2003 when it was owned
by Exelon Enterprises, LLC and as Executive Vice President of
Commonwealth Edison from October 2000 through April 2002. Prior
to his role as Executive Vice President of Commonwealth Edison,
Mr. Helwig was the Senior Vice President of Exelon
Corporation and Commonwealth Edison Nuclear Generation Groups
from January 1998 through October 2000.
Regulatory
Approvals
Antitrust
Approvals
The merger is subject to the expiration or termination of the
applicable waiting period under the HSR Act. Under the HSR Act,
the merger may not be consummated until notifications have been
given and certain information has been furnished to the
Antitrust Division and the FTC and the applicable waiting period
has expired or been terminated.
On May 7, 2007, the FTC notified Quanta and InfraSource
that the FTC was granting early termination of the statutory
waiting period under the HSR Act.
There can be no assurance that the merger will not be challenged
on antitrust or competition grounds or, if a challenge is made,
what the outcome would be. The Antitrust Division, the FTC, any
U.S. state and other applicable regulatory bodies may
challenge the merger on antitrust or competition grounds at any
time, including after the expiration or termination of the
waiting period under the HSR Act or other applicable process, as
they may deem necessary or desirable or in the public interest.
Accordingly, at any time before or after the completion of the
merger, any such party could take action under the antitrust
laws, including, without limitation, by seeking to enjoin the
effective time of the merger or permitting completion subject to
regulatory concessions or conditions. Private parties may also
seek to take legal action under antitrust laws under certain
circumstances.
61
Other
Regulatory Procedures
The merger may be subject to certain regulatory requirements of
other municipal, state, federal and foreign governmental
agencies and authorities, including those relating to the offer
and sale of securities. Quanta and InfraSource are currently
working to evaluate and comply in all material respects with
these requirements, as appropriate, and do not currently
anticipate that they will hinder, delay or restrict completion
of the merger.
Three InfraSource subsidiaries, Sunesys, LLC, Sunesys of
Virginia, Inc. and M.J. Electric, LLC, are regulated by various
state utility commissions
and/or the
FCC, and will need to provide notices to, or acquire consents
from, such state utility commissions
and/or the
FCC prior to the completion of the merger, which will constitute
a change in control of InfraSource. Notices or requests for
consents must be filed with the FCC and utility commissions in
twelve states and the District of Columbia. As of June 29,
2007, InfraSource had received all of the consents and approvals
from the applicable state public utility commissions and the FCC
necessary for the completion of the merger.
It is possible that one or more of the regulatory approvals
required to complete the merger will not be obtained on a timely
basis or at all. In addition, it is possible that any of the
governmental entities with which filings are made may seek
regulatory concessions as conditions for granting approval of
the merger. Under the merger agreement, Quanta and InfraSource
have each agreed to use commercially reasonable efforts to
complete the merger, including to gain clearance from antitrust
authorities and obtain other required approvals. See “The
Merger Agreement — Covenants.”
Although Quanta and InfraSource do not expect regulatory
authorities to raise any significant objections to the merger,
Quanta and InfraSource cannot be certain that all required
regulatory approvals will be obtained or that these approvals
will not contain terms, conditions or restrictions that would be
detrimental to Quanta after the effective time of the merger.
Quanta and InfraSource have not yet obtained any of the
governmental or regulatory approvals required to complete the
merger.
Material
U.S. Federal Income Tax Consequences of the
Merger
The following describes the material U.S. federal income
tax consequences of the merger to InfraSource stockholders if
they hold shares of InfraSource common stock as a capital asset
(generally property held for investment) and are:
|
|
|
|
•
|
an individual citizen or resident of the United States;
|
|
|
•
|
a corporation or other entity taxable as a corporation created
in or organized under the laws of the United States or any
political subdivision thereof;
|
|
|
•
|
an estate the income of which is subject to U.S. federal
income tax without regard to its source; or
|
|
|
•
|
a trust if a court within the United States is able to exercise
primary supervision over its administration and one or more
U.S. persons have the authority to control all of the
substantial decisions of such trust.
|
This discussion is not intended to be a complete analysis and
does not address all potential tax consequences that may be
relevant to any particular InfraSource stockholder. Moreover,
this discussion does not apply to InfraSource stockholders if
they are subject to special treatment under the Internal Revenue
Code including, without limitation, because they are:
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•
|
a foreign person or entity;
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•
|
a tax-exempt organization, financial institution, mutual fund,
dealer or broker in securities or insurance company;
|
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|
•
|
a dealer or trader who marks its securities to market for
U.S. federal income tax purposes;
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|
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•
|
a person who holds shares of InfraSource common stock as part of
an integrated investment such as a straddle, hedge, constructive
sale, conversion transaction or other risk reduction transaction;
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•
|
a person who holds shares of InfraSource common stock in an
individual retirement or other tax-deferred account;
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•
|
a person whose functional currency is not the U.S. dollar;
|
62
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•
|
an individual who received shares of InfraSource common stock,
or who acquires shares of Quanta common stock, pursuant to the
exercise of employee stock options or otherwise as compensation
or in connection with the performance of services;
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•
|
except where specifically stated below, a person whose relative
stock interest in InfraSource is not minimal or who exercises
control over the affairs of InfraSource;
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•
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a partnership or other flow-through entity (including an S
corporation or a limited liability company treated as a
partnership for U.S. federal income tax purposes) and
persons who hold an interest in such entities; or
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•
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a person subject to the alternative minimum tax.
|
If a partnership, or other entity or arrangement treated as a
partnership for U.S. federal income tax purposes, exchanges
its shares of InfraSource common stock in the merger, the tax
treatment of a partner in the partnership will depend upon the
status of that partner and the activities of the partnership.
Partners in a partnership that intends to exchange its shares of
InfraSource common stock in the merger should consult their tax
advisors as to the particular U.S. federal income tax
consequences applicable to them.
This discussion also does not address the tax consequences of
the merger under foreign, state, local or other tax laws. The
following discussion is based on existing U.S. federal
income tax law, including the provisions of the Internal Revenue
Code, the Treasury Regulations thereunder, the Internal Revenue
Service, referred to as the IRS, rulings, judicial decisions and
other administrative pronouncements, all as in effect on the
date of this joint proxy statement/prospectus. Neither Quanta
nor InfraSource can provide any assurance that future
legislative, administrative or judicial changes or
interpretations will not affect the accuracy of the statements
or conclusions set forth below. Any future change in the
U.S. federal income tax law or interpretation thereof could
apply retroactively and could affect the accuracy of the
following discussion. In addition, neither Quanta nor
InfraSource can assure InfraSource stockholders that the IRS
will agree with the conclusions expressed herein.
InfraSource stockholders are strongly urged to consult their
tax advisors as to the U.S. federal income tax consequences
of the merger, including the income tax consequences arising
from their own facts and circumstances, and as to any estate,
gift, state, local or
non-U.S. tax
consequences, arising out of the merger and the ownership and
disposition of shares of Quanta common stock.
General
The obligation of InfraSource to consummate the merger is
conditioned upon the receipt of a tax opinion, reasonably
satisfactory in form and in substance, dated the effective time
of the merger, from Ballard Spahr Andrews & Ingersoll,
LLP, that the merger will be treated for U.S. federal
income tax purposes as a “reorganization” qualifying
under the provisions of section 368(a) of the Internal
Revenue Code and that Quanta, InfraSource and Merger Sub (if
applicable) each will be a “party to the
reorganization” within the meaning of the Internal Revenue
Code.
The tax opinion described above will be based on certain facts,
representations, covenants and assumptions, including
representations of Quanta and InfraSource, and assumes that the
parties will comply with certain reporting obligations under the
Internal Revenue Code. This discussion and the tax opinion are
not binding on the IRS or any court and do not preclude the IRS
or a court from reaching a contrary conclusion.
Assuming the merger is consummated as described in the merger
agreement and this joint proxy statement/prospectus, it is the
opinion of Ballard Spahr Andrews & Ingersoll, LLP that
the merger will be treated as a “reorganization” under
Section 368(a) of the Internal Revenue Code. In addition,
the remainder of the discussion under “Material
U.S. Federal Income Tax Consequences of the Merger,”
subject to the limitations described above, constitutes the
opinion of Ballard Spahr Andrews & Ingersoll, LLP and,
assuming the merger qualifies as a “reorganization”,
Akin Gump Strauss Hauer & Feld LLP.
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•
|
Upon the deemed exchange pursuant to the conversion of the
shares of InfraSource common stock into shares of Quanta common
stock in the merger, InfraSource stockholders will not recognize
any gain or loss (except with respect to cash received in lieu
of a fractional share of Quanta common stock, as discussed
below).
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63
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•
|
The aggregate tax basis of any shares of Quanta common stock
InfraSource stockholders receive in exchange for their shares of
InfraSource common stock in the merger (before reduction for the
basis in any fractional share of Quanta common stock for which
they receive cash) will be the same as the aggregate tax basis
of their shares of InfraSource common stock.
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•
|
The holding period of any shares of Quanta common stock
InfraSource stockholders receive in the merger generally will
include the holding period of the shares of InfraSource common
stock they exchanged for such shares of Quanta common stock.
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•
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If InfraSource stockholders have differing bases or holding
periods in respect of their shares of InfraSource common stock,
they should consult their tax advisor prior to the exchange with
regard to identifying the bases or holding periods of the
particular shares of Quanta common stock received in the merger.
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•
|
Because Quanta will not issue any fractional shares of Quanta
common stock in the merger, if InfraSource stockholders exchange
shares of InfraSource common stock in the merger and would
otherwise have received a fraction of a share of Quanta common
stock, they will receive cash for that fractional share. Any
cash they receive in lieu of a fractional share of Quanta common
stock would be treated as received in an exchange of that
fractional interest for cash. The amount of any capital gain or
loss attributable to such exchange will be equal to the amount
of cash received with respect to the fractional interest less
the portion of the tax basis of the shares of InfraSource common
stock surrendered that is allocated to the fractional interest.
InfraSource stockholders are urged to consult their tax advisors
regarding the tax treatment of any cash received in the merger
in lieu of fractional shares of Quanta common stock.
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•
|
If InfraSource stockholders are individuals, any gain they
recognize upon the receipt of cash in lieu of a fractional share
of Quanta common stock will be subject to U.S. federal
income tax at a maximum 15% rate if their holding period in the
shares of InfraSource common stock is more than one year on the
date of completion of the merger. The deductibility of any
recognized capital losses is subject to limitations.
|
If the IRS were to challenge successfully the qualification of
the merger as a reorganization, InfraSource stockholders would
be required to recognize gain or loss equal to the difference
between their adjusted tax basis in the shares of InfraSource
common stock they surrender in the merger and an amount equal to
any cash received plus the fair market value, as of the
effective time of the merger, of any shares of Quanta common
stock received or to be received in the merger. In such event,
each InfraSource stockholder’s tax basis in the shares of
Quanta common stock received in the merger would equal their
fair market value as of the date of the merger, and such
InfraSource stockholder’s holding period for the shares of
Quanta common stock would begin on the day after the merger.
U.S. Information
Reporting and Backup Withholding
Under U.S. federal income tax laws, Quanta or the exchange
agent will be required to report to a InfraSource stockholder
and to the IRS cash payments made to such InfraSource
stockholder in lieu of the issuance of fractional shares of
Quanta common stock in the merger, and InfraSource stockholders
will be subject to a backup withholding tax at the rate of 28%
with respect to any cash received in the merger in lieu of
fractional shares of Quanta common stock; unless they
(1) are a corporation or come within certain other exempt
categories or (2) provide a correct taxpayer identification
number and, in each case, otherwise comply with applicable
requirements of the backup withholding rules. To prevent backup
withholding on payments made to InfraSource stockholders
pursuant to the merger, InfraSource stockholders must provide
the exchange agent with their correct taxpayer identification
number by completing an IRS
Form W-9
or a substitute
Form W-9.
If InfraSource stockholders willfully fail to provide their
correct taxpayer identification number, they will be subject to
penalties imposed by the IRS in addition to backup withholding.
Any amounts withheld under these rules are creditable against a
InfraSource stockholder’s U.S. federal income tax
liability if such stockholder files proper documentation with
the IRS. InfraSource stockholders are urged to consult their tax
advisors regarding the tax treatment of any cash received in the
merger in lieu of fractional shares of Quanta common stock.
64
Tax
Return Reporting
If any InfraSource stockholders that are considered
“significant holders” receive shares of Quanta common
stock in the merger, they each will be required (i) to file
a statement with their U.S. federal income tax return
providing certain facts pertinent to the merger, including the
tax basis in the shares of InfraSource common stock that they
surrendered and the fair market value of the shares of Quanta
common stock received in the merger and (ii) to retain
permanent records of these facts relating to the merger. A
“significant holder” for these purposes is any
InfraSource stockholder who, immediately before the merger,
owned at least 5% (by vote or value) of the total outstanding
shares of InfraSource common stock.
The foregoing discussion is not intended to be legal or tax
advice to any particular InfraSource stockholder. Tax matters
regarding the merger are very complicated, and the tax
consequences of the merger to any particular InfraSource
stockholder will depend on that stockholder’s particular
situation. InfraSource stockholders should consult their own tax
advisors regarding the specific tax consequences of the merger,
including tax return reporting requirements, the applicability
of U.S. federal, state, local and foreign tax laws and the
effect of any proposed change in the tax laws to them.
Accounting
Treatment
Quanta intends to account for the merger under the purchase
method for business combinations with Quanta being deemed to
have acquired InfraSource. This means that the assets and
liabilities of InfraSource will be recorded, as of the
completion of the merger, at their fair values and added to
those of Quanta and that any amount in excess thereof will be
goodwill. The reported financial condition and results of
operations of Quanta after completion of the merger will reflect
InfraSource’s assets and liabilities and results after
completion of the merger, but will not be restated retroactively
to reflect the historical financial position or results of
operations of InfraSource. Following the merger, the earnings of
the combined company will reflect purchase accounting
adjustments, including increased amortization and depreciation
expense for the acquired assets.
Listing
of Quanta Common Stock
Quanta will use commercially reasonable efforts to cause the
shares of Quanta common stock to be issued in connection with
the merger to be approved for listing on the NYSE upon the
completion of the merger. Approval of the listing on the NYSE of
the shares of Quanta common stock to be issued pursuant to the
merger is a condition to each party’s obligation to
complete the merger.
Delisting
and Deregistration of InfraSource Common Stock
If the merger is completed, InfraSource common stock will be
delisted from the NYSE and deregistered under the Exchange Act.
Restrictions
on Sales of Shares of Quanta Common Stock Received in the
Merger
The issuance of the shares of Quanta common stock in connection
with the merger will be registered under the Securities Act and
will be freely transferable, except for shares of Quanta common
stock issued to any person who is deemed to be an
“affiliate” of InfraSource under the Securities Act at
the time of the InfraSource special meeting. Persons who may be
deemed to be “affiliates” of InfraSource prior to the
merger include individuals or entities that control, are
controlled by, or are under common control with, InfraSource
prior to the merger, and may include officers and directors of
InfraSource prior to the merger. Affiliates of InfraSource prior
to the merger may not sell any of the shares of Quanta common
stock received by them in connection with the merger except
pursuant to:
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an effective registration statement under the Securities Act
covering the resale of those shares;
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an exemption under paragraph (d) of Rule 145
under the Securities Act; or
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any other applicable exemption under the Securities Act.
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InfraSource has agreed to use commercially reasonable efforts to
cause each person identified as an affiliate of InfraSource to
deliver prior to the InfraSource special meeting, a letter
agreement dated as of the effective time of
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the merger providing, among other things, that such person
agrees not to transfer any shares of Quanta common stock
received in the merger in violation of the Securities Act.
Persons identified as affiliates will be unable to exchange
their InfraSource common stock for the merger consideration
until they execute such letter agreement.
Entry
into a Written Plan for Trading of Securities by David R.
Helwig
On June 8, 2007, David R. Helwig entered into a stock
trading plan, referred to as the Plan, with Lehman Brothers Inc.
intended to comply with
Rule 10b5-1
of the Exchange Act. Under the terms of the Plan,
Mr. Helwig will sell up to 164,073 shares of
InfraSource common stock, which, upon completion of merger, will
convert into approximately 200,661 shares of Quanta common
stock. Pursuant to the terms of the Plan, the first trade date
under the Plan shall be no earlier than two weeks after the
consummation of the merger. The shares covered by the Plan
include shares held directly by Mr. Helwig and shares held
by DRHCLH Partnership, L.P., of which Mr. Helwig is the
sole general partner. Shares will be sold under the Plan at or
above specified market prices during specified time periods. The
Plan, unless earlier terminated in accordance with its terms,
will generally remain effective until the first anniversary of
the first trade made pursuant to the Plan. Transactions under
the Plan will be disclosed publicly through appropriate filings
with the SEC.
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THE
MERGER AGREEMENT
The following summary describes material provisions of the
merger agreement, which is attached as Annex A to this
joint proxy statement/prospectus and is incorporated by
reference herein. Quanta stockholders and InfraSource
stockholders are encouraged to carefully read the merger
agreement in its entirety.
The representations and warranties described below and
included in the merger agreement were made by each of Quanta and
InfraSource to the other. These representations and warranties
were made as of specific dates and are subject to important
exceptions and limitations, including a contractual standard of
materiality different from that generally applicable under
federal securities laws. In addition, the representations and
warranties may have been included in the merger agreement for
the purpose of allocating risk between Quanta and InfraSource,
rather than to establish matters as facts. The merger agreement
is described below in this joint proxy statement/prospectus and
attached as Annex A hereto. Quanta stockholders and
InfraSource stockholders should also read the information
provided elsewhere in this joint proxy statement/prospectus and
in the documents incorporated by reference into this joint proxy
statement/prospectus for additional information regarding Quanta
and InfraSource and their respective businesses. See “Where
You Can Find More Information; Incorporation by
Reference.”
Structure
of the Merger
Pursuant to the terms and subject to the conditions of the
merger agreement, at the effective time of the merger, Merger
Sub, a wholly owned subsidiary of Quanta, will merge with and
into InfraSource, with InfraSource surviving the merger as a
wholly owned subsidiary of Quanta, which is referred to as the
merger.
Effective
Time of the Merger
The closing of the merger and the other transactions
contemplated by the merger agreement will occur no later than
the third business day after all of the conditions to the
completion of the merger contained in the merger agreement have
been satisfied or waived, or at such other time as Quanta and
InfraSource may agree. At the closing, the appropriate parties
will file a certificate of merger with the Secretary of State of
the State of Delaware relating to the merger. The merger will
become effective upon the filing of the certificate of merger or
at such later time as Quanta and InfraSource agree in writing
and specify in the certificate of merger.
Merger
Consideration
The merger agreement provides that at the effective time of the
merger each share of InfraSource common stock issued and
outstanding immediately prior to the effective time of the
merger will be converted into the right to receive
1.223 shares of Quanta common stock.
Based on the number of shares of InfraSource common stock
outstanding on July 26, 2007, Quanta would issue
approximately 50.2 million shares of Quanta common stock
pursuant to the merger. Those amounts will be adjusted upwards
depending on the actual number of shares of InfraSource common
stock outstanding at the effective time of the merger, which
will increase if InfraSource issues any shares in accordance
with the terms of the merger agreement, such as through the
exercise of InfraSource stock options. Based on the outstanding
shares of InfraSource common stock on July 26, 2007 and the
maximum number of additional shares of InfraSource common stock
that may be issued in accordance with the merger agreement
pursuant to the exercise of outstanding InfraSource stock
options that are vested or will vest as a result of the
consummation of the merger, the aggregate number of shares of
Quanta common stock that Quanta would issue pursuant to the
merger is approximately 50.6 million.
Appraisal
Rights
Holders of InfraSource’s common stock, Quanta’s common
stock, and Quanta’s limited vote common stock are not
entitled to dissenters’ rights of appraisal under Delaware
law in connection with the merger.
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Conversion
of Shares; Exchange of Certificates
The conversion of shares of InfraSource common stock into the
right to receive the merger consideration will occur
automatically at the effective time of the merger. As soon as
reasonably practicable after the effective time of the merger,
BNY Mellon Shareowner Services, as exchange agent, will exchange
certificates formerly representing shares of InfraSource common
stock for merger consideration to be received in the merger
pursuant to the merger agreement.
Exchange
Procedures
Prior to the effective time of the merger, Quanta will make
available to BNY Mellon Shareowner Services (the exchange agent
in connection with the merger) the number of shares of Quanta
common stock to be issued as merger consideration, including
shares of Quanta common stock that will be sold by the exchange
agent to provide cash in lieu of fractional shares (as further
described below).
Promptly after the effective time of the merger, the exchange
agent will send a letter of transmittal to each person who was
an InfraSource stockholder at the effective time of the merger
who has not previously and properly surrendered certificates
representing shares of InfraSource common stock to the exchange
agent. This mailing will contain instructions on how to
surrender certificates formerly representing shares of
InfraSource common stock (if these certificates have not already
been surrendered) in exchange for the merger consideration the
holder is entitled to receive under the merger agreement.
If certificates formerly representing shares of InfraSource
common stock are presented for transfer after the effective time
of the merger, they will be exchanged for the merger
consideration into which the shares of InfraSource common stock
formerly represented by that certificate shall have been
converted.
Distributions
with Respect to Unexchanged InfraSource Common
Stock
After the effective time of the merger, holders of shares of
InfraSource common stock will be entitled to dividends and other
distributions payable with a record date after the effective
time of the merger with respect to the number of shares of
Quanta common stock to which they are entitled upon exchange of
their shares of InfraSource common stock, without interest, but
they will not be paid any dividends or other distributions on
such shares of Quanta common stock until they surrender their
shares of InfraSource common stock to the exchange agent in
accordance with the exchange agent’s instructions. After
the effective time of the merger, there will be no transfers on
the stock transfer books of InfraSource of any shares of
InfraSource common stock.
Fractional
Shares
Fractional shares of Quanta common stock will not be delivered
pursuant to the merger. Instead, each holder of shares of
InfraSource common stock who would otherwise be entitled to
receive a fractional share of Quanta common stock pursuant to
the merger will be entitled to receive a cash payment (without
interest), in lieu thereof, in an amount calculated by the
exchange agent that will represent such holder’s
proportionate interest in the net proceeds from the sale by the
exchange agent on behalf of such holder of the aggregate
fractional shares of Quanta common stock that such holder
otherwise would be entitled to receive. Any sale will be made by
the exchange agent within 5 business days after the date upon
which the InfraSource shares of common stock that would
otherwise result in the issuance of such fractional shares of
Quanta common stock have been received by the exchange agent.
Termination
of Exchange Fund
Any portion of the merger consideration, payable pursuant to the
merger agreement, made available to the exchange agent that
remains unclaimed by holders of shares of InfraSource common
stock for one year after the effective time of the merger will
be returned to Quanta upon demand. Thereafter, a holder of
InfraSource common stock must look only to Quanta for payment of
the merger consideration to which the holder is entitled under
the terms of the merger agreement. Any amounts remaining
unclaimed by holders of shares of InfraSource common stock
immediately prior to such time as such amounts would otherwise
escheat to or become the property of any governmental authority
will become the property of Quanta free and clear of any liens.
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Lost
Stock Certificates
If a certificate formerly representing shares of InfraSource
common stock has been lost, stolen or destroyed, the exchange
agent will issue the merger consideration properly payable under
the merger agreement upon receipt of appropriate evidence as to
that loss, theft or destruction, appropriate evidence as to the
ownership of that certificate by the claimant, and appropriate
and customary indemnification.
Withholding
Each of Quanta and the exchange agent will be entitled to deduct
and withhold from the merger consideration payable to any
InfraSource stockholder the amounts it is required to deduct and
withhold under the Internal Revenue Code or any state, local or
foreign tax law. Withheld amounts will be treated for all
purposes of the merger as having been paid to the InfraSource
stockholders from whom they were withheld.
Adjustments
to Prevent Dilution
The per share stock consideration will be equitably adjusted to
provide holders of shares of InfraSource common stock the same
economic effect contemplated by the merger agreement if at any
time between the signing and closing of the merger, there is any
change in the outstanding shares of capital stock of InfraSource
or Quanta, by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment, or stock
dividend with a record date during such period.
Dividends
and Distributions
Until InfraSource stockholders surrender their InfraSource stock
certificates for exchange, any dividends or other distributions
declared after the effective time of the merger with respect to
shares of Quanta common stock into which any of their shares of
InfraSource common stock may have been converted will accrue,
but will not be paid. When InfraSource stockholders surrender
their certificates, Quanta will pay any unpaid dividends or
other distributions, without interest.
Treatment
of Outstanding Stock Options
As of the effective time of the merger, each option to purchase
shares of InfraSource common stock granted under the InfraSource
stock plans will be converted into an option to purchase, on the
same terms and conditions as applied to each such option
immediately prior to the effective time of the merger, the
number of whole shares of Quanta common stock that is equal to
the number of shares of InfraSource common stock subject to such
option immediately prior to the effective time of the merger
multiplied by 1.223, at an exercise price per share of Quanta
common stock equal to the exercise price for each such share of
InfraSource common stock subject to such option immediately
prior to the effective time divided by 1.223.
Treatment
of Outstanding Restricted Stock
Each share of InfraSource common stock that is subject to
transfer
and/or
forfeiture restrictions under the InfraSource stock plans
immediately prior to the effective time of the merger will, upon
its conversion into the merger consideration, continue to be
subject to the same transfer and/or forfeiture restrictions.
Upon the lapsing of those restrictions, the holders of such
shares will be entitled to elect to have Quanta withhold shares
in an amount equal to applicable tax withholding.
Treatment
of InfraSource Employee Stock Purchase Plan
InfraSource took action to terminate all purchases of stock
under InfraSource’s 2004 Employee Stock Purchase Plan
effective as of the last “trading day” of the
then-current “offering period” that expired in May
2007 (as each such term is defined in the InfraSource 2004
Employee Stock Purchase Plan) that was in effect on the date of
the merger agreement. InfraSource will terminate the InfraSource
2004 Employee Stock Purchase Plan in its entirety immediately
prior to the closing date.
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Assumptions
of Rights and Obligations under InfraSource’s Stock
Plans
As of the effective time of the merger, Quanta will assume the
obligations and succeed to the rights of InfraSource under
InfraSource’s stock plans. InfraSource options and
InfraSource restricted shares will not vest as a result of the
merger (except for options to purchase 88,341 shares and
30,210 shares of restricted stock). Prior to the effective
time of the merger, each of the InfraSource stock plans will be
amended, if and to the extent necessary, to reflect the
transactions contemplated by the merger agreement, including the
conversion of the InfraSource options and InfraSource restricted
shares, and Quanta will be substituted for InfraSource in such
stock plans to the extent appropriate to effectuate the
assumption of such InfraSource stock plans by Quanta.
Representations
and Warranties
The merger agreement contains representations and warranties
made by each of the parties regarding aspects of their
respective businesses, financial condition and structure, as
well as other facts pertinent to the merger. Each of
InfraSource, on the one hand, and Quanta and Merger Sub, on the
other hand, has made representations and warranties to the other
in the merger agreement with respect to some or all of the
following subject matters:
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corporate existence, good standing and qualification to conduct
business;
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capitalization, including ownership of subsidiary capital stock
and the absence of restrictions or encumbrances with respect to
capital stock of any subsidiary;
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corporate power and authorization to enter into and carry out
the obligations of the merger agreement and the enforceability
of the merger agreement;
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absence of any conflict or violation of organizational
documents, third party agreements or law or regulation as a
result of entering into and carrying out the obligations of the
merger agreement;
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governmental, third party and regulatory approvals or consents
required to complete the merger;
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filings and reports with the SEC and financial information;
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absence of undisclosed liabilities;
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accuracy of the information supplied for inclusion in this joint
proxy statement/prospectus;
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litigation and compliance with laws;
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absence of certain changes or events;
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tax matters;
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employee benefit plans and ERISA;
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environmental matters;
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insurance;
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labor matters and employees;
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material contracts;
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intellectual property;
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disclosure controls and procedures and internal control over
financial reporting;
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reorganization;
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recommendations of merger by boards of directors and opinions of
financial advisors;
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fees payable to brokers in connection with the merger; and
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required vote by stockholders.
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InfraSource has made additional representations and warranties
to Quanta in the merger agreement with respect to the following
subject matters:
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title to property and equipment; and
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no anti-takeover law or provision in InfraSource’s
certificate of incorporation or bylaws will be applicable to the
merger agreement.
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Quanta has made additional representations and warranties to
InfraSource in the merger agreement with respect to the
following matters:
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the merger will not result in the grant of any rights to any
person under the Rights Agreement; and
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that Quanta has no ownership of InfraSource common stock.
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Certain representations and warranties of Quanta and InfraSource
are qualified as to materiality or as to “material adverse
effect,” which when used with respect to Quanta and
InfraSource means, as the case may be, a materially adverse
effect on the financial condition, business, assets, properties
or results of operations of such party and its subsidiaries,
taken as a whole, no matter how caused or how arising, except
that no materially adverse effect may be caused solely by or
arise solely from one or more of:
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changes to economic, political or business conditions affecting
the economy or financial markets generally, unless any such
changes or occurrence materially and disproportionately affect
such party, taken as a whole;
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the occurrence of natural disasters of any type, unless any such
changes or occurrence materially and disproportionately affect
such party, taken as a whole;
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the occurrence of war, acts of war, terrorism or similar
hostilities, unless any such changes or occurrence materially
and disproportionately affect such party, taken as a
whole; or
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changes in laws of general applicability or interpretations
thereof by courts or governmental entities, unless any such
changes or occurrence materially and disproportionately affect
such party, taken as a whole.
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Conditions
to the Completion of the Merger
The completion of the merger is subject to various conditions.
While it is anticipated that all of these conditions will be
satisfied, there can be no assurance as to whether or when all
of the conditions will be satisfied or, where permissible,
waived.
Conditions
to Each Party’s Obligations
Each party’s obligation to complete the merger is subject
to the satisfaction or waiver of the following conditions:
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adoption by InfraSource stockholders of the merger agreement;
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approval by Quanta stockholders of the issuance of Quanta common
stock pursuant to the merger;
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absence of any statute, rule, order, decree or regulation, and
of any action taken by any court or other governmental entity
which temporarily, preliminarily or permanently restrains,
precludes, enjoins or otherwise prohibits the consummation of
the merger;
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the waiting period (and any extension thereof) applicable to the
consummation of the merger under the HSR Act will have expired
or been terminated;
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effectiveness of the
S-4
registration statement, of which this joint proxy
statement/prospectus constitutes a part, and absence of any stop
order or proceedings for such purpose pending before or
threatened by the SEC; and
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shares of Quanta common stock issuable to the stockholders of
InfraSource pursuant to the merger will have been approved for
listing on the NYSE, subject to official notice of issuance.
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Additional
Conditions to InfraSource’s Obligations
The obligation of InfraSource to complete the merger is subject
to the satisfaction or waiver of the following conditions:
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Quanta’s and Merger Sub’s representations and
warranties set forth in the merger agreement (without giving
effect to any limitation as to “materiality” or
“material adverse effect” set forth therein) will be
true and correct at and as of the closing date of the merger, as
if made at and as of the closing date of the merger (except to
the extent expressly made as of an earlier date, in which case
as of such date), except where the failure of such
representations to be true and correct (without giving effect to
any limitation as to “materiality” or “material
adverse effect” set forth therein) individually or in the
aggregate has not had, and would not be reasonably likely to
have or result in, a material adverse effect on Quanta;
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the performance in all material respects by Quanta and Merger
Sub of their respective obligations contained in the merger
agreement, except to the extent that such covenants are
qualified by terms such as “material” or
“material adverse effect,” in which case Quanta and
Merger Sub will have performed and complied with all of such
covenants in all respects through the closing; and
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the receipt by InfraSource of an opinion of its counsel, dated
the closing date of the merger, to the effect that the merger
will qualify as a reorganization under Section 368(a) of
the Internal Revenue Code and that InfraSource and Quanta will
each be a “party to the reorganization” within the
meaning of Section 368 of the Internal Revenue Code.
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Additional
Conditions to Quanta’s and Merger Sub’s
Obligations
The obligations of Quanta and Merger Sub to complete the merger
are subject to the satisfaction or waiver of the following
conditions:
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InfraSource’s representations and warranties set forth in
the merger agreement will be true and correct (without giving
effect to any limitations as to “materiality” or
“material adverse effect” set forth therein) at and as
of the closing date of the merger, as if made at and as of the
closing date of the merger (except to the extent expressly made
as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be
true and correct (without giving effect to any limitations as to
“materiality” or “material adverse effect”)
individually or in the aggregate has not had, and would not be
reasonably likely to have or result in, a material adverse
effect on InfraSource;
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the performance in all material respects by InfraSource of its
obligations contained in the merger agreement, except to the
extent that such covenants are qualified by terms such as
“material” or “material adverse effect,” in
which case InfraSource will have performed and complied with all
of such covenants in all respects through the closing;
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the receipt by Quanta of customary evidence satisfactory to
Quanta that (i) the InfraSource credit agreement
(including, without limitation, all commitments set forth
therein), the note(s) and each of the other loan documents have
been duly cancelled or repaid in full, and InfraSource will have
satisfied and be discharged from any and all obligations and
liabilities under the InfraSource credit agreement and all
documents and agreements delivered pursuant to the InfraSource
credit agreement and the credit agreement and all documents and
agreements delivered thereunder, as applicable, will be
terminated, (ii) all liens and security interests upon any
property of InfraSource, the InfraSource subsidiaries or any of
its or their affiliates granted in favor of the administrative
agent under the InfraSource credit agreement will have been
released and terminated without the requirement of any further
action by or on behalf of any natural or corporate person, and
(iii) Quanta is in receipt of an acknowledgment of the
repayment and termination of the credit agreement in form and
substance acceptable to Quanta.
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Conduct
of Business Pending the Merger
Conduct
of InfraSource’s Operations
InfraSource has agreed that it will, and will cause its
subsidiaries to, during the period from the date of the merger
agreement until the effective time of the merger:
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conduct the business of InfraSource and its subsidiaries only in
the ordinary course consistent with past practice; and
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use commercially reasonable efforts to preserve intact its
business organization and relationships with third parties and
to keep the services of its present officers and employees.
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During the period from the date of the merger agreement until
the effective time of the merger, except with the prior written
consent of Quanta, which consent will not be unreasonably
withheld, delayed or conditioned or as required by the merger
agreement until the effective time of the merger, InfraSource
will not, and, if applicable, will not permit any of its
subsidiaries to:
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amend its certificate of incorporation or bylaws or similar
organizational documents;
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except for repurchases of capital stock pursuant to outstanding
restricted stock agreements, declare, set aside or pay any
dividend or other distribution with respect to any shares of
capital stock of InfraSource or repurchase, redeem or otherwise
acquire any outstanding shares of capital stock or securities of
or other ownership interests in InfraSource;
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merge or consolidate with any other person or acquire assets of
any other person for consideration in excess of $5,000,000,
individually, and $50,000,000 in the aggregate or enter a new
line of business or commence business operations in any country
in which InfraSource is not operating as of the date of the
merger agreement or make any offer to do any of the foregoing
other than those transactions previously disclosed to Quanta,
provided that for any permitted transaction under such covenant,
InfraSource will provide Quanta a reasonable period prior to
execution to review the documentation associated with such
transaction, which documentation will contain terms and
conditions substantially consistent with the description of the
transaction previously disclosed to Quanta;
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sell, lease, license or otherwise surrender, relinquish or
dispose of any assets or properties (other than to Quanta and
its direct and indirect wholly owned subsidiaries), other than
dispositions of (A) equipment and (B) real property
less than $5,000,000, in each case in the ordinary course of
business consistent with past practice;
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make any change to any material method of tax accounting, make
or change any material tax election, authorize any indemnities
for a material amount of taxes, extend any period for assessment
of any material amount of taxes, file any request for ruling or
determination in respect of any material amount of taxes, amend
any federal income tax return (including by way of a claim for
refund), amend any return other than a federal income tax return
if such amended return would result in an overpayment or
underpayment of a material amount of taxes or if a material
number of such returns would be amended, or settle or compromise
any material amount of taxes;
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except as previously disclosed to Quanta or pursuant to existing
obligations or issuances of shares of InfraSource common stock
upon the exercise of vested InfraSource options, issue any
securities or enter into any amendment of any term of any
outstanding security of InfraSource or of any of the InfraSource
subsidiaries;
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except settlements (A) in the ordinary course of business
not exceeding a $5,000,000 payment by InfraSource or InfraSource
subsidiary with an unconditional release of InfraSource, the
InfraSource subsidiaries and its or their affiliates, as
applicable, from any liabilities or, (B) in the case of
non-monetary settlements, which would not be reasonably likely
to have an adverse impact in any material respect on the
operations of InfraSource and the InfraSource subsidiaries and,
following the effective time of the merger, Quanta and the
Quanta subsidiaries, to enter into any settlement or consent
with respect to any pending litigation or other proceeding;
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incur any indebtedness for borrowed money, except indebtedness
incurred and letters of credit issued under the InfraSource
credit agreement or in the ordinary course of business in
accordance with the InfraSource credit agreement (InfraSource
will notify Quanta of the issuance of any letter of credit in
the amount of $2,000,000 or more prior to the issuance thereof
and in such notification, InfraSource will not be required to
disclose competitive data to Quanta);
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change any method of accounting or accounting practice by
InfraSource or any of the InfraSource subsidiaries except for
any such change required by GAAP;
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take any action that would give rise to a claim under the WARN
Act or any similar state law or regulation because of a plant
closing or mass layoff;
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make or commit to make capital expenditures in excess of 120% of
the aggregate consolidated budgeted amount set forth in
InfraSource’s fiscal 2007 capital expenditure plan as
previously disclosed to Quanta;
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enter into any futures, hedge, swap, collar, put, call, floor,
cap, option or other contracts that are intended to benefit from
or reduce or eliminate the risk of fluctuations in the price of
commodities, or securities, interest rates or currencies, other
than in the ordinary course of business consistent with past
practices;
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except as required under the terms of any InfraSource benefit
plan or by law, adopt, amend, modify or assume any InfraSource
benefit plan (or any plan that would be a InfraSource benefit
plan if so adopted) other than (A) amendments made for
purposes of complying with Section 409A of the Internal
Revenue Code which do not increase InfraSource’s costs
under the amended InfraSource benefit plan or
(B) establishing a 2007 annual incentive plan with terms
and individual targets that are substantially the same as the
2006 annual incentive plan (except to the extent of resetting of
InfraSource performance targets from 2006 to 2007 consistent
with the methodology of setting 2006 InfraSource performance
targets or as previously disclosed to Quanta) with payments
thereunder not to be due until after the completion of fiscal
2007 in accordance with past practice;
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approve any annual increase in compensation for any employee or
officer of InfraSource or the InfraSource subsidiaries (provided
that InfraSource will not be prevented or restricted from
awarding
and/or
paying any bonus under the InfraSource’s 2006 annual
incentive compensation plan to any employee or officer of
InfraSource or the InfraSource subsidiaries in accordance with
the terms of such plan and the bonus information furnished to
Quanta on or prior to the date of the merger agreement except as
required under the terms of any InfraSource employee agreement
or, consistent with past practice as previously disclosed to
Quanta;
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except as required by law or as previously disclosed to Quanta,
(A) enter into, modify or amend any InfraSource employee
agreement with any current or former officer or employee other
than amendments to InfraSource employee agreements made for
purposes of complying with Section 409A of the Code which
do not increase InfraSource’s costs under the amended
InfraSource employee agreement or (B) except in the
ordinary course of business, modify any labor agreement;
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except as required by law or as previously disclosed to Quanta,
(A) enter into, modify or amend any existing
indemnification agreements between InfraSource or any
InfraSource subsidiary and the directors and officers of
InfraSource or any InfraSource subsidiary or (B) amend,
modify or change any terms of the current InfraSource’s and
InfraSource subsidiaries’ directors’ and
officers’ liability insurance policies such that those
amendments, modifications or changes would cause an increase in
the annual premiums payable thereunder;
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except as required by law, permit the committee administering
the Blair Park Services, Inc. Long Term Incentive Plan referred
to as the BP LTIP, to, (A) add additional participants in
the BP LTIP after the date of the merger agreement,
(B) waive or modify any performance targets under the BP
LTIP, (C) accelerate the vesting or payment of any awards
granted thereunder, whether in connection with the merger or
otherwise, (D) change the identity of the committee or
person(s) administering the BP LTIP or (E) otherwise amend
or modify the terms of the BP LTIP;
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other than in connection with any transaction permitted under
the merger agreement, organize or acquire any person that could
become a subsidiary;
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enter into any new contract except for a contract that is
entered into in the ordinary course of business consistent with
past practice and that does not constitute a material contract;
provided that such contract will not have a material adverse
effect on the ability of InfraSource or any of the InfraSource
subsidiaries or affiliates to conduct its business, and provided
further that in obtaining the consent of Quanta with respect to
any such contract, InfraSource will not be required to disclose
competitive data to Quanta;
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deem uncollectible or reserve for any accounts or notes
receivable, except in the ordinary course of business consistent
with past practice;
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except as previously disclosed to Quanta, terminate any material
contract to which it is a party or waive or assign any of its
rights or claims under any material contract in a manner that is
materially adverse to InfraSource or, except in the ordinary
course of business consistent with past practice, modify or
amend in any material respect any material contract;
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except as required or permitted by the InfraSource credit
agreement, place a material encumbrance on any material asset;
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take any action which would reasonably be expected to result in
(A) any inaccuracy of a representation or warranty which
would allow for a termination of the merger agreement, or
(B) cause any of the conditions precedent to the
transactions contemplated by the merger agreement to fail to be
satisfied;
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dissolve or liquidate or adopt a plan of complete or partial
liquidation, dissolution, or reorganization; and
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agree or commit to do any of the foregoing.
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Conduct
of Quanta’s Operations
Quanta has agreed that it will, and will cause its subsidiaries
to, during the period from the date of the merger agreement
until the effective time of the merger:
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conduct the business of Quanta and its subsidiaries only in the
ordinary course of business consistent with past
practice; and
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use commercially reasonable efforts to preserve intact its
business organization and relationships with third parties and
to keep available the services of its present officers and
employees.
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During the period from the date of the merger agreement until
the effective time of the merger, except with the prior written
consent of InfraSource, which consent will not be unreasonably
withheld, delayed or conditioned or as required by the merger
agreement until the effective time of the merger, Quanta will
not, and, if applicable, will not permit any of its subsidiaries
to:
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adopt or propose any change to its certificate of incorporation
or bylaws or those of Merger Sub which would reasonably be
expected to have a material adverse effect on the consummation
of the transactions contemplated by the merger agreement;
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declare, set aside or pay any dividend or other distribution
with respect to any shares of capital stock of Quanta;
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merge or consolidate with any other person or acquire assets of
any other person if such transaction would reasonably be
expected to prevent or materially delay the consummation of the
transactions contemplated by the merger agreement;
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change any method of accounting or accounting practice by Quanta
or any of the Quanta subsidiaries except for any such change
required by GAAP;
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take any action that would give rise to a claim under the WARN
Act or any similar state law or regulation because of a plant
closing or mass layoff that would, individually or in the
aggregate, reasonably be expected to have a material adverse
effect on Quanta;
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except as required under the terms of any Quanta benefit plan or
by law, adopt, amend or assume any Quanta benefit plan (or any
plan that would be a Quanta benefit plan if so adopted) if such
adoption, amendment or assumption, as applicable, either
individually or together with all other such adoptions,
amendments or assumptions, would adversely and
disproportionately affect all employees of InfraSource and the
InfraSource subsidiaries taken as a whole, other than amendments
made for purposes of complying with Section 409A of the
Internal Revenue Code;
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terminate any material contract that would, individually or in
the aggregate, reasonably be expected to have a material adverse
effect on Quanta, waive or assign any of its rights or claims
under any material contract in a manner that is materially
adverse to Quanta or, except in the ordinary course of business
consistent with past practice, modify or amend in any material
respect any material contract that would, individually or in the
aggregate, reasonably be expected to have a material adverse
effect on Quanta;
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take any action which would or could reasonably be expected to
result in (A) any inaccuracy of a representation or
warranty herein which would allow for a termination of the
merger agreement, or (B) cause any of the conditions
precedent to the transactions contemplated by the merger
agreement to fail to be satisfied;
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dissolve or liquidate or adopt a plan of complete or partial
liquidation, dissolution, or reorganization; and
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other than Merger Sub, agree or commit to do any of the
foregoing, except that Quanta subsidiaries (including Merger
Sub) will be permitted to dissolve or liquidate or adopt a plan
of complete or partial liquidation, dissolution, or
reorganization.
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Covenants
Access
Subject to certain conditions, during the period from and after
the date hereof until the earlier of the effective time of the
merger or the termination of the merger agreement, and subject
to applicable law and the confidentiality agreements that were
entered into in connection with the merger agreement,
InfraSource and Quanta will (i) give to the other, its
officers, employees, counsel, financial advisors, auditors and
other authorized representatives reasonable access during normal
business hours and upon reasonable notice to its offices,
properties, books and records and those of its subsidiaries,
(ii) furnish to the other, its officers, employees,
counsel, financial advisors, auditors and other authorized
representatives to the extent reasonably available such
financial and operating data and other information as such
persons may reasonably request (including, to the extent
reasonably practicable, furnishing to the other its financial
results in advance of filing any related SEC filings containing
such financial results), and (iii) instruct its officers,
employees, counsel, financial advisors, auditors and other
authorized representatives and those of its subsidiaries to
cooperate in all reasonable respects with the other’s
investigation of it and its subsidiaries; provided that
information provided to the other and its representatives will
be subject to the confidentiality agreements. No information or
knowledge obtained by a party in any investigation pursuant to
the merger agreement will affect or be deemed to modify any
representation or warranty made by the other party.
Commercially
Reasonable Efforts
Subject to the terms and conditions of the merger agreement,
InfraSource and Quanta will use (and will cause their respective
subsidiaries to use) their commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under the
merger agreement or laws to consummate and make effective as
soon as reasonably practicable, the merger and the other
transactions contemplated by the merger agreement, including
working together to ensure a smooth transition with respect to,
and to maintain existing relationships with, employees,
customers and suppliers of InfraSource and the InfraSource
subsidiaries.
HSR
Act
InfraSource and Quanta have filed with the Antitrust Division
and the FTC the notification required to be filed with respect
to the transactions provided in the merger agreement under the
HSR Act (and requested early
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termination of the waiting period). Each of InfraSource and
Quanta will, in connection therewith, cooperate as necessary to
promptly amend such filings or supply additional information and
documentary material as may be requested pursuant to the HSR
Act. On May 7, 2007, the FTC notified Quanta and
InfraSource that the FTC was granting early termination of the
statutory waiting period under the HSR Act.
Each of InfraSource and Quanta, through outside counsel, will
(A) promptly notify the other of any written communication
to that party from any governmental authority concerning the
merger agreement or the transactions contemplated thereby and,
if practicable, permit such other party’s counsel to review
in advance any proposed written communication to any such
governmental authority concerning the merger agreement or the
transactions contemplated thereby and incorporate such other
party’s reasonable comments and (B) not agree to
participate in any substantive meeting or discussion with any
such governmental authority in respect of any filing,
investigation or inquiry concerning the merger agreement or the
transactions contemplated thereby unless it consults with such
other party’s counsel in advance, and, to the extent
permitted by such governmental authority, gives such other party
the opportunity to attend; provided, however, that, in each
case, any documents reflecting a party’s confidential,
nonpublic valuation of the merger and the transactions
contemplated thereby need not be furnished or made available to
such other party’s counsel.
Conveyance
Taxes
InfraSource and Quanta will cooperate in the preparation,
execution and filing of all returns, questionnaires,
applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock
transfer and stamp taxes, any transfer, recording, registration
and other fees, and any similar taxes that become payable in
connection with the transactions contemplated by the merger
agreement that are required or permitted to be filed on or
before the effective time of the merger.
Notice
of Certain Events
Each of InfraSource and Quanta will promptly notify the other
of: (i) any notice or other communication from any
individual, corporation, general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization, governmental authority or other entity of any kind
or nature alleging that the consent of such person is or may be
required in connection with the transactions contemplated by the
merger agreement; (ii) any notice or other communication
from any governmental authority in connection with the
transactions contemplated by the merger agreement;
(iii) any actions commenced or, to its knowledge,
threatened against, relating to or involving or otherwise
affecting InfraSource, Quanta or any of their respective
subsidiaries that relate to the consummation of the transactions
contemplated by the merger agreement, including the merger;
(iv) any notice of, or other communication relating to, a
default or event that with notice or lapse of time or both,
would become a default, received by it or any of the InfraSource
subsidiaries or the Quanta subsidiaries subsequent to the date
of the merger agreement, under any material agreement; and
(v) any material adverse effect on InfraSource or material
adverse effect on Quanta, as applicable, or the occurrence of
any event which is reasonably likely to result in a material
adverse effect on InfraSource or a material adverse effect on
Quanta, as the case may be.
Actions
and Proceedings
In the event that any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) by any
third party or governmental authority challenging any
transaction contemplated by the merger agreement, or any other
agreement contemplated hereby, each of Quanta and InfraSource
will cooperate in all respects with each other and use its
respective commercially reasonable efforts to contest and resist
any such action or proceeding and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other
order, whether temporary, preliminary or permanent, that is in
effect and that prohibits, prevents or restricts consummation of
the transactions contemplated by the merger agreement.
Consents
and Approvals
InfraSource, Quanta and Merger Sub will cooperate with each
other and (i) promptly prepare and file all necessary
documentation, (ii) effect all necessary applications,
notices, petitions and filings and execute all
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agreements and documents, (iii) use all commercially
reasonable efforts to obtain all necessary permits, licenses,
consents, approvals and authorizations of all governmental
authorities and (iv) use all commercially reasonable
efforts to obtain all necessary permits, consents, approvals and
authorizations of all other parties, in the case of each of the
foregoing clauses (i), (ii), (iii) and (iv), necessary
to consummate the transactions contemplated by the merger
agreement or required by the terms of any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument to which
InfraSource, Merger Sub, Quanta or any of their respective
subsidiaries is a party or by which any of them is bound. Quanta
will be required to amend or obtain a waiver for its credit
agreement and related security and pledge agreements in
connection with the merger. Likewise InfraSource’s credit
agreement will need to be paid in full and the related guaranty,
security and pledge agreements terminated and released.
Preparation
of Proxy Statement/Prospectus and Registration
Statement
InfraSource and Quanta will cooperate in preparing and each will
cause to be filed with the SEC, in connection with the merger,
the proxy statement/prospectus in preliminary form and Quanta
will promptly prepare and file with the SEC the registration
statement, which will include a combined proxy
statement/prospectus and the parties will file the tax opinion
and, if necessary, any other statement or schedule relating to
the merger agreement and the transactions contemplated thereby.
Each of InfraSource, Quanta and Merger Sub will use their
respective reasonable best efforts to furnish the information
required to be included by the SEC in the proxy
statement/prospectus, the registration statement and any such
statement or schedule. Each of InfraSource and Quanta will use
its commercially reasonable efforts to have the registration
statement declared effective under the Securities Act as
promptly as practicable after such filing, and each of
InfraSource and Quanta will as promptly as practicable
thereafter mail the proxy statement/prospectus to its
stockholders. Quanta will also take any action (other than
qualifying to do business in any jurisdiction in which it is not
now so qualified or filing a general consent to service of
process in any jurisdiction) required to be taken under any
applicable state securities laws in connection with the issuance
of Quanta common stock in the merger and InfraSource will
furnish all information concerning InfraSource and InfraSource
stockholders as may be reasonably requested in connection with
any such action. Promptly after the effectiveness of the
registration statement, Quanta and InfraSource will cause the
proxy statement/prospectus to be mailed to their respective
stockholders, and, if necessary, after the definitive proxy
statement/prospectus has been mailed, promptly circulate
amended, supplemented or supplemental proxy materials and, if
required in connection therewith, re-solicit proxies or written
consents, as applicable.
If at any time prior to the effective time, any event or
circumstance relating to InfraSource, Quanta, Merger Sub or any
of their respective affiliates, or its or their respective
officers or directors, should be discovered by InfraSource,
Quanta or Merger Sub that should be set forth in an amendment to
the registration statement or a supplement to the proxy
statement/prospectus, InfraSource, Quanta or Merger Sub will
promptly inform the other parties hereto thereof in writing. All
documents that InfraSource or Quanta is responsible for filing
with the SEC in connection with the transactions contemplated
herein will comply as to form in all material respects with
applicable requirements of the Securities Act and the Exchange
Act. The parties will notify each other promptly of the time
when the registration statement has become effective, of the
issuance of any stop order or suspension of the qualification of
the Quanta common stock issuable in connection with the merger
for offering or sale in any jurisdiction, or of the receipt of
any comments from the SEC or the staff of the SEC and of any
request by the SEC or the staff of the SEC for amendments or
supplements to the proxy statement/prospectus or the
registration statement or for additional information and will
supply each other with copies of (i) all correspondence
between it or any of its representatives, on the one hand, and
the SEC or the staff of the SEC, on the other hand, with respect
to the proxy statement/prospectus, the registration statement or
the merger and (ii) all orders of the SEC relating to the
registration statement.
Each party will use reasonable best efforts to cause to be
delivered to the other party “comfort” letters of such
party’s independent public accountants, dated within two
business days of the effective date of the registration
statement and within two business days of the meetings of
stockholders of such party and such letters addressed to the
other party with regard to certain financial information
regarding such party included in the registration statement, in
form reasonably satisfactory to the other party and customary in
scope and substance for “comfort”
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letters delivered by independent public accountants in
connection with registration statements similar to the
registration statement. Quanta and InfraSource agreed to waive
this provision of the merger agreement regarding delivery of
comfort letters to each other.
Stockholders’
Meetings
InfraSource will, as promptly as reasonably practicable after
the date of the merger agreement (i) take all steps
reasonably necessary in accordance with all applicable laws and
the InfraSource certificate of incorporation and bylaws to duly
call, give notice of, convene and hold a special or annual
meeting of its stockholders for the purpose of securing the
InfraSource stockholders’ adoption of the merger agreement
and consummation of the transactions contemplated by the merger
agreement, (ii) distribute to its stockholders the proxy
statement/prospectus in accordance with all applicable laws and
its certificate of incorporation and bylaws, (iii) use all
commercially reasonably efforts to solicit from its stockholders
proxies in favor of adoption of the merger agreement and
consummation of the transactions contemplated by the merger
agreement and to take all other action necessary or advisable to
secure the InfraSource stockholders’ approval, and
(iv) cooperate and consult with Quanta with respect to each
of the foregoing matters. Subject to certain exceptions,
(A) the proxy statement/prospectus will include a statement
to the effect that the directors present and voting at a duly
called and held meeting of the InfraSource board of directors
have, by resolution adopted by all directors present and voting
at a duly called and held meeting, recommended that the
InfraSource stockholders vote in favor of adoption of the merger
agreement at the InfraSource stockholders’ meeting and
(B) neither the InfraSource board of directors nor any
committee thereof will withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify in a manner adverse to
Quanta, such recommendation of the InfraSource board of
directors that the InfraSource stockholders vote in favor of
adoption of the merger agreement. InfraSource agrees that its
obligations pursuant to the proxy statement/prospectus will not
be affected by the commencement, public proposal, public
disclosure or communication to InfraSource or any other person
of any acquisition proposal. Notwithstanding the foregoing,
nothing contained in the merger agreement will prohibit the
InfraSource board of directors from failing to make or from
withdrawing, amending or modifying its recommendation to the
InfraSource stockholders if the InfraSource board of directors
determines in good faith and after consultation with its outside
legal advisors that such action is necessary for the InfraSource
board of directors to comply with its fiduciary duties to
InfraSource or the InfraSource stockholders under any applicable
laws, but only after (y) providing written notice to Quanta
that it is prepared to make such determination and setting forth
the reasons therefor and (z) for a period of five business
days after providing such notice, InfraSource negotiates with
Quanta in good faith to make such adjustments to the terms and
conditions of the merger agreement as would enable the
InfraSource board of directors to proceed with its
recommendation of the merger agreement, and at the end of such
period the InfraSource board of directors maintains its
determination (after taking into account any proposed
adjustments).
Quanta will, as promptly as reasonably practicable after the
date of the merger agreement (i) take all steps reasonably
necessary to call, give notice of, convene and hold a special
meeting of its stockholders for the purposes of voting upon the
issuance of Quanta common stock issued in connection with the
merger, (ii) distribute to Quanta stockholders the proxy
statement/prospectus in accordance with all applicable laws and
its certificate of incorporation and bylaws, (iii) use all
commercially reasonable efforts to solicit from Quanta
stockholders proxies in favor of approval of the issuance of
Quanta common stock issued in connection with the merger and to
take all other commercially reasonable action necessary to
secure the approval of the issuance of Quanta common stock
issued in connection with the merger by the Quanta stockholders,
and (iv) cooperate and consult with InfraSource with
respect to each of the foregoing matters. Subject to certain
exceptions, (A) the proxy statement/prospectus will include
a statement to the effect that the directors present and voting
at a duly called and held meeting of the Quanta board of
directors have, by resolution adopted by all directors present
and voting at a duly called and held meeting, recommended that
the Quanta stockholders vote in favor of the issuance of Quanta
common stock issued in connection with the merger at the Quanta
stockholder’s meeting and (B) neither the Quanta board
of directors nor any committee thereof will withdraw, amend or
modify, or propose or resolve to withdraw, amend or modify in a
manner adverse to InfraSource, such recommendation of the Quanta
board of directors that the Quanta stockholders vote in favor of
the issuance of Quanta common stock issued in connection with
the merger. Notwithstanding the foregoing, nothing contained in
the merger agreement will prohibit the Quanta board of directors
from failing to make or from withdrawing, amending or modifying
its recommendation to the Quanta stockholders, provided that
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the Quanta board of directors determines in good faith and after
consultation with its outside legal advisors that such action is
necessary for the Quanta board of directors to comply with its
fiduciary duties to Quanta or the Quanta stockholders under any
applicable laws, but only after (y) providing written
notice to InfraSource that it is prepared to make such
determination and setting forth the reasons therefor and
(z) for a period of five business days after providing such
notice, Quanta negotiates with InfraSource in good faith to make
such adjustments to the terms and conditions of the merger
agreement as would enable the Quanta board of directors to
proceed with its recommendation of the merger agreement, and at
the end of such period the Quanta board of directors maintains
its determination (after taking into account any proposed
adjustments).
Indemnification;
Directors’ and Officers’ Insurance
The merger agreement provides that the certificate of
incorporation and bylaws of InfraSource after the effective time
of the merger will continue to contain provisions no less
favorable with respect to indemnification, advancement of
expenses and exculpation of each present and former officer,
director, manager or partner, as applicable, of InfraSource and
InfraSource’s subsidiaries than are presently set forth in
the current InfraSource certificate of incorporation and the
InfraSource bylaws or existing indemnification agreements, which
provisions will not be amended, repealed or otherwise modified
(unless an amendment, repeal or modification is required by law
or any director and officer affected thereby consents in writing
thereto) for a period of six years from the effective time of
the merger in any manner that would adversely affect the rights
thereunder of any such individuals with respect to any acts or
omissions occurring at or prior to the effective time of the
merger.
From and after the effective time of the merger, Quanta will
cause the directors and officers of InfraSource who are
currently covered by directors’ and officers’
liability insurance policy(ies) to be covered by a single
premium tail directors’ and officers’ liability
insurance policy acquired on or prior to the closing date and
maintained by InfraSource, with limits, terms and conditions at
least as favorable to those in the existing policies of
InfraSource, for a period of six years from and after the
effective time of the merger with respect to acts or omissions
occurring prior to the effective time of the merger that were
committed by such directors and officers in their capacities as
such, with policy limits, terms and conditions at least as
favorable to the limits, terms and conditions in the existing
policies of InfraSource (or with such other limits, terms and
conditions as permitted by the final two provisos of this
sentence); provided, further, that in no event shall Quanta be
required to pay an annual premium in excess of 200% of the
current annual premium paid by InfraSource for its existing
coverage on the date of the merger agreement as previously
disclosed to Quanta and provided, further, that if Quanta is
unable to obtain tail coverage with policy limits, terms and
conditions at least as favorable to the limits, terms and
conditions in the existing policies of InfraSource as a result
of the preceding provision, Quanta will obtain the most
advantageous tail coverage as is available for the indemnified
directors and officers. Upon written request by a covered
person, a copy of the policy will be made available to such
covered person.
BP
LTIP Committee
From the effective time of the merger through the duration of
the BP LTIP, the BP LTIP committee shall have two
(2) members, one (1) of whom shall be a member of the
Quanta board of directors who was previously a member of the
InfraSource board of directors.
Publicity
None of InfraSource, Quanta or Merger Sub, nor any of their
respective affiliates, will issue or cause the publication of
any press release or other announcement with respect to the
merger, the merger agreement or the other transactions
contemplated by the merger agreement without the prior
consultation of the other party, except as may be required by
law or by any listing agreement with, or regulation of, any
securities exchange or regulatory authority if all reasonable
best efforts have been made to consult with the other party. In
addition, InfraSource will to the extent reasonably practicable
consult with Quanta regarding the form and content of any public
disclosure of any material developments or matters involving
InfraSource, including earnings releases, reasonably in advance
of publication or release.
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Stock
Exchange Listing
Quanta has agreed to use commercially reasonable efforts to
cause the shares of Quanta common stock to be issued in
connection with the merger to be listed on the NYSE, subject to
official notice of issuance, as of the effective time of the
merger.
Employee
Benefits
During the period commencing at the effective time of the merger
and ending at 11:59 p.m. on December 31, 2007, Quanta
will (x) provide to non-union employees of InfraSource and
any InfraSource subsidiaries who continue employment with the
combined company after the effective time of the merger the same
base salary or wages, as applicable, that were being paid to
such InfraSource employees immediately prior to the effective
time of the merger and (y) maintain those InfraSource
benefit plans that provided pension and welfare benefits
(excluding benefits under defined benefit pension plans) to
InfraSource employees immediately prior to the effective time of
the merger.
During the one (1) year period commencing at the effective
time of the merger, Quanta will provide (A) to certain
InfraSource employees, each of whom experiences a qualifying
termination during such one-year period under the terms of the
InfraSource corporate severance benefit policy, the severance
benefits to which such InfraSource employee is entitled under
such severance benefits policy and (B) to each full-time
salaried InfraSource employee who is not provided for under
(A) above (and who is not a party to an InfraSource
management agreement) and whose employment with the combined
company is involuntarily terminated within such one-year period
other than for cause or as a result of such employee’s
death or disability (in each case, as determined by Quanta in
its sole discretion), severance benefits equal to two weeks base
salary for each completed year of service at the time of such
termination, up to a maximum of six (6) weeks base salary;
provided, that in each case, such InfraSource employee first
executes (and does not revoke) a release of claims in the form
prepared by Quanta.
For purposes of eligibility and vesting under the employee
benefit plans (but not for purposes of the accrual of benefits
under any defined benefit plans) of the combined company after
the effective time of the merger, and for purposes of accrual of
vacation and other paid time off and severance benefits under
any new benefit plans, each InfraSource employee who continues
employment with the combined company after the effective time of
the merger will be credited with his or her years of service
with InfraSource, an InfraSource subsidiary and their respective
affiliates (and any additional service with any predecessor
employer) before the closing, to the same extent as such
InfraSource employee was entitled, before the closing, to credit
for such service under any similar InfraSource benefit plan, but
no such crediting will result in the duplication of benefits
under any InfraSource benefit plan. In addition, and without
limiting the generality of the foregoing: (A) each
InfraSource employee who continues employment with the combined
company after the effective time of the merger will be
immediately eligible to participate, without any waiting time,
in any and all new benefit plans to the extent coverage under
such new benefit plan replaces coverage under a comparable
InfraSource benefit plan in which such InfraSource employee
participated immediately before the replacement; and
(B) for purposes of each new benefit plan providing
medical, dental, pharmaceutical
and/or
vision benefits to any InfraSource employee, Quanta will use
commercially reasonable efforts to cause all pre-existing
condition exclusions and
actively-at-work
requirements of such new benefit plan to be waived for such
employee and his or her covered dependents to the same extent as
under the applicable InfraSource benefit plan, and Quanta will
use commercially reasonable efforts to cause any eligible
expenses incurred by such employee and his or her covered
dependents under an InfraSource benefit plan during the portion
of the plan year of the new benefit plan ending on the date such
employee’s participation in the corresponding new benefit
plan begins to be taken into account under such new benefit plan
for purposes of satisfying all deductible, coinsurance and
maximum
out-of-pocket
requirements applicable to such employee and his or her covered
dependents for the applicable plan year as if such amounts had
been paid in accordance with such new benefit plan.
The merger agreement does not (A) confer upon any of the
InfraSource employees any rights or remedies (including, without
limitation, any right to employment or continued employment for
any specified period) of any nature or kind whatsoever under or
by reason of the merger agreement, or (B) subject to the
provisions described above, obligate the combined company after
the effective time of the merger to maintain any particular
InfraSource
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benefit plan or grant or issue any equity-based awards or limit
the ability of Quanta to amend or terminate any of such
InfraSource benefit plans to the extent permitted thereunder in
accordance with their terms. None of the provisions of the
merger agreement are intended to constitute an amendment to any
InfraSource benefit plan and no InfraSource employee will have
the right to enforce or compel the enforcement of any provisions
of the employee benefits section or the merger agreement.
Certain
Tax Matters
The merger agreement is intended to constitute a “plan of
reorganization” within the meaning of Treasury Regulation
section 1.368-2(g).
Each of Quanta and InfraSource have agreed that they will use
their reasonable best efforts to cause the merger to qualify as
a reorganization within the meaning of section 368(a) of
the Internal Revenue Code.
In connection with the merger, Quanta will file all required
information with its tax returns and maintain all records
required for tax purposes. Quanta and InfraSource will cooperate
in the preparation, execution and filing of all tax returns and
related documents.
Section 16
Matters
Prior to the closing date of the merger, Quanta and InfraSource,
and their respective boards of directors, will use their
commercially reasonable best efforts to take all actions to
cause any dispositions of shares of InfraSource common stock
(including derivative securities with respect to shares of
InfraSource common stock) or acquisitions of Quanta common stock
(including derivative securities with respect to Quanta common
stock) resulting from the transactions contemplated by the
merger agreement by each individual who is subject to the
reporting requirements of Section 16(a) of the Exchange Act
to be exempt from Section 16(b) of the Exchange Act under
Rule 16b-3
promulgated under the Exchange Act in accordance with the terms
and conditions set forth in that certain No-Action Letter, dated
January 12, 1999, issued by the SEC to Skadden, Arps,
Slate, Meagher & Flom LLP.
Affiliates
Letter
Prior to the date of the InfraSource special meeting,
InfraSource will deliver to Quanta a list of names and addresses
of those persons who are, in the opinion of InfraSource, as of
the time of the InfraSource special meeting,
“affiliates” of InfraSource within the meaning of
Rule 145 under the Securities Act. InfraSource will provide
to Quanta such information and documents as Quanta will
reasonably request for purposes of reviewing such list. There
will be added to such list the names and addresses of any other
person subsequently identified by either Quanta or InfraSource
as a person who may be deemed to be such an affiliate of
InfraSource.
InfraSource will exercise its commercially reasonable efforts to
deliver to Quanta, prior to the date of the InfraSource special
meeting, from each affiliate of InfraSource identified in the
foregoing list, a letter dated as of the effective time of the
merger an “affiliates letter.” Quanta will not be
required to maintain the effectiveness of the registration
statement related to the merger or any other registration
statement under the Securities Act for the purposes of resale of
shares of Quanta common stock by such affiliates received
pursuant to the merger and Quanta may direct the exchange agent
not to issue certificates representing shares of Quanta common
stock received by any such affiliate until Quanta has received
from such person an affiliates letter. Quanta may issue
certificates representing shares of Quanta common stock received
by such affiliates bearing a customary legend regarding
applicable Securities Act restrictions and the merger agreement.
InfraSource
Credit Agreement
InfraSource will take all actions as will be necessary to cause
at or prior to effective time of the merger (i) all
obligations (other than contingent indemnification obligations
not yet accrued) under the InfraSource credit agreement to have
been paid and satisfied and the InfraSource credit agreement to
have been terminated without any prepayment penalty or premium
and (ii) in any event (and regardless of whether any letter
of credit remains outstanding post-closing), all liens securing
any obligations under InfraSource credit agreement to have been
released. InfraSource will use commercially reasonable efforts
to deliver to Quanta at least two business days prior to the
closing date of the merger payoff letters from third-party
lenders or financing counterparties in form and
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substance reasonably satisfactory to Quanta, with respect to the
borrowings and fees under the InfraSource credit agreement,
indebtedness identified in InfraSource’s public SEC filings
and any other indebtedness entered into after the date of the
merger agreement or specified by Quanta to InfraSource no later
than twenty days prior to closing date that Quanta in its sole
discretion determines is necessary or desirable under
Quanta’s existing credit agreement covenants to repay.
On or prior to the effective time of the merger, Quanta will
provide sufficient funds to InfraSource to (i) pay all
outstanding borrowings and fees under the InfraSource credit
agreement and the other indebtedness for which payoff letters
will be obtained to the extent InfraSource does not have
sufficient funds to pay such amounts incurred in compliance with
the terms of the merger agreement and (ii) arrange for the
replacement or cash collateralization under customary reasonable
arrangements as to letters of credit outstanding under the
InfraSource credit agreement so that the InfraSource credit
agreement and the other indebtedness for which payoff letters
will be obtained may be terminated by InfraSource in accordance
with the merger agreement.
InfraSource
Deferred Compensation Plan
Prior to the closing date, InfraSource will amend its deferred
compensation plan to prohibit any further employee and employer
contributions thereunder effective as of the effective time of
the merger.
No
Solicitation of Alternative Transactions
InfraSource will not, and will use all reasonable efforts and
act in good faith to cause its subsidiaries and
InfraSource’s and its subsidiaries’ respective
directors, officers, employees, agents, attorneys, investment
bankers, consultants, accountants, and other advisors and
representatives not to, directly or indirectly:
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solicit, initiate, induce or knowingly encourage or facilitate
any inquiry with respect to, or the making, submission,
reaffirmation or announcement of, any acquisition proposal or
any offer or proposal that could reasonably be expected to lead
to any acquisition proposal;
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enter into, continue, participate or engage in any discussions
or negotiations regarding, or provide any confidential or
nonpublic information to any third person with respect to, any
acquisition proposal;
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approve, endorse, recommend or make or authorize any statement,
recommendation or solicitation in support of any acquisition
proposal;
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withdraw, amend or modify, or propose to withdraw, amend or
modify, in a manner adverse to Quanta, the InfraSource board of
directors’ recommendation in favor of the adoption of the
merger agreement by the InfraSource stockholders; or
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execute or enter into, or propose to execute or enter into, any
letter of intent, memorandum of understanding, agreement in
principle, merger or acquisition agreement or similar document
or any contract, agreement or commitment (whether binding or
not) contemplating or otherwise relating to any acquisition
proposal or transaction contemplated thereby (other than a
confidentiality agreement described below).
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InfraSource and InfraSource subsidiaries’ have also agreed
to immediately cease and cause to be terminated any and all
existing activities, discussions or negotiations (including,
without limitation, any such activities, discussions or
negotiations conducted by its representatives) with any third
parties conducted heretofore with respect to consideration of
any acquisition proposal. InfraSource will promptly, and not
later than 48 hours following the execution of the merger
agreement, request in writing that each person which has
executed a confidentiality or non-disclosure agreement prior to
the date of the merger agreement with InfraSource, its
subsidiaries or any of its representatives with respect to such
person’s consideration of an acquisition proposal to
immediately return or destroy all confidential and nonpublic
information heretofore furnished to such person or its
representatives by InfraSource, its subsidiaries or its
representatives pursuant to the terms of such confidentiality or
non-disclosure agreement.
InfraSource has also agreed that, as promptly as practicable
(and in any event no later than 24 hours) after receipt of
any acquisition proposal or request for nonpublic information or
inquiry that could reasonably be expected to lead to an
acquisition proposal or from any person seeking to have
discussions or negotiations with
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InfraSource or its representatives relating to a possible
acquisition proposal, InfraSource will provide Quanta with oral
and written notice of such acquisition proposal, request or
inquiry, including the material terms and conditions of such
acquisition proposal, request or inquiry; the identity of the
person or group making any such acquisition proposal, request or
inquiry; and a copy of all written materials provided by or on
behalf of such person or group in connection with such
acquisition proposal, request or inquiry. InfraSource will
provide Quanta with 24 hours prior written notice (or such
lesser prior notice as is provided to the members of the
InfraSource board of directors) of any meeting of the
InfraSource board of directors or a committee thereof at which
the members of the InfraSource board of directors would
reasonably be expected to consider any acquisition proposal or
any such inquiry or to consider providing nonpublic information
to or have such discussions or negotiations with any person.
The merger agreement provides that in the event that InfraSource
receives, prior to the InfraSource stockholders’ adoption
of the merger agreement, an unsolicited, bona fide written
acquisition proposal from a third party that did not result from
a breach of the merger agreement and that the InfraSource board
of directors has reasonably determined in good faith, after
consultation with its outside financial advisors and outside
counsel, that such acquisition proposal is, or is reasonably
likely to lead to, a superior proposal, InfraSource may then
(1) furnish confidential or nonpublic information to the
third party (and its representatives) making such acquisition
proposal and (2) engage in discussions and negotiations
(including exchanging draft agreements) with the third party and
its representatives with respect to such acquisition proposal;
provided, however, that:
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InfraSource complies with all of the terms of the merger
agreement with respect to solicitation of alternative
transactions;
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InfraSource will have notified Quanta, in writing, of any
decision of the InfraSource board of directors as to whether to
enter into discussions or negotiations concerning any
acquisition proposal or to provide confidential or nonpublic
information to any person as permitted herein, which notice will
be given as promptly as practicable after such decision (and in
any event no later than 24 hours after such determination
was reached);
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InfraSource promptly provides Quanta with oral and written
notice setting forth all such information as is reasonably
necessary to keep Quanta currently informed in all material
respects of the negotiations, status and material terms
(including material amendments or proposed material amendments
and any withdrawals or rejections thereof) of any such
acquisition proposal and will promptly provide Quanta a copy of
all written materials subsequently provided to, by or on behalf
of such person or group in connection with such acquisition
proposal;
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prior to furnishing any nonpublic information or entering into
any negotiations or discussions with such third party,
(1) InfraSource receives from such third party an executed
confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral
information furnished to such third party on InfraSource’s
behalf on terms no less restrictive to such third party than the
confidentiality agreements executed in connection with the
merger agreement, and (2) contemporaneously with furnishing
any such nonpublic information to such third party, InfraSource
furnishes such confidential or nonpublic information to Quanta
(to the extent such information has not been previously so
furnished); and
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the InfraSource board of directors reasonably determines in good
faith, after consultation with outside legal counsel, that the
failure to provide such information or enter into such
discussion or negotiations would reasonably be expected to
result in a breach of the InfraSource board of directors’
fiduciary duties to InfraSource and the InfraSource stockholders
under any applicable laws.
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InfraSource’s
Ability to Make an Alternative Transaction
Recommendation
At any time prior to obtaining the required InfraSource
stockholder vote adopting the merger agreement, and subject to
InfraSource’s compliance at all times with the
non-solicitation provisions described above, the InfraSource
board of directors or a committee thereof may withhold,
withdraw, amend or modify the InfraSource board of
directors’ recommendation in favor of the merger, if:
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InfraSource will have delivered to Quanta written notice at
least 48 hours prior to any meeting of the InfraSource
board of directors or a committee thereof at which the
InfraSource board of directors or
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committee is reasonably expected to consider declaring a
superior proposal or effecting an alternative transaction
recommendation;
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the InfraSource board of directors determines in good faith,
after consultation with InfraSource’s financial advisors
and outside legal counsel, that a superior proposal has been
made and not withdrawn;
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the InfraSource stockholders have not approved the merger
agreement in accordance with applicable laws;
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InfraSource will have delivered to Quanta written notice at
least five business days prior to publicly effecting such
alternative transaction recommendation which will state
expressly (A) that InfraSource has received a superior
proposal, (B) the final terms and conditions of the
superior proposal, (C) the identity of the person or group
making the superior proposal and (D) that InfraSource
intends to effect an alternative transaction recommendation;
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after delivering the written notice, InfraSource will negotiate
in good faith with Quanta and provide Quanta with a reasonable
opportunity to make adjustments in the terms and conditions of
the merger agreement during such five business day period such
that the acquisition proposal would no longer constitute a
superior proposal and the InfraSource board of directors could
proceed with its recommendation to the InfraSource stockholders
in favor of adoption of the merger agreement without making an
alternative transaction recommendation;
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the InfraSource board of directors shall have determined
(A) after consultation with its financial advisor, that the
terms of the superior proposal are more favorable to the
InfraSource stockholders than the terms of the merger and
(B) after consultation with outside legal counsel, that an
alternative transaction recommendation is necessary for the
InfraSource board of directors to comply with its fiduciary
duties to InfraSource and the InfraSource stockholders under
applicable laws;
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InfraSource will not have breached any of the provisions set
forth in the merger agreement with respect to the solicitation
of alternative transactions and InfraSource’s obligations
relating to the InfraSource special meeting; and
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InfraSource will have used all commercially reasonable efforts
to mail the joint proxy statement/prospectus to the InfraSource
stockholders as promptly as practicable after the date of the
merger agreement.
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“Acquisition
proposal”
For purposes of this joint proxy statement/prospectus, the term
“acquisition proposal” means, with respect to
InfraSource, any proposal or offer with respect to:
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a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, dissolution, liquidation
or similar transaction involving InfraSource;
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any purchase of an equity interest (including by means of a
tender or exchange offer) representing an amount equal to or
greater than a 25% voting or economic interest in
InfraSource; or
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any purchase of assets, securities or ownership interests
representing an amount equal to or greater than 25% of the
consolidated assets of InfraSource and the InfraSource
subsidiaries taken as a whole (including, in each case, stock of
such subsidiaries).
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“Superior
proposal”
For purposes of this joint proxy statement/prospectus, the term
“superior proposal” means, with respect to
InfraSource, a bona fide written acquisition proposal with
respect to:
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a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, dissolution, liquidation
or similar transaction involving InfraSource; any purchase of an
equity interest (including by means of a tender or exchange
offer) representing an amount equal to or greater than a 50%
voting or economic interest in InfraSource; or any purchase of
assets, securities or ownership interests representing an amount
equal to or greater than 50% of the consolidated assets of
InfraSource and the InfraSource
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subsidiaries taken as a whole (including, in each case, stock of
such subsidiaries) made by a person other than a party to the
merger agreement; and
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(1) on terms that the InfraSource board of directors (after
consultation with its outside financial advisor and outside
counsel) in good faith concludes to be more favorable from a
financial point of view to InfraSource stockholders (in their
capacity as stockholders) than the transactions contemplated by
the merger agreement, taking into account all terms and
conditions of such proposal and the merger agreement (including
any adjustment by Quanta to amend the terms of the merger
agreement), (2) that is reasonably certain of being
completed on the terms proposed, taking into account all legal,
financial, regulatory and other aspects of the proposal, and
(3) is fully financed and not subject to any financing
contingency.
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“Alternative
Transaction Recommendation”
For purposes of this joint proxy statement/prospectus, the term
“alternative transaction recommendation” means, with
respect to InfraSource, a direct or indirect action or public
proposal made by the InfraSource board of directors or a
committee of the InfraSource board of directors to:
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withhold, withdraw, amend or modify the InfraSource board of
directors’ recommendation in favor of the merger;
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in the case of a superior proposal that is a tender or exchange
offer made directly to the InfraSource stockholders, recommend
that the InfraSource stockholders accept the tender or exchange
offer; or
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approve, endorse, or recommend any superior proposal.
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Termination
of the Merger Agreement
General
The merger agreement may be terminated by written notice at any
time prior to the effective time of the merger in any of the
following ways:
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by mutual written consent of Quanta and InfraSource;
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by either Quanta or InfraSource:
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if the merger is not completed on or before November 30,
2007, unless the failure of the party seeking to terminate the
merger agreement to fulfill any material obligation under the
merger agreement has been the cause of, or resulted in the
failure of the merger to have been completed on or before this
date;
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if the InfraSource stockholders fail to adopt the merger
agreement at the InfraSource stockholders’ meeting;
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if the Quanta stockholders fail to approve the issuance of
shares of Quanta common stock pursuant to the merger;
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if any court or other governmental entity having jurisdiction
over any party to the merger agreement issues an order, decree
or ruling or takes any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of the
merger and such order, decree or ruling or other action has
become final and nonappealable, provided that the parties will
have used their commercially reasonable efforts to have any such
order, decree or ruling or other action vacated or reversed;
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if there has been a breach of any representations, warranties,
covenants or agreements made by the other party in the merger
agreement, or any such representations and warranties shall have
become untrue or incorrect after the execution of the merger
agreement, such that the non-breaching party’s closing
conditions would not be satisfied and such breach or failure to
be true and correct is not cured within 15 calendar days
following receipt of written notice from the non-breaching party
of such breach or failure (or such longer period during which
the breaching party exercises commercially reasonable efforts to
cure);
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if the InfraSource board of directors effects a change in the
InfraSource board of directors recommendation as described under
“The Merger Agreement — Covenants —
Stockholders’ Meeting”;
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if the InfraSource board of directors effects an alternative
transaction recommendation as described under “The Merger
Agreement — Covenants — InfraSource’s
Ability to Make an Alternative Transaction Recommendation”;
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if the Quanta board of directors effects a change in the Quanta
board of directors recommendation as described under “The
Merger Agreement — Covenants —
Stockholders’ Meetings”;
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by InfraSource if the representation relating to Quanta not
having a material adverse effect or any event, change, effect or
development that would, individually or in the aggregate,
reasonably be expected to have a material adverse effect, has
become untrue or incorrect after the date of the merger
agreement and is not reasonably likely to be true on the
termination date;
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by InfraSource if with respect to antitrust matters, if HSR
approval has not been obtained before June 30, 2007, and
the facts and circumstances existing at that time indicate that
(i) a substantial likelihood exists that a governmental
authority will successfully enjoin, restrain or otherwise
prohibit the consummation of the merger (excluding any threat to
seek divestiture of any businesses conducted by InfraSource,
InfraSource subsidiaries, Quanta or Quanta subsidiaries) and
(ii) the continued pursuit by InfraSource of an approval of
the HSR filing would reasonably be expected to have a material
adverse effect on InfraSource and InfraSource subsidiaries,
taken as a whole;
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by Quanta if prior to the effective time of the merger, Quanta
enters into a contractual commitment that would effect a change
in control of Quanta upon consummation thereof;
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by Quanta if the representation relating to InfraSource not
having a material adverse effect or any event, change, effect or
development that would, individually or in the aggregate,
reasonably be expected to have a material adverse effect, has
become untrue or incorrect after the date of the merger
agreement and is not reasonably likely to be true on the
termination date; or
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by Quanta if with respect to antitrust matters, any governmental
authority or any representative of such governmental authority
shall have threatened to seek or shall have issued an order,
decree or ruling or taken any other action from a court of
competent jurisdiction, temporarily or permanently enjoining,
restraining or otherwise prohibiting the consummation of the
merger.
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“Change in control of Quanta” For
purposes of this joint proxy statement/prospectus, the term
“change in control of Quanta” means, with respect to
Quanta, any proposal or offer with respect to:
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a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, dissolution, liquidation
or similar transaction involving Quanta;
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any purchase of an equity interest (including by means of a
tender or exchange offer) representing an amount equal to or
greater than a 50% voting or economic interest in Quanta; or
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any purchase of assets, securities or ownership interests
representing an amount equal to or greater than 50% of the
consolidated assets of Quanta and the Quanta subsidiaries taken
as a whole (including, in each case, stock of such subsidiaries).
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Termination
Fees and Expenses
All costs and expenses incurred in connection with the merger
agreement and the transactions contemplated by the merger
agreement shall be paid by the party incurring such expenses,
except (i) filing fees incurred in connection with SEC
filings relating to the merger and the transactions contemplated
by the merger agreement, which will be paid solely by Quanta,
(ii) printing and mailing costs related thereto, all of
which will be shared equally by Quanta and InfraSource; and
(iii) filing fees incurred in connection with FTC and the
Antitrust Division filings relating to the HSR Act, which will
be shared equally by Quanta and InfraSource.
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InfraSource must pay Quanta a termination fee of
$43 million if:
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(A) Prior to the InfraSource special meeting, any person
(other than Quanta) has made and not withdrawn a proposal to
acquire at least 50.1% of InfraSource’s stock or assets (a
covered proposal), (B) Quanta or InfraSource has terminated
the merger agreement by (i) mutual consent,
(ii) failure to consummate the merger by November 30,
2007, or (iii) failure of the InfraSource stockholders to
adopt the merger agreement by the requisite vote, and
(C) within twelve (12) months of termination of the
merger agreement, InfraSource consummates a covered proposal or
enters into an agreement with respect to an acquisition proposal
which is ultimately consummated (whether prior to or after such
twelve-month period); or
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the merger agreement is terminated by InfraSource or Quanta as a
result of InfraSource’s board of directors changing its
recommendation or effecting an alternative transaction
recommendation;
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provided that InfraSource will not be obligated to pay any
termination fee arising from InfraSource’s board of
directors changing its recommendation (x) if Quanta is
obligated to pay a termination fee to InfraSource as a result of
InfraSource’s board of directors changing its
recommendation based solely upon Quanta entering into a
contractual commitment that, upon consummation, would effect a
change in control of Quanta and such commitment requires that
Quanta terminate the merger agreement or (y) if Quanta
terminates the merger agreement as a result of
InfraSource’s board of directors changing its
recommendation based solely upon Quanta entering into a
contractual commitment that, upon consummation, would effect a
change in control of Quanta and such commitment requires that
Quanta terminate the merger agreement.
InfraSource must pay an expense payment of up to $5 million
to Quanta if InfraSource or Quanta terminates the merger
agreement under certain circumstances related to a breach by
InfraSource of any of its representations, warranties, covenants
or agreements or failure by InfraSource to satisfy the
InfraSource closing conditions to the merger agreement.
Quanta must pay InfraSource a termination fee of
$43 million if:
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the merger agreement is terminated (i) by InfraSource or
Quanta, as a result of Quanta’s board of directors changing
its recommendation or (ii) by Quanta, as a result of Quanta
entering into a contractual commitment that, upon consummation,
would effect a change in control of Quanta; or
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InfraSource terminates the merger agreement as a result of
InfraSource’s board of directors changing its
recommendation based solely upon Quanta entering into a
contractual commitment that, upon consummation, would effect a
change in control of Quanta and such commitment requires that
Quanta terminate the merger agreement.
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Quanta must pay an expense payment of up to $5 million to
InfraSource if Quanta or InfraSource terminates the merger
agreement under certain circumstances related to a breach by
Quanta of any of its representations, warranties, covenants or
agreements or failure by Quanta to satisfy the Quanta closing
conditions to the merger agreement.
Effect
of Termination
In the event of the termination of the merger agreement as
described above, written notice will be given by the terminating
party to the other parties specifying the provision of the
merger agreement pursuant to which such termination is made, and
except with respect to payment of termination fees and certain
sections of the merger agreement, the merger agreement will
become null and void after the expiration of any applicable
period following such notice. In the event of such termination,
there will be no liability on the part of Quanta, Merger Sub or
InfraSource (or any of their respective directors, officers,
employees, agents, legal and financial advisors or other
representatives), except as to payment of termination fees and
certain sections of the merger agreement and except with respect
to the requirement to comply with the confidentiality
agreements; provided that nothing will relieve any party from
any liability or damages with respect to any willful or
intentional breach of any representation, warranty, covenant or
other obligation under the merger agreement.
88
NO
APPRAISAL RIGHTS
Neither holders of InfraSource’s common stock, holders of
Quanta’s common stock, nor holders of Quanta’s limited
vote common stock are entitled to dissenters’ rights of
appraisal under Delaware law in connection with the merger.
89
COMPARISON
OF RIGHTS OF QUANTA’S STOCKHOLDERS
AND INFRASOURCE’S STOCKHOLDERS
The rights of InfraSource stockholders are governed by
InfraSource’s certificate of incorporation and bylaws, each
as amended, and the laws of the State of Delaware, and the
rights of Quanta stockholders are governed by Quanta’s
certificate of incorporation and bylaws, each as amended, and
the laws of the State of Delaware. As a result of the merger,
the InfraSource stockholders will become stockholders of Quanta
and, accordingly, their rights will be governed by Quanta’s
certificate of incorporation and bylaws, each as amended, and
the laws of the State of Delaware. While the rights and
privileges of InfraSource stockholders are, in many instances,
comparable to those of the stockholders of Quanta, there are
some differences. The following is a summary of the material
differences as of the date of this joint proxy
statement/prospectus between the rights of the InfraSource
stockholders and the rights of Quanta stockholders. These
differences arise from differences between the respective
certificates of incorporation and bylaws of InfraSource and
Quanta.
The following discussion of these differences is only a summary
of the material differences and does not purport to be a
complete description of all the differences. Please consult the
General Corporation Law of the State of Delaware and the
respective certificates of incorporation and bylaws, each as
amended, restated, supplemented or otherwise modified from time
to time, of Quanta and InfraSource for a more complete
understanding of these differences.
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Quanta
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InfraSource
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Capital Stock:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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Quanta is authorized to issue:
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InfraSource is authorized to issue:
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• 300,000,000 shares
of common stock, of which 119,176,424 were issued and
outstanding as of July 26, 2007. Immediately following the
completion of the merger, Quanta expects to have
169,788,773 shares of common stock outstanding (based on
the number of outstanding shares of InfraSource common stock on
July 26, 2007, and assuming the exercise of all outstanding
options to purchase shares of InfraSource common stock that are
vested or will vest as a result of the consummation of the
merger).
• 3,345,333 shares of limited vote common stock,
of which 760,171 were issued and outstanding as of July 26,
2007.
• 10,000,000 shares of preferred stock, of which
none are issued and outstanding.
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• 120,000,000 shares
of common stock, of which 41,012,416 were issued and outstanding
as of July 26, 2007.
• 12,000,000 shares of preferred stock, of which
none are issued and outstanding.
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Rights Plans:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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• Quanta is a party to a
rights plan.
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• InfraSource is not a
party to a rights plan.
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Quanta
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InfraSource
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Number and Term of
Directors:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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• The board must consist of at least five directors who are elected annually.
• The number of directors shall be determined from time to time by resolution of the board.
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• The number of
directors shall be determined from time to time by resolution of
the board, but cannot be less than one or more than 15.
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Currently, there are eleven
directors on the board. Ten of these directors are elected by
the common stockholders and one is elected by the limited vote
common stockholders. Post-merger, Quanta will have fourteen
directors on the board, three of whom will be former directors
of InfraSource.
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Currently, there are seven
directors on the board. All of these directors are elected by
the common stockholders.
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Removal of
Directors:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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• Any director may be
removed with or without cause by a majority stockholder vote.
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• Any director may be
removed with or without cause by a majority stockholder vote.
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Stockholder
Consents:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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• Quanta stockholders
may not take action by written consent.
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• InfraSource
stockholders may act by written consent if holders having not
less than the minimum number of votes necessary to take an
action consent in writing.
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Votes Per
Share:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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• Each common
stockholder is entitled to one vote per share. On all matters
other than the election of directors, holders of limited vote
common stock are entitled to one-tenth of one vote on each such
matter.
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• Each common
stockholder is entitled to one vote per share.
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Adjournment of Stockholder
Meetings:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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• A stockholder meeting
may be adjourned solely by the chair of the meeting, and may not
be adjourned by the stockholders.
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• If a quorum is not
represented at a stockholder meeting, a majority of stockholders
has the power to adjourn the meeting until a quorum is
represented.
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Quanta
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InfraSource
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Special Meeting of
Stockholders:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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• May be called only by
the chairman of the board of directors of Quanta. Stockholders
may not call a special meeting of stockholders.
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• May be called by the
chairman of the board of directors, the president, any
vice-president, the secretary, any assistant secretary or, upon
written request of (i) the board of directors, (ii) an
authorized committee of the board of directors or
(iii) stockholders owning a majority of the capital stock.
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Certificate of Incorporation
Amendments:
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Pre-Merger and
Post-Merger:
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Pre-Merger:
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• The Quanta certificate
of incorporation may be amended as provided by Delaware law
except that, to the extent that shares of the Series D
Junior Participating Preferred Stock are issued pursuant to the
Rights Agreement, no amendment may be made that would adversely
affect the powers, preferences or special rights of the
Series D Junior Participating Preferred Stock without the
affirmative vote of
662/3%
of the outstanding shares of Series D Preferred Junior
Participating Stock, voting together as a single class.
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• The InfraSource
certificate of incorporation may be amended as provided by
Delaware law.
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Copies of the governing corporate instruments of Quanta and
InfraSource are available, without charge, to any person,
including any beneficial owner to whom this joint proxy
statement/prospectus is delivered, by following the instructions
listed under “Where You Can Find More Information;
Incorporation By Reference.”
92
THE
QUANTA SPECIAL MEETING
Date,
Time, Place and Purpose of the Quanta Special Meeting
The special meeting of Quanta stockholders will be held on
August 30, 2007, at 9:00 a.m., local time at
1330 Post Oak Boulevard, Level 2, Central Plains Room,
Houston, Texas 77056. The purpose of the Quanta special meeting
is:
1. to consider and vote on the proposal to approve the
issuance of shares of Quanta common stock in the merger pursuant
to the merger agreement;
2. to consider and vote on any adjournment or postponement
of the special meeting, if necessary, to solicit additional
proxies in favor of the proposal to approve the issuance of
shares of Quanta common stock pursuant to the merger
agreement; and
3. to transact any other business that may properly come
before the special meeting or any adjournment or postponement of
the special meeting.
The Quanta board of directors unanimously recommends that Quanta
stockholders vote FOR the proposal to issue shares of
Quanta common stock in the merger pursuant to the merger
agreement and any adjournment or postponement of the special
meeting, if necessary, to solicit additional proxies. For the
reasons for this recommendation, see “The
Merger — Recommendation of the Quanta Board of
Directors and Its Reasons for the Merger.”
Who Can
Vote at the Quanta Special Meeting
Only holders of record of Quanta common stock and Quanta limited
vote common stock at the close of business on July 26,
2007, the Quanta record date, are entitled to notice of, and to
vote at, the Quanta special meeting. As of that date, there were
119,176,424 shares of Quanta common stock and
760,171 shares of Quanta limited vote common stock
outstanding, respectively, and entitled to vote at the Quanta
special meeting, held by approximately 668 and 16 stockholders
of record, respectively.
Each share of Quanta common stock is entitled to one vote, and
each share of Quanta limited vote common stock is entitled to
one-tenth of one vote, on the issuance of shares of Quanta
common stock in the merger pursuant to the merger agreement and
any adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies. On each matter to be
voted on at the special meeting, holders of Quanta common stock
and Quanta limited vote common stock will vote together as a
single class.
Vote
Required for Approval; Quorum
Assuming a quorum is present, the approval of the issuance of
shares of Quanta common stock in the merger pursuant to the
merger agreement requires the affirmative vote of the majority
of the votes cast in person or by proxy at the Quanta special
meeting and any adjournment or postponement of the special
meeting, if necessary, to solicit additional proxies requires
the affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the special meeting
and entitled to vote.
Neither abstentions nor broker non-votes will constitute votes
cast and, accordingly, will have no effect on the outcome of the
vote with respect to the proposal to approve the issuance of
Quanta common stock in the merger but abstentions will have the
same effect as votes AGAINST any adjournment or
postponement of the special meeting, if necessary to solicit
additional proxies.
93
Manner of
Voting
Quanta stockholders may submit their votes for or against the
proposal submitted at the Quanta special meeting in person or by
proxy. Quanta stockholders may be able to submit a proxy in the
following ways:
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Internet. Quanta stockholders may submit a
proxy over the Internet by going to the website listed on their
proxy card. Once at the website, they should follow the
instructions to submit a proxy.
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Telephone. Quanta stockholders may submit a
proxy using the toll-free number listed on their proxy card.
Easy-to-follow
voice prompts will help Quanta stockholders and confirm that
their submission instructions have been followed.
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Mail. Quanta stockholders may submit a proxy
by signing, dating and returning their proxy card in the
preaddressed postage-paid envelope provided.
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Quanta stockholders should refer to their proxy cards or the
information forwarded by their bank, broker or other nominee to
see which options are available to them.
The Internet and telephone proxy submission procedures are
designed to authenticate stockholders and to allow them to
confirm that their instructions have been properly recorded.
The method by which Quanta stockholders submit a proxy will in
no way limit their right to vote at the Quanta special meeting
if they later decide to attend the meeting in person. If shares
of Quanta common stock are held in the name of a bank, broker or
other nominee, Quanta stockholders must obtain a proxy, executed
in their favor, from the holder of record, to be able to vote at
the Quanta special meeting.
All shares of Quanta common stock and Quanta limited vote common
stock entitled to vote and represented by properly completed
proxies received prior to the Quanta special meeting, and not
revoked, will be voted at the Quanta special meeting as
instructed on the proxies. If Quanta stockholders do not
indicate how their shares of Quanta common stock or limited vote
common stock should be voted on a matter, the shares of Quanta
common stock or limited vote common stock represented by their
properly completed proxy will be voted as the Quanta board of
directors recommends and therefore FOR the issuance of shares of
Quanta common stock in the merger and FOR any adjournment or
postponement of the special meeting, if necessary, to solicit
additional proxies.
Revoking
a Proxy
Quanta stockholders may revoke their proxy at any time before it
is exercised by timely sending written notice to the Corporate
Secretary that they would like to revoke their proxy, by timely
delivering a properly executed, later-dated proxy (including
over the Internet or telephone) or by voting by ballot at the
Quanta special meeting. Simply attending the Quanta special
meeting without voting will not revoke their proxy.
Shares Held
in “Street Name”
If Quanta stockholders hold their shares of Quanta common stock
in an account at a bank, broker or other nominee and they wish
to vote such shares, they must return their voting instructions
to the bank, broker or other nominee.
If Quanta stockholders own shares of Quanta common stock through
a bank, broker or other nominee and attend the Quanta special
meeting, they should bring a letter from their bank, broker or
other nominee identifying them as the beneficial owner of such
shares of Quanta common stock and authorizing them to vote.
Brokers of Quanta stockholders will NOT vote shares of Quanta
common stock held in “street name” with respect to the
proposal to approve the issuance of shares of Quanta common
stock in the merger pursuant to the merger agreement or the
adjournment or postponement of the special meeting, if
necessary, to solicit additional
94
proxies unless such Quanta stockholders instruct such brokers
how to vote. Quanta stockholders should therefore provide their
brokers or other nominees with instructions as to how to vote
their shares of Quanta common stock.
Tabulation
of the Votes
Quanta will appoint an Inspector of Election for the Quanta
special meeting to tabulate affirmative and negative votes and
abstentions.
Solicitation
Quanta will pay the cost of soliciting
proxies. Directors, officers and employees of
Quanta and InfraSource may solicit proxies on behalf of Quanta
in person or by telephone, facsimile or other means. Quanta has
engaged MacKenzie Partners, Inc. to assist it in the
distribution and solicitation of proxies. Quanta has agreed to
pay MacKenzie Partners, Inc. a fee of $7,500 plus payment of
certain fees and expenses for its services to solicit proxies.
In accordance with the regulations of the SEC and the NYSE,
Quanta also will reimburse brokerage firms and other custodians,
nominees and fiduciaries for their expenses incurred in sending
proxies and proxy materials to beneficial owners of shares of
Quanta common stock or Quanta limited vote common stock.
95
THE
INFRASOURCE SPECIAL MEETING
Date,
Time, Place and Purpose of the InfraSource Special
Meeting
The special meeting of InfraSource stockholders will be held on
August 30, 2007, at 10:00 a.m., local time, at 1735
Market Street, Suite 4200, Philadelphia, PA 19103. The purpose
of the InfraSource special meeting is:
1. to consider and vote on the proposal to adopt the merger
agreement; and
2. to consider and vote on any adjournment or postponement
of the special meeting, if necessary, to solicit additional
proxies in favor of the proposal to adopt the merger
agreement; and
3. to transact any other business as may properly come
before the InfraSource special meeting or any adjournment or
postponement of the InfraSource special meeting.
The InfraSource board of directors unanimously recommends that
InfraSource stockholders vote FOR the proposal to adopt the
merger agreement and any adjournment or postponement of the
special meeting, if necessary, to solicit additional proxies.
For the reasons for this recommendation, see “The
Merger — Recommendation of the InfraSource Board of
Directors and Its Reasons for the Merger.”
Who Can
Vote at the InfraSource Special Meeting
Only holders of record of InfraSource common stock at the close
of business on July 26, 2007, the InfraSource record date,
are entitled to notice of, and to vote at, the InfraSource
special meeting. As of that date, there were
41,012,416 shares of InfraSource common stock outstanding
and entitled to vote at the InfraSource special meeting, held by
approximately 44 stockholders of record. Each share of
InfraSource common stock is entitled to one vote at the
InfraSource special meeting.
Vote
Required for Approval; Quorum
The affirmative vote of the holders of a majority of the shares
of InfraSource common stock entitled to vote at the special
meeting outstanding as of the InfraSource record date, either in
person or by proxy, is necessary for the adoption of the merger
agreement and any adjournment or postponement of the special
meeting, if necessary, to solicit additional proxies requires
the affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the special meeting
and entitled to vote. If an InfraSource stockholder fails to
vote, or if an InfraSource stockholder abstains, that will have
the same effect as a vote AGAINST adoption of the merger
agreement. Abstentions will also have the same effect as
votes AGAINST any adjournment or postponement of the
special meeting, if necessary, to solicit additional proxies.
The holders of a majority of the total number of outstanding
shares of InfraSource common stock entitled to vote as of the
InfraSource record date, represented either in person or by
proxy, will constitute a quorum at the InfraSource special
meeting for the conduct of business.
Manner of
Voting
InfraSource stockholders may submit their votes for or against
the proposal submitted at the InfraSource special meeting in
person or by proxy. InfraSource stockholders may be able to
submit a proxy in the following ways:
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Internet. InfraSource stockholders may submit
a proxy over the Internet by going to the website listed on
their proxy card. Once at the website, follow the instructions
to submit a proxy.
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Telephone. InfraSource stockholders may submit
a proxy using the toll-free number listed on their proxy card.
Easy-to-follow
voice prompts will help them and confirm that their submission
instructions have been followed.
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Mail. InfraSource stockholders may submit a
proxy by signing, dating and returning their proxy card in the
preaddressed postage-paid envelope provided.
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InfraSource stockholders should refer to their proxy card or the
information forwarded by their bank, broker or other nominee to
see which options are available to them.
The Internet and telephone proxy submission procedures are
designed to authenticate stockholders and to allow InfraSource
stockholders to confirm that their vote has been properly
recorded.
The method by which InfraSource stockholders submit a proxy will
in no way limit their right to vote at the InfraSource special
meeting if they later decide to attend the meeting in person. If
shares of InfraSource common stock are held in the name of a
bank, broker or other nominee, InfraSource stockholders must
obtain a proxy, executed in their favor, from the holder of
record, to be able to vote at the InfraSource special meeting.
All shares of InfraSource common stock entitled to vote and
represented by properly completed proxies received prior to the
InfraSource special meeting, and not revoked, will be voted at
the InfraSource special meeting as instructed on the proxies.
If InfraSource stockholders do not indicate how their shares
of InfraSource common stock should be voted on a matter, the
shares of InfraSource common stock represented by their properly
completed proxy will be voted as the InfraSource board of
directors recommends and therefore, FOR the adoption of the
merger agreement and FOR any adjournment or postponement of the
special meeting, if necessary, to solicit additional proxies.
Revoking
a Proxy
InfraSource stockholders may revoke their proxy at any time
before it is exercised by timely sending written notice to the
Secretary that they would like to revoke their proxy, by timely
delivering a properly executed, later-dated proxy (including
over the Internet or telephone) or by voting by ballot at the
InfraSource special meeting. Simply attending the InfraSource
special meeting without voting will not revoke their proxy.
If InfraSource stockholders hold shares of InfraSource common
stock in an account at a bank, broker or other nominee and they
wish to vote, they must return their voting instructions to the
bank, broker or other nominee.
If InfraSource stockholders own shares of InfraSource common
stock through a bank, broker or other nominee and attend the
InfraSource special meeting, they should bring a letter from
their bank, broker or other nominee identifying them as the
beneficial owner of such shares of InfraSource common stock and
authorizing them to vote.
Brokers will NOT vote shares of InfraSource common stock held in
“street name” unless InfraSource stockholders instruct
their broker how to vote. Such failure to vote will have the
same effect as a vote AGAINST adoption of the merger
agreement. InfraSource stockholders should therefore provide
their brokers or other nominees with instructions as to how to
vote their shares of InfraSource common stock.
Tabulation
of the Votes
InfraSource will appoint an Inspector of Election for the
InfraSource special meeting to tabulate affirmative and negative
votes and abstentions.
Solicitation
InfraSource will pay the cost of soliciting
proxies. Directors, officers and employees of
InfraSource and Quanta may solicit proxies on behalf of
InfraSource in person or by telephone, facsimile or other means.
InfraSource has engaged MacKenzie Partners, Inc. to assist it in
the distribution and solicitation of proxies. InfraSource has
agreed to pay MacKenzie Partners, Inc. a fee of $7,500 plus
payment of certain fees and expenses for its services to solicit
proxies.
In accordance with the regulations of the SEC and the NYSE,
InfraSource also will reimburse brokerage firms and other
custodians, nominees and fiduciaries for their expenses incurred
in sending proxies and proxy materials to beneficial owners of
shares of InfraSource common stock.
97
STOCKHOLDER
PROPOSALS
Quanta
2007 Annual Stockholder Meeting and Future Stockholder
Proposals
Quanta held its 2007 annual meeting of stockholders on
May 24, 2007. Quanta stockholders may submit proposals on
matters appropriate for stockholder action (including any
election of a Quanta director) at meetings of Quanta’s
stockholders in accordance with
Rule 14a-8
under the Exchange Act. In order for a stockholder proposal to
be included in Quanta’s 2008 proxy materials, for
presentation at its 2008 annual meeting of stockholders, such
proposal must be received by Quanta’s Corporate Secretary
at its principal executive offices no later than
December 22, 2007.
InfraSource
2007 Annual Stockholder Meeting and Stockholder
Proposals
InfraSource will hold an annual meeting in 2007 only if the
merger has not already been completed. In order to be included
in the proxy statement for the 2007 annual meeting of
InfraSource’s stockholders, stockholder proposals must have
been received by InfraSource by December 8, 2006.
LEGAL
MATTERS
The validity of the shares of Quanta common stock to be issued
in the merger will be passed upon for Quanta by Akin Gump
Strauss Hauer & Feld LLP. It is a condition to the
merger that InfraSource receive an opinion from Ballard Spahr
Andrews & Ingersoll, LLP concerning the United States
federal income tax consequences of the merger.
EXPERTS
The consolidated financial statements and management’s
assessment of the effectiveness of internal control over
financial reporting (which is included in Management’s
Report on Internal Control over Financial Reporting)
incorporated in this joint proxy
statement/prospectus
by reference to the Annual Report on
Form 10-K
of Quanta Services, Inc. for the year ended December 31,
2006, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
The consolidated financial statements and management’s
assessment of the effectiveness of internal control over
financial reporting (which is included in Management’s
Report on Internal Control over Financial Reporting)
incorporated in this joint proxy
statement/prospectus
by reference to the Annual Report on
Form 10-K
of InfraSource Services, Inc. for the year ended
December 31, 2006, have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU
CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE
Quanta and InfraSource file reports and other information with
the SEC. Quanta stockholders and InfraSource stockholders may
read and copy these reports, statements or other information
filed by either Quanta or InfraSource at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at
1-800-SEC-0330
for further information on the Public Reference Room. The SEC
filings of Quanta and InfraSource are also available to the
public from commercial document retrieval services and at the
website maintained by the SEC at http://www.sec.gov.
Quanta has filed a registration statement on
Form S-4
to register with the SEC the shares of Quanta common stock to be
issued to InfraSource stockholders pursuant to the merger. This
joint proxy statement/prospectus forms a part of that
registration statement and constitutes a prospectus of Quanta,
in addition to being a proxy statement of Quanta for its special
meeting and of InfraSource for its special meeting. The
registration statement, including the attached annexes, exhibits
and schedules, contains additional relevant information about
Quanta and InfraSource. As allowed by SEC rules, this joint
proxy statement/prospectus does not contain all the information
Quanta
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stockholders and InfraSource stockholders can find in the
registration statement or the exhibits to the registration
statement.
The SEC allows Quanta and InfraSource to “incorporate by
reference” information into this joint proxy
statement/prospectus. This means that Quanta and InfraSource can
disclose important information to Quanta stockholders and
InfraSource stockholders by referring them to another document
filed separately with the SEC. The information incorporated by
reference is considered to be a part of this joint proxy
statement/prospectus, except for any information that is
superseded by information that is included directly in this
joint proxy statement/prospectus or incorporated by reference
subsequent to the date of this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference
the documents listed below that Quanta and InfraSource have
previously filed with the SEC. They contain important
information about Quanta and InfraSource and the financial
condition of each company.
|
|
|
|
Quanta SEC Filings (File
No. 001-13831)
|
|
|
Period
and/or Date
Filed
|
Annual Report on
Form 10-K
|
|
|
Fiscal year ended
December 31, 2006
|
Quarterly Report on
Form 10-Q
|
|
|
Quarter ended March 31, 2007
|
Current Reports on
Form 8-K
|
|
|
Filed on March 8, 2007,
March 20, 2007, April 23, 2007, May 8, 2007 and
May 29, 2007
|
Definitive Proxy Statement on
Schedule 14A
|
|
|
Filed on April 20, 2007
|
Description of Quanta capital
stock contained in Quanta’s Registration Statement on
Form-8-A12B and any amendment or report filed for the purpose of
updating such description
|
|
|
|
InfraSource SEC Filings (File
No. 001-32164)
|
|
|
Period
and/or Date
Filed
|
Annual Report on
Form 10-K,
as amended by
Form 10-K/A
|
|
|
Fiscal year ended
December 31, 2006
|
Quarterly Report on
Form 10-Q
|
|
|
Quarter ended March 31, 2007
|
Current Reports on
Form 8-K
|
|
|
Filed on January 5, 2007,
January 12, 2007, March 19, 2007 (three filed on this
date), March 20, 2007, May 8, 2007 and June 11,
2007
|
|
|
|
|
In addition, Quanta and InfraSource incorporate by reference
additional documents that they may file or furnish with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of this joint proxy
statement/prospectus and the dates of the Quanta special meeting
and the InfraSource special meeting (other than information
furnished pursuant to Item 2.02 or Item 7.01 of any
Current Report on
Form 8-K
or exhibits filed under Item 9.01 relating to those Items,
unless expressly stated otherwise therein). These documents
include periodic reports, such as annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K.
Quanta and InfraSource also incorporate by reference the merger
agreement attached to this joint proxy statement/prospectus as
Annex A.
Quanta has supplied all information contained in or incorporated
by reference into this joint proxy statement/prospectus relating
to Quanta and Merger Sub, and InfraSource has supplied all
information contained in this joint proxy statement/prospectus
relating to InfraSource.
Documents incorporated by reference are available to Quanta
stockholders and InfraSource stockholders without charge upon
written or oral request, excluding any exhibits to those
documents, unless the exhibit is specifically incorporated by
reference as an exhibit in this joint proxy
statement/prospectus. Quanta stockholders
99
and InfraSource stockholders can obtain any of these documents
by requesting them in writing or by telephone from the
appropriate company at:
If you are a Quanta stockholder:
Quanta Services, Inc.
Attention: Corporate Secretary
1360 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
(713) 629-7600
If you are an InfraSource stockholder:
InfraSource Services, Inc.
Attention: General Counsel
100 West Sixth Street, Suite 300
Media, Pennsylvania 19063
(610) 480-8000
In order for Quanta stockholders and InfraSource stockholders to
receive timely delivery of the requested documents in advance of
the Quanta special meeting and the InfraSource special meeting,
Quanta or InfraSource, as applicable, should receive such
request by no later than August 20, 2007.
Quanta stockholders and InfraSource stockholders also may obtain
these documents at the Securities and Exchange Commission’s
website, http://www.sec.gov, and may obtain certain of these
documents at Quanta’s website,
“www.quantaservices.com,” by selecting “Investor
Center” and then selecting “SEC Filings,” and at
InfraSource’s website, “www.infrasourceinc.com,”
by selecting “Investors” and then selecting “SEC
Filings.” Information contained on the Quanta and
InfraSource websites is expressly not incorporated by reference
into this joint proxy statement/prospectus.
Quanta and InfraSource are not incorporating the contents of the
websites of the SEC, Quanta, InfraSource or any other person
into this document. Quanta and InfraSource are providing only
the information about how to obtain certain documents that are
incorporated by reference into this joint proxy
statement/prospectus at these websites for the convenience of
Quanta stockholders and InfraSource stockholders.
Quanta and InfraSource have not authorized anyone to give any
information or make any representation about the merger or their
companies that is different from, or in addition to, that
contained in this joint proxy statement/prospectus or in any of
the materials that are incorporated into this joint proxy
statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities
offered by this joint proxy statement/prospectus or the
solicitation of proxies is unlawful, or if you are a person to
whom it is unlawful to direct these types of activities, then
the offer presented in this joint proxy statement/prospectus
does not extend to you. The information contained in this joint
proxy statement/prospectus is accurate only as of the date of
this document unless the information specifically indicates that
another date applies.
100
UNAUDITED
PRO FORMA COMBINED
FINANCIAL INFORMATION
The following unaudited pro forma combined financial
information, which is referred to as the pro forma financial
information, has been prepared to give effect to the merger of
Quanta and InfraSource. The pro forma financial information was
prepared using the historical consolidated financial statements
of Quanta and InfraSource.
The unaudited pro forma combined balance sheet as of
March 31, 2007 combines the historical consolidated balance
sheets of Quanta and InfraSource as of March 31, 2007 and
gives effect to the merger as if it occurred on March 31,
2007.
The unaudited pro forma combined statement of operations for the
fiscal year ended December 31, 2006 and for the three
months ended March 31, 2007 combines the historical
consolidated statements of operations of Quanta and InfraSource
and gives effect to the merger as if it occurred on
January 1, 2006.
In accordance with the merger agreement dated March 18,
2007, holders of shares of InfraSource common stock will have
the right to receive 1.223 shares of Quanta common stock
for each share of InfraSource common stock (see “The
Merger Agreement — Merger Consideration” for
more information).
The pro forma adjustments are preliminary and have been made
solely for purposes of developing the pro forma financial
information necessary to comply with the requirements of the
SEC. The merger’s impact on the actual results reported by
the combined company in periods following the merger may differ
significantly from that reflected in these pro forma financial
statements for a number of reasons, including but not limited
to, the impact of the incremental costs incurred in integrating
the two companies. As a result, the pro forma information is not
necessarily indicative of what the combined company’s
financial condition or results of operations would have been had
the merger been completed on the applicable dates of this pro
forma financial information. In addition, the pro forma
financial information does not purport to project the future
financial condition and results of operations of the combined
company.
Quanta and InfraSource stockholders should read the pro forma
financial information in conjunction with Quanta’s and
InfraSource’s audited historical consolidated financial
statements, accompanying footnotes and the sections entitled
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Quanta’s
Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2007 and Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006 and
InfraSource’s Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2007 and Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006, as amended by
Form 10-K/A,
each incorporated by reference into this document.
F-2
UNAUDITED
PRO FORMA COMBINED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Quanta
|
|
|
InfraSource
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
406,432
|
|
|
$
|
23,620
|
|
|
$
|
(50,009
|
)(b)
|
|
$
|
380,043
|
|
Accounts receivable, net
|
|
|
467,209
|
|
|
|
131,916
|
|
|
|
38,198
|
(c)
|
|
|
637,323
|
|
Costs and estimated earnings in
excess of billings on uncompleted contracts
|
|
|
40,693
|
|
|
|
57,883
|
|
|
|
(38,198
|
)(c)
|
|
|
60,378
|
|
Inventories
|
|
|
25,433
|
|
|
|
4,807
|
|
|
|
—
|
|
|
|
30,240
|
|
Prepaid expenses and other current
assets
|
|
|
31,222
|
|
|
|
17,000
|
|
|
|
—
|
|
|
|
48,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
970,989
|
|
|
|
235,226
|
|
|
|
(50,009
|
)
|
|
|
1,156,206
|
|
Property and equipment, net
|
|
|
292,632
|
|
|
|
161,877
|
|
|
|
—
|
|
|
|
454,509
|
|
Accounts and notes receivable, net
|
|
|
7,322
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,322
|
|
Other assets, net
|
|
|
33,232
|
|
|
|
5,160
|
|
|
|
—
|
|
|
|
38,392
|
|
Other intangible assets, net
|
|
|
6,281
|
|
|
|
839
|
|
|
|
104,461
|
(a)(f)
|
|
|
111,581
|
|
Goodwill
|
|
|
352,310
|
|
|
|
147,015
|
|
|
|
859,298
|
(a)
|
|
|
1,358,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,662,766
|
|
|
$
|
550,117
|
|
|
$
|
913,750
|
|
|
$
|
3,126,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term
debt
|
|
$
|
33,468
|
|
|
$
|
74
|
|
|
$
|
—
|
|
|
$
|
33,542
|
|
Accounts payable and accrued
expenses
|
|
|
239,962
|
|
|
|
116,736
|
|
|
|
32,133
|
(a)(c)
|
|
|
388,831
|
|
Billings in excess of costs and
estimated earnings on uncompleted contracts
|
|
|
23,460
|
|
|
|
18,354
|
|
|
|
(3,519
|
)(c)
|
|
|
38,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
296,890
|
|
|
|
135,164
|
|
|
|
28,614
|
|
|
|
460,668
|
|
Long-term debt, net of current
maturities
|
|
|
—
|
|
|
|
50,055
|
|
|
|
(50,009
|
)(b)
|
|
|
46
|
|
Convertible subordinated notes
|
|
|
413,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
413,750
|
|
Deferred income taxes and other
non-current liabilities
|
|
|
176,690
|
|
|
|
24,599
|
|
|
|
33,916
|
(a)
|
|
|
235,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
887,330
|
|
|
|
209,818
|
|
|
|
12,521
|
|
|
|
1,109,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
—
|
|
|
|
40
|
|
|
|
(39
|
)(a)
|
|
|
1
|
|
Limited vote common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Additional paid-in capital
|
|
|
1,121,166
|
|
|
|
290,752
|
|
|
|
950,775
|
(a)
|
|
|
2,362,693
|
|
Accumulated (deficit) earnings
|
|
|
(318,964
|
)
|
|
|
49,644
|
|
|
|
(49,644
|
)(a)
|
|
|
(318,964
|
)
|
Treasury stock
|
|
|
(26,766
|
)
|
|
|
(137
|
)
|
|
|
137
|
(a)
|
|
|
(26,766
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
775,436
|
|
|
|
340,299
|
|
|
|
901,229
|
|
|
|
2,016,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders’ equity
|
|
$
|
1,662,766
|
|
|
$
|
550,117
|
|
|
$
|
913,750
|
|
|
$
|
3,126,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Unaudited Pro Forma Combined Financial
Statements.
F-3
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Quanta
|
|
|
InfraSource
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except for per share information)
|
|
|
Revenues
|
|
$
|
2,131,038
|
|
|
$
|
992,305
|
|
|
$
|
—
|
|
|
$
|
3,123,343
|
|
Cost of services (including
depreciation)
|
|
|
1,815,222
|
|
|
|
846,646
|
|
|
|
—
|
|
|
|
2,661,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
315,816
|
|
|
|
145,659
|
|
|
|
—
|
|
|
|
461,475
|
|
Selling, general and
administrative expenses
|
|
|
182,639
|
|
|
|
96,287
|
|
|
|
718
|
(d)
|
|
|
281,674
|
|
|
|
|
|
|
|
|
|
|
|
|
2,030
|
(e)
|
|
|
|
|
Amortization of intangible assets
|
|
|
363
|
|
|
|
1,004
|
|
|
|
18,662
|
(f)
|
|
|
20,029
|
|
Goodwill impairment
|
|
|
56,812
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
76,002
|
|
|
|
48,368
|
|
|
|
(21,410
|
)
|
|
|
102,960
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense and write-off of
deferred financing costs
|
|
|
(26,823
|
)
|
|
|
(11,204
|
)
|
|
|
11,204
|
(g)
|
|
|
(26,823
|
)
|
Interest income
|
|
|
13,924
|
|
|
|
953
|
|
|
|
(3,433
|
)(h)
|
|
|
11,444
|
|
Gain on early extinguishment of
debt, net
|
|
|
1,598
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,598
|
|
Other, net
|
|
|
425
|
|
|
|
4,144
|
|
|
|
—
|
|
|
|
4,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
65,126
|
|
|
|
42,261
|
|
|
|
(13,639
|
)
|
|
|
93,748
|
|
Provision for income taxes
|
|
|
47,643
|
|
|
|
16,391
|
|
|
|
(5,319
|
) (i)
|
|
|
58,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
17,483
|
|
|
$
|
25,870
|
|
|
$
|
(8,320
|
)
|
|
$
|
35,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share from continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.15
|
|
|
$
|
0.65
|
|
|
|
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.15
|
|
|
$
|
0.64
|
|
|
|
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
117,027
|
|
|
|
39,757
|
|
|
|
8,866
|
(k)
|
|
|
165,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
117,863
|
|
|
|
40,364
|
|
|
|
9,001
|
(k)
|
|
|
167,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Unaudited Pro Forma Combined Financial
Statements.
F-4
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Quanta
|
|
|
InfraSource
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except for per share information)
|
|
|
Revenues
|
|
$
|
574,880
|
|
|
$
|
203,804
|
|
|
$
|
—
|
|
|
$
|
778,684
|
|
Cost of services (including
depreciation)
|
|
|
496,474
|
|
|
|
175,409
|
|
|
|
—
|
|
|
|
671,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
78,406
|
|
|
|
28,395
|
|
|
|
—
|
|
|
|
106,801
|
|
Selling, general and
administrative expenses
|
|
|
49,232
|
|
|
|
25,771
|
|
|
|
93
|
(d)
|
|
|
75,487
|
|
|
|
|
|
|
|
|
|
|
|
|
391
|
(e)
|
|
|
|
|
Amortization of intangible assets
|
|
|
772
|
|
|
|
60
|
|
|
|
3,171
|
(f)
|
|
|
4,003
|
|
Merger related costs
|
|
|
—
|
|
|
|
3,574
|
|
|
|
(3,574
|
)(j)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
28,402
|
|
|
|
(1,010
|
)
|
|
|
(81
|
)
|
|
|
27,311
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(5,552
|
)
|
|
|
(1,043
|
)
|
|
|
1,043
|
(g)
|
|
|
(5,552
|
)
|
Interest income
|
|
|
4,298
|
|
|
|
328
|
|
|
|
(655
|
)(h)
|
|
|
3,971
|
|
Other, net
|
|
|
29
|
|
|
|
113
|
|
|
|
—
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax
provision (benefit)
|
|
|
27,177
|
|
|
|
(1,612
|
)
|
|
|
307
|
|
|
|
25,872
|
|
Provision (benefit) for income
taxes
|
|
|
(4,027
|
)
|
|
|
(623
|
)
|
|
|
120
|
(i)
|
|
|
(4,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$
|
31,204
|
|
|
$
|
(989
|
)
|
|
$
|
187
|
|
|
$
|
30,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
0.26
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
0.23
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing earnings
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
118,030
|
|
|
|
40,279
|
|
|
|
8,982
|
(k)
|
|
|
167,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
149,608
|
|
|
|
40,279
|
|
|
|
8,982
|
(k)
|
|
|
198,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Unaudited Pro Forma Combined Financial
Statements.
F-5
NOTES TO
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
(In thousands, except for per share amounts and exchange
ratio)
|
|
Note 1 —
|
Basis of
Presentation
|
The unaudited pro forma combined balance sheet as of
March 31, 2007 combines the historical consolidated balance
sheets of Quanta and InfraSource as of March 31, 2007 and
gives effect to the merger as if it occurred on March 31,
2007. The unaudited pro forma combined statements of operations
for the fiscal year ended December 31, 2006 and for the
three months ended March 31, 2007 combine the historical
consolidated statements of operations of Quanta and InfraSource
and give effect to the merger as if it occurred on
January 1, 2006.
The unaudited pro forma combined financial statements, which are
referred to as pro forma financial statements, are based on the
historical financial statements of Quanta and InfraSource and
give effect to the merger between Quanta and InfraSource under
the purchase method of accounting. As a result, the pro forma
financial statements are based on assumptions and adjustments,
including assumptions relating to the allocation of the
consideration paid to the assets acquired and liabilities
assumed from InfraSource based on preliminary estimates of fair
value. The final purchase price allocation may differ from that
reflected in the pro forma financial statements after valuation
procedures are performed and amounts are finalized following the
completion of the merger.
The pro forma adjustments are preliminary and have been made
solely for purposes of developing the pro forma financial
statements for illustrative purposes. The merger’s impact
on the actual results reported by the combined company in
periods following the merger may differ significantly from that
reflected in these pro forma financial statements. These pro
forma financial statements do not give effect to any potential
cost savings or operating synergies that Quanta and InfraSource
expect to result from the merger, nor do they give effect to any
potential costs to be incurred in integrating the two companies.
|
|
Note 2 —
|
Unaudited
Pro Forma Adjustments
|
The purchase price allocation included in the pro forma
financial statements is preliminary and is based on information
that was available to management of Quanta and InfraSource at
the time the pro forma financial statements were prepared.
Accordingly, the purchase price allocation will change and the
impact of such changes could be material. Certain adjustments
have been made to the historical InfraSource balance sheet and
statement of operations to conform to Quanta’s accounting
policies. The following summarizes the adjustments made to
derive the pro forma financial statements.
Unaudited
Pro Forma Combined Balance Sheet
(a) Purchase price: For each share of InfraSource common
stock outstanding, InfraSource stockholders will receive
1.223 shares of Quanta common stock (together with cash in
lieu of fractional shares). Additionally, Quanta will issue
replacement stock options under a formula whereby each
InfraSource optionee will receive options to purchase
1.223 shares of Quanta common stock for each underlying
option to purchase shares of InfraSource common stock.
The pro forma purchase price which would have been paid to
InfraSource stockholders under the computation specified in the
merger agreement is based on the number of shares of InfraSource
common stock outstanding as of March 31, 2007, the date of
the balance sheet under which the merger is being presented.
Under the provisions of Statement of Financial Accounting
Standards No. 141, Business Combinations, Quanta is treated as
the acquiror of InfraSource for accounting purposes.
Accordingly, Quanta will allocate the purchase price paid to the
fair value of the InfraSource assets acquired and liabilities
assumed. The allocation of purchase price is preliminary and
subject to the final outcome of fair value analyses to be
conducted after the completion of the merger. The residual
amount of the purchase price has been allocated to goodwill. The
pro forma presentation presumes that the historical value of
InfraSource’s tangible assets and liabilities approximates
fair
F-6
NOTES TO
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS — (Continued)
value based upon Quanta’s initial evaluations. The actual
amounts recorded when the merger is completed may differ
materially from the pro forma amounts presented herein (in
thousands):
|
|
|
|
|
Aggregate purchase price of
InfraSource common stock(1)
|
|
$
|
1,216,206
|
|
Accrued transaction costs(2)
|
|
|
28,614
|
|
|
|
|
|
|
Aggregate consideration
|
|
|
1,244,820
|
|
Estimated fair value of the net
tangible assets acquired as of March 31, 2007(3)
|
|
|
(192,445
|
)
|
Intangible assets(4)
|
|
|
(105,300
|
)
|
Deferred tax liability, net(5)
|
|
|
33,916
|
|
Estimated fair value of
InfraSource stock options(6)
|
|
|
25,322
|
|
|
|
|
|
|
Goodwill(7)
|
|
|
1,006,313
|
|
Historical InfraSource goodwill
|
|
|
(147,015
|
)
|
|
|
|
|
|
Pro forma goodwill adjustment
|
|
$
|
859,298
|
|
|
|
|
|
|
|
|
|
(1) |
|
The aggregate purchase price of InfraSource common stock is
calculated as follows (in thousands, except ratios and per share
information): |
|
|
|
|
|
Exchange ratio
|
|
|
1.223
|
|
InfraSource shares outstanding
(March 31, 2007)
|
|
|
40,310
|
|
Number of Quanta shares to be
exchanged
|
|
|
49,299
|
|
Average closing price per share of
Quanta common stock for the five trading days ended
March 21, 2007
|
|
$
|
24.67
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
1,216,206
|
|
|
|
|
|
|
|
|
|
(2) |
|
Represents the estimated transaction costs related to the
merger, which primarily include investment banker fees,
professional fees and estimated severance costs. |
|
(3) |
|
Represents the estimated fair value of net tangible assets of
InfraSource calculated as historical stockholders’ equity
less historical goodwill and other intangibles, net. The
historical value of InfraSource’s tangible assets and
liabilities approximates fair value based upon Quanta’s
initial evaluation. Management has begun to gather detailed
records and currently anticipates completing a full review of
the tangible assets and liabilities acquired prior to
December 31, 2007, although the timing of the closing of
the transaction may influence the timing of the completion of
this review significantly. |
|
(4) |
|
Represents the adjustments to record intangible assets at
estimated fair value including customer relationships
($71.5 million) and backlog ($33.8 million). Quanta
estimated the fair value of these intangibles using the income
approach, specifically the excess earnings method. Quanta’s
excess earnings analysis consisted of discounting to present
value the projected cash flows attributable to customer
relationships and backlog, with assumptions for growth, customer
contract renewals, rates of return and other assumptions. |
|
(5) |
|
Represents the net estimated deferred income tax benefit of the
acquired intangible assets (other than goodwill). |
|
(6) |
|
Represents the adjustment to the purchase price to record the
fair value of the InfraSource stock options based on the
acquisition measurement date. |
|
(7) |
|
Goodwill represents the excess of the purchase price over the
fair value of the acquired net assets. Quanta anticipates
realizing meaningful operational and cost synergies, such as
enhancing the combined service offerings, expanding the
geographic reach and resource base of the combined company,
improving the utilization of personnel and fixed assets, the
elimination of duplicate corporate functions, |
F-7
NOTES TO
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
as well as accelerating revenue growth through enhanced
cross-selling and marketing opportunities. Quanta believes these
opportunities contribute to the recognition of substantial
goodwill. |
(b) Represents the assumed repayment of InfraSource’s
outstanding indebtedness under its credit facility as of
March 31, 2007, pursuant to the terms of the merger
agreement.
(c) Certain adjustments have been made to the historical
InfraSource balance sheet presentation to conform to
Quanta’s accounting policies. Unbilled accounts receivable
of $38.2 million have been reclassified to accounts
receivable, net and $3.5 million of unearned revenue has
been reclassified to accounts payable and accrued expenses.
Unaudited
Pro Forma Combined Statement of Operations
(d) Represents the reclassification of certain items to
conform InfraSource’s presentation to Quanta’s
accounting policies. (See Note (g) for further explanation).
(e) Represents the adjustment to record estimated
incremental non-cash stock-based compensation due to the
increase in fair value of the InfraSource stock options based on
the acquisition measurement date.
(f) Represents the adjustment to record estimated
incremental amortization expense on identifiable intangible
assets over their respective useful lives. The amortization of
the intangible assets is based upon the estimated consumption of
the economic benefits of each intangible asset or on a
straight-line basis if the pattern of economic benefits
consumption cannot be reliably estimated. Backlog is amortized
utilizing the estimated pattern of the consumption of the
economic benefit over the weighted average estimated life of
2.28 years for electrical and telecommunication projects.
Customer relationships are amortized on a straight-line basis
over the estimated useful life of 15 years. In accordance
with SFAS No. 142, “Goodwill and Other Intangible
Assets,” the unaudited pro forma combined statements of
operations do not include goodwill amortization. The pro forma
amortization expense associated with the other intangible assets
recorded by Quanta for the year ended December 31, 2006, as
a result of the acquisition of InfraSource is approximately
$19.7 million. InfraSource’s historical amortization
expense of $1.0 million for the year ended
December 31, 2006, associated with its intangible assets
was eliminated as part of this pro forma presentation. The pro
forma amortization expense associated with the other intangible
assets recorded by Quanta, for the three months ended
March 31, 2007, as a result of the acquisition of
InfraSource is approximately $3.3 million.
InfraSource’s historical amortization expense of
$0.1 million for the three months ended March 31,
2007, associated with its other intangible assets, was
eliminated as part of this pro forma presentation. Upon
completion of the third party valuation of the intangible assets
as of the merger date, there exists a possibility that the final
fair values of the intangible assets and the method of
amortization may change from the preliminary estimates and
methods used in this pro forma presentation.
(g) Represents the elimination of the historical
InfraSource interest expense of $6.2 million and the
write-off of deferred financing costs of $4.3 million for
the year ended December 31, 2006 and the elimination of the
historical InfraSource interest expense of $0.9 million for
the three months ended March 31, 2007, as a result of the
assumed repayment as of January 1, 2006 and 2007 of
InfraSource’s outstanding indebtedness under its credit
facility pursuant to the terms of the merger agreement. Also,
letter of credit fees of $0.7 million and $0.1 million
for the year ended December 31, 2006 and for the three
months ended March 31, 2007 have been reclassified to
selling, general and administrative expenses to conform to
Quanta’s presentation.
(h) Represents the reduction of Quanta’s historical
interest income for the year ended December 31, 2006 and
for the three months ended March 31, 2007, as a result of
the assumed repayment as of January 1, 2006 and 2007 of
InfraSource’s outstanding indebtedness under its credit
facility. The interest income reduction was calculated using the
weighted average rate of return on Quanta’s taxable
investments for the year ended December 31, 2006 and for
the three months ended March 31, 2007 multiplied by the
average amounts required to repay InfraSource’s outstanding
indebtedness under its credit facility of approximately
$71.8 million for the year ended December 31, 2006 and
$51.1 million for the three months ended March 31,
2007.
F-8
NOTES TO
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS — (Continued)
(i) Represents the adjustment to record a tax provision on
the pro forma combined income adjustments at the estimated
incremental statutory income tax rate of the combined company.
(j) Represents the elimination of InfraSource’s
historical merger related costs of $3.6 million for the
three months ended March 31, 2007, as these costs are
nonrecurring and are directly attributable to the acquisition.
(k) Reflects the adjustment to convert each share of
InfraSource common stock into 1.223 shares of Quanta common
stock.
|
|
Note 3 —
|
Unaudited
Pro Forma Combined Earnings Per Share
|
The following table provides the computational data for the
unaudited pro forma combined basic and diluted earnings per
share for the period presented. Both the basic and diluted
weighted average number of shares of InfraSource common stock
outstanding have been adjusted to reflect the impact of the
merger by applying the 1.223:1 exchange ratio to amounts
historically reported by InfraSource (in thousands, except per
share data):
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Earnings
|
|
|
|
per Share
|
|
|
|
For the
|
|
|
For the Three
|
|
|
|
Year Ended
|
|
|
Months Ended
|
|
|
|
December 31, 2006
|
|
|
March 31, 2007
|
|
|
Unaudited pro forma combined
income from continuing operations
|
|
$
|
35,033
|
|
|
$
|
30,402
|
|
Effect of convertible subordinated
notes under the “if converted” method —
interest expense addback, net of taxes
|
|
|
—
|
|
|
|
3,199
|
|
|
|
|
|
|
|
|
|
|
Net pro forma combined income from
continuing operations for diluted earnings per share
|
|
$
|
35,033
|
|
|
$
|
33,601
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding for basic earnings per share
|
|
|
165,650
|
|
|
|
167,291
|
|
Effect of dilutive stock options
and restricted stock
|
|
|
1,578
|
|
|
|
926
|
|
Effect of convertible subordinated
notes under the “if converted” method —
weighted convertible share issuable
|
|
|
—
|
|
|
|
30,652
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares,
outstanding for diluted earnings per share
|
|
|
167,228
|
|
|
|
198,869
|
|
|
|
|
|
|
|
|
|
|
Pro forma combined basic earnings
per share from continuing operations
|
|
$
|
0.21
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
Pro forma combined diluted
earnings per share from continuing operations
|
|
$
|
0.21
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
The unaudited pro forma combined basic and diluted earnings per
share do not purport to be indicative of the actual results that
would have been achieved by the combined company for the periods
presented or that will be achieved by the combined company in
the future.
F-9
Annex A
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
QUANTA SERVICES, INC. (PARENT)
QUANTA MS ACQUISITION, INC. (MERGER SUB)
and
INFRASOURCE SERVICES, INC. (COMPANY)
dated as of
March 18, 2007
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I THE MERGER
|
|
|
A-1
|
|
1.1
|
|
The Merger
|
|
|
A-1
|
|
1.2
|
|
Closing; Effective Time
|
|
|
A-1
|
|
1.3
|
|
Effects of the Merger
|
|
|
A-2
|
|
1.4
|
|
Certificate of Incorporation and
Bylaws
|
|
|
A-2
|
|
1.5
|
|
Directors and Officers of the
Surviving Corporation
|
|
|
A-2
|
|
1.6
|
|
Directors and Officers of Parent
|
|
|
A-2
|
|
1.7
|
|
Additional Actions
|
|
|
A-2
|
|
ARTICLE II CONVERSION OF
SECURITIES
|
|
|
A-2
|
|
2.1
|
|
Effect on Capital Stock
|
|
|
A-2
|
|
2.2
|
|
Surrender and Payment
|
|
|
A-3
|
|
2.3
|
|
Treatment of Stock Options;
Restricted Stock; Company ESPP
|
|
|
A-4
|
|
2.4
|
|
Adjustments to Prevent Dilution
|
|
|
A-6
|
|
2.5
|
|
Withholding
|
|
|
A-6
|
|
ARTICLE III REPRESENTATIONS
AND WARRANTIES OF COMPANY
|
|
|
A-6
|
|
3.1
|
|
Organization and Standing
|
|
|
A-6
|
|
3.2
|
|
Subsidiaries
|
|
|
A-7
|
|
3.3
|
|
Corporate Power and Authority
|
|
|
A-7
|
|
3.4
|
|
Capitalization of Company
|
|
|
A-7
|
|
3.5
|
|
Conflicts; Consents and Approvals
|
|
|
A-8
|
|
3.6
|
|
Company SEC Reports and Financial
Statements
|
|
|
A-9
|
|
3.7
|
|
Absence of Undisclosed Liabilities
|
|
|
A-10
|
|
3.8
|
|
Proxy Statement/Prospectus;
Registration Statement
|
|
|
A-10
|
|
3.9
|
|
Compliance with Law
|
|
|
A-10
|
|
3.10
|
|
Litigation
|
|
|
A-11
|
|
3.11
|
|
Absence of Certain Changes or
Events
|
|
|
A-11
|
|
3.12
|
|
Taxes
|
|
|
A-12
|
|
3.13
|
|
Employee Benefit Plans; ERISA
|
|
|
A-13
|
|
3.14
|
|
Environmental Matters
|
|
|
A-15
|
|
3.15
|
|
Insurance
|
|
|
A-16
|
|
3.16
|
|
Labor Matters; Employees
|
|
|
A-16
|
|
3.17
|
|
Title to Property and Equipment
|
|
|
A-17
|
|
3.18
|
|
Material Contracts
|
|
|
A-17
|
|
3.19
|
|
Intellectual Property
|
|
|
A-18
|
|
3.20
|
|
Disclosure Controls and Procedures
and Internal Control Over Financial Reporting
|
|
|
A-18
|
|
3.21
|
|
Tax-Free Reorganization
|
|
|
A-18
|
|
3.22
|
|
Opinion of Financial Advisor
|
|
|
A-18
|
|
3.23
|
|
Brokerage and Finders’ Fees
|
|
|
A-18
|
|
3.24
|
|
Anti-takeover Provisions
|
|
|
A-19
|
|
3.25
|
|
Board Recommendation; Required
Vote
|
|
|
A-19
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE IV REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
|
|
|
A-19
|
|
4.1
|
|
Organization and Standing
|
|
|
A-19
|
|
4.2
|
|
Corporate Power and Authority
|
|
|
A-20
|
|
4.3
|
|
Conflicts; Consents and Approval
|
|
|
A-20
|
|
4.4
|
|
Capitalization of Parent and
Merger Sub
|
|
|
A-21
|
|
4.5
|
|
Parent SEC Reports and Financial
Statements
|
|
|
A-22
|
|
4.6
|
|
Absence of Undisclosed Liabilities
|
|
|
A-23
|
|
4.7
|
|
Proxy Statement/Prospectus;
Registration Statement
|
|
|
A-23
|
|
4.8
|
|
Compliance with Law
|
|
|
A-23
|
|
4.9
|
|
Litigation
|
|
|
A-23
|
|
4.10
|
|
Absence of Certain Changes or
Events
|
|
|
A-24
|
|
4.11
|
|
Taxes
|
|
|
A-24
|
|
4.12
|
|
Employee Benefit Plans; ERISA
|
|
|
A-25
|
|
4.13
|
|
Environmental Matters
|
|
|
A-26
|
|
4.14
|
|
Insurance
|
|
|
A-27
|
|
4.15
|
|
Labor Matters; Employees
|
|
|
A-27
|
|
4.16
|
|
Intellectual Property
|
|
|
A-28
|
|
4.17
|
|
Material Contracts
|
|
|
A-28
|
|
4.18
|
|
Disclosure Controls and Procedures
and Internal Control Over Financial Reporting
|
|
|
A-28
|
|
4.19
|
|
Tax-Free Reorganization
|
|
|
A-29
|
|
4.20
|
|
Rights Agreement
|
|
|
A-29
|
|
4.21
|
|
Opinion of Financial Advisor
|
|
|
A-29
|
|
4.22
|
|
Section 203 of the DGCL
|
|
|
A-29
|
|
4.23
|
|
Brokerage and Finders’ Fees
|
|
|
A-29
|
|
4.24
|
|
Board Recommendation
|
|
|
A-29
|
|
4.25
|
|
Required Vote by Parent
Stockholders
|
|
|
A-29
|
|
ARTICLE V COVENANTS OF THE
PARTIES
|
|
|
A-29
|
|
5.1
|
|
Acquisition Proposals
|
|
|
A-29
|
|
5.2
|
|
Mutual Covenants
|
|
|
A-32
|
|
5.3
|
|
Covenants of Company
|
|
|
A-34
|
|
5.4
|
|
Covenants of Parent
|
|
|
A-37
|
|
5.5
|
|
Stockholders’ Meetings
|
|
|
A-40
|
|
5.6
|
|
Preparation of the Proxy
Statement/Prospectus and Registration Statement
|
|
|
A-41
|
|
5.7
|
|
BP LTIP Committee
|
|
|
A-42
|
|
5.8
|
|
Stock Exchange Listing
|
|
|
A-42
|
|
5.9
|
|
Publicity
|
|
|
A-42
|
|
5.10
|
|
Section 16 Matters
|
|
|
A-42
|
|
5.11
|
|
Certain Tax Matters
|
|
|
A-43
|
|
5.12
|
|
Affiliates Letter
|
|
|
A-43
|
|
ARTICLE VI CONDITIONS TO THE
MERGER
|
|
|
A-44
|
|
6.1
|
|
Conditions to the Obligations of
Each Party
|
|
|
A-44
|
|
6.2
|
|
Conditions to Obligations of
Company
|
|
|
A-44
|
|
6.3
|
|
Conditions to Obligations of
Parent and Merger Sub
|
|
|
A-45
|
|
A-ii
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE VII TERMINATION; FEES
AND EXPENSES
|
|
|
A-45
|
|
7.1
|
|
Termination by Mutual Consent
|
|
|
A-45
|
|
7.2
|
|
Termination by Either Parent or
Company
|
|
|
A-45
|
|
7.3
|
|
Termination by Company
|
|
|
A-46
|
|
7.4
|
|
Termination by Parent
|
|
|
A-46
|
|
7.5
|
|
Effect of Termination
|
|
|
A-47
|
|
7.6
|
|
Fees and Expenses
|
|
|
A-47
|
|
ARTICLE VIII MISCELLANEOUS
|
|
|
A-48
|
|
8.1
|
|
Non-Survival of Representations
and Warranties
|
|
|
A-48
|
|
8.2
|
|
Notices
|
|
|
A-48
|
|
8.3
|
|
Interpretation
|
|
|
A-49
|
|
8.4
|
|
Counterparts
|
|
|
A-49
|
|
8.5
|
|
Entire Agreement
|
|
|
A-49
|
|
8.6
|
|
Third-Party Beneficiaries
|
|
|
A-50
|
|
8.7
|
|
Governing Law
|
|
|
A-50
|
|
8.8
|
|
Remedies
|
|
|
A-50
|
|
8.9
|
|
Consent to Jurisdiction; Venue;
Jury Trial
|
|
|
A-50
|
|
8.10
|
|
Assignment
|
|
|
A-51
|
|
8.11
|
|
Amendment
|
|
|
A-51
|
|
8.12
|
|
Extension; Waiver
|
|
|
A-51
|
|
8.13
|
|
No Presumption Against Drafter
|
|
|
A-51
|
|
8.14
|
|
Severability
|
|
|
A-51
|
|
|
|
|
|
|
Exhibit A Restated
Certificate of Incorporation of the Surviving Corporation
|
|
|
|
|
Exhibit B Form of Affiliates
Letter
|
|
|
|
|
A-iii
INDEX OF
DEFINED TERMS
|
|
|
|
|
Defined Term
|
|
Page
|
|
2003 Plan
|
|
|
6
|
|
2004 Plan
|
|
|
6
|
|
Acquisition Proposal
|
|
|
46
|
|
Action
|
|
|
15
|
|
Adjusted Option
|
|
|
6
|
|
Affiliates Letter
|
|
|
64
|
|
Agreement
|
|
|
1
|
|
Alternative Transaction
Recommendation
|
|
|
45
|
|
Applicable Laws
|
|
|
4
|
|
Board
|
|
|
1
|
|
BP LTIP
|
|
|
21
|
|
Certificate of Merger
|
|
|
2
|
|
Change in Control of Parent
|
|
|
68
|
|
Change in the Company Board
Recommendation
|
|
|
60
|
|
Change in the Parent Board
Recommendation
|
|
|
60
|
|
Change of Recommendation Notice
|
|
|
45
|
|
Closing
|
|
|
2
|
|
Closing Date
|
|
|
2
|
|
Code
|
|
|
1
|
|
Company
|
|
|
1
|
|
Company Balance Sheet
|
|
|
13
|
|
Company Benefit Plans
|
|
|
19
|
|
Company Board Recommendation
|
|
|
27
|
|
Company Bylaws
|
|
|
9
|
|
Company Certificate
|
|
|
9
|
|
Company Common Stock
|
|
|
1
|
|
Company Disclosure Letter
|
|
|
8
|
|
Company Employee Agreement
|
|
|
19
|
|
Company Employees
|
|
|
56
|
|
Company Engagement Letters
|
|
|
27
|
|
Company ERISA Affiliate
|
|
|
19
|
|
Company ESPP
|
|
|
7
|
|
Company Material Adverse Effect
|
|
|
9
|
|
Company Material Contract
|
|
|
25
|
|
Company Option
|
|
|
6
|
|
Company Permits
|
|
|
15
|
|
Company Restricted Shares
|
|
|
7
|
|
Company SEC Documents
|
|
|
13
|
|
Company Stock Plans
|
|
|
6
|
|
Company Stockholder
|
|
|
3
|
|
Company Stockholder Meeting
|
|
|
59
|
|
Company Stockholders’ Approval
|
|
|
27
|
|
Company Subsidiaries
|
|
|
9
|
|
A-iv
|
|
|
|
|
Defined Term
|
|
Page
|
|
Company Termination Fee
|
|
|
69
|
|
Confidentiality Agreement
|
|
|
44
|
|
Confidentiality Agreements
|
|
|
44
|
|
Covered Proposal
|
|
|
69
|
|
Credit Agreement
|
|
|
10
|
|
Dark Fiber Confidentiality
Agreement
|
|
|
44
|
|
Delaware Secretary of State
|
|
|
2
|
|
DGCL
|
|
|
1
|
|
Effective Time
|
|
|
2
|
|
Encumbrance
|
|
|
12
|
|
Environmental Laws
|
|
|
21
|
|
ERISA
|
|
|
19
|
|
Exchange Act
|
|
|
10
|
|
Exchange Agent
|
|
|
3
|
|
Exchange Ratio
|
|
|
3
|
|
FCPA
|
|
|
15
|
|
GAAP
|
|
|
13
|
|
Governmental Authority
|
|
|
12
|
|
Hazardous Substances
|
|
|
22
|
|
HSR Act
|
|
|
12
|
|
Indemnified Directors and Officers
|
|
|
58
|
|
Insurance Amount
|
|
|
58
|
|
Intellectual Property
|
|
|
25
|
|
Labor Agreements
|
|
|
23
|
|
Merger
|
|
|
1
|
|
Merger Consideration
|
|
|
3
|
|
Merger Sub
|
|
|
1
|
|
Merger Sub Bylaws
|
|
|
28
|
|
Merger Sub Certificate
|
|
|
28
|
|
Merger Sub Common Stock
|
|
|
3
|
|
Multiemployer Plan
|
|
|
20
|
|
New Plans
|
|
|
57
|
|
NYSE
|
|
|
13
|
|
Parent
|
|
|
1
|
|
Parent Balance Sheet
|
|
|
31
|
|
Parent Benefit Plans
|
|
|
36
|
|
Parent Board Recommendation
|
|
|
42
|
|
Parent Bylaws
|
|
|
28
|
|
Parent Certificate
|
|
|
28
|
|
Parent Common Stock
|
|
|
3
|
|
Parent Disclosure Letter
|
|
|
27
|
|
Parent ERISA Affiliate
|
|
|
36
|
|
Parent Limited Vote Common
Stock
|
|
|
30
|
|
Parent Material Adverse Effect
|
|
|
28
|
|
A-v
|
|
|
|
|
Defined Term
|
|
Page
|
|
Parent Material Contract
|
|
|
40
|
|
Parent Permits
|
|
|
33
|
|
Parent Proposal
|
|
|
28
|
|
Parent Required Vote
|
|
|
28
|
|
Parent Restricted Shares
|
|
|
7
|
|
Parent Rights Agreement
|
|
|
31
|
|
Parent SEC Documents
|
|
|
31
|
|
Parent Stock Options
|
|
|
30
|
|
Parent Stock Plan
|
|
|
30
|
|
Parent Stockholder Meeting
|
|
|
60
|
|
Parent Stockholders
|
|
|
30
|
|
Parent Subsidiaries
|
|
|
28
|
|
Parent Subsidiary
|
|
|
28
|
|
Parent Termination Fee
|
|
|
70
|
|
PBGC
|
|
|
20
|
|
Person
|
|
|
47
|
|
Property and Equipment
|
|
|
24
|
|
Proxy Statement/Prospectus
|
|
|
14
|
|
Registration Statement
|
|
|
15
|
|
Representatives
|
|
|
42
|
|
Returns
|
|
|
19
|
|
Sarbanes-Oxley Act
|
|
|
13
|
|
SEC
|
|
|
12
|
|
Securities Act
|
|
|
11
|
|
Stock Certificate
|
|
|
3
|
|
Subsidiary
|
|
|
9
|
|
Superior Proposal
|
|
|
46
|
|
Surviving Corporation
|
|
|
2
|
|
Taxes
|
|
|
19
|
|
Termination Date
|
|
|
67
|
|
WARN Act
|
|
|
23
|
|
A-vi
AGREEMENT
AND PLAN OF MERGER
This Agreement and Plan of Merger (this
“Agreement”) is made and entered into as
of March 18, 2007, by and among Quanta Services, Inc., a
Delaware corporation (“Parent”), Quanta
MS Acquisition, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent (“Merger Sub”), and
InfraSource Services, Inc., a Delaware corporation
(“Company”).
RECITALS
WHEREAS, Parent, Merger Sub and Company desire that Parent
acquire all of the capital stock of Company through the merger
of Merger Sub with and into Company, with Company as the
surviving corporation (the “Merger”),
pursuant to which each share of Common Stock of Company, par
value $0.001 per share (“Company Common
Stock”), issued and outstanding at the Effective
Time (as defined in Section 1.2), excluding shares of
Company Common Stock owned by Parent, Merger Sub or Company (or
any of their respective direct or indirect wholly owned
subsidiaries), will be converted into the right to receive the
Merger Consideration as defined in Section 2.1(b), all as
more fully provided in this Agreement; and
WHEREAS, the respective board of directors (each a
“Board”) of each of Parent, Merger Sub
and Company has determined that the Merger, upon the terms and
subject to the conditions set forth in this Agreement, is
advisable, fair to and in the best interests of their respective
stockholders; and
WHEREAS, the Parent Board has resolved to submit to the
stockholders of Parent for their approval the issuance of shares
of Parent Common Stock (as defined in Section 2.1(b)) and
the Company Board has resolved to submit this Agreement to the
stockholders of Company for their approval; and
WHEREAS, Parent, Merger Sub and Company desire to make those
representations, warranties, covenants and agreements specified
herein in connection with this Agreement; and
WHEREAS, for U.S. federal income tax purposes, it is
intended that the Merger will qualify as a reorganization under
the provisions of Section 368(a) of the U.S. Internal
Revenue Code of 1986, as amended
(the “Code”).
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained
herein, Parent, Merger Sub and Company agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and
subject to the conditions of this Agreement, and in accordance
with the provisions of the Delaware General Corporation Law (the
“DGCL”), Merger Sub shall be merged with
and into Company at the Effective Time. As a result of the
Merger, the separate corporate existence of Merger Sub shall
cease and Company shall continue its existence as a wholly owned
subsidiary of Parent under the laws of the State of Delaware.
Company, in its capacity as the corporation surviving the
Merger, is hereinafter sometimes referred to as the
“Surviving Corporation.”
1.2 Closing; Effective Time. A
closing (the “Closing”) shall be held at
the offices of Akin Gump Strauss Hauer & Feld LLP,
1111 Louisiana Street, 44th Floor, Houston, Texas
77002-5200,
or such other place as the parties hereto may agree, as soon as
practicable but no later than the third business day following
the date upon which all conditions set forth in Article VI
(other than those conditions that by their nature are to be
satisfied or waived at the Closing, but subject to the
satisfaction or waiver of those conditions) are satisfied or
waived, or at such other date as Parent and Company may agree
(such date, the “Closing Date”). As
promptly as possible on the Closing Date, the parties hereto
shall cause the filing with the Secretary of State of the State
of Delaware (the “Delaware Secretary of
State”) of a certificate of merger (the
“Certificate of Merger”) in such form as
is required by and executed in accordance with Section 251
of the DGCL. The Merger shall become effective when the
Certificate of Merger has been filed with the Delaware Secretary
of State or at such later time as shall be agreed upon by Parent
and Company and specified in the Certificate of Merger (the
“Effective Time”).
A-1
1.3 Effects of the Merger. From and
after the Effective Time, the Merger shall have the effects set
forth in the DGCL.
1.4 Certificate of Incorporation and
Bylaws. The Certificate of Merger shall provide
that at the Effective Time, (a) the Surviving
Corporation’s Restated Certificate of Incorporation as in
effect immediately prior to the Effective Time shall be amended
and restated in its entirety as of the Effective Time so as to
read as set forth on Exhibit A hereto and
(b) Merger Sub’s Bylaws in effect immediately prior to
the Effective Time shall be the Surviving Corporation’s
Bylaws; in each case, until thereafter changed or amended in
accordance with the respective terms thereof and the DGCL.
1.5 Directors and Officers of the Surviving
Corporation. From and after the Effective Time,
the officers of Merger Sub shall be the officers of the
Surviving Corporation and the directors of Merger Sub shall be
the directors of the Surviving Corporation, in each case, until
the earlier of their death, resignation, removal or until their
respective successors are duly elected and qualified. On or
prior to the Closing Date, Company shall deliver to Parent
evidence reasonably satisfactory to Parent of the resignations
of the directors of Company and, as requested by Parent, the
officers of Company as directors and officers, such resignations
to be effective as of the Effective Time.
1.6 Directors and Officers of
Parent. The directors and officers of Parent
immediately after the Effective Time shall be the directors and
officers of Parent immediately prior to the Effective Time,
until such time as their death, resignation, removal or until
their respective successors shall be duly elected and qualified,
except that the Parent Board shall appoint three new directors,
who are directors of Company selected by the Parent Board.
1.7 Additional Actions. If, at any
time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further deeds, assignments or
assurances in law or any other acts are necessary or desirable
to (a) vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of Company or
(b) otherwise carry out the provisions of this Agreement,
Company and its officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments or
assurances in law and to take all acts necessary, proper or
desirable to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Corporation
and otherwise to carry out the provisions of this Agreement, and
the officers and directors of the Surviving Corporation are
authorized in the name of Company or otherwise to take any and
all such action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Effect on Capital Stock. At the
Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub or Company or their respective
stockholders:
(a) Each share of common stock, $0.001 par value, of
Merger Sub (“Merger Sub Common Stock”)
issued and outstanding immediately prior to the Effective Time
shall be converted into one (1) fully paid and
nonassessable share of common stock, $0.001 par value, of
the Surviving Corporation. Such newly issued shares shall
thereafter constitute all of the issued and outstanding
Surviving Corporation capital stock.
(b) Subject to the other provisions of this
Article II, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (excluding
any shares of Company Common Stock owned by Parent, Merger Sub
or Company or any of their respective direct or indirect wholly
owned subsidiaries (which shares shall be cancelled and shall
cease to exist with no payment being made with respect thereto)
shall be converted into 1.223 shares (the
“Exchange Ratio”) of common stock of
Parent, par value $0.00001 per share (“Parent
Common Stock”) (such stock, the “Merger
Consideration”). At the Effective Time, all shares
of Company Common Stock shall no longer be outstanding and
automatically shall be cancelled and shall cease to exist, and
each holder of a certificate, or shares in book-entry form, that
immediately prior to the Effective Time represented such shares
of Company Common Stock (a “Stock
Certificate”) shall cease to have any rights with
respect thereto, except the right to receive the Merger
Consideration.
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2.2 Surrender and Payment.
(a) Exchange Agent; Exchange Fund. Prior
to the Effective Time, for the benefit of the shares of Company
Common Stock issued and outstanding immediately prior to the
Effective Time that are held by any holder of share(s) of
Company Common Stock (a “Company
Stockholder”), Parent shall designate, or shall
cause to be designated (pursuant to an agreement in form and
substance reasonably acceptable to Company), a bank or trust
company that is reasonably satisfactory to Company to act as
agent for the payment of the Merger Consideration in respect of
the Stock Certificates upon surrender of such Stock Certificates
in accordance with this Article II from time to time after
the Effective Time (the “Exchange
Agent”). Parent will make available to the Exchange
Agent, as needed, the Merger Consideration to be delivered in
respect of the shares of Company Common Stock pursuant to
Section 2.1(b), including cash in lieu of fractional shares
in accordance with Section 2.2(e).
(b) Exchange Procedure. As soon as
reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a Stock Certificate
(i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
the Stock Certificates held by such Company Stockholder shall
pass, only upon proper delivery of the Stock Certificates to the
Exchange Agent and, in the case of shares in book-entry form,
any additional documents specified by the procedures set forth
in the form of letter of transmittal and shall be in such
customary form and have such other customary provisions as
Parent may reasonably specify), and (ii) instructions for
use in effecting the surrender of the Stock Certificates in
exchange for the Merger Consideration. Upon surrender of a Stock
Certificate in proper form for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed
and validly executed, and such other documents as may reasonably
be required by the Exchange Agent or Parent, the holder of such
Stock Certificate shall be entitled to receive in exchange
therefor (x) a certificate representing that number of
whole shares of Parent Common Stock that such holder is entitled
to receive pursuant to this Article II, (y) a check in
the amount (after giving effect to any required tax
withholdings) of (A) any cash in lieu of fractional shares
plus (B) any unpaid non-stock dividends and (z) any
other dividends or other distributions that such holder has the
right to receive pursuant to the provisions of this
Article II, and the Stock Certificate so surrendered shall
be cancelled. In the event of a transfer of ownership of Company
Common Stock that is not registered in the stock transfer books
of Company, a certificate representing the proper number of
shares of Parent Common Stock, together with a check for any
cash to be paid upon surrender of the Stock Certificate and any
other dividends or distributions in respect thereof, may be
issued and paid to a Person (as defined in
Section 5.2(d)(i)) other than the Person in whose name the
Stock Certificate so surrendered is registered if the Stock
Certificate shall be properly endorsed and otherwise be in
proper form for transfer and the Person requesting such payment
shall pay any transfer or other Taxes (as defined in
Section 3.12(l)) required by reason of the payment to a
Person other than the registered holder of the Stock Certificate
or establish to the satisfaction of Parent that the Tax has been
paid or is not applicable. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Stock
Certificate.
(c) Distributions with Respect to Unexchanged Shares;
Voting.
(i) To the fullest extent permitted by all laws, statutes,
orders, rules or regulations promulgated, or judgments,
decisions or orders entered, by any Governmental Authority (as
defined in Section 3.5(e)), in each case, to the extent
applicable (collectively, “Applicable
Laws”), all shares of Parent Common Stock to be
issued pursuant to the Merger shall be deemed issued and
outstanding as of the Effective Time and if any dividend or
other distribution is declared by Parent in respect of the
Parent Common Stock, the record date for which is at or after
the Effective Time, that declaration shall include dividends or
other distributions in respect of all shares of Parent Common
Stock issuable pursuant to this Agreement. No dividends or other
distributions in respect of the Parent Common Stock shall be
paid to any holder of any unsurrendered Stock Certificate until
such Stock Certificate is surrendered for exchange in accordance
with this Article II. Subject to the effect of all
Applicable Laws, following surrender of any such Stock
Certificate, there shall be issued and paid to the holder of the
certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (A) at the
time of such surrender, the dividends or other distributions
(1) with a record date at or after the Effective Time and a
payment date on or before such surrender with respect to such
whole shares of Parent Common Stock and (2) not paid and
(B) at the appropriate payment date, the dividends or other
distributions payable with respect to such whole shares of
Parent Common Stock with a record date after the Effective Time
but with a payment date subsequent to surrender.
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(ii) To the fullest extent permitted by Applicable Laws,
holders of unsurrendered Stock Certificates shall be entitled to
vote after the Effective Time at any meeting of Parent
Stockholders (as defined in Section 4.4) the number of
whole shares of Parent Common Stock represented by such Stock
Certificates, regardless of whether such holders have exchanged
their Stock Certificates.
(d) Stock Transfer Books. At the close of
business on the day on which the Effective Time occurs, the
stock transfer books of Company shall be closed, and there shall
be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Stock Certificates
are presented to the Surviving Corporation or the Exchange Agent
for transfer or any other reason, they shall be cancelled and
exchanged as provided in this Article II.
(e) Fractional Shares. Notwithstanding
any other provision of this Agreement, no fractional shares of
Parent Common Stock will be issued and any Company Stockholder
entitled to receive a fractional share of Parent Common Stock
but for this Section 2.2(e) shall be entitled to receive a
cash payment (without interest) in lieu thereof, which payment
shall be calculated by the Exchange Agent and shall represent
such holder’s proportionate interest in a share of Parent
Common Stock based on the net proceeds from the sale by the
Exchange Agent on behalf of such holder of the aggregate
fractional shares of Parent Common Stock that such holder
otherwise would be entitled to receive. Any such sale shall be
made by the Exchange Agent within five business days after the
date upon which the Stock Certificate(s) (or affidavit(s) of
loss and indemnity in lieu thereof) that would otherwise result
in the issuance of such fractional shares of Parent Common Stock
have been received by the Exchange Agent.
(f) No Liability. Any portion of the
Merger Consideration held by the Exchange Agent for payment to
the holders of unsurrendered Stock Certificates that remains
unclaimed one year after the Effective Time shall be delivered,
at Parent’s option, to Parent (including any interest and
other income resulting from investments of such Merger
Consideration). Any stockholders of Company who have not
theretofore complied with this Article II shall thereafter
look only to Parent for delivery of any shares of Parent Common
Stock and payment of any cash, dividends and other distributions
in respect thereof payable or deliverable pursuant to
Section 2.1, Section 2.2(c) and Section 2.2(e)
upon due surrender of their Stock Certificate (or affidavits of
loss and indemnity in lieu thereof), in each case, without any
interest thereon. Notwithstanding the foregoing, none of Parent,
Merger Sub, Company or the Exchange Agent shall be liable to any
Person in respect of any cash properly delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(g) Lost Stock Certificates. If any Stock
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming a
Stock Certificate to be lost, stolen or destroyed and, if
required by Parent or the Surviving Corporation, the posting by
such Person of a bond in such reasonable amount as Parent or the
Surviving Corporation may reasonably direct as indemnity against
any claim that may be made against it with respect to the Stock
Certificate, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Stock Certificate the shares of Parent
Common Stock and the cash and any unpaid dividends and other
distributions that would be payable or deliverable in respect
thereof pursuant to this Agreement had such lost, stolen or
destroyed Stock Certificate been surrendered.
(h) No Further Ownership Rights in Company Common
Stock. The Merger Consideration paid in
accordance with the terms of this Article II in respect of
Stock Certificates that have been surrendered in accordance with
the terms of this Agreement shall be deemed to have been paid in
full satisfaction of all rights pertaining to the shares of
Company Common Stock represented thereby.
2.3 Treatment of Stock Options; Restricted Stock;
Company ESPP.
(a) As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, each
option to purchase shares of Company Common Stock (a
“Company Option”) granted under
Company’s 2003 Omnibus Stock Incentive Plan (the
“2003 Plan”), or Company’s 2004
Omnibus Stock Incentive Plan, (the “2004 Plan”
and, together with the 2003 Plan, the
“Company Stock Plans”), whether vested
or unvested, that is outstanding and unexercised immediately
prior to the Effective Time shall cease to represent a right to
purchase shares of Company Common Stock and shall be converted
into an option (an “Adjusted Option”) to
purchase, on the same terms and conditions as applied to each
such Company Option immediately prior to the Effective Time
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(including, without limitation, the same vesting conditions),
the number of whole shares of Parent Common Stock that is equal
to the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio (rounded down to the nearest
whole share), at an exercise price per share of Parent Common
Stock (rounded up to the nearest whole penny) equal to the
exercise price for each such share of Company Common Stock
subject to such Company Option immediately prior to the
Effective Time divided by the Exchange Ratio; provided, that the
exercise price and the number of shares of Parent Common Stock
subject to such Adjusted Option shall be determined in a manner
consistent with the requirements of Section 409A of the
Code. Section 2.3(a) of the Company Disclosure Letter (as
defined in Article III below) contains a true and complete
list of the Company Options held by each option holder on the
date of this Agreement and sets forth next to the name of each
such holder (i) the number of Company Options such option
holder holds on a grant by grant basis, (ii) the date on
which such Company Options were granted, (iii) the exercise
price and vesting schedule applicable to such Company Options
and (iv) the circumstances pursuant to which the vesting of
such Company Options will be accelerated. Except for the Company
Options, no current or former employee, director or consultant
of Company or any Company Subsidiary holds options or other
rights to acquire Company Common Stock.
(b) Each share of Company Common Stock that is subject to
transfer and/or forfeiture restrictions under the Company Stock
Plans immediately prior to the Effective Time (collectively, the
“Company Restricted Shares”) shall, upon
its conversion into the Merger Consideration pursuant to
Section 2.1 hereof, continue to be subject to such
restrictions (the shares of Parent Common Stock subject to such
transfer and/or forfeiture restrictions after the Effective Time
are hereafter collectively referred to as “Parent
Restricted Shares”) and, upon the lapsing of such
restrictions, Parent shall be entitled to withhold such amounts
as may be required to be withheld under the Code and any
applicable state or local tax law with respect to the lapsing of
such restrictions; provided, that each holder of such Parent
Restricted Shares may satisfy such withholding obligations by
any approved method under the applicable Company Stock Plan.
Section 2.3(b) of the Company Disclosure Letter contains a
true and complete list of the Company Restricted Shares held by
each holder thereof on the date of this Agreement and sets forth
next to the name of each holder (i) the number of Company
Restricted Shares such holder holds on a grant by grant basis,
(ii) the date on which such Company Restricted Shares were
granted, (iii) the vesting schedule pursuant to which the
transfer and/or forfeiture restrictions on such Company
Restricted Shares shall lapse and (iv) the circumstances
pursuant to which the vesting of such Company Restricted Shares
will be accelerated. Except for the Company Restricted Shares
and except as set forth on Section 2.3(b) of the Company
Disclosure Letter, no current or former employee, director or
consultant of Company or any Company Subsidiary (as defined in
Section 3.1(a)) holds restricted shares of Company Common
Stock.
(c) The Company Board shall take any and all actions
reasonably necessary (including, without limitation, adopting
any necessary plan amendment) to terminate all purchases of
stock under Company’s 2004 Employee Stock Purchase Plan
(the “Company ESPP”) effective as of the
last “Trading Day” of the “Offering Period”
(as each such term is defined in the Company ESPP) that is in
effect on the date of this Agreement and provide that no
additional Offering Periods shall commence under the Company
ESPP after the date of this Agreement. Company shall terminate
the Company ESPP in its entirety immediately prior to the
Closing Date.
(d) As of the Effective Time, Parent shall assume the
obligations and succeed to the rights of Company under the
Company Stock Plans with respect to the Adjusted Options and the
Parent Restricted Shares. Company and Parent agree that
(i) except as disclosed on Sections 2.3(a)
and (b) of the Company Disclosure Letter, Company Options
and Company Restricted Shares shall not vest as a result of the
Merger and (ii) prior to the Effective Time each of the
Company Stock Plans shall be amended, if and to the extent
necessary, to reflect the transactions contemplated by this
Agreement, including the conversion of the Company Options and
Company Restricted Shares pursuant to Sections 2.3(a) and
(b) above and the substitution of Parent for Company
thereunder to the extent appropriate to effectuate the
assumption of such Company Stock Plans by Parent. From and after
the Effective Time, all references to Company (other than any
references relating to a “Change in Control” of
Company) in each Company Stock Plan and in each agreement
evidencing any award of Company Options or Company Restricted
Shares shall be deemed to refer to Parent, unless Parent
determines otherwise.
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(e) Parent shall take all action necessary or appropriate
to have available for issuance under an effective registration
statement filed with the SEC a sufficient number of shares of
Parent Common Stock for delivery upon exercise of the Adjusted
Options.
2.4 Adjustments to Prevent
Dilution. In the event that Company changes the
number of shares of Company Common Stock or securities
convertible or exchangeable into or exercisable for shares of
Company Common Stock, or Parent changes the number of shares of
Parent Common Stock or securities convertible or exchangeable
into or exercisable for shares of Parent Common Stock, issued
and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse stock split),
stock dividend or distribution, recapitalization, merger,
subdivision, issuer tender or exchange offer, or other similar
transaction, the Merger Consideration shall be equitably
adjusted.
2.5 Withholding. Each of Parent and
the Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement
such amounts as Parent or the Exchange Agent is required to
deduct and withhold under the Code or any provision of state,
local, or foreign Applicable Laws, with respect to the making of
such payment. To the extent that amounts are so withheld by
Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid
to the person in respect of whom such deduction and withholding
was made by Parent or the Exchange Agent, as the case may be.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Except as set forth in the disclosure letter, or in a specific
reference to a Company SEC Document (as defined in
Section 3.6) filed and publicly available prior to the date
of this Agreement referred to in such disclosure letter,
delivered by Company to Parent at or prior to the execution and
delivery of this Agreement (the “Company Disclosure
Letter”) (each section of which qualifies the
correspondingly numbered representation, warranty or covenant to
the extent specified therein or in the referred to portion of
the Company SEC Documents and such other representations,
warranties or covenants to the extent a matter in such section
is disclosed in such a way as to make its relevance to such
other representation, warranty or covenant reasonably apparent;
provided however, that any disclosures in a “Risk
Factors” or similar section included in any Company SEC
Documents shall not be deemed a qualification of any
representation, warranty or covenant, or the matters expressly
set forth on the Company Disclosure Letter or the exceptions in
the definition of “Company Material Adverse Effect”),
Company represents and warrants to Parent as follows:
3.1 Organization and Standing.
(a) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to own, lease,
use and operate its properties and to conduct its business as
and where now owned, leased, used, operated and conducted. Each
of the Subsidiaries listed on Section 3.1 of the Company
Disclosure Letter (the “Company
Subsidiaries”) is an organization duly organized,
validly existing, and in good standing under the laws of its
jurisdiction of organization with full entity power and
authority to own, lease, use and operate its properties and to
conduct its business as and where now owned, leased, used,
operated and conducted. Each of Company and the Company
Subsidiaries is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of the
business conducted by it or the property it owns, leases or
operates requires it to so qualify, except where the failure to
be so qualified or in good standing in such jurisdiction would
not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect (as defined below).
Company is not in default in the performance, observance or
fulfillment of any provision of Company’s Restated
Certificate of Incorporation, as amended (the
“Company Certificate”), or
Company’s Amended and Restated Bylaws (the
“Company Bylaws”), each of which is in
the form as filed and publicly available prior to date of this
Agreement in the Company SEC Documents. Company has made
available to Parent complete and correct copies of the
certificates of incorporation and bylaws or similar
organizational documents for each of the Company Subsidiaries.
(b) For purposes of this Agreement,
(i) “Company Material Adverse
Effect” means a materially adverse effect on the
financial condition, business, assets, properties or results of
operations of Company and the Company
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Subsidiaries, taken as a whole, no matter how caused or how
arising, except that no materially adverse effect may be caused
solely by or arise solely from one or more of (A) changes
to economic, political or business conditions affecting the
economy or financial markets generally, (B) the occurrence
of natural disasters of any type, (C) occurrence of war,
acts of war, terrorism or similar hostilities or
(D) changes in Applicable Laws, unless any such change or
occurrence specified in clauses (A), (B), (C) or
(D) materially and disproportionately affects Company and
the Company Subsidiaries taken as a whole and
(ii) “Subsidiary” means, with
respect to any party, any corporation, partnership, limited
liability company, joint venture or other entity or enterprise,
whether incorporated or unincorporated, of which (x) at
least a majority of the securities or other interests having by
their terms voting power to elect a majority of the directors or
others performing similar functions with respect to such
corporation or other entity is directly or indirectly
beneficially owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and one or more of
its Subsidiaries, or (y) such party or any Subsidiary of
such party is a general partner of a partnership or a manager of
a limited liability company.
3.2 Subsidiaries. Except as set
forth on Section 3.2 of the Company Disclosure Letter,
Company does not own, directly or indirectly, any equity or
other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, other than the Company
Subsidiaries. Company is not subject to any obligation or
requirement to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any such
entity or any other person. Company owns, directly or
indirectly, each of the outstanding shares of capital stock (or
other ownership interests having by their terms ordinary voting
power to elect a majority of directors or others performing
similar functions with respect to such subsidiary) of each of
the Company Subsidiaries. Each of the ownership interests of
each of the Company Subsidiaries is duly authorized and validly
issued and is owned, directly or indirectly, by Company free and
clear of all Encumbrances (as defined in Section 3.5(b)),
other than pursuant to the Securities Pledge Agreements, entered
into in connection with the Credit Agreement, dated
June 30, 2006, among Company, InfraSource Incorporated,
JPMorgan Chase Bank, N.A., as syndication agent, Bank of
America, N.A., as administrative agent, and the lenders party
thereto (the “Credit Agreement”). There
are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale or transfer
of any securities of any of the Company Subsidiaries, nor are
there outstanding any securities that are convertible into or
exchangeable for any shares of capital stock or other voting
securities or ownership interests of any of the Company
Subsidiaries. Neither Company nor any of the Company
Subsidiaries is a party to, or has any commitment to become a
party to, any joint venture, off-balance sheet partnership or
any similar contract (including without limitation any contract
relating to any transaction or relationship between or among
Company and any of the Company Subsidiaries, on the one hand,
and any unconsolidated affiliate, including without limitation
any structured finance, special purpose or limited purpose
entity or Person, on the other hand, or any “off-balance
sheet arrangement” (as defined in Item 303(a) of
Regulation S-K
promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”))).
3.3 Corporate Power and
Authority. Company has all requisite corporate
power and authority to enter into and deliver this Agreement, to
perform its obligations under this Agreement, and, subject to
approval and adoption of this Agreement and the transactions
contemplated by this Agreement by the Company Stockholders, to
consummate the transactions contemplated by this Agreement. The
execution, performance and delivery of this Agreement by Company
have been duly authorized by all necessary corporate action on
the part of Company, subject to adoption of this Agreement and
the transactions contemplated by this Agreement by the Company
Stockholders, and no other corporate proceedings on the part of
Company are necessary to authorize or approve this Agreement or
to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
Company, and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, constitutes the legal, valid
and binding obligation of Company enforceable against it in
accordance with its terms, except that such enforceability
(a) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of
creditors’ rights generally and (b) is subject to
general principles of equity.
3.4 Capitalization of Company.
(a) As of December 31, 2006, Company’s authorized
capital stock consisted of (i) 120,000,000 shares of
Company Common Stock, of which 40,233,869 shares were
issued and outstanding (including 164,531 Company Restricted
Shares issued under the Company Stock Plans), and
(ii) 12,000,000 shares of preferred stock, par value
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$.001 per share, issuable in series, none of which were
outstanding. At December 31, 2006, there were outstanding
Company Options to purchase an aggregate of
2,230,989 shares of Company Common Stock and unvested
restricted stock covering 164,531 shares of Company Common
Stock (which were included in the outstanding shares). Since
December 31, 2006, except as set forth on
Section 3.4(a) of the Company Disclosure Letter,
(i) no shares of Company Common Stock have been issued,
except pursuant to Company Options outstanding on
December 31, 2006, (ii) no Company Options have been
granted, and (iii) no issuances are currently contemplated.
(b) Other than as set forth in Section 3.4(a)
(including the exceptions set forth in the last sentence of
Section 3.4(a)) of this Agreement or Section 3.4(b) of
the Company Disclosure Letter, there are no outstanding
(i) shares of Company capital stock or Company voting
securities, (ii) subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale, repurchase
or transfer of any securities of Company, or
(iii) securities that are convertible into or exchangeable
for any shares of Company capital stock or Company voting
securities, and neither Company nor any of the Company
Subsidiaries has any obligation of any kind to issue any
additional securities or to pay for, repurchase, redeem or
otherwise acquire any securities of Company or any of the
Company Subsidiaries or any of their respective predecessors.
None of the Company Subsidiaries owns any Company capital stock,
option or warrant to acquire Company capital stock or other
interest determined by reference to the value of Company capital
stock.
(c) Each outstanding share of Company capital stock is, and
each share of Company capital stock that may be issued will be,
when issued, duly authorized and validly issued, fully paid and
nonassessable, and not subject to any preemptive or similar
rights. The issuance and sale of all of the shares of capital
stock described in this Section 3.4 have been in compliance
with United States federal and state securities laws. Neither
Company nor any of the Company Subsidiaries is obligated to
register any securities under the Securities Act of 1933, as
amended (together with the rules and regulations thereunder, the
“Securities Act”), or under any state
securities law or granted registration rights to any individual
or entity.
3.5 Conflicts; Consents and
Approvals. Neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated by this Agreement in accordance with the terms
hereof will:
(a) conflict with, or result in a breach of any provision
of, the Company Certificate or the Company Bylaws;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with
the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any Person (with the
giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result
in the creation of any lien, security interest, pledge,
mortgage, charge, option, hypothecation, easement, restriction
or other encumbrance (an “Encumbrance”)
upon any properties or assets of Company or any of the Company
Subsidiaries under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument or
obligation to which Company or any of the Company Subsidiaries
is a party, except (i) the Credit Agreement, and
(ii) the agreements set forth in Section 3.5(c) of the
Company Disclosure Letter;
(c) except as set forth on Section 3.5(c) of the
Company Disclosure Letter, violate, or conflict with, or result
in any change in the rights or obligations of any party under
any of its Company Material Contracts (as defined in
Section 3.18(a));
(d) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Company or any of the Company
Subsidiaries or any of their respective properties or
assets; or
(e) except as set forth on Section 3.5(e) of the
Company Disclosure Letter, require any action or consent or
approval of, or review by, or registration or filing by Company
or any of its affiliates with, any third party or any local,
domestic, foreign or multinational court, arbitral tribunal,
administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (each of
the foregoing, a “Governmental
Authority”), other than (i) approval of this
Agreement and the transactions contemplated by this Agreement by
Company Stockholders, (ii) actions required by the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (together
with the rules and regulations thereunder, the “HSR
Act”), (iii) registrations or other actions
required under United States federal and state securities
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laws, (iv) compliance with any applicable requirements
under stock exchange rules, (v) consents or approvals of
any Governmental Authority, which are normally obtained after
the consummation of this type of transaction, and (vi) the
filing with the Delaware Secretary of State of the Certificate
of Merger;
other than in the case of Sections 3.5(b), 3.5(c), 3.5(d)
and 3.5(e) those exceptions that would not, individually or in
the aggregate, reasonably be expected to have a Company Material
Adverse Effect.
3.6 Company SEC Reports and Financial
Statements.
(a) Company has timely filed with the United States
Securities and Exchange Commission (the
“SEC”) all forms and documents required
to be filed by it since May 12, 2004 under the Exchange
Act, including (A) its Annual Reports on
Form 10-K,
(B) its Quarterly Reports on
Form 10-Q,
(C) all proxy statements relating to meetings of
stockholders of Company (in the form mailed to stockholders),
and (D) all other forms, reports and registration
statements required to be filed by Company with the SEC. The
documents described in clauses (A)-(D) above, in each case
as amended (whether filed prior to, on or after the date of this
Agreement), are referred to in this Agreement collectively as
the “Company SEC Documents.” As of their
respective dates or, if amended and publicly available prior to
the date of this Agreement, as of the date of such amendment
with respect to those disclosures that are amended, the Company
SEC Documents, including the financial statements and schedules
provided therein or incorporated by reference therein,
(x) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading
and (y) complied in all material respects with the
applicable requirements of the Exchange Act, the Securities Act,
the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”) and other Applicable Laws, as the case may
be, and the applicable rules and regulations of the SEC
thereunder. None of the Subsidiaries of Company is subject to
the periodic reporting requirements of the Exchange Act or
required to file any form, report or other document with the
SEC, The New York Stock Exchange (the
“NYSE”), any stock exchange or any other
comparable Governmental Authority.
(b) The December 31, 2006 consolidated balance sheet
of Company (the “Company Balance Sheet”)
and the related consolidated statements of operations and
comprehensive income (loss), changes in stockholders’
equity and cash flows (including, in each case, the related
notes, where applicable), as reported in the Company’s
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 filed with the
SEC under the Exchange Act, fairly present, and the financial
statements to be filed by Company with the SEC after the date of
this Agreement will fairly present, in all material respects,
the consolidated financial position and the consolidated results
of operations, cash flows and changes in stockholders’
equity of Company and its Subsidiaries as of the respective
dates or for the respective fiscal periods therein set forth;
each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed
by Company with the SEC after the date of this Agreement will
comply, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto;
and each of such statements (including the related notes, where
applicable) has been, and the financial statements to be filed
by Company with the SEC after the date of this Agreement will
be, prepared in accordance with United States generally accepted
accounting principles (“GAAP”)
consistently applied during the periods involved. Except as set
forth on Section 3.6(b) of the Company Disclosure Letter,
the books and records of Company and its Subsidiaries have been,
and are being, maintained in accordance with GAAP and any other
applicable legal and accounting requirements.
PricewaterhouseCoopers LLP is an independent registered public
accounting firm with respect to Company and has not resigned or
been dismissed as independent public accountants of Company.
(c) Since September 23, 2003, (A) except as set
forth on Section 3.6(c) of the Company Disclosure Letter,
the exercise price of each Company Option has been no less than
the Fair Market Value (as defined under the terms of the
respective Company Stock Plans under which such Company Option
was granted) of a share of Company Common Stock as determined on
the date of grant of such Company Option, and (B) all
grants of Company Options were validly issued and properly
approved by the Company Board (or a duly authorized committee or
subcommittee thereof) in material compliance with Applicable
Laws and recorded in Company’s financial statements
referred to in Section 3.6(b) in accordance with GAAP, and
no such grants involved any “back dating,”
“forward dating” or similar practices with respect to
the effective date of grant.
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(d) Since December 31, 2006, Company and the Company
Subsidiaries have not entered into any futures, hedge, swap,
collar, put, call, floor, cap, option or other contracts that
are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, or securities,
interest rates or currencies, other than in the ordinary course
of business consistent with past practices.
(e) Neither Company nor any of the Company Subsidiaries
has, since September 23, 2003, extended or maintained
credit, arranged for the extension of credit, or renewed an
extension of credit, in the form of a personal loan to or for
any director or executive officer (or equivalent thereof) of
Company as prohibited under Section 402 of the
Sarbanes-Oxley Act.
3.7 Absence of Undisclosed Liabilities.
(a) Except (i) as and to the extent disclosed or
reserved against on the balance sheet of Company as of
December 31, 2006 included in the Company SEC Documents
filed prior to the date of this Agreement or (ii) as
incurred since the date thereof in the ordinary course of
business consistent with prior practice, neither Company nor any
of the Company Subsidiaries has any liabilities or obligations
of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, that
would (x) be required by GAAP to be reflected on a
consolidated balance sheet of Company and the Company
Subsidiaries (or disclosed in the notes thereto) or
(y) otherwise reasonably be expected to be material to
Company and the Company Subsidiaries taken as a whole.
(b) Since December 31, 2006, Company has not recorded,
and does not expect to record, the reversal of any previously
recognized profits, or the recognition of any losses, on any
projects of Company or any Company Subsidiary that are
individually or in the aggregate in excess of $5,000,000.
(c) Since December 31, 2006 and through the date of
this Agreement, Company and Company Subsidiaries have not deemed
uncollectible or reserved for any accounts or notes receivable,
except in the ordinary course of business consistent with past
practice.
3.8 Proxy Statement/Prospectus; Registration
Statement. None of the information to be supplied
by Company for inclusion in (a) the joint proxy statement
relating to the Company Stockholder Meeting (as defined in
Section 5.5(a)) and the Parent Stockholder Meeting (as
defined in Section 5.5(b)) (also constituting the
prospectus in respect of Parent Common Stock into which Company
Common Stock will be converted) (the “Proxy
Statement/Prospectus”), to be filed by Company and
Parent with the SEC, and any amendments or supplements thereto,
or (b) the Registration Statement on
Form S-4
(the “Registration Statement”) to be
filed by Parent with the SEC in connection with the Merger, and
any amendments or supplements thereto, will, at the respective
times such documents are filed, and, in the case of the Proxy
Statement/Prospectus, at the time the Proxy Statement/Prospectus
or any amendment or supplement thereto is first mailed to the
Company Stockholders and Parent Stockholders, at the time of the
Company Special Meeting and the Parent Special Meeting and at
the Effective Time, and, in the case of the Registration
Statement, when it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state
any material fact required to be made therein or necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
3.9 Compliance with Law. Except as
to matters involving Environmental Laws (as defined in
Section 3.14(a)) or Hazardous Substances (as defined in
Section 3.14(b)) to which Section 3.14 shall apply,
Company and the Company Subsidiaries hold all franchises,
grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders of all
Governmental Authorities necessary for the lawful conduct of
their respective businesses (the “Company
Permits”), except for failures to hold such Company
Permits that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect. Company and the Company Subsidiaries are in compliance
with the terms of the Company Permits, except where the failure
so to comply would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect. The businesses of Company and the Company Subsidiaries
are not being conducted in violation of Applicable Laws, except
for violations that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect. No investigation or review by any Governmental Authority
with respect to Company or any of the Company Subsidiaries is
pending or, to the knowledge of
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Company, threatened, nor has any Governmental Authority
indicated in writing an intention to conduct any such
investigation or review, other than, in each case, those the
outcome of which would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect. Neither Company, any Company Subsidiary, nor, to the
knowledge of Company, any director, officer, agent, employee or
other person acting on behalf of Company or any of the Company
Subsidiaries, has used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to
government officials or others, or established or maintained any
unlawful or unrecorded funds in violation of the Foreign Corrupt
Practices Act of 1977, as amended (the
“FCPA”).
3.10 Litigation. Except as to Taxes
to which Section 3.12 shall apply and to matters involving
Environmental Laws or Hazardous Substances to which
Section 3.14 shall apply, and except as set forth on
Section 3.10 of the Company Disclosure Letter, there is no
suit, claim, action, proceeding, hearing, notice of violation,
investigation or demand letter (an
“Action”) pending or, to the knowledge
of Company, threatened, against Company or any of the Company
Subsidiaries or any executive officer or director of Company or
any of the Company Subsidiaries that would, individually or in
the aggregate, reasonably be expected to have a Company Material
Adverse Effect or that would be required to be disclosed in the
Company SEC Documents. There is no outstanding order, writ,
injunction, judgment, award, rule or decree against Company or
any of the Company Subsidiaries or by which any property, asset
or operation of Company or any of the Company Subsidiaries is
bound or affected that would, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect. Since December 31, 2006 and through the date of
this Agreement, Company and the Company Subsidiaries have not
entered into any settlement or consent with respect to any
pending litigation or other proceeding other than settlements
(i) in the ordinary course of business not exceeding a
$5,000,000 payment by Company or a Company Subsidiary with an
unconditional release of Company, the Company Subsidiaries and
its or their affiliates, as applicable, from any liabilities or,
(ii) in the case of non-monetary settlements, which would
not be reasonably likely to have an adverse impact in any
material respect on the operations of Company and the Company
Subsidiaries and, following the Effective Time, Parent and the
Parent Subsidiaries.
3.11 Absence of Certain Changes or
Events. Except as set forth on
Sections 3.11(a) through (h) of the Company Disclosure
Letter:
(a) Since December 31, 2006, there has not been any
Company Material Adverse Effect or any event, change, effect or
development that would, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect, except as contemplated in this Agreement;
(b) Since December 31, 2006 and through the date of
this Agreement, Company and the Company Subsidiaries have
conducted their business and operated their properties in the
ordinary course of business consistent with past practice,
except as contemplated in this Agreement;
(c) Since December 31, 2006 and through the date of
this Agreement, Company and Company Subsidiaries have not merged
or consolidated with any other Person or acquired assets of any
other Person for consideration in excess of $5,000,000,
individually, and $50,000,000 in the aggregate or entered into a
new line of business or commenced business operations in any
country in which Company is not operating as of the date of this
Agreement or made any offer or committed to do any of the
foregoing;
(d) Since December 31, 2006, there has not been any
declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of
Company, or any repurchase, redemption or other acquisition by
Company or any of the Company Subsidiaries of any outstanding
shares of capital stock or other securities of, or other
ownership interests in, Company or any of the Company
Subsidiaries;
(e) Since December 31, 2006, except as set forth on
Section 3.11(e) of the Company Disclosure Letter, there has
not been any amendment of any term of (i) any outstanding
security of Company or any of the Company Subsidiaries or
(ii) any Company Benefit Plan or Company Employee Agreement
(as defined in Section 3.13(a)) of Company or any of the
Company Subsidiaries;
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(f) Since December 31, 2006 and through the date of
this Agreement, Company has not incurred any indebtedness for
borrowed money, except indebtedness incurred and letters of
credit issued under the Credit Agreement or in the ordinary
course of business in accordance with the Credit Agreement;
(g) At the date of this Agreement, Company and Company
Subsidiaries have not made or committed to make capital
expenditures in excess of the aggregate consolidated budgeted
amount set forth in Company’s fiscal 2007 capital
expenditure plan as previously disclosed to Parent; and
(h) Since December 31, 2006, there has not been any
change in any method of accounting or accounting practice by
Company or any of the Company Subsidiaries, except for any such
change required because of a concurrent change in GAAP or to
conform a Company Subsidiary’s accounting policies and
practices to those of Company.
3.12 Taxes. Notwithstanding any
other provisions in this Agreement to the contrary other than
Sections 3.6, 3.13 and 3.21, this representation contains
Company’s sole representation regarding Taxes.
(a) (i) Company and each of the Company Subsidiaries
has timely filed, or sought and received an extension to file,
all material United States federal, state and local and all
foreign Returns (as defined in Section 3.12(k)) required to
be filed by it, (ii) all such Returns were true, correct
and complete in all material respects, (iii) Company and
each of the Company Subsidiaries have paid or caused to be paid
all Taxes (whether or not shown on such Returns as owing),
except where the failure to pay such Taxes would not,
individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect, (iv) each of Company and
the Company Subsidiaries has timely withheld and paid all
material amounts of Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, shareholder or other third
party, (v) except as set forth on Section 3.12(a)(v)
of the Company Disclosure Letter, neither Company nor any of the
Company Subsidiaries is currently the beneficiary of any
extension of time within which to file any material Return,
(vi) except as set forth on Section 3.12(a)(vi) of the
Company Disclosure Letter, neither Company nor any of the
Company Subsidiaries has any liability for the Taxes of any
person (other than Company and the Company Subsidiaries) under
Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), as a
transferor or successor, by contract or otherwise,
(vii) the charges, accruals and reserves for Taxes with
respect to Company and the Company Subsidiaries reflected in the
Company Balance Sheet are adequate under GAAP to cover Tax
liabilities accruing through the date thereof,
(viii) except as set forth on Section 3.12(a)(viii) of
the Company Disclosure Letter, no deficiencies for any material
amounts of Taxes have been asserted or assessed, or, to the
knowledge of Company, proposed, against Company or any Company
Subsidiary that have not been paid in full, (ix) except as
set forth on Section 3.12(a)(ix) of the Company Disclosure
Letter, there is no action, suit, proceeding, investigation,
audit or claim underway, pending or, to the knowledge of Company
or any Company Subsidiary, threatened or scheduled to commence,
against or with respect to Company or any Company Subsidiary in
respect of any material amount of Tax, and (x) except as
set forth on Section 3.12(a)(x) of the Company Disclosure
Letter, there is no outstanding order, writ, injunction,
judgment, award, rule or decree against Company or any of the
Company Subsidiaries related to any material amount of Tax.
(b) Neither Company nor any Company Subsidiary has
requested or is the subject of or bound by any private letter
ruling, technical advice memorandum, closing agreement or
similar ruling, memorandum or agreement with any taxing
authority with respect to any material Taxes, nor is any such
request outstanding.
(c) Each of Company and the Company Subsidiaries has
disclosed on its Returns all positions taken therein that could
give rise to a substantial understatement of Tax within the
meaning of Section 6662 of the Code.
(d) Neither Company nor any Company Subsidiary has entered
into, has any liability in respect of, or has any filing
obligations with respect to, any transaction that constitutes a
“listed transaction,” as defined in
Section 1.6011-4
of the Treasury Regulations.
(e) Neither Company nor any Company Subsidiary will be
required to include any material item of income in, or exclude
any material item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing
Date as a result of any (i) change in method of accounting
for a taxable period
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ending on or prior to the Closing Date under Section 481(c)
of the Code (or any corresponding or similar provision of state,
local or foreign Applicable Law) or (ii) “closing
agreement” as described in Section 7121 of the Code
(or any corresponding or similar provision of state, local or
foreign Applicable Law) executed on or prior to the Closing Date.
(f) Except as set forth on Section 3.12(f) of the
Company Disclosure Letter, since September 24, 2003,
neither Company nor any Company Subsidiary has undergone an
“ownership change” pursuant to Section 382(g) of
the Code.
(g) Since September 24, 2003, neither Company nor any
Company Subsidiary has been a distributing corporation or a
controlled corporation for purposes of Section 355 of the
Code.
(h) The Company has made available to Parent correct and
complete copies of (i) all U.S. federal income tax
Returns of Company and the Company Subsidiaries relating to
taxable periods ending on or after December 31, 2003, filed
through the date of this Agreement, (ii) any audit report
(or notice of proposed adjustment to the extent not included in
an audit report) within the last three years relating to any
material amounts of Taxes due from or with respect to Company or
any of its Subsidiaries and (iii) any substantive and
non-privileged correspondence and memoranda relating to the
matters described in clauses (i) or (ii) of this
Section 3.12(h).
(i) Except as set forth on Section 3.12(i) of the
Company Disclosure Letter, neither Company nor any Company
Subsidiary has made any payment, is obligated to make any
payment, or is a party to any agreement that could obligate it
to make any payment that will not be deductible under
Section 280G or 162(m) of the Code (or any
corresponding provision of state, local or foreign Applicable
Law).
(j) Except as set forth on Section 3.12(j) of the
Company Disclosure Letter, from December 31, 2006 until the
date of this Agreement, neither Company nor any Company
Subsidiary has made any change to any material method of Tax
accounting, made or changed any material Tax election,
authorized any indemnities for a material amount of Taxes,
amended any Return (including by way of a claim for refund) such
that the amended Return results in an overpayment or
underpayment of a material amount of Taxes, or settled or
compromised any material Tax liability.
(k) “Returns” means returns,
reports, forms or other documentation (including any additional
or supporting material and any amendments or supplements)
required to be filed with any Governmental Authority of the
United States or any other relevant jurisdiction responsible for
the imposition or collection of Taxes, including any information
returns, claims for refunds, amended returns, or declarations of
estimated Taxes.
(l) “Taxes” means all taxes
(whether United States federal, state or local or foreign) based
upon or measured by income and any other tax whatsoever,
including gross receipts, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll,
employment, unemployment, net worth, social security,
worker’s compensation, excise, or property taxes, together
with any interest, penalties, additions to tax and additional
amounts imposed with respect thereto.
3.13 Employee Benefit Plans; ERISA.
(a) Section 3.13(a)(i) of the Company Disclosure
Letter contains a true and complete list of the Company Benefit
Plans (as defined below). For purposes of this Agreement,
“Company Benefit Plans” shall mean all
material employee benefit plans or arrangements of any type
(including without limitation, the Company Stock Plans, the
Company ESPP and plans described in Section 3(3) of the
Employee Retirement Income Security Act of 1976, as amended
(“ERISA”)), sponsored, maintained or
contributed to by Company or any trade or business, whether or
not incorporated, which together with Company would be deemed a
single employer within the meaning of Section 414(b),
(c) or (m) of the Code or Section 4001(b)(1) of
ERISA (a “Company ERISA Affiliate”)
within six years prior to the Effective Time; provided, that the
term “Company Benefit Plans” shall not include any
Multiemployer Plan (as defined below) or union-sponsored welfare
plan, and Section 3.13(a)(ii) of the Company Disclosure
Letter lists each individual employment, compensation, severance
or similar agreement with respect to which Company or any
Company ERISA Affiliate has any current or future obligation or
liability (“Company
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Employee Agreement”). With respect to each
Company Benefit Plan, Company has provided or made available to
Parent a true, correct and complete copy of such Company Benefit
Plan, and, to the extent applicable, trust agreements, insurance
contracts and other funding vehicles, the most recent Annual
Reports (Form 5500 Series) and accompanying schedules,
summary plan descriptions, and the most recent determination
letter from the Internal Revenue Service. Company has provided
or made available to Parent a true, correct and complete copy of
(x) each Company Employee Agreement that has not been filed
with the Company SEC Documents or (y) the form(s) of each
Company Employee Agreement and has listed on
Section 3.13(a)(ii) of the Company Disclosure Letter the
name of each of the individuals who have signed such Company
Employee Agreement by each type of form. All Company Employee
Agreements referenced in clause (y) of the preceding
sentence conform substantially to the form(s) of such Company
Employee Agreements provided to Parent.
(b) With respect to each Company Benefit Plan: (i) if
intended to qualify under Section 401(a) or 401(k) of the
Code, such plan has received a favorable determination letter
from the Internal Revenue Service with respect to its
qualification, and its related trust has been determined to be
exempt from tax under Section 501(a) of the Code and, to
the knowledge of Company, nothing has occurred since the date of
such letter to adversely affect such qualification or exemption;
(ii) each such plan has been administered in substantial
compliance with its terms and Applicable Laws;
(iii) neither Company nor any Company ERISA Affiliate has
engaged in, and Company and each Company ERISA Affiliate do not
have any knowledge of any Person that has engaged in, any
transaction or acted or failed to act in any manner that would
subject Company or any Company ERISA Affiliate to any liability
for a breach of fiduciary duty under ERISA; (iv) except as
set forth on Section 3.13(b)(iv) of the Company Disclosure
Letter, no disputes, government audits, examinations or
investigations are pending or, to the knowledge of Company or
any Company ERISA Affiliate, threatened other than ordinary
claims for benefits; (v) neither Company nor any Company
ERISA Affiliate has engaged in, and Company and each Company
ERISA Affiliate do not have any knowledge of any Person that has
engaged in, any transaction in violation of Section 406(a)
or (b) of ERISA or Section 4975 of the Code for which
no exemption exists under Section 408 of ERISA or
Section 4975(c) of the Code or Section 4975(d) of the
Code; (vi) all contributions due have been made on a timely
basis; and (vii) except for outstanding awards under the
Company Stock Plans and the Company ESPP, such plan may be
terminated on a prospective basis without any continuing
liability for benefits other than benefits accrued to the date
of such termination. All contributions required under any
Company Benefit Plan which have not been made have been properly
recorded on the books of Company or a Company ERISA Affiliate.
(c) Neither Company nor any Company ERISA Affiliate has
incurred or taken any action that could reasonably be expected
to cause it to incur any liability (i) on account of a
partial or complete withdrawal (within the meaning of
Sections 4205 and 4203 of ERISA, respectively) with respect
to any multiemployer plan, as described in Section 3(37) of
ERISA (a “Multiemployer Plan”), or
(ii) on account of unpaid contributions to any such
Multiemployer Plan. To the knowledge of Company, no
Multiemployer Plan to which Company or any Company ERISA
Affiliate contributes or is obligated to contribute is insolvent
or in reorganization, within the meaning of Sections 4245
and 4241 of ERISA.
(d) Neither Company nor any Company ERISA Affiliate has
incurred or taken any action that could reasonably be expected
to cause it to incur any liability to the Pension Benefit
Guaranty Corporation (the “PBGC”) as a
result of the voluntary or involuntary termination of any
Company Benefit Plan which is subject to Title IV of ERISA.
(e) No event has occurred with respect to a Company Benefit
Plan that could reasonably be expected to result in liability to
Company or any Company ERISA Affiliate which would have a
Company Material Adverse Effect.
(f) Except as set forth in Section 3.13(f) of the
Company Disclosure Letter, (i) no present or former
employees of Company or any of the Company Subsidiaries are
covered by any employee agreements or plans that provide or will
provide severance pay, post-termination health or life insurance
benefits (except as required pursuant to Section 4980B of
the Code or Part 6 of Title I of ERISA) or any similar
benefits or has or will obtain a right to receive a
gross-up
payment from Company or any of the Company Subsidiaries with
respect to any excise taxes which may be imposed upon such
present or former employee pursuant to Sections 409A or
4999 of the Code or otherwise, (ii) neither the execution
of this Agreement nor the consummation of the transactions shall
cause any payments or benefits to any employee, officer or
director of Company or any of the Company Subsidiaries to be
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either subject to an excise tax or non-deductible to Company
under Sections 4999 and 280G of the Code, respectively, and
(iii) neither the execution of this Agreement nor the
consummation of the transactions shall result in, cause the
accelerated vesting or delivery of, or increase the amount or
value of, any payment or benefit to any employee, officer or
director of Company or any of the Company Subsidiaries.
(g) Section 3.13(g) of the Company Disclosure Letter
(i) lists for each participant in the Blair Park Services,
Inc. and Sunesys, Inc. Performance Unit Plan
2005-2008
(the “BP LTIP”) the applicable
performance target(s) and (ii) describes the committee or
person(s) administering the BP LTIP. The consummation of the
transactions contemplated by this Agreement will not accelerate
the vesting or payment of awards granted under the BP LTIP to
any employee of Blair Park Services, Inc. or Sunesys, Inc.
3.14 Environmental
Matters. Notwithstanding any other provision in
this Agreement to the contrary other than in Section 3.6,
this representation contains Company’s sole representation
regarding matters involving Environmental Laws or Hazardous
Substances. Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material
Adverse Effect:
(a) The businesses of Company and the Company Subsidiaries
have been and are operated in compliance with all applicable
federal, state and local statutes, ordinances, licenses, rules,
orders, regulations, permit conditions, injunctive obligations
and legal requirements relating to the protection of the
environment and public health, including without limitation the
common law and the Federal Clean Water Act, Safe Drinking Water
Act, Resource Conservation & Recovery Act, Clean Air
Act, Comprehensive Environmental Response, Compensation and
Liability Act, and Emergency Planning and Community Right to
Know Act, each as amended and currently in effect (together,
“Environmental Laws”).
(b) Neither Company nor any of the Company Subsidiaries has
caused the generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal,
transport or handling of any chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum, petroleum products or any other substance regulated
under any Environmental Law (together, “Hazardous
Substances”), except in compliance with all
Environmental Laws, and, to Company’s knowledge, no
generation, treatment, manufacture, processing, distribution,
use, storage, discharge, release, disposal, transport or
handling of any Hazardous Substances has occurred at any
property or facility owned, leased or operated by Company or any
of the Company Subsidiaries except in compliance with all
Environmental Laws.
(c) Neither Company nor any of the Company Subsidiaries has
received any written notice from any Governmental Authority or
third party or, to the knowledge of Company, any other
communication alleging or concerning any violation by Company or
any of the Company Subsidiaries of, or responsibility or
liability of Company or any of the Company Subsidiaries under,
any Environmental Law. There are no pending or, to the knowledge
of Company, threatened claims, suits, actions or proceedings
with respect to the businesses or operations of Company or any
of the Company Subsidiaries alleging or concerning any violation
of, or responsibility or liability under, any Environmental Law.
There is no outstanding order, writ, injunction, judgment,
award, rule or decree against Company or any of the Company
Subsidiaries related to any Environmental Law or Hazardous
Substances.
(d) Company and the Company Subsidiaries have obtained and
are in compliance with all approvals, permits, licenses,
registrations and similar authorizations from all Governmental
Authorities under all Environmental Laws required for the
operation of the businesses of Company and the Company
Subsidiaries as currently conducted; and, to the knowledge of
Company, there are no pending or threatened, actions or
proceedings alleging violations of or seeking to modify, revoke
or deny renewal of any of such approvals, permits, licenses,
registrations and similar authorizations.
(e) No claims have been asserted or, to the knowledge of
Company, threatened to be asserted against Company or any of the
Company Subsidiaries or against any Person (as defined in
Section 5.2(d)) whose liability for any claim Company or
any of the Company Subsidiaries has retained or assumed either
contractually or by operation of law for any personal injury
(including wrongful death) or property damage (real or personal)
arising out of alleged exposure or otherwise related to
Hazardous Substances.
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3.15 Insurance. Company has made
available to Parent a true, complete and correct copy of each
insurance policy of Company and each material insurance policy
of the Company Subsidiaries currently in effect or the binder
therefor. Company maintains insurance with reputable insurers
for the business and assets of Company and the Company
Subsidiaries against all risks normally insured against, and in
amounts normally carried, by corporations of similar size
engaged in similar lines of business. All premiums due on such
policies have been paid, and there is no existing default or
notice of non-renewal, except for such defaults or notices as
would not constitute a Company Material Adverse Effect. Company
maintains levels of self-insurance and reserves which Company
believes are adequate to meet current liabilities.
3.16 Labor Matters; Employees.
(a) Except, in each case, individually or in the aggregate,
as would not reasonably be expected to have a Company Material
Adverse Effect, (i) there is no labor strike, dispute,
slowdown, work stoppage or lockout actually pending or, to the
knowledge of Company, threatened against or affecting Company or
any of the Company Subsidiaries and, during the past five years,
there has not been any such action, (ii) neither Company
nor any of the Company Subsidiaries have any knowledge of any
current union organizing activities among the employees of
Company or any of the Company Subsidiaries, (iii) Company
and the Company Subsidiaries have each at all times been in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, and are not
engaged in any unfair labor practices as defined in the National
Labor Relations Act or other Applicable Laws, ordinance or
regulation and Company is not liable for any arrears of wages or
any withholding taxes or penalties for failure to comply with
any of the foregoing, (iv) there is no unfair labor
practice charge or complaint against Company or any of the
Company Subsidiaries pending or, to the knowledge of Company,
threatened before the National Labor Relations Board or any
similar state or foreign agency, (v) there is no grievance
or arbitration proceeding arising out of any collective
bargaining agreement or other grievance procedure relating to
Company or any of the Company Subsidiaries, (vi) neither
the Occupational Safety and Health Administration nor any other
federal or state agency has threatened to file any citation, and
there are no pending citations, relating to Company or any of
the Company Subsidiaries, and (vii) there is no employee or
governmental claim or investigation, including any charges to or
by the Equal Employment Opportunity Commission or any state
employment practice agency, investigations regarding Fair Labor
Standards Act compliance, audits by the Office of Federal
Contractor Compliance Programs, Workers’ Compensation
claims, harassment complaints, demand letters, or threatened
claims. Section 3.16(a)(ii) of the Company Disclosure
Letter sets forth a list, as of the date of this Agreement, of
any material collective bargaining or similar agreement with any
labor organization, or work rules, past practices, or implied
contractual terms or agreements with any labor organization or
employee association applicable to employees of Company or any
of the Company Subsidiaries (collectively the, “Labor
Agreements”) to which Company or any of the Company
Subsidiaries is a party, and none of the employees of Company or
any of the Company Subsidiaries are represented by any material
labor organization except as set forth on
Section 3.16(a)(ii) of the Company Disclosure Letter.
(b) Since the enactment of the Worker Adjustment and
Retraining Notification Act of 1988 (“WARN
Act”), neither Company nor any of the Company
Subsidiaries has effectuated (i) a plant closing affecting
any site of employment or one or more facilities or operating
units within any site of employment or facility of Company or
any of the Company Subsidiaries, or (ii) a mass layoff (as
defined in the WARN Act) affecting any site of employment or
facility of Company or any of the Company Subsidiaries, nor has
Company or any of the Company Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations
sufficient in number to trigger application of any similar state
or local law, in each case that would reasonably be expected to
have a Company Material Adverse Effect.
(c) Neither Company nor any of the Company Subsidiaries has
been suspended or debarred from doing business with the United
States government, or state or local government entity, or is
the subject of a finding of non-responsibility or ineligibility
for United States government contracting, or contracting with a
state or local government entity, and neither Company nor any of
the Company Subsidiaries has, or is violating, Executive Order
11246 or its implementing regulations, with respect to any
government contract, or any state or local law applicable to
contracting with such governmental entity, and neither Company
nor any of the Company Subsidiaries has been notified by one or
more significant customers that Company or any of the Company
Subsidiaries is not currently considered qualified by that
customer or customers to perform or bid on work for that
customer because of safety
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record concerns, except for any such disqualification that would
not reasonably be expected to have a material adverse effect on
Company or any material Company Subsidiary.
3.17 Title to Property and
Equipment. Except for goods and other property
sold, used, leased, licensed or otherwise surrendered,
relinquished or otherwise disposed of since December 31,
2006 in the ordinary course of business consistent with past
practice or as disclosed in Section 3.17 of the Company
Disclosure Letter, as of the date of this Agreement, Company,
directly or indirectly through the Company Subsidiaries, has
good and marketable title to all of the property and equipment
reflected in Company’s December 31, 2006 financial
statements included in the Company SEC Documents (the
“Property and Equipment”), free and
clear of any Encumbrance, except: (a) Encumbrances
reflected in the balance sheet of Company as of
December 31, 2006 (or the notes thereto) included in the
Company SEC Documents; (b) Encumbrances for taxes not yet
due and payable; and (c) such imperfections of title,
easements and Encumbrances that would not reasonably be expected
to have, individually or in the aggregate, a Company Material
Adverse Effect. All leases and other agreements pursuant to
which Company or any of the Company Subsidiaries leases or
otherwise acquires or obtains rights affecting any real or
personal property are valid, and effective, except where the
failure to be valid or effective would not, individually or in
the aggregate, reasonably be expected to have a Company Material
Adverse Effect; and there is not, under any such leases any
event of default or event which with notice or lapse of time, or
both, would constitute a default by Company or any of the
Company Subsidiaries that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect.
3.18 Material Contracts.
(a) Set forth in Section 3.18(a) of the Company
Disclosure Letter or listed as an exhibit to Company’s
Annual Report on
Form 10-K
for the year ended December 31, 2006 or to any other
Company SEC Document filed and publicly available between
December 31, 2006 and the date of this Agreement is a list
of each contract, lease, indenture, agreement, arrangement or
understanding to which Company or any of the Company
Subsidiaries is subject that is currently in effect and
(i) is of a type that would be required to be included as
an exhibit to a
Form S-1
Registration Statement pursuant to the rules and regulations of
the SEC if such a registration statement were filed by Company,
(ii) which expressly limits the ability of the Company or
any of the Company Subsidiaries or would limit the ability of
Parent or any of the Parent Subsidiaries (as defined in
Section 4.1(a)) after the Effective Time, to compete in or
conduct any line of business or compete with any Person or in
any geographic area or during any period of time, in each case,
if such limitation is or is reasonably likely to be material to
the Company and the Company Subsidiaries, taken as a whole, or,
following the Effective Time, to Parent and any Parent
Subsidiaries, taken as a whole, (iii) which requires them
to deal exclusively in any material respect with any Person or
group of related Persons, or (iv) which is a shareholder
rights agreement or which otherwise provides for the issuance of
any securities in respect of this Agreement or the Merger. Each
contract, lease, indenture, agreement, arrangement, commitment
or understanding of the type described in this
Section 3.18(a), whether or not included as an exhibit to
the Company SEC Documents, is referred to herein as a
“Company Material Contract,” and for
purposes of Section 5.3(xix) and the bringdown of
Section 3.18(b) pursuant to Section 6.3(a),
“Company Material Contract” shall include as of the
date entered into any such contract, lease, indenture,
agreement, arrangement, commitment or understanding that is
entered into after the date of this Agreement. The Company has
previously made available to Parent true, complete and correct
copies of each Company Material Contract that is not included as
an exhibit to the Company SEC Documents.
(b) (A) All Company Material Contracts are the valid
and legally binding obligations of Company and, to the knowledge
of Company, each of the other parties thereto and are
enforceable in accordance with their respective terms;
(B) Company is not in material breach or default with
respect to, and to the knowledge of Company, no other party to
any Company Material Contract is in material breach or default
with respect to, its obligations thereunder, including with
respect to payments or otherwise; (C) no party to any
Company Material Contract has given notice of any action to
terminate, cancel, rescind or procure a judicial reformation
thereof; and (D) except as set forth in the Company SEC
Documents filed and publicly available prior to the date of this
Agreement no Company Material Contract contains any provision
that prevents Company or any of the Company Subsidiaries from
owning, managing and operating the Property and Equipment of
Company and the Company Subsidiaries in accordance with
historical practices, except, in the case of each of (A)-(D)
above, as would not reasonably be expected to have a Company
Material Adverse Effect.
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3.19 Intellectual Property. Company
or the Company Subsidiaries own, or are licensed or otherwise
have the right to use, all patents, patent rights, trademarks,
rights, trade names, trade name rights, service marks, service
mark rights, copyrights, technology, know-how, processes and
other proprietary intellectual property rights and computer
programs (“Intellectual Property”)
currently used in the conduct of the business of Company and the
Company Subsidiaries, except where the failure to so own or
otherwise have the right to use such Intellectual Property would
not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. No Person has notified
either Company or any of the Company Subsidiaries in writing and
Company does not have any knowledge that their use of the
Intellectual Property infringes on the rights of any Person,
subject to such claims and infringements as do not, individually
or in the aggregate, give rise to any liability on the part of
Company and the Company Subsidiaries that would, individually or
in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, and, to Company’s knowledge, no
Person is infringing on any right of Company or any of the
Company Subsidiaries with respect to any such Intellectual
Property. No claims are pending or, to Company’s knowledge,
threatened that Company or any of the Company Subsidiaries is
infringing or otherwise adversely affecting the rights of any
Person with regard to any Intellectual Property, except for
claims that would, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.
3.20 Disclosure Controls and Procedures and
Internal Control Over Financial
Reporting. Company has established and maintains
“disclosure controls and procedures” (as defined in
Rules 13a-14(c)
and
15d-14(c) of
the Exchange Act) that are designed to provide reasonable
assurance that information (both financial and non-financial)
required to be disclosed by Company in the reports that it files
or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and that all such information is
accumulated and communicated to Company’s management as
appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive
Officer and Chief Financial Officer of Company required under
the Exchange Act with respect to such reports. As of
December 31, 2006, there were no “material
weaknesses” in Company’s or any of the Company
Subsidiaries’ internal controls as contemplated under
Section 404 of the Sarbanes-Oxley Act. Company has
disclosed, based on the most recent evaluation of its internal
control over financial reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) by its chief executive officer and chief
financial officer, to Company’s auditors and the audit
committee of the Company Board (a) any significant
deficiencies in the design or operation of its internal control
over financial reporting that are reasonably likely to adversely
affect Company’s ability to record, process, summarize and
report financial information and has identified for the
Company’s auditors and audit committee of the Company Board
any material weaknesses in its internal control over financial
reporting and (b) any fraud, whether or not material, that
involves management or other employees who have a significant
role in Company’s internal control over financial
reporting. Since the date of Company’s most recent
evaluation of internal control over financial reporting, to the
knowledge of Company, no facts or circumstances have arisen or
occurred that would be required to be disclosed to
Company’s auditors or Company’s audit committee
regarding (x) a significant deficiency in the design or
operation of its internal control over financial reporting,
(y) a material weakness in its internal control over
financial reporting or (z) fraud, whether or not material,
that involves management or other employees who have a
significant role in Company’s internal control over
financial reporting.
3.21 Tax-Free
Reorganization. Neither Company nor, to the
knowledge of Company, any of its affiliates has taken or agreed
to take any action that would prevent the Merger from
constituting a reorganization within the meaning of
Section 368(a) of the Code.
3.22 Opinion of Financial
Advisor. The Company Board has received the
written opinion of Citigroup Global Markets Inc., Company’s
financial advisor, dated as of the date of this Agreement, to
the effect that, as of the date of this Agreement, the Exchange
Ratio is fair to the Company Stockholders from a financial point
of view. A true, complete and correct copy of such opinion will
promptly be delivered to Parent by Company solely for
informational purposes after receipt thereof.
3.23 Brokerage and Finders’
Fees. Except for Company’s obligations to
Citigroup Global Markets Inc., FMI Corporation, and Navigant
Capital Advisors, LLC, neither Company nor any director,
officer, employee or affiliate of Company, has incurred or will
incur on behalf of Company or the Company Subsidiaries, any
brokerage, finders’, investment banking or similar fee in
connection with the transactions contemplated by this Agreement.
True and correct copies of all agreements and engagement letters
currently in effect with Citigroup Global Markets
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Inc., FMI Corporation, and Navigant Capital Advisors, LLC (the
“Company Engagement Letters”) have been
provided to Parent. Company is solely responsible for the fees
and expenses of Citigroup Global Markets Inc., FMI Corporation,
and Navigant Capital Advisors, LLC as and to the extent set
forth in the Company Engagement Letters and has previously
provided to Parent the method for calculating the fees payable
under each Company Engagement Letter.
3.24 Anti-takeover
Provisions. Company and the Company Board have
each taken all actions necessary to be taken such that no
restrictive provision of any “moratorium,”
“control share acquisition,” “fair price,”
“interested stockholder,” “affiliate
transaction,” “business combination,” or other
similar anti-takeover statutes, laws or regulations enacted by
the federal or any state government, including the State of
Delaware and Section 203 of DGCL, or any applicable
anti-takeover provision in the Company Certificate or the
Company Bylaws of Company or in the certificate of incorporation
or bylaws or comparable constituent documents of any Company
Subsidiary, is, or at the Effective Time will be, applicable to
Company, Parent, Merger Sub, Company Common Stock, this
Agreement or the transactions contemplated by this Agreement.
3.25 Board Recommendation; Required
Vote. The Company Board, at a meeting duly called
and held, by unanimous vote has (a) determined that this
Agreement and the transactions contemplated hereby, including
the Merger, are advisable, fair to and in the best interests of
the Company Stockholders; (b) declared advisable and in all
respects approved and adopted this Agreement, and the
transactions contemplated by this Agreement, including the
Merger; and (c) resolved to recommend that the Company
Stockholders approve and adopt this Agreement and the Merger
(collectively, the “Company Board
Recommendation”). The affirmative vote of holders
of a majority of the outstanding Company Common Stock to adopt
this Agreement and the Merger is the only vote of the holders of
any class or series of capital stock of Company necessary to
adopt this Agreement and approve the transactions contemplated
by this Agreement, including the Merger (the “Company
Stockholders’ Approval”).
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure letter, or in a specific
reference to a Parent SEC Document (as defined in
Section 4.5(a)) filed and publicly available prior to the
date of this Agreement referred to in such disclosure letter,
delivered by Parent to Company at or prior to the execution and
delivery of this Agreement (the “Parent Disclosure
Letter”) (each section of which qualifies the
correspondingly numbered representation, warranty or covenant to
the extent specified therein or in the referred to portion of
the Parent SEC Documents and such other representations,
warranties or covenants to the extent a matter in such section
is disclosed in such a way as to make its relevance to such
other representation, warranty or covenant reasonably apparent;
provided however, that any disclosures in a “Risk
Factors” or similar section included in any Parent SEC
Documents shall not be deemed a qualification of any
representations, warranty or covenant, or the matters expressly
set forth on the Parent Disclosure Letter or the exceptions in
the definition of “Parent Material Adverse Effect”),
Parent and Merger Sub jointly and severally represent and
warrant to Company as follows:
4.1 Organization and
Standing. (a) Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware with full
corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of the Subsidiaries
listed on Section 4.1 of the Parent Disclosure Letter (the
“Parent Subsidiaries” and each, a
“Parent Subsidiary”) is an organization
duly organized, validly existing, and in good standing under the
laws of its jurisdiction of organization with full entity power
and authority to own, lease, use and operate its properties and
to conduct its business as and where now owned, leased, used,
operated and conducted. Each of Parent, Merger Sub and the
Parent Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of the
business conducted by it or the property it owns, leases or
operates requires it to so qualify, except where the failure to
be so qualified or in good standing in such jurisdiction would
not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect (defined below). Parent is
not in default in the performance, observance or fulfillment of
any provision of Parent’s Certificate of Incorporation (the
“Parent Certificate”) or Parent’s
Bylaws (the “Parent Bylaws”), each of
which is in the form as filed and publicly available prior to
the date of this Agreement in the Parent SEC Documents (as
defined in
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Section 4.5(a)). Merger Sub is not in default in the
performance, observance or fulfillment of any provision of
Merger Sub’s Certificate of Incorporation (the
“Merger Sub Certificate”) or Merger
Sub’s Bylaws (the “Merger Sub
Bylaws”).
(b) For purposes of this Agreement,
(i) “Parent Material Adverse
Effect” means a materially adverse effect on the
financial condition, business, assets, properties or results of
operations of Parent and the Parent Subsidiaries, taken as a
whole, no matter how caused or how arising, except that no
materially adverse effect may be caused solely by or arise
solely from one or more of (A) changes to economic,
political or business conditions affecting the economy or
financial markets generally, (B) the occurrence of natural
disasters of any type, (C) occurrence of war, acts of war,
terrorism or similar hostilities, or (D) changes in
Applicable Laws, unless any such change or occurrence specified
in clauses (A), (B), (C) or (D) materially and
disproportionately affects Parent and the Parent Subsidiaries
taken as a whole.
4.2 Corporate Power and
Authority. Each of Parent and Merger Sub has all
requisite corporate power and authority to enter into and
deliver this Agreement, to perform its obligations under the
Agreement, and to consummate the transactions contemplated by
this Agreement, subject to the receipt of the affirmative vote
of the holders of a majority of votes cast at a meeting at which
a majority of the outstanding shares held by Parent Stockholders
(as defined in Section 4.4(a)) are present and voting (the
“Parent Required Vote”) to authorize the
issuance of Parent Common Stock pursuant to this Agreement under
Rule 312.02 of the NYSE (the “Parent
Proposal”). The execution, performance and delivery
of this Agreement and the consummation of the transactions
contemplated by this Agreement by Parent and Merger Sub, have
been duly authorized by all necessary corporate action except
for the Parent Required Vote, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize
or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Merger Sub, and,
assuming the due authorization, execution and delivery by
Company, constitutes a legal, valid and binding obligation of
each of Merger Sub and Parent enforceable against each of them
in accordance with its terms, except that such enforceability
(a) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of
creditors’ rights generally and (b) is subject to
general principles of equity.
4.3 Conflicts; Consents and
Approval. Neither the execution and delivery of
this Agreement by Parent or Merger Sub nor the consummation of
the transactions contemplated by this Agreement in accordance
with the terms hereof will:
(a) conflict with, or result in a breach of any provision
of the Parent Certificate or the Parent Bylaws, or the Merger
Sub Certificate or the Merger Sub Bylaws;
(b) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent or any of its
Subsidiaries or their respective properties or assets;
(c) violate, or conflict with, or result in any change in
the rights or obligations of any party under any of its Parent
Material Contracts (as defined in Section 4.17(a));
(d) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with
the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any individual or entity
(with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result
in the creation of any Encumbrance upon any properties or assets
of Parent or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, undertaking, agreement, lease
or other instrument or obligation to which Parent or any of its
Subsidiaries is a party except those set forth on
Section 4.3(d) of the Parent Disclosure Letter; or
(e) except as set forth on Section 4.3(e) of the
Parent Disclosure Letter, require any action or consent or
approval of, or review by, or registration or filing by Parent
or any of its Subsidiaries with, any third party or any
Governmental Authority, other than (u) the Parent Required
Vote and the adoption of this Agreement and the transactions
contemplated hereby by Parent as the sole stockholder of Merger
Sub, (v) actions required by the HSR Act,
(w) compliance with any United States federal and state
securities laws and any other applicable takeover laws,
(x) compliance with any applicable requirements under stock
exchange rules, (y) consents or
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approvals of any Governmental Authority, which are normally
obtained after the consummation of this type of transaction, and
(z) the filing with the Delaware Secretary of State of the
Certificate of Merger; except in the case of clauses (b),
(c), (d) and (e) above for any of the foregoing that
would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
4.4 Capitalization of Parent and Merger Sub.
(a) As of December 31, 2006, Parent’s authorized
capital stock consisted of (i) 300,000,000 shares of
Parent Common Stock, of which 117,618,130 shares were
issued and outstanding (including 1,298,070 shares of
unvested Parent restricted stock issued under Parent’s
Amended 2001 Stock Incentive Plan, as amended and restated
March 13, 2003 (the “Parent Stock
Plan”)), (ii) 3,345,333 shares of limited
vote common stock, par value $0.00001 per share, of which
915,805 shares were issued and outstanding (the
“Parent Limited Vote Common Stock”)
(such holders of the outstanding Parent Common Stock and Parent
Limited Vote Stock, the “Parent
Stockholders”), (iii) 10,000,000 shares
of preferred stock, par value $0.00001 per share, of which
there were no shares issued and outstanding, and
(iv) 1,000,000 shares of Series D Junior
Preferred Stock, of which there are no shares issued and
outstanding. At December 31, 2006, there were outstanding
stock options to acquire Parent Common Stock (the
“Parent Stock Options”) covering an
aggregate of 779,298 shares of Parent Common Stock. Since
December 31, 2006, (i) except as set forth on
Section 4.4(a) of the Parent Disclosure Letter, no shares
of Parent Common Stock have been issued, except pursuant to
Parent Stock Options outstanding on December 31, 2006,
restricted stock issued pursuant to the Parent Stock Plan, the
conversion of Parent Limited Vote Common Stock upon the
sale thereof, and the conversion of any of Parent’s
convertible securities, and (ii) no Parent Stock Options
have been granted.
(b) Other than as set forth in Section 4.4(a)
(including the exceptions set forth in the last sentence of
Section 4.4(a)) of this Agreement or on Section 4.4(b)
of the Parent Disclosure Letter, there are no outstanding
(i) shares of Parent capital stock or Parent voting
securities, (ii) subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale, repurchase
or transfer of any securities of Parent, or
(iii) securities that are convertible into or exchangeable
for any shares of Parent capital stock or Parent voting
securities, and neither Parent nor any of the Parent
Subsidiaries has any obligation of any kind to issue any
additional securities or to pay for, repurchase, redeem or
otherwise acquire any securities of Parent or any of the Parent
Subsidiaries or any of their respective predecessors. None of
the Parent Subsidiaries owns any Parent capital stock, option or
warrant to acquire Parent capital stock or other interest
determined by reference to the value of Parent capital stock.
(c) All issued and outstanding shares of Parent’s
capital stock are, and all shares that may be issued or granted
pursuant to the exercise of Parent Stock Options will be, when
issued or granted in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. The issuance and
sale of all of the shares of capital stock described in this
Section 4.4 have been in compliance with United States
federal and state securities laws. Except as set forth on
Section 4.4(c) of the Parent Disclosure Letter and as may
be provided in the Amended and Restated Rights Agreement dated
as of March 8, 2000, as amended and restated as of
October 24, 2002 between Parent and American Stock
Transfer & Trust Company, as Rights Agent (the
“Parent Rights Agreement”), neither
Parent nor any of the Parent Subsidiaries is obligated to
register any securities under the Securities Act or under any
state securities law or granted registration rights to any
individual or entity.
(d) As of the date of this Agreement, the authorized
capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $0.01 per share, all of which shares are
validly issued and outstanding. All of the issued and
outstanding capital stock of Merger Sub is, and at the Effective
Time will be, owned by Parent or a direct or indirect wholly
owned Subsidiary of Parent. Merger Sub has not conducted any
business prior to the date of this Agreement and has no, and
prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its
formation and pursuant to this Agreement and the Merger and the
other transactions contemplated by this Agreement.
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4.5 Parent SEC Reports and Financial
Statements.
(a) Parent has timely filed with the SEC all forms and
documents required to be filed by it since January 1, 2004
under the Exchange Act, including (A) its Annual Reports on
Form 10-K,
(B) its Quarterly Reports on
Form 10-Q,
(C) all proxy statements relating to meetings of
shareholders of Parent (in the form mailed to shareholders), and
(D) all other forms, reports and registration statements
required to be filed by Parent with the SEC. The documents
described in clauses (A)-(D) above, in each case as amended
(whether filed prior to, on or after the date of this
Agreement), are referred to in this Agreement collectively as
the “Parent SEC Documents.” As of their
respective dates or, if amended and publicly available prior to
the date of this Agreement, as of the date of such amendment
with respect to those disclosures that are amended, the Parent
SEC Documents, including the financial statements and schedules
provided therein or incorporated by reference therein,
(x) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading
and (y) complied in all material respects with the
applicable requirements of the Exchange Act, the Securities Act,
the Sarbanes-Oxley Act and other Applicable Laws as the case may
be, and the applicable rules and regulations of the SEC
thereunder. None of the Subsidiaries of the Parent is subject to
the periodic reporting requirements of the Exchange Act or
required to file any form, report or other document with the
SEC, NYSE, any stock exchange or any other comparable
Governmental Authority.
(b) The December 31, 2006 consolidated balance sheet
of Parent (the “Parent Balance Sheet”)
and the related consolidated statements of operations and
comprehensive income (loss), changes in shareholders’
equity and cash flows (including, in each case, the related
notes, where applicable), as reported in Parent’s Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006 filed with the
SEC under the Exchange Act, fairly present, and the financial
statements to be filed by Parent with the SEC after the date of
this Agreement will fairly present, in all material respects,
the consolidated financial position and the consolidated results
of operations, cash flows and changes in stockholders’
equity of Parent and its Subsidiaries as of the respective dates
or for the respective fiscal periods therein set forth; each of
such statements (including the related notes, where applicable)
complies, and the financial statements to be filed by Parent
with the SEC after the date of this Agreement will comply, with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable)
has been, and the financial statements to be filed by Parent
with the SEC after the date of this Agreement will be, prepared
in accordance with GAAP consistently applied during the periods
involved. The books and records of Parent and its Subsidiaries
have been, and are being, maintained in accordance with GAAP and
any other applicable legal and accounting requirements.
PricewaterhouseCoopers LLP is an independent registered public
accounting firm with respect to Parent and has not resigned (or
indicated that it declines to stand for re-appointment after
completion of the current audit) or been dismissed as
independent public accountants of Parent.
(c) Since January 1, 2000, (A) the exercise price
of each Parent Stock Option has been no less than the Fair
Market Value (as defined under the terms of the respective
Parent Stock Plan under which such Parent Stock Option was
granted) of a share of Parent Common Stock as determined on the
date of grant of such Parent Stock Option, and (B) all
grants of Parent Stock Options were validly issued and properly
approved by the Parent Board (or a duly authorized committee or
subcommittee thereof) in material compliance with Applicable
Laws and recorded in Parent’s financial statements referred
to in Section 4.5(b) in accordance with GAAP, and no such
grants involved any “back dating,” “forward
dating” or similar practices with respect to the effective
date of grant.
(d) Except as set forth on Section 4.5(d) of the
Parent Disclosure Letter, neither Parent nor any of the Parent
Subsidiaries is a party to, or has any commitment to become a
party to, any joint venture, off-balance sheet partnership or
any similar contract (including without limitation any contract
relating to any transaction or relationship between or among
Parent and any of the Parent Subsidiaries, on the one hand, and
any unconsolidated affiliate, including without limitation any
structured finance, special purpose or limited purpose entity or
Person, on the other hand, or any “off-balance sheet
arrangement” (as defined in Item 303(a) of
Regulation S-K
of the Exchange Act)).
(e) Neither Parent nor any of the Parent Subsidiaries has,
since July 30, 2002, extended or maintained credit,
arranged for the extension of credit, or renewed an extension of
credit, in the form of a personal loan to or for any
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director or executive officer (or equivalent thereof) of Parent
as prohibited under Section 402 of the Sarbanes Oxley Act.
4.6 Absence of Undisclosed
Liabilities. Except (a) as and to the extent
disclosed or reserved against on the balance sheet of Parent as
of December 31, 2006 included in the Parent SEC Documents
filed prior to the date of this Agreement or (b) as
incurred since the date thereof in the ordinary course of
business consistent with prior practice, neither Parent nor any
of the Parent Subsidiaries has any liabilities or obligations of
any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, that
would (i) be required by GAAP to be reflected on a
consolidated balance sheet of Parent and the Parent Subsidiaries
(or disclosed in the notes thereto) or (ii) otherwise
reasonably be expected to be material to Parent and the Parent
Subsidiaries taken as a whole.
4.7 Proxy Statement/Prospectus; Registration
Statement. None of the information to be supplied
by Parent for inclusion in (a) the Proxy
Statement/Prospectus, to be filed by Parent and Company with the
SEC, and any amendments or supplements thereto, or (b) the
Registration Statement to be filed by Parent with the SEC in
connection with the Merger, and any amendments or supplements
thereto, will, at the respective times such documents are filed,
and, in the case of the Proxy Statement/Prospectus, at the time
the Proxy Statement/Prospectus or any amendment or supplement
thereto is first mailed to Company Stockholders and Parent
Stockholders, at the time of the Company Special Meeting and the
Parent Special Meeting and at the Effective Time, and, in the
case of the Registration Statement, when it becomes effective
under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be
made therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were
made, not misleading.
4.8 Compliance with Law. Except as
to matters involving Environmental Laws or Hazardous Substances
to which Section 4.13 shall apply, Parent and the Parent
Subsidiaries hold all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders of all Governmental
Authorities necessary for the lawful conduct of their respective
businesses (the “Parent Permits”),
except for failures to hold such Parent Permits that would not,
individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect. Parent and the Parent
Subsidiaries are in compliance with the terms of the Parent
Permits, except where the failure so to comply would not,
individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect. The businesses of Parent and
the Parent Subsidiaries are not being conducted in violation of
Applicable Laws, except for violations that would not,
individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect. Except as set forth on
Section 4.8 of the Parent Disclosure Letter, no
investigation or review by any Governmental Authority with
respect to Parent or any of the Parent Subsidiaries is pending
or, to the knowledge of Parent, threatened, nor has any
Governmental Authority indicated in writing an intention to
conduct any such investigation or review, other than, in each
case, those the outcome of which would not, individually or in
the aggregate, reasonably be expected to have a Parent Material
Adverse Effect. Neither Parent, any Parent Subsidiary, nor, to
the knowledge of Parent, any director, officer, agent, employee
or other Person acting on behalf of Parent or any of the Parent
Subsidiaries, has used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to
government officials or others, or established or maintained any
unlawful or unrecorded funds in violation of the FCPA.
4.9 Litigation. Except as to
matters involving Environmental Laws or Hazardous Substances to
which Section 4.13 shall apply, and except as set forth on
Section 4.9 of the Parent Disclosure Letter, there is no
Action, pending or, to the knowledge of Parent, threatened,
against Parent or any of the Parent Subsidiaries or any
executive officer or director of Parent or any of the Parent
Subsidiaries that would, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect
or that would be required to be disclosed in the Parent SEC
Documents. There is no outstanding order, writ, injunction,
judgment, award, rule or decree against Parent or any of the
Parent Subsidiaries or by which any property, asset or operation
of Parent or any of the Parent Subsidiaries is bound or affected
that would, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
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4.10 Absence of Certain Changes or
Events. Except as set forth on
Sections 4.10(a) through (f) of the Parent Disclosure
Letter:
(a) Since December 31, 2006, there has not been any
Parent Material Adverse Effect or any event, change, effect or
development that would, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect,
except as contemplated in this Agreement;
(b) Since December 31, 2006 and through the date of
this Agreement, Parent and the Parent Subsidiaries have
conducted their business and operated their properties in the
ordinary course of business consistent with past practice,
except as contemplated in this Agreement;
(c) There has not been any action taken by Parent or any of
the Parent Subsidiaries from December 31, 2006 through the
date of this Agreement that, if taken during the period from the
date of this Agreement through the Effective Time, would
constitute a breach of Section 5.4(a);
(d) Since December 31, 2006, there has not been any
declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of
Parent, or any repurchase, redemption or other acquisition by
Parent or any of the Parent Subsidiaries of any outstanding
shares of capital stock or other securities of, or other
ownership interests in, Parent or any of the Parent Subsidiaries;
(e) Since December 31, 2006, there has not been any
amendment of any term of any outstanding security of Parent or
any of the Parent Subsidiaries; and
(f) Since December 31, 2006, there has not been any
change in any method of accounting or accounting practice by
Parent or any of the Parent Subsidiaries, except for any such
change required because of a concurrent change in GAAP or to
conform a Parent Subsidiary’s accounting policies and
practices to those of Parent.
4.11 Taxes. Notwithstanding any
other provisions in this Agreement to the contrary other than
Sections 4.5 and 4.19, this representation contains
Parent’s sole representation regarding Taxes.
(a) (i) Parent and each of the Parent Subsidiaries has
timely filed, or sought and received an extension to file, all
material United States federal, state and local and all foreign
Returns required to be filed by it, (ii) all such Returns
were true, correct and complete in all material respects,
(iii) Parent and each of the Parent Subsidiaries have paid
or caused to be paid all Taxes (whether or not shown on such
Returns as owing), except where the failure to pay such Taxes
would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect,
(iv) each of Parent and the Parent Subsidiaries has timely
withheld and paid all material amounts of Taxes required to have
been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, shareholder
or other third party, (v) except as set forth on
Section 4.11(a)(v) of the Parent Disclosure Letter, neither
Parent nor any of the Parent Subsidiaries is currently the
beneficiary of any extension of time within which to file any
material Return, (vi) neither Parent nor any of the Parent
Subsidiaries has any liability for the Taxes of any person
(other than Parent and the Parent Subsidiaries) under Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), as a
transferor or successor, by contract or otherwise,
(vii) the charges, accruals and reserves for Taxes with
respect to Parent and the Parent Subsidiaries reflected in the
Parent Balance Sheet are adequate under GAAP to cover Tax
liabilities accruing through the date thereof, (viii) no
deficiencies for any material amounts of Taxes have been
asserted or assessed, or, to the knowledge of Parent, proposed,
against Parent or any Parent Subsidiary that have not been paid
in full, (ix) there is no action, suit, proceeding,
investigation, audit or claim underway, pending or, to the
knowledge of Parent or any Parent Subsidiary, threatened or
scheduled to commence, against or with respect to Parent or any
Parent Subsidiary in respect of any material amount of Tax, and
(x) there is no outstanding order, writ, injunction,
judgment, award, rule or decree against Parent or any of the
Parent Subsidiaries related to any material amount of Tax.
(b) Except as set forth on Section 4.11(b) of the
Parent Disclosure Letter, neither Parent nor any Parent
Subsidiary has requested or is the subject of or bound by any
private letter ruling, technical advice memorandum, closing
agreement or similar ruling, memorandum or agreement with any
taxing authority with respect to any material Taxes, nor is any
such request outstanding.
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(c) Each of Parent and the Parent Subsidiaries has
disclosed on its Returns all positions taken therein that could
give rise to a substantial understatement of Tax within the
meaning of Section 6662 of the Code.
(d) Neither Parent nor any Parent Subsidiary has entered
into, has any liability in respect of, or has any filing
obligations with respect to, any transaction that constitutes a
“listed transaction,” as defined in
Section 1.6011-4
of the Treasury Regulations.
(e) Neither Parent nor any Parent Subsidiary will be
required to include any material item of income in, or exclude
any material item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing
Date as a result of any (i) change in method of accounting
for a taxable period ending on or prior to the Closing Date
under Section 481(c) of the Code (or any corresponding or
similar provision of state, local or foreign Applicable Law) or
(ii) “closing agreement” as described in
Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign Applicable Law) executed on
or prior to the Closing Date.
(f) Since December 31, 2003, neither Parent nor any
Parent Subsidiary has undergone an “ownership change”
pursuant to Section 382(g) of the Code.
(g) Since December 31, 2003, neither Parent nor any
Parent Subsidiary has been a distributing corporation or a
controlled corporation for purposes of Section 355 of the
Code.
(h) The Parent has made available to Company correct and
complete copies of (i) all U.S. federal income tax
Returns of Parent and the Parent Subsidiaries relating to
taxable periods ending on or after December 31, 2003, filed
through the date of this Agreement, (ii) any audit report
(or notice of proposed adjustment to the extent not included in
an audit report) within the last three years relating to any
material amounts of Taxes due from or with respect to Parent or
any of its Subsidiaries, and (iii) except as set forth on
Section 4.11(h) of the Parent Disclosure Letter, any
substantive and non-privileged correspondence and memoranda
relating to the matters described in clauses (i) or
(ii) of this Section 4.11(h).
4.12 Employee Benefit Plans; ERISA.
(a) Section 4.12(a) of the Parent Disclosure Letter
contains a true and complete list of the Parent Benefit Plans
(as defined below). For purposes of this Agreement,
“Parent Benefit Plans” shall mean all
material employee benefit plans or arrangements of any type
(including without limitation, the Parent Stock Plan and plans
described in Section 3(3) of ERISA) sponsored, maintained
or contributed to by Parent or any trade or business, whether or
not incorporated, which together with Parent would be deemed a
single employer within the meaning of Section 414(b),
(c) or (m) of the Code or Section 4001(b)(1) of
ERISA (a “Parent ERISA Affiliate”)
within six years prior to the Effective Time; provided, that the
term “Parent Benefit Plans” shall not include any
Multiemployer Plan (as defined below) or union-sponsored welfare
plan. With respect to each Parent Benefit Plan, Parent has
provided or made available to Company a true, correct and
complete copy of such Parent Benefit Plan, and, to the extent
applicable, trust agreements, insurance contracts and other
funding vehicles, the most recent Annual Reports (Form 5500
Series) and accompanying schedules, summary plan descriptions,
and the most recent determination letter from the Internal
Revenue Service.
(b) With respect to each Parent Benefit Plan: (i) if
intended to qualify under Section 401(a) or 401(k) of the
Code, such plan has received a favorable determination letter
from the Internal Revenue Service with respect to its
qualification, and its related trust has been determined to be
exempt from tax under Section 501(a) of the Code and, to
the knowledge of Parent, nothing has occurred since the date of
such letter to adversely affect such qualification or exemption;
(ii) except as set forth on Section 4.12(b)(ii) of the
Parent Disclosure Letter, each such plan has been administered
in substantial compliance with its terms and Applicable Laws;
(iii) neither Parent nor any Parent ERISA Affiliate has
engaged in, and Parent and each Parent ERISA Affiliate do not
have any knowledge of any Person that has engaged in, any
transaction or acted or failed to act in any manner that would
subject Parent or any Parent ERISA Affiliate to any liability
for a breach of fiduciary duty under ERISA; (iv) except as
set forth on Section 4.12(b)(iv) of the Parent Disclosure
Letter, no disputes, government audits, examinations or
investigations are pending or, to the knowledge of Parent or any
Parent ERISA Affiliate, threatened other than ordinary claims
for benefits; (v) neither Parent nor any Parent ERISA
Affiliate has engaged in, and Parent and each Parent ERISA
Affiliate do not have any knowledge of any Person that has
engaged in, any transaction in violation of Section 406(a)
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or (b) of ERISA or Section 4975 of the Code for which
no exemption exists under Section 408 of ERISA or
Section 4975(c) of the Code or Section 4975(d) of the
Code; (vi) except as disclosed on Annual Reports
(Form 5500 Series) filed with respect to such plan prior to
the date of this Agreement, all contributions due have been made
on a timely basis; and (vii) except for outstanding awards
under the Parent Stock Plan, obligations pursuant to collective
bargaining agreements and claim liabilities under self-insured
medical plans, such plan may be terminated on a prospective
basis without any continuing liability for benefits other than
benefits accrued to the date of such termination. All
contributions required under any Parent Benefit Plan which have
not been made have been properly recorded on the books of Parent
or a Parent ERISA Affiliate.
(c) Except as set forth on Section 4.12(c) of the
Parent Disclosure Letter, neither Parent nor any Parent ERISA
Affiliate has incurred or taken any action that could reasonably
be expected to cause it to incur any liability (i) on
account of a partial or complete withdrawal (within the meaning
of Sections 4205 and 4203 of ERISA, respectively) with
respect to any Multiemployer Plan, or (ii) on account of
unpaid contributions to any such Multiemployer Plan. To the
knowledge of Parent, no Multiemployer Plan to which Parent or
any Parent ERISA Affiliate contributes or is obligated to
contribute is insolvent or in reorganization, within the meaning
of Sections 4245 and 4241 of ERISA.
(d) Neither Parent nor any Parent ERISA Affiliate has
incurred or taken any action that could reasonably be expected
to cause it to incur any liability to the PBGC as a result of
the voluntary or involuntary termination of any Parent Benefit
Plan which is subject to Title IV of ERISA.
(e) No event has occurred with respect to a Parent Benefit
Plan that could reasonably be expected to result in liability to
Parent or any Parent ERISA Affiliate which would have a Parent
Material Adverse Effect.
4.13 Environmental
Matters. Notwithstanding any other provision in
this Agreement to the contrary other than in Section 4.5,
this representation contains Parent’s sole representation
regarding matters involving Environmental Laws or Hazardous
Substances. Except as would not reasonably be expected to have a
Parent Material Adverse Effect:
(a) The businesses of Parent and the Parent Subsidiaries
have been and are operated in compliance with all Environmental
Laws.
(b) Neither Parent nor any of the Parent Subsidiaries has
caused the generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal,
transport or handling of any Hazardous Substances, except in
compliance with all Environmental Laws, and, to Parent’s
knowledge, no generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal,
transport or handling of any Hazardous Substances has occurred
at any property or facility owned, leased or operated by Parent
or any of the Parent Subsidiaries except in compliance with all
Environmental Laws.
(c) Neither Parent nor any of the Parent Subsidiaries has
received any written notice from any Governmental Authority or
third party or, to the knowledge of Parent, any other
communication alleging or concerning any violation by Parent or
any of the Parent Subsidiaries of, or responsibility or
liability of Parent or any of the Parent Subsidiaries under, any
Environmental Law. There are no pending or, to the knowledge of
Parent, threatened claims, suits, actions or proceedings with
respect to the businesses or operations of Parent or any of the
Parent Subsidiaries alleging or concerning any violation of, or
responsibility or liability under, any Environmental Law. There
is no outstanding order, writ, injunction, judgment, award, rule
or decree against Parent or any of the Parent Subsidiaries
related to any Environmental Law or Hazardous Substances.
(d) Parent and the Parent Subsidiaries have obtained and
are in compliance with all approvals, permits, licenses,
registrations and similar authorizations from all Governmental
Authorities under all Environmental Laws required for the
operation of the businesses of Parent and the Parent
Subsidiaries as currently conducted; and, to the knowledge of
Parent, there are no pending or threatened, actions or
proceedings alleging violations of or seeking to modify, revoke
or deny renewal of any of such approvals, permits, licenses,
registrations and similar authorizations.
(e) No claims have been asserted or, to the knowledge of
Parent, threatened to be asserted against Parent or any of the
Parent Subsidiaries or against any Person whose liability for
any claim Parent or any of the Parent
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Subsidiaries has retained or assumed either contractually or by
operation of law for any personal injury (including wrongful
death) or property damage (real or personal) arising out of
alleged exposure or otherwise related to Hazardous Substances.
4.14 Insurance. Parent has made
available to Company a true, complete and correct copy of each
insurance policy of Parent and each material insurance policy of
the Parent Subsidiaries currently in effect or the binder
therefor. Parent maintains insurance with reputable insurers for
the business and assets of Parent and the Parent Subsidiaries
against all risks normally insured against, and in amounts
normally carried, by corporations of similar size engaged in
similar lines of business. All premiums due on such policies
have been paid, and there is no existing default or notice of
non-renewal, except for such defaults or notices as would not
constitute a Parent Material Adverse Effect. Parent maintains
levels of self-insurance and reserves which Parent believes are
adequate to meet current liabilities.
4.15 Labor Matters; Employees.
(a) Except as set forth on Section 4.15(a) of the
Parent Disclosure Letter, and except, in each case, individually
or in the aggregate, as would not reasonably be expected to have
a Parent Material Adverse Effect, (i) there is no labor
strike, dispute, slowdown, work stoppage or lockout actually
pending or, to the knowledge of Parent, threatened against or
affecting Parent or any of the Parent Subsidiaries and, during
the past five years, there has not been any such action,
(ii) neither Parent nor any of the Parent Subsidiaries have
any knowledge of any current union organizing activities among
the employees of Parent or any of the Parent Subsidiaries,
(iii) Parent and the Parent Subsidiaries have each at all
times been in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and
health, and are not engaged in any unfair labor practices as
defined in the National Labor Relations Act or other Applicable
Laws, ordinance or regulation and Parent is not liable for any
arrears of wages or any withholding taxes or penalties for
failure to comply with any of the foregoing, (iv) there is
no unfair labor practice charge or complaint against Parent or
any of the Parent Subsidiaries pending or, to the knowledge of
Parent, threatened before the National Labor Relations Board or
any similar state or foreign agency, (v) there is no
grievance or arbitration proceeding arising out of any
collective bargaining agreement or other grievance procedure
relating to Parent or any of the Parent Subsidiaries,
(vi) neither the Occupational Safety and Health
Administration nor any other federal or state agency has
threatened to file any citation, and there are no pending
citations, relating to Parent or any of the Parent Subsidiaries,
and (vii) there is no employee or governmental claim or
investigation, including any charges to or by the Equal
Employment Opportunity Commission or any state employment
practice agency, investigations regarding Fair Labor Standards
Act compliance, audits by the Office of Federal Contractor
Compliance Programs, Workers’ Compensation claims,
harassment complaints, demand letters, or threatened claims.
(b) Since the enactment of the WARN Act, neither Parent nor
any of the Parent Subsidiaries has effectuated (i) a plant
closing affecting any site of employment or one or more
facilities or operating units within any site of employment or
facility of Parent or any of the Parent Subsidiaries, or
(ii) a mass layoff (as defined in the WARN Act) affecting
any site of employment or facility of Parent or any of the
Parent Subsidiaries, nor has Parent or any of the Parent
Subsidiaries been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to
trigger application of any similar state or local law, in each
case that would reasonably be expected to have a Parent Material
Adverse Effect.
(c) Neither Parent nor any of the Parent Subsidiaries has
been suspended or debarred from doing business with the United
States government, or state or local government entity, or is
the subject of a finding of non-responsibility or ineligibility
for United States government contracting, or contracting with a
state or local government entity, and neither Parent nor any of
the Parent Subsidiaries has, or is violating, Executive Order
11246 or its implementing regulations, with respect to any
government contract, or any state or local law applicable to
contracting with such governmental entity, and neither Parent
nor any of the Parent Subsidiaries has been notified by one or
more significant customers that Parent or any of the Parent
Subsidiaries is not currently considered qualified by that
customer or customers to perform or bid on work for that
customer because of safety record concerns, except for any such
disqualification that would not reasonably be expected to have a
material adverse effect on Parent or any material Parent
Subsidiary.
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4.16 Intellectual Property. Parent
or the Parent Subsidiaries own, or are licensed or otherwise
have the right to use, all Intellectual Property currently used
in the conduct of the business of Parent and the Parent
Subsidiaries, except where the failure to so own or otherwise
have the right to use such Intellectual Property would not,
individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect. Except as set forth on
Section 4.16 of the Parent Disclosure Letter, no Person has
notified either Parent or any of the Parent Subsidiaries in
writing and Parent does not have any knowledge that their use of
the Intellectual Property infringes on the rights of any Person,
subject to such claims and infringements as do not, individually
or in the aggregate, give rise to any liability on the part of
Parent and the Parent Subsidiaries that would reasonably be
expected to have a Parent Material Adverse Effect, and, to
Parent’s knowledge, no Person is infringing on any right of
Parent or any of the Parent Subsidiaries with respect to any
such Intellectual Property. No claims are pending or, to
Parent’s knowledge, threatened that Parent or any of the
Parent Subsidiaries is infringing or otherwise adversely
affecting the rights of any Person with regard to any
Intellectual Property, except for claims that would not,
individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect.
4.17 Material Contracts.
(a) Set forth in Section 4.17(a) of the Parent
Disclosure Letter or listed as an exhibit to Parent’s
Annual Report on
Form 10-K
for the year ended December 31, 2006 or to any other Parent
SEC Document filed and publicly available between
December 31, 2006 and the date of this Agreement is a list
of each contract, lease, indenture, agreement, arrangement or
understanding to which Parent or any of the Parent Subsidiaries
is subject that is currently in effect and is of a type that
would be required to be included as an exhibit to a
Form S-1
Registration Statement pursuant to the rules and regulations of
the SEC if such a registration statement were filed by Parent.
Each contract, lease, indenture, agreement, arrangement,
commitment or understanding of the type described in this
Section 4.17(a), whether or not included as an exhibit to
the Parent SEC Documents, is referred to herein as a
“Parent Material Contract,” and for
purposes of Section 5.4(a)(vii) and the bringdown of
Section 4.17(b) pursuant to Section 6.2(a),
“Parent Material Contract” shall include as of the
date entered into any such contract, lease, indenture,
agreement, arrangement, commitment or understanding that is
entered into after the date of this Agreement. The Parent has
previously made available to Company true, complete and correct
copies of each Parent Material Contract that is not included as
an exhibit to the Parent SEC Documents.
(b) (A) All Parent Material Contracts are the valid
and legally binding obligations of Parent and, to the knowledge
of Parent, each of the other parties thereto and are enforceable
in accordance with their respective terms; (B) Parent is
not in material breach or default with respect to, and to the
knowledge of Parent, no other party to any Parent Material
Contract is in material breach or default with respect to, its
obligations thereunder, including with respect to payments or
otherwise; and (C) no party to any Parent Material Contract
has given notice of any action to terminate, cancel, rescind or
procure a judicial reformation thereof, except, in the case of
each of (A)-(C) above, as would not reasonably be expected to
have a Parent Material Adverse Effect.
4.18 Disclosure Controls and Procedures and
Internal Control Over Financial Reporting. Parent
has established and maintains “disclosure controls and
procedures” (as defined in
Rules 13a-14(c)
and 15d-14(c)
of the Exchange Act) that are designed to provide reasonable
assurance that information (both financial and non-financial)
required to be disclosed by Parent in the reports that it files
or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and that all such information is
accumulated and communicated to Parent’s management as
appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive
Officer and Chief Financial Officer of Parent required under the
Exchange Act with respect to such reports. As of
December 31, 2006, there were no “material
weaknesses” in Parent’s or any of the Parent
Subsidiaries’ internal controls as contemplated under
Section 404 of the Sarbanes-Oxley Act. Parent has
disclosed, based on the most recent evaluation of its internal
control over financial reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) by its chief executive officer and chief
financial officer, to Parent’s auditors and the audit
committee of the Parent Board (a) any significant
deficiencies in the design or operation of its internal control
over financial reporting that are reasonably likely to adversely
affect Parent’s ability to record, process, summarize and
report financial information and has identified for the
Parent’s auditors and audit committee of the Parent Board
any material weaknesses in its internal control over financial
reporting and (b) any fraud, whether or not material, that
involves management or other employees who have a significant
role in Parent’s internal control over financial reporting.
Since the date of Parent’s
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most recent evaluation of internal control over financial
reporting, to the knowledge of Parent, no facts or circumstances
have arisen or occurred that would be required to be disclosed
to Parent’s auditors or Parent’s audit committee
regarding (x) a significant deficiency in the design or
operation of its internal control over financial reporting,
(y) a material weakness in its internal control over
financial reporting or (z) fraud, whether or not material,
that involves management or other employees who have a
significant role in Parent’s internal control over
financial reporting.
4.19 Tax-Free
Reorganization. Neither Parent nor Merger Sub,
nor, to the knowledge of Parent and Merger Sub, any of the
Parent Subsidiaries, have taken or agreed to take any action
that would prevent the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code. Without
limiting the foregoing representation, neither Parent nor Merger
Sub, nor, to the knowledge of Parent and Merger Sub, any of the
Parent Subsidiaries, has owned any shares of Company Common
Stock at any time since September 24, 2003.
4.20 Rights Agreement. Company
shall not be deemed to be an Acquiring Person (as such term is
defined in the Parent Rights Agreement) and the Distribution
Date (as such term is defined in the Parent Rights Agreement)
shall not be deemed to occur and the Rights (as such term is
defined in the Parent Rights Agreement) will not separate from
the common stock of Parent as a result of entering into this
Agreement or consummating the Merger and/or the other
transactions contemplated hereby.
4.21 Opinion of Financial
Advisor. The Parent Board has received the
written opinion of Credit Suisse Securities (USA) LLC,
Parent’s financial advisor, dated as of the date of this
Agreement, to the effect that, as of the date of this Agreement,
the Exchange Ratio is fair to Parent from a financial point of
view. A true, complete and correct copy of such opinion will
promptly be delivered to Company by Parent solely for
informational purposes after receipt thereof.
4.22 Section 203 of the
DGCL. Neither Parent nor Merger Sub is, and at no
time during the last three years has been, an “interested
stockholder” of Company as defined in Section 203 of
the DGCL. As of the date of this Agreement, neither Parent nor
Merger Sub owns any shares of capital stock of Company for
purposes of Section 203.
4.23 Brokerage and Finders’
Fees. Except for Parent’s obligations to
Credit Suisse Securities (USA) LLC, neither Parent, Merger Sub
nor any of their respective directors, officers or employees has
incurred or will incur on behalf of Parent or Merger Sub any
brokerage, finders’, investment banking or similar fee in
connection with the transactions contemplated by this Agreement.
4.24 Board Recommendation. The
Parent Board, at a meeting duly called and held, by unanimous
vote of the members present at such meeting has
(a) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are advisable, fair
to and in the best interests of the Parent Stockholders;
(b) declared advisable and in all respects approved this
Agreement, and the transactions contemplated by this Agreement,
including the Merger and the Parent Proposal; (c) resolved
to recommend that the Parent Stockholders approve the Parent
Proposal; and (d) directed that the Parent Proposal be
submitted to Parent Stockholders for consideration in accordance
with this Agreement, which resolutions, as of the date of this
Agreement, have not been subsequently rescinded, modified or
withdrawn in any way (collectively, the “Parent Board
Recommendation”).
4.25 Required Vote by Parent
Stockholders. The Parent Required Vote to approve
the Parent Proposal is the only vote of the holders of capital
stock of Parent necessary to approve the transactions
contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1 Acquisition Proposals.
(a) No Solicitation. Company shall not,
and shall use all reasonable efforts and act in good faith to
cause its Subsidiaries and Company’s and its
Subsidiaries’ respective directors, officers, employees,
agents, attorneys,
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investment bankers, consultants, accountants, and other advisors
and representatives (collectively,
“Representatives”) not to, directly or
indirectly: (i) solicit, initiate, induce or knowingly
encourage or facilitate any inquiry with respect to, or the
making, submission, reaffirmation or announcement of, any
Acquisition Proposal (as defined below) or any offer or proposal
that could reasonably be expected to lead to any Acquisition
Proposal, (ii) enter into, continue, participate or engage
in any discussions or negotiations regarding, or provide any
confidential or nonpublic information to any third person with
respect to, any Acquisition Proposal, (iii) approve,
endorse, recommend or make or authorize any statement,
recommendation or solicitation in support of any Acquisition
Proposal, (iv) withdraw, amend or modify, or propose to
withdraw, amend or modify, in a manner adverse to Parent, the
Company Board’s recommendation in favor of the adoption of
the Agreement by the Company Stockholders or (v) execute or
enter into, or propose to execute or enter into, any letter of
intent, memorandum of understanding, agreement in principle,
merger or acquisition agreement or similar document or any
contract, agreement or commitment (whether binding or not)
contemplating or otherwise relating to any Acquisition Proposal
or transaction contemplated thereby (other than a
confidentiality agreement described below), except in the case
of clauses (ii), (iii), (iv) or (v) to the extent
expressly permitted by this Section 5.1.
(b) Cessation of Ongoing Discussions; Destruction/Return
of Confidential Material. Company and its
Subsidiaries will immediately cease and cause to be terminated
any and all existing activities, discussions or negotiations
(including, without limitation, any such activities, discussions
or negotiations conducted by its Representatives) with any third
parties conducted heretofore with respect to consideration of
any Acquisition Proposal. Company shall promptly, and not later
than 48 hours following the execution of this Agreement,
request in writing that each Person which has executed a
confidentiality or non-disclosure agreement prior to the date of
this Agreement with Company, its Subsidiaries or any of its
Representatives with respect to such Person’s consideration
of an Acquisition Proposal to immediately return or destroy all
confidential and nonpublic information heretofore furnished to
such Person or its representatives by Company, its Subsidiaries
or its Representatives pursuant to the terms of such
confidentiality or non-disclosure agreement.
(c) Notification of Unsolicited Acquisition
Proposals. As promptly as practicable (and in any
event no later than 24 hours) after receipt of any
Acquisition Proposal or request for nonpublic information or
inquiry that could reasonably be expected to lead to an
Acquisition Proposal or from any Person seeking to have
discussions or negotiations with Company or its Representatives
relating to a possible Acquisition Proposal, Company shall
provide Parent with oral and written notice of such Acquisition
Proposal, request or inquiry, including the material terms and
conditions of such Acquisition Proposal, request or inquiry; the
identity of the Person or group making any such Acquisition
Proposal, request or inquiry; and a copy of all written
materials provided by or on behalf of such Person or group in
connection with such Acquisition Proposal, request or inquiry.
Company shall provide Parent with 24 hours prior written
notice (or such lesser prior notice as is provided to the
members of the Company Board) of any meeting of the Company
Board or a committee thereof at which the members of the Company
Board would reasonably be expected to consider any Acquisition
Proposal or any such inquiry or to consider providing nonpublic
information to or have such discussions or negotiations with any
Person.
(d) Superior Proposals. Notwithstanding
anything to the contrary contained in Section 5.1(a), in
the event that Company receives prior to the adoption of this
Agreement by the Company Stockholders pursuant to the terms
hereof an unsolicited, bona fide written Acquisition Proposal
from a third party that did not result from a breach of this
Section 5.1 and that the Company Board has reasonably
determined in good faith, after consultation with its outside
financial advisors and outside counsel, that such Acquisition
Proposal is, or is reasonably likely to lead to, a Superior
Proposal (as defined in Section 5.1(g)(ii)), Company may
then (1) furnish confidential or nonpublic information to
the third party (and its representatives) making such
Acquisition Proposal and (2) engage in discussions and
negotiations (including exchanging draft agreements) with the
third party and its representatives with respect to such
Acquisition Proposal; provided, however, that:
(i) Company complies with all of the terms of this
Section 5.1;
(ii) Company shall have notified Parent, in writing, of any
decision of the Company Board as to whether to enter into
discussions or negotiations concerning any Acquisition Proposal
or to provide confidential or nonpublic information to any
Person as permitted herein, which notice shall be given as
promptly as practicable after such decision (and in any event no
later than 24 hours after such determination was reached);
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(iii) Company promptly provides Parent with oral and
written notice setting forth all such information as is
reasonably necessary to keep Parent currently informed in all
material respects of the negotiations, status and material terms
(including material amendments or proposed material amendments
and any withdrawals or rejections thereof) of any such
Acquisition Proposal and shall promptly provide Parent a copy of
all written materials subsequently provided to, by or on behalf
of such Person or group in connection with such Acquisition
Proposal;
(iv) prior to furnishing any nonpublic information or
entering into any negotiations or discussions with such third
party, (1) Company receives from such third party an
executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written
and oral information furnished to such third party on
Company’s behalf on terms no less restrictive to such third
party than (i) the confidentiality agreement, dated as of
December 5, 2006, between Parent and Company (the
“Confidentiality Agreement”) and
(ii) to the extent such third party is not currently
conducting a similar dark fiber business, the confidentiality
agreement, dated as of December 29, 2006, between Parent
and Company specific to the dark fiber business of Company (the
“Dark Fiber Confidentiality Agreement”
and together with the Confidentiality Agreement, the
“Confidentiality Agreements”), and
(2) contemporaneously with furnishing any such nonpublic
information to such third party, Company furnishes such
confidential or nonpublic information to Parent (to the extent
such information has not been previously so furnished); and
(v) the Company Board reasonably determines in good faith,
after consultation with outside legal counsel, that the failure
to provide such information or enter into such discussion or
negotiations would reasonably be expected to result in a breach
of the Company Board’s fiduciary duties to Company and the
Company Stockholders under Applicable Laws.
(e) Change of Recommendation. Subject to
the provisions of Section 5.5 and this Section 5.1, in
response to the receipt of a Superior Proposal prior to
obtaining the Company Stockholders’ Approval, (x) the
Company Board or a committee thereof may withhold, withdraw,
amend or modify the Company Board Recommendation in favor of the
Merger, and, in the case of a Superior Proposal that is a tender
or exchange offer made directly to the Company Stockholders, may
recommend that the Company Stockholders accept the tender or
exchange offer, or (y) the Company Board may approve,
endorse, or recommend any Superior Proposal (any of the
foregoing actions in clauses (x) and (y), an
“Alternative Transaction
Recommendation”), if all of the following
conditions in clauses (i) through (viii) are met:
(i) Company shall have delivered to Parent written notice
at least 48 hours prior to any meeting of the Company Board
or a committee thereof at which the Company Board or committee
is reasonably expected to consider declaring a Superior Proposal
or effecting an Alternative Transaction Recommendation;
(ii) the Company Board determines in good faith, after
consultation with the Company’s financial advisors and
outside legal counsel, that a Superior Proposal has been made
and not withdrawn;
(iii) the Company Stockholders have not approved this
Agreement in accordance with Applicable Laws;
(iv) Company shall have delivered to Parent written notice
(a “Change of Recommendation Notice”) at
least five business days prior to publicly effecting such
Alternative Transaction Recommendation which shall state
expressly (A) that Company has received a Superior
Proposal, (B) the final terms and conditions of the
Superior Proposal, (C) the identity of the Person or group
making the Superior Proposal and (D) that Company intends
to effect an Alternative Transaction Recommendation;
(v) after delivering the Change of Recommendation Notice,
Company shall negotiate in good faith with Parent and provide
Parent with a reasonable opportunity to make adjustments in the
terms and conditions of this Agreement during such five business
day period such that the Acquisition Proposal would no longer
constitute a Superior Proposal and the Company Board could
proceed with its recommendation to the Company Stockholders in
favor of adoption of this Agreement without making an
Alternative Transaction Recommendation;
(vi) the Company Board shall have determined (A) after
consultation with its financial advisor, that the terms of the
Superior Proposal are more favorable to the Company Stockholders
than the terms of the Merger
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(as it may be adjusted pursuant to
paragraph (v) above) and (B) after consultation
with outside legal counsel, that an Alternative Transaction
Recommendation is necessary for the Company Board to comply with
its fiduciary duties to Company and the Company Stockholders
under Applicable Laws;
(vii) Company shall not have breached any of the provisions
set forth in Section 5.5 or this Section 5.1; and
(viii) Company shall have used all commercially reasonable
efforts to mail the Proxy Statement/Prospectus to the Company
Stockholders as promptly as practicable after the date of this
Agreement.
(f) Nothing in this Section shall prohibit Company from at
any time taking and disclosing to the Company Stockholders a
position contemplated by
Rule 14e-2(a)
promulgated under the Exchange Act, nor shall anything in this
Agreement restrict Parent from developing, soliciting,
considering, communicating, exchanging or furnishing
information, negotiating, disclosing, entering into or
consummating potential or definitive strategic transactions
through both internally generated or third-party proposals.
(g) For purposes of this Agreement:
(i) “Acquisition Proposal” means
any proposal or offer with respect to (1) a merger,
reorganization, share exchange, consolidation, business
combination, recapitalization, dissolution, liquidation or
similar transaction involving Company, (2) any purchase of
an equity interest (including by means of a tender or exchange
offer) representing an amount equal to or greater than a 25%
voting or economic interest in Company or (3) any purchase
of assets, securities or ownership interests representing an
amount equal to or greater than 25% of the consolidated assets
of Company and the Company Subsidiaries taken as a whole
(including, in each case, stock of such subsidiaries).
(ii) “Superior Proposal” means a
bona fide written Acquisition Proposal (except that references
in the definition of “Acquisition Proposal” to
“25%” shall be replaced by “50%”) made by a
Person other than a party hereto (1) that is on terms that
the Company Board (after consultation with its outside financial
advisor and outside counsel) in good faith concludes to be more
favorable from a financial point of view to Company Stockholders
(in their capacity as stockholders) than the transactions
contemplated by this Agreement, taking into account all terms
and conditions of such proposal and this Agreement (including
any adjustment by Parent to amend the terms of this Agreement),
(2) that is reasonably certain of being completed on the
terms proposed, taking into account all legal, financial,
regulatory and other aspects of the proposal, and (3) is
fully financed and not subject to any financing contingency.
5.2 Mutual Covenants.
(a) Commercially Reasonable
Efforts. Subject to the terms and conditions of
this Agreement, Company and Parent will use (and will cause
their respective subsidiaries to use) their commercially
reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or
advisable under this Agreement or Applicable Laws to consummate
and make effective as soon as reasonably practicable, the Merger
and the other transactions contemplated by this Agreement,
including working together to ensure a smooth transition with
respect to, and to maintain existing relationships with,
employees, customers and suppliers of Company and the Company
Subsidiaries.
(b) HSR Act.
(i) Company and Parent shall, promptly after the execution
and delivery of this Agreement, file with the Federal Trade
Commission and the Department of Justice the notification
required to be filed with respect to the transactions provided
in this Agreement under the HSR Act (and request early
termination of the waiting period). Each of Company and Parent
shall, in connection therewith, cooperate as necessary to
promptly amend such filings or supply additional information and
documentary material as may be requested pursuant to the HSR Act.
(ii) Each of Company and Parent, through outside counsel,
will (A) promptly notify the other of any written
communication to that party from any Governmental Authority
concerning this Agreement or the transactions contemplated
hereby and, if practicable, permit such other party’s
counsel to review in advance
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any proposed written communication to any such Governmental
Authority concerning this Agreement or the transactions
contemplated hereby and incorporate such other party’s
reasonable comments and (B) not agree to participate in any
substantive meeting or discussion with any such Governmental
Authority in respect of any filing, investigation or inquiry
concerning this Agreement or the transactions contemplated
hereby unless it consults with such other party’s counsel
in advance, and, to the extent permitted by such Governmental
Authority, gives such other party the opportunity to attend;
provided, however, that, in each case, any
documents reflecting a party’s confidential, nonpublic
valuation of the Merger and the transactions contemplated hereby
need not be furnished or made available to such other
party’s counsel.
(c) Conveyance Taxes. Company and Parent
shall cooperate in the preparation, execution and filing of all
Returns, questionnaires, applications or other documents
regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any
similar Taxes that become payable in connection with the
transactions contemplated by this Agreement that are required or
permitted to be filed on or before the Effective Time.
(d) Notice of Certain Events. Each of
Company and Parent shall promptly notify the other of:
(i) any notice or other communication from any individual,
corporation, general or limited partnership, limited liability
company, joint venture, estate, trust, association,
organization, Governmental Authority or other entity of any kind
or nature (each, a “Person”) alleging
that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
Governmental Authority in connection with the transactions
contemplated by this Agreement;
(iii) any Actions commenced or, to its knowledge,
threatened against, relating to or involving or otherwise
affecting Company, Parent or any of their respective
subsidiaries that relate to the consummation of the transactions
contemplated by this Agreement, including the Merger;
(iv) any notice of, or other communication relating to, a
default or event that with notice or lapse of time or both,
would become a default, received by it or any of the Company
Subsidiaries or the Parent Subsidiaries subsequent to the date
of this Agreement, under any material agreement; and
(v) any Company Material Adverse Effect or Parent Material
Adverse Effect, as applicable, or the occurrence of any event
which is reasonably likely to result in a Company Material
Adverse Effect or Parent Material Adverse Effect, as the case
may be.
(e) Actions and Proceedings. In the event
that any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) by any third party
or Governmental Authority challenging any transaction
contemplated by this Agreement, or any other agreement
contemplated hereby, each of Parent and Company shall cooperate
in all respects with each other and use its respective
commercially reasonable efforts to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect
and that prohibits, prevents or restricts consummation of the
transactions contemplated by this Agreement.
(f) Consents and Approvals. Company,
Parent and Merger Sub shall cooperate with each other and
(i) promptly prepare and file all necessary documentation,
(ii) effect all necessary applications, notices, petitions
and filings and execute all agreements and documents,
(iii) use all commercially reasonable efforts to obtain all
necessary permits, licenses, consents, approvals and
authorizations of all Governmental Authorities and (iv) use
all commercially reasonable efforts to obtain all necessary
Permits, consents, approvals and authorizations of all other
parties, in the case of each of the foregoing clauses (i),
(ii), (iii) and (iv), necessary to consummate the
transactions contemplated by this Agreement or required by the
terms of any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument to which Company, Merger Sub, Parent or any of their
respective subsidiaries is a party or by which any of them is
bound.
(g) Access. During the period from and
after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement pursuant to
Article VII, and subject to Applicable Laws and the
Confidentiality Agreements, (A) Company shall (i) give
Parent, its officers, employees, counsel, financial advisors,
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auditors and other authorized representatives reasonable access
during normal business hours and upon reasonable notice to the
offices, properties, books and records of Company and the
Company Subsidiaries, (ii) furnish to Parent, its officers,
employees, counsel, financial advisors, auditors and other
authorized representatives to the extent reasonably available
such financial and operating data and other information as such
Persons may reasonably request (including, to the extent
reasonably practicable, furnishing to Parent Company’s
financial results in advance of filing any Company SEC Documents
containing such financial results), and (iii) instruct the
officers, employees, counsel, financial advisors, auditors and
other authorized representatives of Company and the Company
Subsidiaries to cooperate in all reasonable respects with Parent
in its investigation of Company and the Company Subsidiaries;
provided that information provided to Parent and its
representatives pursuant to this Section 5.2(g) shall be
subject to the Confidentiality Agreements; and (B) Parent
shall (i) give Company, its officers, employees, counsel,
financial advisors, auditors and other authorized
representatives reasonable access during normal business hours
and upon reasonable notice to the offices, properties, books and
records of Parent and the Parent Subsidiaries, (ii) furnish
to Company, its officers, employees, counsel, financial
advisors, auditors and other authorized representatives to the
extent reasonably available such financial and operating data
and other information as such Persons may reasonably request
(including, to the extent reasonably practicable, furnishing to
Company Parent’s financial results in advance of filing any
Parent SEC Documents containing such financial results), and
(iii) instruct the officers, employees, counsel, financial
advisors, auditors and other authorized representatives of
Parent and the Parent Subsidiaries to cooperate in all
reasonable respects with Company in its investigation of Parent
and the Parent Subsidiaries; provided that information
provided to Company and its representatives pursuant to this
Section 5.2(g) shall be subject to the Confidentiality
Agreements; provided, further, that (w) any access
to information pursuant to this Section 5.2(g) shall be
conducted in such manner as not to interfere unreasonably with
the conduct of the business of Company or Parent, as applicable;
(x) neither party shall be required to prepare special
records, reports, analysis or other information that they do not
prepare in the ordinary course of business, unless such
preparation would not impose an unreasonable burden;
(y) neither party shall be required to take any action that
would constitute a waiver of the attorney-client privilege, or
would, in the reasonable determination of the applicable party,
violate any anti-competition Applicable Law; and
(z) Company or Parent shall not be required pursuant to
this Section 5.2(g) to permit any inspection, or disclose
any information, that in the reasonable judgment of Company or
Parent, as the case may be, would result in the disclosure of
any trade secrets of Company, Company Subsidiaries, Parent,
Parent Subsidiaries or any third party, or other confidential
information of any third party in violation of any obligations
with respect to trade secrets or such confidential information,
if Company or Parent, as the case may be, shall have used all
commercially reasonable efforts to obtain the consent of such
third party to such inspection or disclosure. No information or
knowledge obtained by a party in any investigation pursuant to
this Section shall affect or be deemed to modify any
representation or warranty made by the other party hereunder.
5.3 Covenants of Company.
(a) Conduct of Company’s
Operations. From the date of this Agreement until
the Effective Time, Company shall and shall cause each of the
Company Subsidiaries to conduct its business and operate its
properties in the ordinary course of business consistent with
past practice and Company shall and shall cause each of the
Company Subsidiaries to use its commercially reasonable efforts
to preserve intact its business organization and relationships
with third parties and to keep available the services of its
present officers and employees. Without limiting the generality
of the foregoing, except with the prior written consent of
Parent, which consent shall not be unreasonably withheld,
delayed or conditioned or as required by this Agreement until
the Effective Time:
(i) Company shall not adopt or propose any change to the
Company Certificate or Company Bylaws;
(ii) Company shall not, and shall not permit any of the
Company Subsidiaries to, (A) declare, set aside or pay any
dividend or other distribution with respect to any shares of
capital stock of Company or (B) repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or
other securities of, or other ownership interests in Company,
other than repurchases of outstanding shares of capital stock
pursuant to outstanding restricted stock agreements set forth on
Section 5.3(a)(ii) of the Company Disclosure Letter;
(iii) Company shall not, and shall not permit any of the
Company Subsidiaries to, merge or consolidate with any other
Person or acquire assets of any other Person for consideration
in excess of $5,000,000, individually, and $50,000,000 in the
aggregate or enter a new line of business or commence business
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operations in any country in which Company is not operating as
of the date of this Agreement or make any offer to do any of the
foregoing, other than such acquisitions set forth on
Section 5.3(a)(iii) of the Company Disclosure Letter;
provided that for any transaction permitted by this
Section 5.3(a)(iii), Company shall provide Parent a
reasonable period prior to execution to review the documentation
associated with such transaction, which documentation shall
contain terms and conditions substantially consistent with the
description of the transaction previously disclosed to Parent;
(iv) Company shall not, and shall not permit any of the
Company Subsidiaries to, sell, lease, license or otherwise
surrender, relinquish or dispose of any assets or properties
(other than to Parent and its direct and indirect wholly owned
subsidiaries), other than dispositions of (A) equipment and
(B) real property less than $5,000,000, in each case in the
ordinary course of business consistent with past practice;
(v) Company shall not, nor shall it permit any of the
Company Subsidiaries to, make any change to any material method
of Tax accounting, make or change any material Tax election,
authorize any indemnities for a material amount of Taxes, extend
any period for assessment of any material amount of Taxes, file
any request for ruling or determination in respect of any
material amount of Taxes, amend any Federal income tax Return
(including by way of a claim for refund), amend any Return other
than a Federal income tax Return if such amended Return would
result in an overpayment or underpayment of a material amount of
Taxes or if a material number of such Returns would be amended,
or settle or compromise any material amount of Taxes;
(vi) Except as set forth on Section 5.3(a)(vi) of the
Company Disclosure Letter, Company shall not, and shall not
permit any of the Company Subsidiaries to, issue any securities
(except (A) pursuant to existing obligations disclosed in
the Company SEC Documents filed and publicly available prior to
the date of this Agreement or (B) issuances of shares of
Company Common Stock upon the exercise of vested Company
Options) or enter into any amendment of any term of any
outstanding security of Company or of any of the Company
Subsidiaries;
(vii) Company shall not, and shall not permit any of the
Company Subsidiaries to, enter into any settlement or consent
with respect to any pending litigation or other proceeding other
than settlements (A) in the ordinary course of business not
exceeding a $5,000,000 payment by Company or a Company
Subsidiary with an unconditional release of Company, the Company
Subsidiaries and its or their affiliates, as applicable, from
any liabilities or, (B) in the case of non-monetary
settlements, which would not be reasonably likely to have an
adverse impact in any material respect on the operations of
Company and the Company Subsidiaries and, following the
Effective Time, Parent and the Parent Subsidiaries;
(viii) Company shall not incur any indebtedness for
borrowed money, except indebtedness incurred and letters of
credit issued under the Credit Agreement or in the ordinary
course of business in accordance with the Credit Agreement;
provided, however, that Company shall notify Parent of
the issuance of any letter of credit in the amount of $2,000,000
or more prior to the issuance thereof; provided in such
notification, Company shall not be required to disclose
competitive data to Parent;
(ix) Company shall not, and shall not permit any of the
Company Subsidiaries to, change any method of accounting or
accounting practice by Company or any of the Company
Subsidiaries except for any such change required by GAAP;
(x) Company shall not, and shall not permit any of the
Company Subsidiaries to, take any action that would give rise to
a claim under the WARN Act or any similar state law or
regulation because of a plant closing or mass layoff;
(xi) Company and Company Subsidiaries shall not make or
commit to make capital expenditures in excess of 120% of the
aggregate consolidated budgeted amount set forth in
Company’s fiscal 2007 capital expenditure plan as
previously disclosed to Parent;
(xii) Company shall not, and shall not permit any of the
Company Subsidiaries to enter into any futures, hedge, swap,
collar, put, call, floor, cap, option or other contracts that
are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, or securities,
interest rates or currencies, other than in the ordinary course
of business consistent with past practices;
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(xiii) Except as required under the terms of any Company
Benefit Plan or by Applicable Law, Company shall not, and shall
not permit any of the Company Subsidiaries to adopt, amend,
modify or assume any Company Benefit Plan (or any plan that
would be a Company Benefit Plan if so adopted) other than
(A) amendments made for purposes of complying with
Section 409A of the Code which do not increase
Company’s costs under the amended Company Benefit Plan or
(B) establishing a 2007 annual incentive plan with terms
and individual targets that are substantially the same as the
2006 annual incentive plan (except to the extent of resetting of
Company performance targets from 2006 to 2007 consistent with
the methodology of setting 2006 Company performance targets or
as set forth on Section 5.3(a)(xiii) of the Company
Disclosure Letter) with payments thereunder not to be due until
after the completion of fiscal 2007 in accordance with past
practice;
(xiv) Except as required under the terms of any Company
Employee Agreement or, consistent with past practice as
previously disclosed to Parent, or except as set forth on
Section 5.3(a)(xiv) of the Company Disclosure Letter,
Company shall not, and shall not permit any of the Company
Subsidiaries to approve any annual increase in compensation for
any employee or officer of Company or the Company Subsidiaries,
provided that nothing herein contained shall prevent or restrict
Company from awarding and/or paying any bonus under the
Company’s 2006 annual incentive compensation plan to any
employee or officer of Company or the Company Subsidiaries in
accordance with the terms of such plan and the bonus information
furnished to Parent on or prior to the date of this Agreement;
(xv) Except as required by Applicable Laws, or except as
set forth on Section 5.3(a)(xv) of the Company Disclosure
Letter, Company or Company Subsidiaries shall not (A) enter
into, modify or amend any Company Employee Agreement with any
current or former officer or employee other than amendments to
Company Employee Agreements made for purposes of complying with
Section 409A of the Code which do not increase
Company’s costs under the amended Company Employee
Agreement or (B) except in the ordinary course of business
modify any Labor Agreement;
(xvi) Except as required by Applicable Laws or as set forth
on Section 5.3(a)(xvi) of the Company Disclosure Letter,
Company or Company Subsidiaries shall not (A) enter into,
modify or amend any existing indemnification agreements between
Company or any Company Subsidiary and the directors and officers
of Company or any Company Subsidiary, which are identified on
Section 5.4(c)(i) of the Company Disclosure Letter or
(B) amend, modify or change any terms of the current
Company’s and Company Subsidiaries’ directors’
and officers’ liability insurance policies such that those
amendments, modifications or changes would cause an increase in
the annual premiums payable thereunder;
(xvii) Except as required by Applicable Laws, Company shall
not, nor shall Company permit the committee administering the BP
LTIP to, (A) add additional participants in the BP LTIP
after the date of this Agreement, (B) waive or modify any
performance targets under the BP LTIP, (C) accelerate the
vesting or payment of any awards granted thereunder, whether in
connection with the Merger or otherwise, (D) change the
identity of the committee or person(s) administering the BP LTIP
or (E) otherwise amend or modify the terms of the BP LTIP;
(xviii) Other than in connection with any transaction
permitted by Section 5.3(a)(iii), Company shall not, and
shall not permit any of the Company Subsidiaries to, organize or
acquire any Person that could become a subsidiary;
(xix) Company shall not, and shall not permit any of the
Company Subsidiaries to, enter into any new contract except for
a contract that is entered into in the ordinary course of
business consistent with past practice and that does not
constitute a Company Material Contract; provided that
such contract would not have a material adverse effect on the
ability of Company or any subsidiaries or affiliates to conduct
its business, and provided further that in obtaining the
consent of Parent with respect to any such contract, Company
shall not be required to disclose competitive data to Parent;
(xx) Company shall not, nor shall Company permit any of the
Company Subsidiaries to deem uncollectible or reserve for any
accounts or notes receivable, except in the ordinary course of
business consistent with past practice;
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(xxi) Except as set forth in Section 5.3(b), Company
shall not, nor shall it permit any of the Company Subsidiaries
to, terminate any Company Material Contract to which it is a
party or waive or assign any of its rights or claims under any
Company Material Contract in a manner that is materially adverse
to Company or, except in the ordinary course of business
consistent with past practice, modify or amend in any material
respect any Company Material Contract;
(xxii) Except as required or permitted by the Credit
Agreement, Company shall not place a material Encumbrance on any
material asset;
(xxiii) Company shall not take any action which would
reasonably be expected to result in (A) any inaccuracy of a
representation or warranty herein which would allow for a
termination of this Agreement, or (B) cause any of the
conditions precedent to the transactions contemplated by this
Agreement to fail to be satisfied;
(xxiv) Company shall not dissolve or liquidate or adopt a
plan of complete or partial liquidation, dissolution, or
reorganization; and
(xxv) Company shall not, and shall not permit any of the
Company Subsidiaries to, agree or commit to do any of the
foregoing.
(b) Company Termination of Credit
Agreement. Company shall take all actions as
shall be necessary to cause at or prior to Effective Time
(i) all obligations (other than contingent indemnification
obligations not yet accrued) under the Credit Agreement to have
been paid and satisfied and the Credit Agreement to have been
terminated without any prepayment penalty or premium and
(ii) in any event (and regardless of whether any letter of
credit remains outstanding post-closing), all liens securing any
obligations under Credit Agreement to have been released.
Company shall use commercially reasonable efforts to deliver to
Parent at least two business days prior to the Closing Date
payoff letters from third-party lenders or financing
counterparties in form and substance reasonably satisfactory to
Parent, with respect to the borrowings and fees under the Credit
Agreement, indebtedness identified in the Company SEC Documents
and any other indebtedness entered into after the date of this
Agreement or specified by Parent to Company no later than twenty
days prior to Closing that Parent in its sole discretion
determines is necessary or desirable under Parent’s
existing credit agreement covenants to repay.
(c) Company Deferred Compensation
Plan. Prior to the Closing Date, Company shall
amend Company’s Deferred Compensation Plan to prohibit any
further employee and employer contributions thereunder effective
as of the Effective Time.
5.4 Covenants of Parent.
(a) Conduct of Parent’s
Operations. From the date of this Agreement until
the Effective Time, Parent shall and shall cause each of the
Parent Subsidiaries to conduct its business and operate its
properties in the ordinary course of business consistent with
past practice and Parent shall and shall cause each of the
Parent Subsidiaries to use its commercially reasonable efforts
to preserve intact its business organization and relationships
with third parties and to keep available the services of its
present officers and employees. Without limiting the generality
of the foregoing, except with the prior written consent of
Company, which consent shall not be unreasonably withheld,
delayed or conditioned or as required by this Agreement until
the Effective Time:
(i) Parent shall not adopt or propose any change to the
Parent Certificate or the Parent Bylaws or those of Merger Sub
which would reasonably be expected to have a material adverse
effect on the consummation of the transactions contemplated by
the Agreement;
(ii) Parent shall not, and shall not permit any of the
Parent Subsidiaries to, declare, set aside or pay any dividend
or other distribution with respect to any shares of capital
stock of Parent;
(iii) Parent shall not, and shall not permit any of the
Parent Subsidiaries to, merge or consolidate with any other
Person or acquire assets of any other Person if such transaction
would reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated by the Agreement;
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(iv) Parent shall not, and shall not permit any of the
Parent Subsidiaries to, change any method of accounting or
accounting practice by Parent or any of the Parent Subsidiaries
except for any such change required by GAAP;
(v) Parent shall not, and shall not permit any of the
Parent Subsidiaries to, take any action that would give rise to
a claim under the WARN Act or any similar state law or
regulation because of a plant closing or mass layoff that would,
individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect;
(vi) Except as required under the terms of any Parent
Benefit Plan or by Applicable Law, Parent shall not, and shall
not permit any of the Parent Subsidiaries to adopt, amend or
assume any Parent Benefit Plan (or any plan that would be a
Parent Benefit Plan if so adopted) if such adoption, amendment
or assumption, as applicable, either individually or together
with all other such adoptions, amendments or assumptions, would
adversely and disproportionately affect all employees of Company
and the Company Subsidiaries taken as a whole, other than
amendments made for purposes of complying with Section 409A
of the Code;
(vii) Parent shall not, nor shall it permit any of the
Parent Subsidiaries to, (A) terminate any Parent Material
Contract that would, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect,
(B) waive or assign any of its rights or claims under any
Parent Material Contract in a manner that is materially adverse
to Parent or, (C) except in the ordinary course of business
consistent with past practice, modify or amend in any material
respect any Parent Material Contract that would, individually or
in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect;
(viii) Parent shall not take any action which would
reasonably be expected to result in (A) any inaccuracy of a
representation or warranty herein which would allow for a
termination of this Agreement, or (B) cause any of the
conditions precedent to the transactions contemplated by this
Agreement to fail to be satisfied;
(ix) Parent shall not dissolve or liquidate or adopt a plan
of complete or partial liquidation, dissolution, or
reorganization; and
(x) Parent shall not, and shall not permit any of the
Parent Subsidiaries (other than Merger Sub) to, agree or commit
to do any of the foregoing, except Parent Subsidiaries shall be
permitted to dissolve or liquidate or adopt a plan of complete
or partial liquidation, dissolution, or reorganization.
(b) Employee Benefits.
(i) During the period commencing at the Effective Time and
ending at 11:59 p.m. on December 31, 2007, Parent
shall (x) provide or shall cause the Surviving Corporation
to provide to employees of Company and any Company Subsidiaries
(other than those employees who are subject to a collective
bargaining agreement) (“Company
Employees”) who continue employment with Parent,
the Surviving Corporation or a Company Subsidiary after the
Effective Time the same base salary or wages, as applicable,
that were being paid to Company Employees immediately prior to
the Effective Time and (y) maintain or cause the Surviving
Corporation to maintain those Company Benefit Plans that
provided pension and welfare benefits (excluding benefits under
defined benefit pension plans) to Company Employees immediately
prior to the Effective Time.
(ii) Without limiting Section 5.4(b)(i) hereof, during
the one (1) year period commencing at the Effective Time,
Parent shall provide, or shall cause the Surviving Corporation,
to provide, to (A) each Company Employee whose name is
listed on Part I of Section 5.4(b)(ii) of the Company
Disclosure Letter and who experiences a qualifying termination
during such one-year period under the terms of the Severance
Benefit Policy set forth in Part II of
Section 5.4(b)(ii) of the Company Disclosure Letter, the
severance benefits to which such Company Employee is entitled
under such Severance Benefits Policy and (B) to each
full-time salaried Company Employee whose name is not listed on
Part I of Section 5.4(b)(ii) of the Company Disclosure
Letter (and who is not a party to a Company Employee Agreement
immediately prior to the Effective Time) and whose employment
with Parent, the Surviving Corporation or any Company Subsidiary
is involuntarily terminated as a result of the Merger by Parent,
the Surviving Corporation or such Company Subsidiary during such
one-year period other than for cause or as a result of such
Company Employee’s death or disability (in each case, as
determined by Parent in its sole discretion), severance benefits
equal to two weeks
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base salary for each completed year of service at the time of
such termination, up to a maximum of six (6) weeks base
salary; provided, that in each case, such Company Employee first
executes (and does not revoke) a release of claims in the form
prepared by Parent.
(iii) For purposes of eligibility and vesting under the
employee benefit plans (but not for purposes of the accrual of
benefits under any defined benefit plans) of Parent, the
Surviving Corporation, the Company Subsidiaries and their
respective affiliates providing benefits to any Company
Employees after the Closing (the “New
Plans”), and for purposes of accrual of vacation
and other paid time off and severance benefits under New Plans,
each Company Employee who continues employment with Parent, the
Surviving Corporation or a Company Subsidiary after the
Effective Time shall be credited with his or her years of
service with Company, the Company Subsidiaries and their
respective affiliates (and any additional service with any
predecessor employer) before the Closing, to the same extent as
such Company Employee was entitled, before the Closing, to
credit for such service under any similar Company Benefit Plan,
provided, however, that no such crediting shall result in
the duplication of benefits under any Company Benefit Plan. In
addition, and without limiting the generality of the foregoing:
(A) each Company Employee who continues employment with
Parent, the Surviving Corporation or a Company Subsidiary after
the Effective Time shall be immediately eligible to participate,
without any waiting time, in any and all New Plans to the extent
coverage under such New Plan replaces coverage under a
comparable Company Benefit Plan in which such Company Employee
participated immediately before the replacement; and
(B) for purposes of each New Plan providing medical,
dental, pharmaceutical and/or vision benefits to any Company
Employee, Parent shall use or shall cause the Surviving
Corporation to use commercially reasonable efforts to cause all
pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such employee and
his or her covered dependents to the same extent as under the
applicable Company Benefit Plan, and Parent shall use or shall
cause the Surviving Corporation to use commercially reasonable
efforts to cause any eligible expenses incurred by such employee
and his or her covered dependents under an Company Benefit Plan
during the portion of the plan year of the New Plan ending on
the date such employee’s participation in the corresponding
New Plan begins to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum
out-of-pocket requirements applicable to such employee and his
or her covered dependents for the applicable plan year as if
such amounts had been paid in accordance with such New Plan.
(iv) Nothing herein expressed or implied shall
(A) confer upon any of the Company Employees any rights or
remedies (including, without limitation, any right to employment
or continued employment for any specified period) of any nature
or kind whatsoever under or by reason of the Agreement, or
(B) subject to the provisions of Sections 5.4(b)(i)
and (ii) above, obligate Parent, the Surviving Corporation
or any of their respective subsidiaries to maintain any
particular Company Benefit Plan or grant or issue any
equity-based awards or limit the ability of Parent to amend or
terminate any of such Company Benefit Plans to the extent
permitted thereunder in accordance with their terms. None of the
provisions of this Agreement are intended to constitute an
amendment to any Company Benefit Plan and no Company Employee
shall have the right to enforce or compel the enforcement of any
provisions of this Section 5.4(b) or this Agreement.
(c) Indemnification; Directors’ and Officers’
Insurance.
(i) The certificate of incorporation and bylaws of the
Surviving Corporation shall continue to contain provisions no
less favorable with respect to indemnification, advancement of
expenses and exculpation of each present and former officer,
director, manager or partner, as applicable, of Company and the
Company Subsidiaries (the “Indemnified Directors and
Officers”) than are presently set forth in the
Company Certificate and the Company Bylaws, which provisions
shall not be amended, repealed or otherwise modified (unless an
amendment, repeal or modification is required by Applicable Laws
or any Indemnified Director and Officer affected thereby
consents in writing thereto) for a period of six years from the
Effective Time in any manner that would adversely affect the
rights thereunder of any such individuals with respect to any
acts or omissions occurring at or prior to the Effective Time.
The existing indemnification agreements between Company or any
Company Subsidiary and the directors and officers of Company as
identified on Section 5.4(c)(i) of the Company Disclosure
Letter shall continue in full force and effect after the
Effective Time and shall not be amended, terminated or otherwise
modified (unless an amendment or modification is required by
Applicable Laws or is consented to by the applicable Indemnified
Officer and Director) for a period of
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six years after the Effective Time in any manner that would
adversely affect the rights thereunder of any such individuals
with respect to any acts or omissions occurring at or prior to
the Effective Time.
(ii) From and after the Effective Time, Parent shall cause
the directors and officers of Company who are currently covered
by Company’s existing directors’ and officer’s
liability insurance policy(ies) identified on
Section 5.4(c)(ii) of the Company Disclosure Letter to be
covered by a single premium tail directors’ and
officers’ liability insurance policy acquired on or prior
to the Closing Date and maintained by the Surviving Corporation,
with limits, terms and conditions at least as favorable to those
in the existing policies of Company, for a period of six years
from and after the Effective Time with respect to acts or
omissions occurring prior to the Effective Time that were
committed by such directors and officers in their capacities as
such, with policy limits, terms and conditions at least as
favorable to the limits, terms and conditions in the existing
policies of Company (or with such other limits, terms and
conditions as permitted by the following two provisos of this
sentence); provided, further, that in no event
shall Parent be required to pay an annual premium in excess of
200% of the current annual premium paid by Company for its
existing coverage on the date of this Agreement as identified on
Section 5.4(c)(ii) of the Company Disclosure Letter (the
“Insurance Amount”); and
provided, further, that if Parent is unable to
obtain tail coverage with policy limits, terms and conditions at
least as favorable to the limits, terms and conditions in the
existing policies of Company as a result of the preceding
provision, Parent shall obtain the most advantageous tail
coverage as is available for the Insurance Amount. Upon written
request by a covered person, a copy of the policy will be made
available to such covered person.
(iii) This Section (c) is intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified
Directors and Officers (to the extent the provisions of this
Section (c) are applicable thereto) and their
respective heirs and legal representatives.
(iv) In the event that the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges
into any other Person or engages in any other transaction such
that the Surviving Corporation shall not be the continuing or
surviving corporation or entity of such consolidation, merger or
transaction or (ii) transfers or conveys all or
substantially all of its properties and assets as an entirety in
one or a series of related transactions to any Person(s), then,
and in each such case, proper provision shall be made so that
such continuing or surviving corporation or entity or such
Person(s), as the case may be, shall assume and agree to perform
the obligations set forth in this Section (c).
(d) Parent Contribution to Termination of Credit
Agreement. On or prior to the Effective Time,
Parent will provide sufficient funds to Company to (i) pay
all outstanding borrowings and fees under the Credit Agreement
and the other indebtedness for which payoff letters shall be
obtained or described in Section 5.3(b) to the extent
Company does not have sufficient funds to pay such amounts
incurred in compliance with the terms of this Agreement,
including Section 5.3, and (ii) arrange for the
replacement or cash collateralization under customary reasonable
arrangements as to letters of credit outstanding under the
Credit Agreement so that the Credit Agreement and the other
indebtedness for which payoff letters shall be obtained or
described in Section 5.3(b) may be terminated by Company in
accordance with Section 5.3(b).
5.5 Stockholders’ Meetings.
(a) Company shall, as promptly as reasonably practicable
after the date of this Agreement (i) take all steps
reasonably necessary in accordance with the Applicable Laws and
the Company Certificate and Company Bylaws to duly call, give
notice of, convene and hold a special or annual meeting of its
stockholders (the “Company Stockholder
Meeting”) for the purpose of securing the Company
Stockholders’ Approval, (ii) distribute to its
stockholders the Proxy Statement/Prospectus in accordance with
Applicable Laws and its Company Certificate and Company Bylaws,
(iii) use all commercially reasonably efforts to solicit
from its stockholders proxies in favor of approval of this
Agreement and to take all other action necessary or advisable to
secure the Company Stockholders’ Approval, and
(iv) cooperate and consult with Parent with respect to each
of the foregoing matters. Except to the extent expressly
permitted by this Section 5.5(a) or Section 5.1:
(A) the Proxy Statement/Prospectus shall include a
statement to the effect that the directors present and voting at
a duly called and held meeting of the Company Board have, by
resolution adopted by all directors present and voting at a duly
called and held meeting, recommended that the Company
Stockholders vote in favor of adoption of this Agreement at the
Company Stockholder Meeting and
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(B) neither the Company Board nor any committee thereof
shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Parent, such
recommendation of the Company Board that the Company
Stockholders vote in favor of adoption of this Agreement.
Without limiting the generality of the foregoing, Company agrees
that its obligations pursuant to this Section 5.5(a) shall
not be affected by the commencement, public proposal, public
disclosure or communication to Company or any other Person of
any Acquisition Proposal. Notwithstanding the foregoing, nothing
contained in this Agreement shall prohibit the Company Board
from failing to make or from withdrawing, amending or modifying
its recommendation to the Company Stockholders (collectively, a
“Change in the Company Board
Recommendation”), provided that the Company
Board determines in good faith and after consultation with its
outside legal advisors that such action is necessary for the
Company Board to comply with its fiduciary duties to Company or
the Company Stockholders under Applicable Laws, but only after
(y) providing written notice to Parent that it is prepared
to make the determination permitted by this Section 5.5(a)
and setting forth the reasons therefor and (z) for a period
of five business days after providing such notice, Company
negotiates with Parent in good faith to make such adjustments to
the terms and conditions of this Agreement as would enable the
Company Board to proceed with its recommendation of this
Agreement, and at the end of such period the Company Board
maintains its determination permitted by this
Section 5.5(a) (after taking into account any proposed
adjustments).
(b) Parent shall, as promptly as reasonably practicable
after the date of this Agreement (i) take all steps
reasonably necessary to call, give notice of, convene and hold a
special meeting of its stockholders (the “Parent
Stockholder Meeting”) for the purposes of voting
upon the Parent Proposal, (ii) distribute to Parent
Stockholders the Proxy Statement/Prospectus in accordance with
Applicable Laws and its certificate of incorporation and bylaws,
(iii) use all commercially reasonable efforts to solicit
from Parent Stockholders proxies in favor of approval of the
Parent Proposal and to take all other commercially reasonable
action necessary to secure the approval of the Parent Proposal
by the Parent Required Vote, and (iv) cooperate and consult
with Company with respect to each of the foregoing matters.
Except to the extent expressly permitted by this
Section 5.5(b): (A) the Proxy Statement/Prospectus
shall include a statement to the effect that the directors
present and voting at a duly called and held meeting of the
Parent Board have, by resolution adopted by all directors
present and voting at a duly called and held meeting,
recommended that the Parent Stockholders vote in favor of the
Parent Proposal at the Parent Stockholder Meeting and
(B) neither the Parent Board nor any committee thereof
shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Parent, such
recommendation of the Parent Board that the Parent Stockholders
vote in favor of the Parent Proposal. Notwithstanding the
foregoing, nothing contained in this Agreement shall prohibit
the Parent Board from failing to make or from withdrawing,
amending or modifying its recommendation to the Parent
Stockholders (collectively, a “Change in the Parent
Board Recommendation”), provided that the Parent
Board determines in good faith and after consultation with its
outside legal advisors that such action is necessary for the
Parent Board to comply with its fiduciary duties to Parent or
the Parent Stockholders under Applicable Laws, but only after
(y) providing written notice to Company that it is prepared
to make the determination permitted by this Section 5.5(b)
and setting forth the reasons therefor and (z) for a period
of five business days after providing such notice, Parent
negotiates with Company in good faith to make such adjustments
to the terms and conditions of this Agreement as would enable
the Parent Board to proceed with its recommendation of this
Agreement, and at the end of such period the Parent Board
maintains its determination permitted by this
Section 5.5(b) (after taking into account any proposed
adjustments).
5.6 Preparation of the Proxy Statement/Prospectus
and Registration Statement.
(a) As promptly as practicable after the execution of this
Agreement, Company and Parent shall cooperate in preparing, and
each shall cause to be filed with the SEC, in connection with
the Merger, the Proxy Statement/Prospectus in preliminary form
and Parent shall promptly prepare and file with the SEC the
Registration Statement, which will include a combined Proxy
Statement/Prospectus and the parties shall file the opinion
referenced in Section 6.2(c) and, if necessary, any other
statement or schedule relating to this Agreement and the
transactions contemplated hereby. Each of Company, Parent and
Merger Sub shall use their respective reasonable best efforts to
furnish the information required to be included by the SEC in
the Proxy Statement/Prospectus, the Registration Statement and
any such statement or schedule. Each of Company and Parent shall
use its commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as
promptly as practicable after such filing, and each of Company
and Parent shall as promptly as practicable thereafter mail the
Proxy
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Statement/Prospectus to its stockholders. Parent shall also take
any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or filing a
general consent to service of process in any jurisdiction)
required to be taken under any applicable state securities laws
in connection with the issuance of Parent Common Stock in the
Merger and Company shall furnish all information concerning
Company and Company Stockholders as may be reasonably requested
in connection with any such action. Promptly after the
effectiveness of the Registration Statement, Parent and Company
shall cause the Proxy Statement/Prospectus to be mailed to their
respective stockholders, and, if necessary, after the definitive
Proxy Statement/Prospectus has been mailed, promptly circulate
amended, supplemented or supplemental proxy materials and, if
required in connection therewith, re-solicit proxies or written
consents, as applicable.
(b) If at any time prior to the Effective Time, any event
or circumstance relating to Company, Parent, Merger Sub or any
of their respective affiliates, or its or their respective
officers or directors, should be discovered by Company, Parent
or Merger Sub that should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy
Statement/Prospectus, Company, Parent or Merger Sub shall
promptly inform the other parties hereto thereof in writing. All
documents that Company or Parent is responsible for filing with
the SEC in connection with the transactions contemplated herein
will comply as to form in all material respects with applicable
requirements of the Securities Act and the Exchange Act. The
parties shall notify each other promptly of the time when the
Registration Statement has become effective, of the issuance of
any stop order or suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or of the receipt of any comments
from the SEC or the staff of the SEC and of any request by the
SEC or the staff of the SEC for amendments or supplements to the
Proxy Statement/Prospectus or the Registration Statement or for
additional information and shall supply each other with copies
of (i) all correspondence between it or any of its
Representatives, on the one hand, and the SEC or the staff of
the SEC, on the other hand, with respect to the Proxy
Statement/Prospectus, the Registration Statement or the Merger
and (ii) all orders of the SEC relating to the Registration
Statement.
(c) Each party shall use reasonable best efforts to cause
to be delivered to the other party “comfort” letters
of such party’s independent public accountants, dated
within two business days of the effective date of the
Registration Statement and within two business days of the
meetings of stockholders of such party and such letters
addressed to the other party with regard to certain financial
information regarding such party included in the Registration
Statement, in form reasonably satisfactory to the other party
and customary in scope and substance for “comfort”
letters delivered by independent public accountants in
connection with registration statements similar to the
Registration Statement.
5.7 BP LTIP Committee. From the
Effective Time through the duration of the BP LTIP, the BP LTIP
committee shall have two (2) members, one (1) of whom
shall be a Parent Board member who was previously a Company
Board member.
5.8 Stock Exchange Listing. Parent
shall use commercially reasonable efforts to cause the Parent
Common Stock that is to be issued in connection with the Merger
to be listed on the NYSE, subject to official notice of
issuance, as of the Effective Time.
5.9 Publicity. None of Company,
Parent or Merger Sub, nor any of their respective affiliates,
shall issue or cause the publication of any press release or
other announcement with respect to the Merger, this Agreement or
the other transactions contemplated by this Agreement without
the prior consultation of the other party, except as may be
required by Applicable Laws or by any listing agreement with, or
regulation of, any securities exchange or regulatory authority
if all commercially reasonable efforts have been made to consult
with the other party. In addition, Company shall to the extent
reasonably practicable consult with Parent regarding the form
and content of any public disclosure of any material
developments or matters involving Company, including earnings
releases, reasonably in advance of publication or release.
5.10 Section 16 Matters. Prior
to the Closing Date, Parent and Company, and their respective
Boards, shall use their commercially reasonable efforts to take
all actions to cause any dispositions of Company Common Stock
(including derivative securities with respect to Company Common
Stock) or acquisitions of Parent Common Stock (including
derivative securities with respect to Parent Common Stock)
resulting from the transactions contemplated hereby by each
individual who is subject to the reporting requirements of
Section 16(a) of the Exchange Act to be
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exempt from Section 16(b) of the Exchange Act under
Rule 16b-3
promulgated under the Exchange Act in accordance with the terms
and conditions set forth in that certain No-Action Letter, dated
January 12, 1999, issued by the SEC to Skadden, Arps,
Slate, Meagher & Flom LLP.
5.11 Certain Tax Matters.
(a) This Agreement is intended to constitute a “plan
of reorganization” within the meaning of Treasury
Regulation Section 1.368-2(g).
(b) Parent, Merger Sub, Company, the Parent Subsidiaries,
and the Company Subsidiaries each shall use its reasonable best
efforts to cause the Merger to qualify as a
“reorganization” within the meaning of
Section 368(a) of the Code and to obtain the tax opinion
set forth in Section 6.2(c).
(c) Officers of Parent, Merger Sub and Company shall
execute and deliver to Ballard Spahr Andrews &
Ingersoll, LLP, tax counsel for Company, certificates
substantially in the form agreed to by the parties and such firm
at such time or times as may reasonably be requested by such
firm, including contemporaneously with the execution of this
Agreement, at the time the Registration Statement is declared
effective by the SEC, and the Effective Time, in connection with
such tax counsel’s delivery of opinions pursuant to
Section 6.2(c) hereof. Each of Parent, Merger Sub and
Company shall use its reasonable best efforts not to take or
cause to be taken any action that would cause to be untrue (or
fail to take or cause not to be taken any action which would
cause to be untrue) any of the certifications and
representations included in the certificates described in this
Section 5.11(c).
(d) Company and Parent shall cooperate in the preparation,
execution and filing of all Returns, questionnaires,
applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock
transfer and stamp taxes, and transfer, recording, registration
and other fees and similar Taxes which become payable in
connection with the Merger that are required or permitted to be
filed on or before the Effective Time. Except to the extent set
forth in Section 2.5, each of Merger Sub and Company shall
pay, without deduction from any amount payable to holders of
Company Common Stock and without reimbursement from the other
party, any such Taxes or fees imposed on it by any Governmental
Authority, which becomes payable in connection with the Merger.
(e) Between the date of this Agreement and the Effective
Time, Company agrees to (i) prepare all Returns, other than
income tax Returns, for any periods ending prior to the
Effective Time and which are required to be filed within
15 days following such date (taking extensions to file into
account) using tax accounting methods and principles consistent
with those used for preceding tax periods, unless a change is
required by Applicable Laws, and (ii) prepare and submit to
Parent U.S. federal and other material income tax Returns
for any periods ending prior to the Effective Time, which are
required to be filed prior to 30 days following the
Effective Time (taking extensions to file into account). Company
shall make such income tax Returns available to the Parent for
review prior to filing with the relevant Governmental Authority
and shall not refuse any reasonable request by the Parent with
respect to such Returns. Each Return described in
clause (i) or (ii) of this Section 5.11(e) shall
be prepared and filed, and all related Taxes paid, on or prior
to Effective Time.
5.12 Affiliates Letter. Prior to
the date of the Company Stockholder Meeting, Company shall
deliver to Parent a list of names and addresses of those Persons
who are, in the opinion of the Company, as of the time of the
Company Stockholder Meeting, “affiliates” of Company
within the meaning of Rule 145 under the Securities Act.
Company shall provide to Parent such information and documents
as Parent shall reasonably request for purposes of reviewing
such list. There shall be added to such list the names and
addresses of any other Person subsequently identified by either
Parent or Company as a Person who may be deemed to be such an
affiliate of Company; provided, however, that no
such Person identified by Parent shall be added to the list of
affiliates of Company if Parent shall receive from Company, on
or before the date of Company Stockholder Meeting, an opinion of
counsel reasonably satisfactory to Parent to the effect that
such Person is not such an affiliate. Company shall exercise its
commercially reasonable efforts to deliver or cause to be
delivered to Parent, prior to the date of Company Stockholder
Meeting, from each affiliate of Company identified in the
foregoing list (as the same may be supplemented as aforesaid), a
letter dated as of the Closing Date substantially in the form
attached as Exhibit B (the “Affiliates
Letter”). Parent shall not be required to maintain
the effectiveness of the Registration Statement or any other
registration statement under the Securities Act for the purposes
of resale by such affiliates of Parent Common
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Stock received pursuant to the Merger, and Parent may direct the
Exchange Agent not to issue certificates or other electronic
format representing Parent Common Stock received by any such
affiliate until Parent has received from such Person an
Affiliates Letter. Parent may issue certificates representing
Parent Common Stock received by such affiliates bearing a
customary legend regarding applicable Securities Act
restrictions and the provisions of this Section 5.12.
ARTICLE VI
CONDITIONS
TO THE MERGER
6.1 Conditions to the Obligations of Each
Party. The obligations of Company, Parent and
Merger Sub to consummate the Merger shall be subject to the
satisfaction or waiver of the following conditions at or prior
to the Effective Time:
(a) (i) This Agreement shall have been approved and
adopted by the Company Stockholders in accordance with
Applicable Laws, the Company Certificate and the Company Bylaws
and (ii) the Parent Proposal shall have been approved and
adopted by the Parent Required Vote in accordance with
Applicable Laws, the Parent Certificate and the Parent Bylaws.
(b) The requisite waiting period (and extensions, if any),
if any, under the HSR Act shall have expired or terminated.
(c) No provision of any Applicable Laws and no judgment,
temporary restraining order, preliminary or permanent
injunction, order, decree or other legal restraint or
prohibition issued by a Governmental Authority of competent
jurisdiction shall prohibit the consummation of the Merger.
(d) The Registration Statement shall have become effective
in accordance with the provisions of the Securities Act and no
stop order suspending the effectiveness of the Registration
Statement may be in effect and no proceeding for such purpose
may be pending before or threatened by the SEC.
(e) The Parent Common Stock to be issued in the Merger
shall have been approved for listing on the NYSE, subject to
office notice of issuance.
6.2 Conditions to Obligations of
Company. The obligation of Company to consummate
the Merger shall also be subject to the satisfaction or waiver
by Company at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of each of the
Parent and Merger Sub set forth in this Agreement shall be true
and correct (without giving effect to any limitation as to
“materiality” or “Parent Material Adverse
Effect” set forth therein) at and as of the Closing Date,
as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such
date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to
any limitation as to “materiality” or “Parent
Material Adverse Effect” set forth therein) individually or
in the aggregate has not had, and would not be reasonably likely
to have or result in, a Parent Material Adverse Effect.
(b) Parent and Merger Sub shall have performed and complied
with all of their respective covenants hereunder in all material
respects through the Closing, except to the extent that such
covenants are qualified by terms such as “material” or
“Parent Material Adverse Effect,” in which case Parent
and Merger Sub shall have performed and complied with all of
such covenants in all respects through the Closing.
(c) Company shall have received the opinion of Ballard
Spahr Andrews & Ingersoll, LLP, counsel to Company, in
form and substance reasonably satisfactory to Company, dated the
Closing Date, rendered on the basis of facts, representations
and assumptions set forth in such opinion and the certificates
obtained from officers of Parent, Merger Sub and Company, all of
which are consistent with the state of facts existing as of the
Effective Time, to the effect that (i) the Merger will
qualify as a reorganization within the meaning of
Section 368(a) of the Code and (ii) Company, Merger
Sub (if applicable), and Parent each will be a “party to
the reorganization” within the meaning of Section 368
of the Code. In rendering the opinion described in this
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Section 6.2(c), Ballard Spahr Andrews &
Ingersoll, LLP shall have received and may rely upon the
certificates and representations referred to in
Section 5.11(c) hereof.
(d) Parent shall have delivered to Company a certificate
executed by Parent’s Chief Executive Officer or Chief
Financial Officer on behalf of Parent to the effect that each of
the conditions specified above in Sections 6.2(a) and
(b) is satisfied in all respects.
6.3 Conditions to Obligations of Parent and Merger
Sub. The obligation of Parent and Merger Sub to
consummate the Merger shall also be subject to the satisfaction
or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) The representations and warranties of Company set forth
in this Agreement shall be true and correct (without giving
effect to any limitation as to “materiality” or
“Company Material Adverse Effect” set forth therein)
at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such
representations and warranties to be so true and correct
(without giving effect to any limitation as to
“materiality” or “Company Material Adverse
Effect” set forth therein) individually or in the aggregate
has not had, and would not be reasonably likely to have or
result in, a Company Material Adverse Effect.
(b) Company shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing, except to the extent that such covenants are qualified
by terms such as “material” or “Company Material
Adverse Effect,” in which case Company shall have performed
and complied with all of such covenants in all respects through
the Closing.
(c) Company shall provide customary evidence satisfactory
to Parent that (i) the Credit Agreement (including, without
limitation, all commitments set forth therein), the note(s) and
each of the other loan documents have been duly cancelled or
repaid in full, and Company shall have satisfied and be
discharged from any and all obligations and liabilities under
the Credit Agreement and all documents and agreements delivered
pursuant to the Credit Agreement and the Credit Agreement and
all documents and agreements delivered thereunder, as
applicable, shall be terminated, (ii) all liens and
security interests upon any property of Company, the Company
Subsidiaries or any of its or their affiliates granted in favor
of the administrative agent under the Credit Agreement shall
have been released and terminated without the requirement of any
further action by or on behalf of any natural or corporate
person, and (iii) Parent shall have received an
acknowledgment of the repayment and termination of the Credit
Agreement in form and substance acceptable to Parent.
(d) Company shall have delivered to Parent a certificate
duly executed by Company’s Chief Executive Officer or Chief
Financial Officer on behalf of Company to the effect that each
of the conditions specified in Sections 6.3(a),
(b) and (c) is satisfied in all respects.
ARTICLE VII
TERMINATION;
FEES AND EXPENSES
7.1 Termination by Mutual
Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time,
whether before or after the adoption and approval of this
Agreement by the Company Stockholders or the Parent Stockholders
referred to in Section 6.1(a), by mutual written consent of
Company and Parent by action of their respective Boards.
7.2 Termination by Either Parent or
Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time
by action of the Board of either Parent or Company, upon written
notice to Company or Parent, as applicable, if:
(a) the Merger shall not have been consummated by
November 30, 2007 (the “Termination
Date”), whether such date is before or after the
date of the adoption of this Agreement by the Company
Stockholders or the Parent Stockholders; provided,
however, that the right to terminate this Agreement
pursuant to this
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Section 7.2(a) shall not be available to any party whose
breach of any provision of this Agreement results in the failure
of the Merger to be consummated by the Termination Date;
(b) the Company Stockholders fail to adopt this Agreement
because of the failure to obtain the Company Stockholders’
Approval at the Company Stockholder Meeting;
(c) the Parent Proposal shall not have been approved
because of the failure to obtain the Parent Required Vote at the
Parent Stockholder Meeting; or
(d) any Governmental Authority of competent jurisdiction
shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise
prohibiting the consummation of the Merger and such order,
decree or ruling or other action shall have become final and
nonappealable; provided, that the parties hereto shall
have used their commercially reasonable efforts to have any such
order, decree or ruling or other action vacated or reversed.
7.3 Termination by Company. This
Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, except for
Section 7.3(f), which termination right may only be
exercised after the 100th day following the date of the HSR
filing, by action of the Company Board, upon written notice to
Parent, if:
(a) there has been a breach of any representations,
warranties, covenants or agreements made by Parent or Merger Sub
in this Agreement, or any such representations and warranties
shall have become untrue or incorrect after the execution of
this Agreement, such that the conditions set forth in
Sections 6.2(a) or (b) would not be satisfied at the
Closing and such breach or failure to be true and correct is not
cured within 15 calendar days following receipt of written
notice from Company of such breach or failure (or such longer
period during which Parent or Merger Sub exercises commercially
reasonable efforts to cure);
(b) the Company Board shall have effected a Change in the
Company Board Recommendation;
(c) the Company Board shall have effected an Alternative
Transaction Recommendation as provided for in Section 5.1
of this Agreement;
(d) the Parent Board shall have effected a Change in the
Parent Board Recommendation;
(e) the representation set forth in Section 4.10(a)
shall become untrue or incorrect at any time after the date of
this Agreement and such representation is not reasonably likely
to be true and correct on the Termination Date; or
(f) with respect to antitrust matters, HSR approval has not
been obtained before the expiration of 100 days after the
date of the HSR filing, and facts and circumstances existing at
that time indicate that (i) a substantial likelihood exists
that the Governmental Authority will successfully enjoin,
restrain or otherwise prohibit the consummation of the Merger
(excluding any threat to seek divestiture of any businesses
conducted by Company, the Company Subsidiaries, Parent or the
Parent Subsidiaries) and (ii) the continued pursuit by
Company of an approval of the HSR filing would reasonably be
expected to have a material adverse effect on Company and the
Company Subsidiaries, taken as a whole.
7.4 Termination by Parent. This
Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, except for
Section 7.4(g), which termination right may only be
exercised after the 100th day following the date of the HSR
filing, by action of the Parent Board, upon written notice to
Company, if:
(a) there has been a breach of any representation,
warranty, covenant or agreement made by Company in this
Agreement, or any such representation and warranty shall have
become untrue or incorrect after the execution of this
Agreement, such that the conditions set forth in
Sections 6.3(a) or (b) would not be satisfied at the
Closing and such breach or failure to be true and correct is not
cured within 15 calendar days following receipt of written
notice from Parent of such breach or failure (or such longer
period during which Company exercises commercially reasonable
efforts to cure);
(b) the Company Board shall have effected a Change in the
Company Board Recommendation;
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(c) the Company Board shall have effected an Alternative
Transaction Recommendation as provided for in Section 5.1
of this Agreement;
(d) the Parent Board shall have effected a Change in the
Parent Board Recommendation;
(e) prior to the Effective Time, Parent enters into a
contractual commitment that would effect a Change in Control of
Parent upon consummation thereof, which for purposes of this
Agreement a “Change in Control of
Parent” shall mean a transaction within
clauses (1), (2) or (3) of the definition of an
Acquisition Proposal (except that references in the definition
of “Acquisition Proposal” to “25%” shall be
replaced with “50%” and references to
“Company” and the “Company Subsidiaries”
shall be replaced with “Parent” and “Parent
Subsidiaries”, respectively);
(f) the representation set forth in Section 3.11(a)
shall become untrue or incorrect at any time after the date of
this Agreement and such representation is not reasonably likely
to be true and correct on the Termination Date; or
(g) with respect to antitrust matters, any Governmental
Authority or any representative of such Governmental Authority
shall have threatened to seek or shall have issued an order,
decree or ruling or taken any other action from a court of
competent jurisdiction, temporarily or permanently enjoining,
restraining or otherwise prohibiting the consummation of the
Merger.
7.5 Effect of Termination. In the
event of the termination of this Agreement as provided in
Sections 7.1, 7.2, 7.3 or 7.4, written notice thereof shall
forthwith be given by the terminating party to the other parties
specifying the provision of this Agreement pursuant to which
such termination is made, and except with respect to
Sections 7.5, 7.6 and Article VIII, this Agreement
shall forthwith become null and void after the expiration of any
applicable period following such notice. In the event of such
termination, there shall be no liability on the part of Parent,
Merger Sub or Company (or any of their respective directors,
officers, employees, agents, legal and financial advisors or
other Representatives), except as set forth in Section 7.6
and Article VIII of this Agreement and except with respect
to the requirement to comply with the Confidentiality
Agreements; provided that nothing herein shall relieve any party
from any liability or damages with respect to any willful or
intentional breach of any representation, warranty, covenant or
other obligation under this Agreement.
7.6 Fees and Expenses.
(a) In the event that:
(i) (A) Prior to the Company Stockholder Meeting, any
Person (other than Parent) shall have made and not withdrawn an
Acquisition Proposal (substituting 50.1% for the 25% threshold
set forth in the definition of Acquisition Proposal, a
“Covered Proposal”) for Company,
(B) Parent or Company shall have terminated this Agreement
pursuant to Section 7.1, Section 7.2(a) or
Section 7.2(b), and (C) within twelve (12) months
of termination of this Agreement, Company consummates a Covered
Proposal or enters into an agreement with respect to an
Acquisition Proposal which is ultimately consummated (whether
prior to or after such twelve-month period); or
(ii) this Agreement shall be terminated pursuant to
Sections 7.3(b), 7.3(c), 7.4(b) or 7.4(c);
then, in any such event, Company shall pay to Parent a
termination fee in cash of $43.0 million (the
“Company Termination Fee”); provided
that Company shall not be obligated to pay any Company
Termination Fee to Parent pursuant to Section 7.3(b)
(x) if Parent is obligated to pay a Parent Termination Fee
(as defined below) to Company pursuant to
Section 7.6(b)(ii) or (y) if Parent terminates this
Agreement pursuant to Section 7.4(b) as a result of a
Change in the Company Board Recommendation based solely upon
Parent entering into a contractual commitment that, upon
consummation, would effect a Change in Control of Parent and
such commitment requires that Parent terminate this Agreement.
(b) In the event that:
(i) this Agreement shall be terminated pursuant to Sections
7.3(d), 7.4(d) or 7.4(e); or
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(ii) Company terminates this Agreement pursuant to
Section 7.3(b) as a result of a Change in the Company Board
Recommendation based solely upon Parent entering into a
contractual commitment that, upon consummation, would effect a
Change in Control of Parent and such commitment requires that
Parent terminate this Agreement;
then, in any such event, Parent shall pay to Company a
termination fee (the “Parent Termination
Fee”) in cash of $43.0 million.
(c) Any Company Termination Fee that becomes payable shall
be paid by wire transfer of same-day funds and (i) in the
case of Section 7.6(a)(i), be paid within two business days
of the date of consummation of the Covered Proposal or
Acquisition Proposal, and (ii) in the case of
Section 7.6(a)(ii), be paid within two business days of the
date that this Agreement is terminated.
(d) Any Parent Termination Fee that becomes payable under
Section 7.6(b) shall be paid by wire transfer of same-day
funds and be paid within two business days of the date this
Agreement is terminated.
(e) Except as specifically provided in this
Section 7.6, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party hereto incurring such
expenses, except (i) filing fees incurred in connection
with SEC filings relating to the Merger and the transactions
contemplated by this Agreement, which shall be paid solely by
Parent, (ii) printing and mailing costs related thereto,
all of which shall be shared equally by Parent and Company; and
(iii) filing fees incurred in connection with Federal Trade
Commission and the Department of Justice filings relating to the
HSR Act, which shall be shared equally by Parent and Company.
(f) Company shall pay Parent an amount not to exceed
$5.0 million as reimbursement for expenses of Parent
actually incurred relating to the transactions contemplated by
this Agreement prior to termination (including, but not limited
to, fees and expenses of Parent’s legal counsel, financial
advisors, and accountant(s)) in the event of the termination of
this Agreement (i) by Parent or Company pursuant to
Section 7.2(a) if the failure to satisfy the conditions set
forth in Section 6.3 by the Termination Date shall have
resulted in the Closing not occurring or (ii) by Parent
pursuant to Section 7.4(a). The expenses payable pursuant
to this Section 7.6(f) shall be paid by wire transfer of
same-day funds within 10 business days after demand therefor
following the occurrence of the termination giving rise to the
payment obligation described in this Section 7.6(f).
(g) Parent shall pay Company an amount not to exceed
$5.0 million as reimbursement for expenses of Company
actually incurred relating to the transactions contemplated by
this Agreement prior to termination (including, but not limited
to, fees and expenses of Company’s legal counsel, financial
advisors, and accountant(s)) in the event of the termination of
this Agreement (i) by Parent or Company pursuant to
Section 7.2(a) if the failure to satisfy the conditions set
forth in Section 6.2(a), (b) or (d) by the
Termination Date shall have resulted in the Closing not
occurring, or (ii) by Company pursuant to
Section 7.3(a). The expenses payable pursuant to this
Section 7.6(g) shall be paid by wire transfer of same-day
funds within 10 business days after demand therefor
following the occurrence of the termination giving rise to the
payment obligation described in this Section 7.6(g).
ARTICLE VIII
MISCELLANEOUS
8.1 Non-Survival of Representations and
Warranties. The representations, warranties,
covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
Notwithstanding the foregoing, the agreements and covenants
which by their nature are to be performed following the
Effective Time, specifically including Section 5.4, shall
survive consummation of the Merger.
8.2 Notices. All notices and other
communications under this Agreement shall be in writing and
shall be deemed given if delivered personally, telecopied (which
is confirmed) or delivered by a nationally recognized
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overnight courier service to the parties hereto at the following
addresses (or at such other address for a party hereto as shall
be specified by like notice):
if to Parent or Merger Sub, to:
Quanta Services, Inc.
1360 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
Telephone:
(713) 629-7600
Facsimile:
(713) 629-7639
Attention: General Counsel
with a copy to (which copy shall not constitute notice):
Akin Gump Strauss Hauer & Feld LLP
1111 Louisiana Street, 44th Floor
Houston, Texas 77002
Telephone:
(713) 220-5896
Facsimile:
(713) 236-0822
|
|
|
|
Attention:
|
Christine B. LaFollette
|
Mark Zvonkovic
if to Company, to:
InfraSource Services, Inc.
100 West Sixth Street, Suite 300
Media, Pennsylvania 19063
Telephone:
(610) 480-8000
Facsimile:
(610) 480-8097
Attention: General Counsel
with a copy to (which copy shall not constitute notice):
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Telephone:
(215) 864-8631
Facsimile:
(215) 864-9969
Attention: Mary J. Mullany
8.3 Interpretation. When a
reference is made in this Agreement to an Article or Section,
such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings, the table of
contents and the index of defined terms contained in this
Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.”
8.4 Counterparts. This Agreement
may be executed in counterparts, which together shall constitute
one and the same agreement. The parties hereto may execute more
than one copy of this Agreement, each of which shall constitute
an original.
8.5 Entire Agreement. This
Agreement (including the Company Disclosure Letter, Parent
Disclosure Letter and Exhibits attached hereto and the documents
and instruments referred to herein that are to be delivered at
Closing), together with the Confidentiality Agreements,
constitutes the entire agreement among the parties hereto and
supersedes all prior agreements, arrangements, undertakings,
understandings, representations and warranties made by or among
the parties hereto, or any of them, written and oral, with
respect to the subject matter hereof. The parties hereto agree
that the Confidentiality Agreements shall continue in full force
and effect in accordance with their terms, except that it shall
terminate immediately prior to the Effective Time.
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8.6 Third-Party
Beneficiaries. Except for the agreements set
forth in Sections 1.5 and Section 5.4(c), which are
intended to be for the benefit of the Persons covered thereby
and may be enforced by such Persons, nothing in this Agreement,
express or implied, is intended or shall be construed to create
any third-party beneficiaries.
8.7 Governing Law. The Merger, this
Agreement and the transactions contemplated by this Agreement,
and all disputes between the parties under or related to this
Agreement or the facts and circumstances leading to its
execution, whether in contract, tort or otherwise, shall be
governed by and construed in accordance with the Laws of the
State of Delaware, without reference to conflict of laws
principles.
8.8 Remedies. Except as otherwise
provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of
any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
of this Agreement, this being in addition to any other remedy to
which they are entitled at law or in equity, without the
necessity of posting bonds or other undertaking in connection
therewith. The parties acknowledge that in the absence of a
waiver, a bond or undertaking may be required by a court and the
parties hereby waive any such requirement of such a bond or
undertaking.
8.9 Consent to Jurisdiction; Venue; Jury Trial.
(a) Each of the parties hereto (i) irrevocably submits
to the exclusive personal jurisdiction of the Delaware Court of
Chancery (as well as to the jurisdiction of the Delaware Supreme
Court to which an appeal may be taken from such court), for the
purpose of any Action arising out of or relating to this
Agreement, and the transactions contemplated by this Agreement,
(ii) agrees that all claims in respect of such Action or
proceeding shall be heard and determined exclusively in the
Delaware Court of Chancery, (iii) agrees that it shall not
attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from such court, (iv) waives any
defense of inconvenient forum to the maintenance of any action
or proceeding so brought, and (v) agrees not to bring any
action or proceeding arising out of or relating to this
Agreement or any of the transactions contemplated by this
Agreement in any other court. Each of the parties hereto agrees
that a final judgment in any Action shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
(b) Each of the parties hereto agrees to waive any bond,
surety or other security that might be required of any other
party with respect to any action or proceeding, including an
appeal thereof.
(c) Each of the parties hereto irrevocably consents to the
service of any summons and complaint and any other process in
any other Action relating to the Merger, on behalf of itself or
its property, by the personal delivery of copies of such process
to such party or by sending or delivering a copy of the process
to the party to be served at the address and in the manner
provided for the giving of notices in Section 8.2. Nothing
in this Section 8.9 shall affect the right of any party
hereto to serve legal process in any other manner permitted by
law.
(d) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES
SUCH WAIVER VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO
ENTER INTO THIS MERGER AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.9.
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8.10 Assignment. Neither this
Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties hereto. Subject to the
preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns.
8.11 Amendment. This Agreement may
be amended by the parties hereto at any time before or after
approval of the Merger by the Company Stockholders;
provided, however, that after any such approval,
no amendment shall be made that by law requires further approval
by the Company Stockholders without such approval having been
obtained. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
8.12 Extension; Waiver. At any time
prior to the Effective Time, the parties may (a) extend the
time for the performance of any of the obligations or other acts
of the other parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto or (c) subject to the
proviso of Section 8.11, waive compliance with any of the
agreements or conditions contained herein. Any agreement on the
part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf
of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights and the single or partial
exercise of any rights hereof shall not preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege.
8.13 No Presumption Against
Drafter. Each of the parties hereto has jointly
participated in the negotiation and drafting of this Agreement.
In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by each of the parties hereto and no
presumptions or burdens of proof shall arise favoring any party
by virtue of the authorship of any of the provisions of this
Agreement.
8.14 Severability. Any term or
provision of this Agreement that is invalid or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and
provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is
enforceable.
A-51
IN WITNESS WHEREOF, Parent, Merger Sub and Company have signed
this Agreement as of the date first written above.
QUANTA SERVICES, INC.
Name: John R. Colson
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Title:
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Chief Executive Officer and
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Chairman of the Board
QUANTA MS ACQUISITION, INC.
Name: James H. Haddox
INFRASOURCE SERVICES, INC.
Name: David R. Helwig
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Title:
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Chief Executive Officer, President
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and Chairman of the Board
A-52
March 17, 2007
Board of Directors
Quanta Services, Inc.
1360 Post Oak Blvd.
Suite 2100
Houston, TX 77056
Members of the Board:
You have asked us to advise you with respect to the fairness,
from a financial point of view, to Quanta Services, Inc.
(“Acquiror”), of the Exchange Ratio (as defined below)
set forth in the Agreement and Plan of Merger (the “Merger
Agreement”), to be entered into by and among Acquiror,
InfraSource Services, Inc. (the “Company”), and Quanta
MS Acquisition, Inc., a wholly owned subsidiary of Acquiror
(“Merger Sub”). The Merger Agreement will provide for,
among other things, the merger (the “Merger”) of
Merger Sub with and into the Company pursuant to which the
Company will become a wholly owned subsidiary of Acquiror and
each share of common stock, par value $0.001 per share
(“Company Common Stock”), of the Company issued and
outstanding immediately prior to the Effective Time (as defined
in the Merger Agreement), shall be converted into the right to
receive 1.223 shares of common stock (the “Exchange
Ratio”), par value $0.00001 per share (“Acquiror
Common Stock”), of Acquiror.
In arriving at our opinion, we have reviewed the March 17,
2007 draft of the Merger Agreement (the “Draft Merger
Agreement”) and certain publicly available business and
financial information relating to the Company and Acquiror. We
have also reviewed certain other information and data relating
to the Company and Acquiror, including financial forecasts
relating to the Company as provided to and discussed with us by
the management of the Company, and adjustments thereto as
provided to and discussed with us by the management of Acquiror,
and financial forecasts relating to Acquiror as provided to and
discussed with us by the management of Acquiror, and we have met
with the managements of the Company and Acquiror to discuss the
business and prospects of the Company and Acquiror. We have also
reviewed certain estimates of cost savings, synergies and other
benefits expected to result from the Merger, as prepared and
provided to us by the management of Acquiror. We have also
considered certain financial and stock market data of the
Company and Acquiror, and we have compared that data with
similar data for other publicly held companies in businesses we
deemed similar to those of the Company and Acquiror. We also
considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria
that we deemed relevant.
In connection with our review, we have not assumed any
responsibility for independent verification of any of the
foregoing information and have relied on such information being
complete and accurate in all material respects. With respect to
the financial forecasts for the Company that we have reviewed,
the management of the Company has advised us, and we have
assumed, that such forecasts have been reasonably prepared on
bases reflecting the best currently available estimates and
judgments of the management of the Company as to the future
financial performance of the Company, and with respect to
adjustments to the Company’s forecasts and the financial
forecasts for Acquiror that we have reviewed, the management of
Acquiror has advised us, and we have assumed, that such
adjustments and forecasts have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the management of Acquiror as to the future financial
performance of the Company and Acquiror. With respect to the
estimates provided to us by the management of Acquiror with
respect to the cost savings, synergies and other benefits
expected to result from the Merger, we have been advised by the
management of Acquiror, and we have assumed, that such estimates
have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of
Acquiror as to such cost savings, synergies and other benefits,
and will be realized in the amounts and the times indicated
thereby. The management of the Company has advised us, and we
have assumed with your consent, that no financial statements of
the Company included in the Company’s filings with the
Securities and Exchange Commission prior to the date of this
letter will require restatement in any respect that would be
material to our analyses or this opinion. You also have informed
us, and we have assumed, that the Merger will be treated as a
tax-free reorganization for federal income tax purposes.
B-1
We have assumed, with your consent, that the final executed
Merger Agreement will conform to the Draft Merger Agreement
reviewed by us in all respects material to our analyses. We also
have assumed, with your consent, that, in the course of
obtaining any regulatory or third party consents, approvals or
agreements in connection with the Merger, no delay, limitation,
restriction or condition will be imposed that would have an
adverse effect on the Company, Acquiror or the contemplated
benefits of the Merger and that the Merger will be consummated
in accordance with the terms of the Draft Merger Agreement
without waiver, modification or amendment of any material term,
condition or agreement thereof. In addition, we have not been
requested to make, and have not made, an independent evaluation
or appraisal of the assets or liabilities (contingent or
otherwise) of Acquiror or the Company, nor have we been
furnished with any such evaluations or appraisals. Our opinion
addresses only the fairness, from a financial point of view, to
Acquiror of the Exchange Ratio and does not address any other
aspect or implication of the Merger or any other agreement,
arrangement or understanding entered into in connection with the
Merger or otherwise. We are not expressing any opinion as to
what the value of shares of Acquiror Common Stock actually will
be when issued to the holders of Company Common Stock pursuant
to the Merger or the prices at which shares of Acquiror Common
Stock will trade at any time. Our opinion is necessarily based
upon information made available to us as of the date hereof and
financial, economic, market and other conditions as they exist
and can be evaluated on the date hereof. Our opinion does not
address the relative merits of the Merger as compared to
alternative transactions or strategies that might be available
to Acquiror, nor does it address the underlying business
decision of Acquiror to proceed with the Merger.
We have acted as financial advisor to Acquiror in connection
with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation
of the Merger. We will also receive a fee for rendering this
opinion. In addition, Acquiror has agreed to indemnify us for
certain liabilities and other items arising out of our
engagement. From time to time, we and our affiliates have in the
past provided and in the future we may provide, investment
banking and other financial services to the Company and
Acquiror, for which we have received, and would expect to
receive, compensation. We are a full service securities firm
engaged in securities trading and brokerage activities as well
as providing investment banking and other financial services. In
the ordinary course of business, we and our affiliates may
acquire, hold or sell, for our and our affiliates own accounts
and the accounts of customers, equity, debt and other securities
and financial instruments (including bank loans and other
obligations) of the Company, Acquiror and any other company that
may be involved in the Merger, as well as provide investment
banking and other financial services to such companies.
It is understood that this letter is for the information of
Board of Directors of Acquiror in connection with its
consideration of the Merger and does not constitute a
recommendation to any stockholder as to how such stockholder
should vote or act on any matter relating to the proposed
Merger, including the issuance of shares of Acquiror Common
Stock in connection therewith. Based upon and subject to the
foregoing, it is our opinion that, as of the date hereof, the
Exchange Ratio is fair, from a financial point of view, to
Acquiror.
Very truly yours,
CREDIT SUISSE SECURITIES (USA) LLC
B-2
March 17, 2007
The Board of Directors
InfraSource Services Inc.
100 West Sixth Street Suite 300
Media, PA 19063
Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of the common stock of
InfraSource Services, Inc. (the “Company”) of the
Exchange Ratio (defined below) set forth in an Agreement and
Plan of Merger (the “Merger Agreement”) to be entered
into among the Company, Quanta Services, Inc.
(“Quanta”) and Quanta MS Acquisition, Inc., a wholly
owned subsidiary of Quanta (“Merger Sub”). As more
fully described in the Merger Agreement, (i) Merger Sub
will be merged with and into the Company (the
“Merger”) and (ii) each outstanding share of the
common stock, par value $0.001 per share, of the Company
(“Company Common Stock”), other than shares held in
treasury or held by Quanta, will be converted into the right to
receive 1.223 shares (the “Exchange Ratio”) of
the common stock, par value $0.00001 per share, of Quanta
(“Quanta Common Stock”).
In arriving at our opinion, we reviewed a draft dated
March 17, 2007 of the Merger Agreement and held discussions
with certain senior officers, directors and other
representatives and advisors of the Company and certain senior
officers and other representatives and advisors of Quanta
concerning the businesses, operations and prospects of the
Company and Quanta. We examined certain publicly available
business and financial information relating to the Company and
Quanta as well as certain financial forecasts and other
information and data relating to the Company and Quanta which
were provided to or discussed with us by the respective
managements of the Company and Quanta, including information
relating to the potential strategic implications and operational
benefits (including the amount, timing and achievability
thereof) anticipated by the managements of the Company and
Quanta to result from the Merger. We reviewed the financial
terms of the Merger as set forth in the Merger Agreement in
relation to, among other things: current and historical market
prices and trading volumes of the Company Common Stock and
Quanta Common Stock; the historical and projected earnings and
other operating data of the Company and Quanta; and the
capitalization and financial condition of the Company and
Quanta. We considered, to the extent publicly available, the
financial terms of certain other transactions which we
considered relevant in evaluating the Merger and analyzed
certain financial, stock market and other publicly available
information relating to the businesses of other companies whose
operations we considered relevant in evaluating those of the
Company and Quanta. We also evaluated certain potential pro
forma financial effects of the Merger on Quanta. In addition to
the foregoing, we conducted such other analyses and examinations
and considered such other information and financial, economic
and market criteria as we deemed appropriate in arriving at our
opinion.
In rendering our opinion, we have assumed and relied, without
assuming any responsibility for independent verification, upon
the accuracy and completeness of all financial and other
information and data publicly available or provided to or
otherwise reviewed by or discussed with us and upon the
assurances of the managements of the Company and Quanta that
they are not aware of any relevant information that has been
omitted or that remains undisclosed to us. With respect to
financial forecasts and other information and data relating to
the Company and Quanta provided to or otherwise reviewed by or
discussed with us, we have been advised by the respective
managements of the Company and Quanta that such forecasts and
other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the managements of the Company and Quanta as to the future
financial performance of the Company and Quanta, the potential
strategic implications and operational benefits (including the
amount, timing and achievability thereof) anticipated to result
from the Merger and the other matters covered thereby. We have
assumed, with your consent, that the Merger will be consummated
in accordance with its terms, without waiver, modification or
amendment of any material term, condition or agreement and that,
in the course of obtaining the necessary regulatory or third
party approvals, consents and releases for the Merger, no delay,
limitation, restriction or condition will be imposed that would
have
C-1
The Board of Directors
InfraSource Services, Inc.
March 17, 2007
Page 2
an adverse effect on the Company, Quanta or the contemplated
benefits of the Merger. Representatives of the Company have
advised us, and we further have assumed, that the final terms of
the Merger Agreement will not vary materially from those set
forth in the draft reviewed by us. We also have assumed, with
your consent, that the Merger will be treated as a tax-free
reorganization for federal income tax purposes. Our opinion, as
set forth herein, relates to the relative values of the Company
and Quanta. We are not expressing any opinion as to what the
value of the Quanta Common Stock actually will be when issued
pursuant to the Merger or the price at which the Quanta Common
Stock will trade at any time. We have not made or been provided
with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or Quanta
nor have we made any physical inspection of the properties or
assets of the Company or Quanta. We were not requested to, and
we did not, solicit third party indications of interest in the
possible acquisition of all or a part of the Company, nor were
we requested to consider, and our opinion does not address, the
relative merits of the Merger as compared to any alternative
business strategies that might exist for the Company or the
effect of any other transaction in which the Company might
engage. Our opinion is necessarily based upon information
available to us, and financial, stock market and other
conditions and circumstances existing, as of the date hereof.
Citigroup Global Markets Inc. has acted as financial advisor to
the Company in connection with the proposed Merger and will
receive a fee for such services, a significant portion of which
is contingent upon the consummation of the Merger. We also will
receive a fee in connection with the delivery of this opinion.
In the ordinary course of our business, we and our affiliates
may actively trade or hold the securities of the Company and
Quanta for our own account or for the account of our customers
and, accordingly, may at any time hold a long or short position
in such securities. In addition, we and our affiliates
(including Citigroup Inc. and its affiliates) may maintain
relationships with the Company, Quanta and their respective
affiliates.
Our advisory services and the opinion expressed herein are
provided for the information of the Board of Directors of the
Company in its evaluation of the proposed Merger, and our
opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder
should vote or act on any matters relating to the proposed
Merger.
Based upon and subject to the foregoing, our experience as
investment bankers, our work as described above and other
factors we deemed relevant, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair, from a financial
point of view, to the holders of the Company Common Stock.
Very truly yours,
CITIGROUP GLOBAL MARKETS INC.
C-2