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Filed pursuant to Rule 424(b)(3)
Registration No. 333-65160
PROSPECTUS
INTEGRATED ELECTRICAL SERVICES, INC.
OFFER TO EXCHANGE UP TO
$125,000,000 OF 9 3/8% SENIOR SUBORDINATED NOTES DUE 2009
FOR
$125,000,000 OF 9 3/8% SENIOR SUBORDINATED NOTES DUE 2009
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
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TERMS OF THE EXCHANGE OFFER
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- We are offering to exchange up to $125,000,000 of our outstanding 9 3/8%
Senior Subordinated Notes due 2009 for new notes with substantially identical
terms that have been registered under the Securities Act and are freely
tradable.
- We will exchange all outstanding notes that you validly tender and do not
validly withdraw before the exchange offer expires for an equal principal
amount of new notes.
- The exchange offer expires at 5:00 p.m., New York City time, on August 30,
2001, unless extended. We do not currently intend to extend the exchange
offer.
- Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of the exchange offer.
- The exchange of outstanding notes for new notes will not be a taxable event
for U.S. federal income tax purposes.
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TERMS OF THE NEW 9 3/8% SENIOR SUBORDINATED NOTES OFFERED IN THE EXCHANGE OFFER
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MATURITY
- The new notes will mature on February 1, 2009.
INTEREST
- Interest on the new notes is payable on February 1 and August 1 of each year,
beginning August 1, 2001.
- Interest will accrue from May 29, 2001.
REDEMPTION
- We may redeem some or all of the new notes at any time on or after February 1,
2004 at redemption prices listed in "Description of the New Notes -- Optional
Redemption."
- We may also redeem up to 35% of the new notes using the proceeds of certain
equity offerings completed before February 1, 2002.
CHANGE OF CONTROL
- If we sell assets or experience a change of control, subject to certain
conditions, we must offer to purchase the new notes.
RANKING
- The new notes will be subordinated to all existing and future senior
indebtedness. The new notes will rank equally with all of our other existing
and future senior subordinated indebtedness and will rank senior to all our
subordinated indebtedness.
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SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF FACTORS YOU SHOULD
CONSIDER BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is July 27, 2001.
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This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission. In making your investment decision, you
should rely only on the information contained in this prospectus and in the
accompanying letter of transmittal. We have not authorized anyone to provide you
with any other information. If you receive any unauthorized information, you
must not rely on it. We are not making an offer to sell these securities in any
state where the offer is not permitted. You should not assume that the
information contained in this prospectus is accurate as of any date other than
the date on the front cover of this prospectus.
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TABLE OF CONTENTS
PROSPECTUS SUMMARY.......................................... 1
RISK FACTORS................................................ 6
EXCHANGE OFFER.............................................. 14
USE OF PROCEEDS............................................. 25
BUSINESS.................................................... 26
DESCRIPTION OF THE NEW NOTES................................ 27
FEDERAL INCOME TAX CONSIDERATIONS........................... 60
PLAN OF DISTRIBUTION........................................ 63
LEGAL MATTERS............................................... 65
EXPERTS..................................................... 65
WHERE YOU CAN FIND MORE INFORMATION......................... 65
FORWARD-LOOKING STATEMENTS.................................. 66
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PROSPECTUS SUMMARY
This summary may not contain all the information that may be important to
you. You should read this entire prospectus and the documents to which we have
referred you before making an investment decision. You should carefully consider
the information set forth under "Risk Factors." In addition, certain statements
include forward-looking information which involves risks and uncertainties. See
"Forward-Looking Statements." Unless this prospectus otherwise indicates or the
context otherwise requires, the terms "we," "our," "us," "IES" or the "Company"
as used in this prospectus refer to Integrated Electrical Services, Inc. and its
subsidiaries.
THE COMPANY
We are the second largest provider of electrical contracting services in
the United States. We are also a growing provider of solutions in the data
communications and utilities markets. We provide a broad range of services
including designing, building and maintaining electrical, data communications
and utilities systems for commercial, industrial and residential customers.
Our executive offices are located at 1800 West Loop South, Suite 500,
Houston, Texas 77027, and our telephone number is (713) 860-1500.
THE EXCHANGE OFFER
On May 29, 2001, we completed a private offering of the outstanding notes.
We entered into a registration rights agreement with the initial purchasers in
the private offering in which we agreed to deliver to you this prospectus and to
use our reasonable best efforts to complete the exchange offer within 180 days
after the date we issued the outstanding notes.
Exchange Offer...................... We are offering to exchange new notes
for outstanding notes.
Expiration Date..................... The exchange offer will expire at 5:00
p.m. New York City time, on August 30,
2001, unless we decide to extend it.
Condition to the Exchange Offer..... The registration rights agreement does
not require us to accept outstanding
notes for exchange if the exchange
offer or the making of any exchange by
a holder of the outstanding notes would
violate any applicable law or
interpretation of the staff of the
Securities and Exchange Commission. A
minimum aggregate principal amount of
outstanding notes being tendered is not
a condition to the exchange offer.
Procedures for Tendering Outstanding
Notes............................... To participate in the exchange offer,
you must complete, sign and date the
letter of transmittal, or a facsimile
of the letter of transmittal, and
transmit it together with all other
documents required by the letter of
transmittal, including the outstanding
notes that you wish to exchange, to
State Street Bank and Trust Company, as
exchange agent, at the address
indicated on the cover page of the
letter of transmittal. In the
alternative, you can tender your
outstanding notes by following the
procedures for book-entry transfer
described in this prospectus.
If your outstanding notes are held
through The Depository Trust Company
and you wish to partici-
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pate in the exchange offer, you may do
so through the automated tender offer
program of The Depository Trust
Company. If you tender under this
program, you will agree to be bound by
the letter of transmittal that we are
providing with this prospectus as
though you had signed the letter of
transmittal. If a broker, dealer,
commercial bank, trust company or other
nominee is the registered holder of
your outstanding notes, we urge you to
contact that person promptly to tender
your outstanding notes in the exchange
offer. For more information on
tendering your outstanding notes,
please refer to the sections in this
prospectus entitled "Exchange
Offer -- Terms of the Exchange Offer,"
"-- Procedures for Tendering" and
"-- Book-Entry Transfer."
Guaranteed Delivery Procedures...... If you wish to tender your outstanding
notes and you cannot get your required
documents to the exchange agent on
time, you may tender your outstanding
notes according to the guaranteed
delivery procedures described in
"Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal of Tenders............... You may withdraw your tender of
outstanding notes at any time prior to
the expiration date. To withdraw, you
must have delivered a written or
facsimile transmission notice of
withdrawal to the exchange agent at its
address indicated on the cover page of
the letter of transmittal before 5:00
p.m. New York City time on the
expiration date of the exchange offer.
Acceptance of Outstanding Notes and
Delivery of New Notes............... If you fulfill all conditions required
for proper acceptance of outstanding
notes, we will accept any and all
outstanding notes that you properly
tender in the exchange offer on or
before 5:00 p.m. New York City time on
the expiration date. We will return any
outstanding note that we do not accept
for exchange to you without expense as
promptly as practicable after the
expiration date. We will deliver the
new notes as promptly as practicable
after the expiration date and
acceptance of the outstanding notes for
exchange. Please refer to the section
in this prospectus entitled "Exchange
Offer -- Terms of the Exchange Offer."
Fees and Expenses................... We will bear all expenses related to
the exchange offer. Please refer to the
section in this prospectus entitled
"Exchange Offer -- Fees and Expenses."
Use of Proceeds..................... The issuance of the new notes will not
provide us with any new proceeds. We
are making this exchange offer solely
to satisfy our obligations under our
registration rights agreement.
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Consequences of Failure to Exchange
Outstanding Notes................... If you do not exchange your outstanding
notes in this exchange offer, you will
no longer be able to require us to
register the outstanding notes under
the Securities Act of 1933 except in
the limited circumstances provided
under our registration rights
agreement. In addition, you will not be
able to resell, offer to resell or
otherwise transfer the outstanding
notes unless we have registered the
outstanding notes under the Securities
Act of 1933, or unless you resell,
offer to resell or otherwise transfer
them under an exemption from the
registration requirements of, or in a
transaction not subject to, the
Securities Act of 1933.
U.S. Federal Income Tax
Considerations...................... The exchange of new notes for
outstanding notes in the exchange offer
should not be a taxable event for U.S.
federal income tax purposes. Please
read "Federal Income Tax
Considerations."
Exchange Agent...................... We have appointed State Street Bank and
Trust Company as exchange agent for the
exchange offer. You should direct
questions and requests for assistance,
requests for additional copies of this
prospectus or the letter of transmittal
and requests for the notice of
guaranteed delivery to the exchange
agent addressed as follows: Two Avenue
de Lafayette, 5th Floor, Corporate
Trust Window, Boston, Massachusetts
02111-1724. Eligible institutions may
make requests by facsimile at (617)
662-1452.
TERMS OF THE NEW NOTES
The new notes will be identical to the outstanding notes except that the
new notes are registered under the Securities Act of 1933 and will not have
restrictions on transfer, registration rights or provisions for additional
interest and will contain different administrative terms. The new notes will
evidence the same debt as the outstanding notes, and the same indenture will
govern the new notes and the outstanding notes.
The following summary contains basic information about the new notes and is
not intended to be complete. It does not contain all the information that is
important to you. For a more complete understanding of the new notes, please
refer to the section of this document entitled "Description of the New Notes."
Issuer.............................. Integrated Electrical Services, Inc.
Notes Offered....................... $125 million in aggregate principal
amount of 9 3/8% Senior Subordinated
Notes due 2009.
Maturity............................ February 1, 2009.
Interest on the New Notes........... Annual Rate 9 3/8%.
Interest Payment Dates.............. February 1 and August 1 of each year,
commencing on August 1, 2001.
Sinking Fund........................ None.
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Optional Redemption................. On or after February 1, 2004, we may
redeem some or all of the new notes at
the redemption prices listed in the
"Description of the New
Notes -- Optional Redemption" section
of this prospectus, plus accrued but
unpaid interest to the date of
redemption. Before February 1, 2002, we
may redeem up to 35% of the aggregate
principal amount of the new notes with
the net proceeds of certain sales of
equity at the price listed in the
section "Description of New Notes"
under the heading "Optional
Redemption," provided at least 65% of
the aggregate principal amount of the
new notes originally issued remains
outstanding after such redemption.
Change of Control................... If we sell assets or if a change of
control occurs, subject to certain
conditions, we may be required to offer
to repurchase the notes at prices
listed in the section "Description of
New Notes -- Change of Control." The
term "Change of Control" is defined in
the "Description of the New
Notes -- Certain Definitions" section
of this prospectus.
Guarantees.......................... Each of our subsidiaries will fully and
unconditionally guarantee the new notes
on a senior subordinated basis. Future
subsidiaries also may be required to
guarantee the new notes.
Ranking............................. The new notes will be subordinated to
all existing and future senior
indebtedness. The new notes will rank
equally with all our other existing and
future senior subordinated indebtedness
and will rank senior to all our
subordinated indebtedness. The
guarantees will be subordinated to all
existing and future senior indebtedness
of such subsidiaries. Because the new
notes are subordinated, in the event of
bankruptcy, liquidation or dissolution,
holders of the new notes will not
receive any payment until holders of
senior indebtedness and guarantor
senior indebtedness have been paid in
full. See "Description of the New
Notes -- Ranking."
Specified Covenants................. The indenture governing the new notes
will contain covenants that, among
other things, restrict our ability and
the ability of our restricted
subsidiaries to:
- borrow money;
- pay dividends or repurchase stock;
- make investments;
- use assets as security in other
transactions;
- sell certain assets or merge with or
into other companies;
- sell stock in our subsidiaries; and
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- limit our subsidiaries from making
dividends and other payments.
All of these limitations are subject to
a number of important exceptions and
qualifications, which are described in
the "Description of the New
Notes -- Certain Covenants" section of
this prospectus.
Transfer Restrictions; Absence of a
Public Market for the Notes......... The new notes generally will be freely
transferable, but will also be new
securities for which there will not
initially be a market. There can be no
assurance as to the development or
liquidity of any market for the new
notes.
RISK FACTORS
See "Risk Factors," beginning on page 6 hereof, for a discussion of certain
factors that you should consider before participating in the exchange offer.
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RISK FACTORS
In addition to the other information set forth elsewhere or incorporated by
reference in this prospectus, the following factors relating to our company and
the exchange offer and the new notes should be considered carefully in deciding
whether to participate in the exchange offer.
RISKS RELATED TO OUR BUSINESS
Downturns in Construction Could Adversely Affect Our Business Because More
than Half of Our Business is Dependent on Levels of New Construction Activity.
More than half of our business is the installation of electrical systems in
newly constructed and renovated buildings, plants and residences. Our ability to
maintain or increase revenues from new installation services will depend on the
number of new construction starts and renovations, which will likely be
correlated with the cyclical nature of the construction industry. The number of
new building starts will be affected by general and local economic conditions,
changes in interest rates and other factors, including the following:
- employment and income levels;
- interest rates and other factors affecting the availability and cost of
financing;
- tax implications for homebuyers;
- consumer confidence; and
- housing demand.
Additionally, a majority of our business is focused in the southeastern and
southwestern portion of the United States, concentrating our exposure to local
economic conditions in those regions. Downturns in levels of construction or
housing starts could result in a material reduction in our activity levels.
The Estimates We Use in Placing Bids Could Be Materially Incorrect. The Use of
Incorrect Estimates Could Result in Losses on a Fixed Price Contract. These
Losses Could Be Material to Our Business.
More than half of our revenues are generated under fixed price contracts.
We must estimate the costs of completing a particular project to bid for these
fixed price contracts. The cost of labor and materials, however, may vary from
the costs we originally estimated. Variations from estimated contract costs
along with other risks inherent in performing fixed price contracts may result
in actual revenue and gross profits for a project differing from those we
originally estimated and could result in losses on projects. Depending upon the
size of a particular project, actual costs that are higher than estimated
contract costs can have a significant impact on our operating results for any
fiscal quarter or year. Our results in 2000 were adversely affected by losses
recorded on fixed-priced contracts at one of our subsidiaries.
A Significant Amount of Our Historic Growth has Occurred Through the
Acquisition of Existing Businesses; However, Future Acquisitions Will Be Made
on a Selective Basis and May Be Difficult to Identify and Integrate and May
Disrupt Our Business and Adversely Affect Our Operating Results.
Historically, a significant amount of our growth has come through
acquisitions. From April 1998 to our last significant acquisition in December
1999, we made 67 acquisitions. Although we have significantly diminished our
acquisition activity, we intend to continue to pursue selected acquisition
opportunities in the future. We continually evaluate acquisition prospects to
complement and expand our existing business platforms. The timing, size or
success of any acquisition effort and the associated potential capital
commitments cannot be predicted. If we are unable to find appropriate
acquisitions, our future ability to grow our revenues and profitability may be
diminished.
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Each acquisition, however, involves a number of risks. These risks include:
- the diversion of our management's attention from our existing businesses
to integrating the operations and personnel of the acquired business;
- possible adverse effects on our operating results during the integration
process; and
- our possible inability to achieve the intended objectives of the
combination.
We may seek to finance an acquisition through borrowings under our credit
facility or through the issuance of new debt or equity securities. There can be
no assurance that we will be able to secure this financing if and when it is
needed or on terms we consider acceptable. If we should proceed with a
relatively large cash acquisition, we could deplete a substantial portion of our
financial resources to the possible detriment of our other operations. Any
future acquisitions could also dilute the equity interests of our stockholders,
require us to write off assets for accounting purposes or create other
undesirable accounting issues, such as significant expenses for amortization of
goodwill or other intangible assets.
We May Experience Difficulties in Managing Internal Growth.
In order to continue to grow internally, we expect to expend significant
time and effort managing and expanding existing operations. We cannot guarantee
that our systems, procedures and controls will be adequate to support our
expanding operations, including the timely receipt of financial information. Our
growth imposes significant added responsibilities on our senior management, such
as the need to identify, recruit and integrate new senior managers and
executives. If we are unable to manage our growth, or if we are unable to
attract and retain additional qualified management, our operations could be
materially adversely effected.
There is Currently a Shortage of Qualified Electricians. Since the Majority of
Our Work is Performed by Electricians, this Shortage May Negatively Impact Our
Business, Including Our Ability to Grow.
There is currently a shortage of qualified electricians in the United
States. In order to conduct our business, it is necessary to employ
electricians. Over the last few years, the growth of the U.S. economy has
increased the demand for electricians, making it difficult for us to attract,
hire and retain competent electricians. While overall economic growth has
diminished, our ability to increase productivity and profitability may be
limited by the difficulty of employing, training and retaining the number of
skilled electricians required to meet our needs. Accordingly, we cannot assure
you that, among other things:
- we will be able to maintain the skilled labor force necessary to operate
efficiently; and
- our labor expenses will not increase as a result of a shortage in the
skilled labor supply.
Due to Seasonality and Differing Regional Economic Conditions, Our Results May
Fluctuate from Period to Period.
Our business can be subject to seasonal variations in operations and demand
that affect the construction business, particularly in residential construction.
Our revenues in the winter are typically significantly lower than in the summer.
Accordingly, our performance in any particular quarter may not be indicative of
the results that can be expected for any other quarter or for the entire year.
To Service Our Indebtedness and to Fund Working Capital, We Will Require a
Significant Amount of Cash. Our Ability to Generate Cash Depends on Many
Factors.
Our ability to make payments on and to refinance our indebtedness and to
fund planned capital expenditures will depend on our ability to generate cash in
the future. This is subject to our operational performance, as well as general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Our new credit facility will expire in May 2004.
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We cannot assure you that our business will generate sufficient cash flow
from operations or that future borrowings will be available to us under our
credit facility in an amount sufficient to enable us to pay our indebtedness, or
to fund our other liquidity needs. We may need to refinance all or a portion of
our indebtedness, on or before maturity. We cannot assure you that we will be
able to refinance any of our indebtedness on commercially reasonable terms or at
all. Our inability to refinance our debt on commercially reasonable terms could
materially adversely affect our business.
The Highly Competitive Nature of Our Industry Could Affect Our Profitability
by Reducing Our Profit Margins.
The electrical contracting industry is served by small, owner-operated
private companies, public companies and several large regional companies. We
could also face competition in the future from other competitors entering these
markets. Some of our competitors offer a greater range of services, including
mechanical construction, plumbing and heating, ventilation and air conditioning
services. Competition in our markets depends on a number of factors, including
price. Some of our competitors may have lower overhead cost structures and may,
therefore, be able to provide services comparable to ours at lower rates than we
do. If we are unable to offer our services at competitive prices or if we have
to reduce our prices to remain competitive, our profitability would be impaired.
Our Operations are Subject to Numerous Physical Hazards Associated with the
Construction of Electrical Systems. If an Accident Occurs, It Could Result in
an Adverse Effect on Our Business.
Hazards related to our industry include, but are not limited to,
electrocutions, fires, mechanical failures or transportation accidents. These
hazards can cause personal injury and loss of life, severe damage to or
destruction of property and equipment and may result in suspension of
operations. Our insurance does not cover all types or amounts of liabilities.
Our third-party insurance is subject to large deductibles for which we establish
reserves and, accordingly, we effectively self insure for much of our insurance
coverage. No assurance can be given either that our insurance or our provisions
for incurred claims and incurred but not reported claims will be adequate to
cover all losses or liabilities we may incur in our operations or that we will
be able to maintain adequate insurance at reasonable rates or at all.
We Have a Substantial Amount of Debt. Our Current Debt Level Could Limit Our
Ability to Fund Future Working Capital Needs and Increase Our Exposure During
Adverse Economic Conditions.
We have a significant amount of debt. The following chart shows certain
important credit statistics and is presented assuming we had completed this
offering as of March 31, 2001 and applied the proceeds as described in "Use of
Proceeds." The ratio of earnings to fixed charges assumes we had completed this
offering at the beginning of the 12-month period.
Total indebtedness................................... $276.9 million
Stockholders' equity................................. $523.5 million
Debt to total capitalization......................... 0.35x
Ratio of earnings to fixed charges................... 3.0x
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures,
acquisitions and other general corporate requirements;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
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- place us at a disadvantage compared to our competitors that have less
debt; and
- limit our ability to borrow additional funds.
Additionally, the indenture and other documents governing our indebtedness
contain financial and other restrictive covenants. Failing to comply with those
covenants could result in an event of default which, if not cured or waived,
could have a material adverse effect on us. See "Description of the Notes."
We may incur additional indebtedness in the future which may intensify the
risks described above. The terms of the indenture do not prohibit us or our
subsidiaries from incurring additional indebtedness, including indebtedness that
is senior in right of payment to the notes, although the indenture does contain
certain limitations on additional indebtedness. As of July 2, 2001, we had
outstanding letters of credit of $5.3 million and additional available
borrowings of up to $144.7 million under our credit facility, subject to
customary borrowing conditions.
The New Notes and the Subsidiary Guarantees Rank Behind All of Our and Our
Subsidiary Guarantors' Existing and Future Senior Indebtedness.
As a result of the subordinated nature of the new notes and guarantees,
upon any distribution to our creditors or the creditors of the guarantors in a
bankruptcy, liquidation or reorganization or similar proceeding relating to us
or the guarantors or our or their property, the holders of senior indebtedness
of our company and the guarantors will be entitled to be paid in full in cash
before any payment may be made with respect to the new notes or the subsidiary
guarantees.
In addition, all payments on the new notes and the guarantees will be
blocked in the event of a payment default on certain senior indebtedness and may
be blocked for up to 179 of 360 consecutive days in the event of certain
non-payment defaults on senior indebtedness.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our company or the guarantors, holders of the new notes
will participate with trade creditors and all other holders of subordinated
indebtedness of our company and the guarantors in the assets remaining after we
and the subsidiary guarantors have paid all of the senior indebtedness. In any
of these cases, we and the subsidiary guarantors may not have sufficient funds
to pay all of our creditors and holders of new notes may receive less, ratably,
than the holders of senior indebtedness. However, because the indenture requires
that amounts otherwise payable to holders of the new notes in a bankruptcy or
similar proceeding be paid to holders of senior indebtedness instead, holders of
the new notes may receive less, ratably, than holders of trade payables in any
such proceeding.
As of July 2, 2001, the new notes and subsidiary guarantees would have been
subordinated to approximately $1.9 senior indebtedness and up to $144.7 would
have been available for borrowing as additional senior indebtedness under our
credit facility, subject to customary borrowing conditions. We will be permitted
to borrow substantial additional indebtedness, including senior indebtedness, in
the future under the terms of the indenture.
The Loss of a Group of Key Personnel, Either at the Corporate or Operating
Level, Could Adversely Affect Our Business.
The loss of key personnel or the inability to hire and retain qualified
employees could have an adverse effect on our business, financial condition and
results of operations. Our operations depend on the continued efforts of our
current and future executive officers, senior management and management
personnel at the companies we have acquired. A criteria we use in evaluating
acquisition candidates is the quality of their management. We cannot guarantee
that any member of management at the corporate or subsidiary level will continue
in their capacity for any particular period of time. If we lose a group of key
personnel, our operations could be adversely affected. We do not maintain key
man life insurance.
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Some Significant Restructuring Transactions May Not Constitute a Change of
Control, Which Would Obligate Us to Offer to Repurchase Your New Notes, and
Even if a Transaction Does Trigger That Obligation, We May Not be Able to
Repurchase the New Notes.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding new notes. However,
certain important corporate events, such as leveraged recapitalizations that
would increase the level of our indebtedness, would not constitute a "Change of
Control" under the indenture. Moreover, even if a transaction triggers a
repurchase obligation, it is possible that we will not have sufficient funds at
the time of the change of control to make the required repurchase of new notes.
In addition, restrictions in our credit facility will not allow such
repurchases. See "Description of Notes -- Change of Control."
A Subsidiary Guarantee Could Be Voided or Subordinated Because of Federal
Bankruptcy Law or Comparable State Law Provisions.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, one or more of the subsidiary guarantees could be
voided, or claims in respect of a subsidiary guarantee could be subordinated to
all other debts of that guarantor if, among other things, the guarantor, at the
time it incurred the indebtedness evidenced by its guarantee received less than
reasonably equivalent value or fair consideration for the incurrence of such
guarantee; and
- was insolvent or rendered insolvent by reason of such incurrence; or
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets; or
- the present fair saleable value of its assets were less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
We cannot be sure as to the standards that a court would use to determine
whether or not the guarantors were solvent at the relevant time, or, regardless
of the standard that the court uses, that the issuance of the guarantee of the
notes would not be voided or the guarantee of the notes would not be
subordinated to that guarantor's other debt.
If the guarantees were legally challenged, any guarantee could also be
subject to the claim that, since the guarantee was incurred for our benefit, and
only indirectly for the benefit of the guarantor, the obligations of the
applicable guarantor were incurred for less than fair consideration.
A court could thus void the obligations under the guarantee or subordinate
the guarantee to the applicable guarantor's other debt or take other action
detrimental to holders of the new notes.
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Our Results of Operations Could Be Adversely Affected as a Result of Goodwill
Amortization or Write-Offs.
When we acquire a business, we record an asset called "goodwill" equal to
the excess amount we pay for the business, including liabilities assumed, over
the fair value of the tangible assets of the business we acquire. Pursuant to
accounting principles generally accepted in the United States, we amortize this
goodwill over its estimated useful life of 40 years following the acquisition,
which directly impacts our earnings in those years. Furthermore, we continually
evaluate whether events or circumstances have occurred that indicate that the
remaining useful life of goodwill may warrant revision or that the remaining
balance may not be recoverable.
On February 14, 2001 the Financial Accounting Standards Board issued a
revised limited Exposure Draft of its 1999 proposed Statement, Business
Combinations and Intangible Assets. The Exposure Draft contains the FASB's
tentative decision reached in December 2000 to eliminate amortization of
purchased goodwill. Under that approach, goodwill would not be amortized to
earnings. Instead, goodwill would be reviewed for impairment, meaning that it
would be written down and expensed against earnings in the periods in which the
recorded value of goodwill exceeds its fair value. FASB expects to issue its
final statement regarding the treatment of purchased goodwill by the end of July
2001. Because the proposal has not been finalized and certain details regarding
its use have yet to be defined, we are unable to predict the way in which its
adoption will affect our financial reports. Because we have made numerous
acquisitions since our founding, we carry significant amounts of goodwill on our
books for which we would no longer be required to recognize a periodic
amortization charge as a result of this proposal.
Should we be required to accelerate the amortization of goodwill or write
it off completely because of impairments, our results from operations may be
materially adversely affected.
RISKS RELATED TO THE EXCHANGE OFFER AND THE NEW NOTES
If You Do Not Properly Tender Your Outstanding Notes, You Will Continue to
Hold Unregistered Outstanding Notes and Your Ability to Transfer Outstanding
Notes Will Be Adversely Affected.
We will only issue new notes in exchange for outstanding notes that you
timely and properly tender. Therefore, you should allow sufficient time to
endure timely delivery of the outstanding notes and you should carefully follow
the instructions on how to tender your outstanding notes. Neither we nor the
exchange agent is required to tell you of any defects or irregularities with
respect to your tender of outstanding notes.
If you do not exchange your outstanding notes for new notes pursuant to the
exchange offer, the outstanding notes you hold will continue to be subject to
the existing transfer restrictions. In general, you may not offer or sell the
outstanding notes except under an exemption from, or in a transaction not
subject to, the Securities Act of 1933 and applicable state securities laws. We
do not plan to register outstanding notes under the Securities Act of 1933
unless our registration rights agreement with the initial purchasers of the
outstanding notes requires us to do so. Further, if you continue to hold any
outstanding notes after the exchange offer is consummated, you may have trouble
selling them because there will be fewer outstanding notes outstanding.
If an Active Trading Market Does Not Develop for the New Notes, You May Be
Unable to Sell the New Notes or to Sell the New Notes at a Price That You Deem
Sufficient.
The new notes will be new securities for which there currently is no
established trading market. Although we will register the new notes under the
Securities Act of 1933, we do not intend to apply for listing of the new notes
on any securities exchange or for quotation of the new notes in any automated
dealer quotation system. In addition, although the initial purchasers of the
outstanding notes have informed us that they intend to make a market in the new
notes after the exchange offer, the initial purchasers may stop making a market
at any time. Finally, if a large number of holders of outstanding notes do not
tender outstanding notes or tender outstanding notes improperly, the limited
amount of new notes that would be
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issued and outstanding after we consummate the exchange offer could adversely
affect the development of a market for these new notes.
A Guarantee Could Be Voided if the Guarantor Fraudulently Transferred the
Guarantee at the Time It Incurred the Indebtedness, Which Could Result in the
Noteholders Being Able to Rely on Only Integrated Electrical Services, Inc. to
Satisfy Claims.
Under U.S. bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee can be voided, or claims under a guarantee may be
subordinated to all other debts of that guarantor if, among other things, the
guarantor, at the time it incurred the indebtedness evidenced by its guarantee:
- intended to hinder, delay or defraud any present or future creditor or
received less than reasonably equivalent value or fair consideration for
the incurrence of the guarantee;
- was insolvent or rendered insolvent by reason of such incurrence;
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay those debts as they mature.
In addition, any payment by that guarantor under a guarantee could be
voided and required to be returned to the guarantor or to a fund for the benefit
of the creditors of the guarantor.
The measures of insolvency for purposes of fraudulent transfer laws vary
depending upon the governing law. Generally, a guarantor would be considered
insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets;
- the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they became absolute and
mature; or
- it could not pay its debts as they became due.
On the basis of historical financial information, recent operating history
and other factors, we believe that the subsidiary guarantees are being incurred
for proper purposes and in good faith and that each subsidiary guarantor, after
giving effect to its guarantee of the notes, will not be insolvent, have
unreasonably small capital for the business in which it is engaged or have
incurred debts beyond their ability to pay those debts as they mature. We cannot
be certain, however, that a court would agree with our conclusions in this
regard.
Holders of the New Notes Will Be Effectively Subordinated to All of Our and
the Subsidiary Guarantors' Secured Indebtedness and to All Liabilities of Our
Non-Guarantor Subsidiaries.
Holders of our secured indebtedness, including the indebtedness under our
credit facilities, have claims with respect to our assets constituting
collateral for their indebtedness that are prior to your claims under the new
notes. In the event of a default on the new notes or our bankruptcy, liquidation
or reorganization, those assets would be available to satisfy obligations with
respect to the indebtedness secured thereby before any payment could be made on
the new notes. Accordingly, the secured indebtedness would effectively be senior
to the new notes to the extent of the value of the collateral securing the
indebtedness. While the indenture governing the new notes places some
limitations on our ability to create liens, there are significant exceptions to
these limitations, including with respect to sale and leaseback transactions,
that will allow us to secure some kinds of indebtedness without equally and
ratably securing the new notes. To the extent the value of the collateral is not
sufficient to satisfy the
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secured indebtedness, the holders of that indebtedness would be entitled to
share with the holders of the new notes and the holders of other claims against
us with respect to our other assets.
In addition, the new notes are not guaranteed by all of our subsidiaries,
and our non-guarantor subsidiaries are permitted to incur additional
indebtedness under the indenture. As a result, holders of the new notes will be
effectively subordinated to claims of third party creditors, including holders
of indebtedness, and preferred shareholders of these non-guarantor subsidiaries.
Claims of those other creditors, including trade creditors, secured creditors,
authorities, holders of indebtedness or guarantees issued by the non-guarantor
subsidiaries and preferred shareholders of the non-guarantor subsidiaries, will
generally have priority as to the assets of the non-guarantor subsidiaries over
our claims and equity interests. As a result, holders of our indebtedness,
including the holders of the new notes, will be effectively subordinated to all
those claims.
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EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the issuance of the outstanding notes, we entered into a
registration rights agreement. Under the registration rights agreement, we
agreed to:
- within 60 days after the original issuance of the outstanding notes, file
a registration statement with the SEC with respect to a registered offer
to exchange each outstanding note for a new note having terms
substantially identical in all material respects to such note except that
the new note will not contain terms with respect to transfer
restrictions);
- use our reasonable best efforts to cause the registration statement to be
declared effective under the Securities Act of 1933 within 150 days after
the original issuance of the outstanding notes;
- promptly following the effectiveness of the registration statement, offer
the new notes in exchange for surrender of the outstanding notes; and
- keep the exchange offer open for not less than 20 business days (or
longer if required by applicable law) after the date notice of the
exchange offer is mailed to the holders of the outstanding notes.
We have fulfilled the agreements described in the first two of the
preceding bullet points, and as soon as practicable after this registration
statement becomes effective, we will offer eligible holders of the outstanding
notes the opportunity to exchange their outstanding notes for new notes
registered under the Securities Act. Holders are eligible if they are not
prohibited by any law or policy of the SEC from participating in this exchange
offer. The new notes will be substantially identical to the outstanding notes
except that the new notes will not contain terms with respect to transfer
restrictions, registration rights or additional interest.
Under limited circumstances, we agreed to use our reasonable best efforts
to cause the SEC to declare effective a shelf registration statement for the
resale of the outstanding notes. We also agreed to use our reasonable best
efforts to keep the shelf registration statement effective for up to two years
after its effective date. The circumstances include if:
- we are not permitted to effect the exchange offer because of any change
in law or applicable interpretations of the law by the staff of the SEC;
- for any other reason the exchange offer is not consummated within 180
days after the date of issuance of the notes;
- any notes validly tendered pursuant to the exchange offer are not
exchanged by us for exchange notes within ten days of being accepted in
the exchange offer;
- the initial purchasers so request with respect to notes held by the
initial purchasers that are not eligible to be exchanged for exchange
notes in the exchange offer;
- any applicable law or interpretations do not permit any holder of notes
to participate in the exchange offer; or
- any holder of notes that participates in the exchange offer does not
receive freely transferable exchange notes in exchange for tendered
notes.
We will pay additional cash interest on the applicable outstanding notes,
subject to certain exceptions if:
- the exchange offer registration statement is not filed with the
Securities and Exchange Commission on or before 60 days after the date of
the original issuance of the outstanding notes or the shelf registration
statement is not filed with the SEC on or before the shelf filing date;
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- the exchange offer registration statement is not declared effective
within 150 days after the date of the original issuance of the
outstanding notes or the shelf registration statement is not declared
effective within 120 days after the shelf filing date;
- the exchange offer is not consummated on or before 180 days after the
date of the original issuance of the outstanding notes; or
- the shelf registration statement is filed and declared effective within
120 days after the shelf filing date but thereafter ceases to be
effective, at any time that we and our guarantor subsidiaries are
obligated to maintain its effectiveness, without being succeeded within
30 days by an additional registration statement filed and declared
effective (each such event referred to in the preceding clauses being a
"registration default")
from and including the date on which any such registration default occurs to but
excluding the date on which all registration defaults have been cured.
The rate of additional interest will be increased by an additional 0.25%
per annum upon the occurrence of the registration default, and shall be further
increased by 0.25% on the 91st day after a registration default has occurred,
until the applicable registration statement is filed, the exchange offer
registration statement is declared effective and the exchange offer is
consummated, or the shelf registration statement is declared effective or again
becomes effective, as the case may be. All accrued additional interest will be
paid to holders in the same manner as interest payments on the notes on
semi-annual payment dates that correspond to interest payment dates for the
notes. Additional interest only accrues during a registration default.
Upon the effectiveness of this registration statement, the consummation of
the exchange offer, the effectiveness of a shelf registration statement, or the
effectiveness of a succeeding registration statement, as the case may be, the
interest rate borne by the notes from the date of such effectiveness or
consummation, as the case may be, will be reduced to the original interest rate.
However, if after any such reduction in interest rate, a different event
specified in the clauses above occurs, the interest rate may again be increased
pursuant to the preceding provisions.
To exchange your outstanding notes for transferable new notes in the
exchange offer, you will be required to make the following representations:
- any new notes will be acquired in the ordinary course of your business;
- you have no arrangement or understanding with any person or entity to
participate in the distribution of the new notes;
- you are not engaged in and do not intend to engage in the distribution of
the new notes;
- if you are a broker-dealer that will receive new notes for your own
account in exchange for outstanding notes, you acquired those notes as a
result of market-making activities or other trading activities and you
will deliver a prospectus, as required by law, in connection with any
resale of such new notes; and
- you are not our "affiliate," as defined in Rule 405 of the Securities
Act.
In addition, we may require you to provide information to be used in
connection with the shelf registration statement to have your outstanding notes
included in the shelf registration statement and benefit from the provisions
regarding additional interest described in the preceding paragraphs. A holder
who sells outstanding notes under the shelf registration statement generally
will be required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers. Such a holder will also be
subject to the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the registration rights
agreement that are applicable to such a holder, including indemnification
obligations.
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The description of the registration rights agreement contained in this
section is a summary only. For more information, you should review the
provisions of the registration rights agreement that we filed with the SEC as an
exhibit to the registration statement of which this prospectus is a part.
RESALE OF NEW NOTES
Based on no action letters of the SEC staff issued to third parties, we
believe that new notes may be offered for resale, resold and otherwise
transferred by you without further compliance with the registration and
prospectus delivery provisions of the Securities Act if:
- you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act;
- such new notes are acquired in the ordinary course of your business; and
- you do not intend to participate in a distribution of the new notes.
The SEC, however, has not considered the exchange offer for the new notes
in the context of a no action letter, and the SEC may not make a similar
determination as in the no action letters issued to these third parties.
If you tender in the exchange offer with the intention of participating in
any manner in a distribution of the new notes, you
- cannot rely on such interpretations by the SEC staff; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
Unless an exemption from registration is otherwise available, any security
holder intending to distribute new notes should be covered by an effective
registration statement under the Securities Act. This registration statement
should contain the selling security holder's information required by Item 507 of
Regulation S-K under the Securities Act. This prospectus may be used for an
offer to resell, resale or other retransfer of new notes only as specifically
described in this prospectus. Only broker-dealers that acquired the outstanding
notes as a result of market-making activities or other trading activities may
participate in the exchange offer. Each broker-dealer that receives new notes
for its own account in exchange for outstanding notes, where such outstanding
notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge in the letter of
transmittal that it will deliver a prospectus in connection with any resale of
the new notes. Please read the section captioned "Plan of Distribution" for more
details regarding the transfer of new notes.
TERMS OF THE EXCHANGE OFFER
Subject to the terms and conditions described in this prospectus and in the
letter of transmittal, we will accept for exchange any outstanding notes
properly tendered and not withdrawn prior to 5:00 p.m. New York City time on the
expiration date. We will issue new notes in principal amount equal to the
principal amount of outstanding notes surrendered under the exchange offer.
Outstanding notes may be tendered only for new notes and only in integral
multiples of $1,000.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $125,000,000 in aggregate principal
amount of the outstanding notes are outstanding. This prospectus and the letter
of transmittal are being sent to all registered holders of outstanding notes.
There will be no fixed record date for determining registered holders of
outstanding notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement, the applicable requirements of the
Securities Act and the Securities Exchange Act of 1934 and
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the rules and regulations of the SEC. Outstanding notes that the holders thereof
do not tender for exchange in the exchange offer will remain outstanding and
continue to accrue interest. These outstanding notes will be entitled to the
rights and benefits such holders have under the indenture relating to the notes
and the registration rights agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent and complied with the applicable provisions of the
registration rights agreement. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the new notes from us.
If you tender outstanding notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the letter of
transmittal, transfer taxes with respect to the exchange of outstanding notes.
We will pay all charges and expenses, other than certain applicable taxes
described below, in connecting with the exchange offer. It is important that you
read the section labeled "-- Fees and Expenses" for more details regarding fees
and expenses incurred in the exchange offer.
We will return any outstanding notes that we do not accept for exchange for
any reason without expense to their tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m. New York City time on August
30, 2001, unless, in our sole discretion, we extend it.
EXTENSIONS, DELAYS IN ACCEPTANCE, TERMINATION OR AMENDMENT
We expressly reserve the right, at any time or various times, to extend the
period of time during which the exchange offer is open. We may delay acceptance
of any outstanding notes by giving oral or written notice of such extension to
their holders. During any such extensions, all outstanding notes previously
tendered will remain subject to the exchange offer, and we may accept them for
exchange.
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
outstanding notes of the extension no later than 9:00 a.m., New York City time,
on the business day after the previously scheduled expiration date.
If any of the conditions described below under "-- Conditions to the
Exchange Offer" have not been satisfied, we reserve the right, in our sole
discretion
- to delay accepting for exchange any outstanding notes,
- to extend the exchange offer, or
- to terminate the exchange offer,
by giving oral or written notice of such delay, extension or termination to the
exchange agent. Subject to the terms of the registration rights agreement, we
also reserve the right to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of outstanding notes. If we amend the exchange offer in a
manner that we determine to constitute a material change, we will promptly
disclose such amendment by means of a prospectus supplement. The supplement will
be distributed to the registered holders of the outstanding notes. Depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, we will extend the exchange offer if the exchange offer
would otherwise expire during such period.
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CONDITIONS TO THE EXCHANGE OFFER
We will not be required to accept for exchange, or exchange any new notes
for, any outstanding notes if the exchange offer, or the making of any exchange
by a holder of outstanding notes, would violate applicable law or any applicable
interpretation of the staff of the SEC. Similarly, we may terminate the exchange
offer as provided in this prospectus before accepting outstanding notes for
exchange in the event of such a potential violation.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us the representations
described under "-- Purpose and Effect of the Exchange Offer," "-- Procedures
for Tendering" and "Plan of Distribution" and such other representations as may
be reasonably necessary under applicable SEC rules, regulations or
interpretations to allow us to use an appropriate form to register the new notes
under the Securities Act.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any outstanding notes not previously accepted for
exchange, upon the occurrence of any of the conditions to the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the outstanding notes
as promptly as practicable.
These conditions are for our sole benefit, and we may assert them or waive
them in whole or in part at any time or at various times in our sole discretion.
If we fail at any time to exercise any of these rights, this failure will not
mean that we have waived our rights. Each such right will be deemed an ongoing
right that we may assert at any time or at various times.
In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue new notes in exchange for any such outstanding
notes, if at such time any stop order has been threatened or is in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture relating to the notes under the Trust
Indenture Act of 1939.
PROCEDURES FOR TENDERING
How to Tender Generally
Only a holder of outstanding notes may tender such outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal;
- have the signature on the letter of transmittal guaranteed if the letter
of transmittal so requires; and
- mail or deliver such letter of transmittal or facsimile to the exchange
agent prior to 5:00 p.m. New York City time on the expiration date; or
- comply with the automated tender offer program procedures of The
Depository Trust Company, or DTC, described below.
In addition, either:
- the exchange agent must receive outstanding notes along with the letter
of transmittal;
- the exchange agent must receive, prior to 5:00 p.m. New York City time on
the expiration date, a timely confirmation of book-entry transfer of such
outstanding notes into the exchange agent's account at DTC according to
the procedure for book-entry transfer described below or a properly
transmitted agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at its
address indicated on the cover page of the letter of
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transmittal. The exchange agent must receive such documents prior to 5:00 p.m.
New York City time on the expiration date.
The tender by a holder that is not withdrawn prior to 5:00 p.m. New York
City time on the expiration date will constitute an agreement between the holder
and us in accordance with the terms and subject to the conditions described in
this prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE 5:00 P.M. NEW YORK CITY TIME ON THE
EXPIRATION DATE. YOU SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OUTSTANDING
NOTES TO US. YOU MAY REQUEST YOUR BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
How to Tender if You Are a Beneficial Owner
If you beneficially own outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender those notes, you should contact the registered holder promptly
and instruct it to tender on your behalf. If you are a beneficial owner and wish
to tender on your own behalf, you must, prior to completing and executing the
letter of transmittal and delivering your outstanding notes, either:
- make appropriate arrangements to register ownership of the outstanding
notes in your name; or
- obtain a properly completed bond power from the registered holder of
outstanding notes.
The transfer of registered ownership, if permitted under the indenture for
the notes, may take considerable time and may not be completed prior to the
expiration date.
Signatures and Signature Guarantees
You must have signatures on a letter of transmittal or a notice of
withdrawal (as described below) guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Securities Exchange Act. In
addition, such entity must be a member of one of the recognized signature
guarantee programs identified in the letter of transmittal. Signature guarantees
are not required, however, if the notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal;
- for the account of a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondence in
the United States, or an eligible guarantor institution.
When You Need Endorsements or Bond Powers
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes, the outstanding notes must be
endorsed or accompanied by a properly completed bond power. The bond power must
be signed by the registered holder as the registered holder's name appears on
the outstanding notes. A member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States, or an eligible guarantor institution must guarantee the signature on the
bond power.
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If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to
deliver the letter of transmittal.
Tendering Through DTC's Automated Tender Offer Program
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the outstanding notes to the exchange
agent in accordance with its procedures for transfer. DTC will then send an
agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, to the
effect that:
- DTC has received an express acknowledgment from a participant in its
automated tender offer program that is tendering outstanding notes that
are the subject of such book-entry confirmation;
- such participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable notice of guaranteed delivery; and
- the agreement may be enforced against such participant.
Determinations Under the Exchange Offer
We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered outstanding notes and
withdrawal of tendered outstanding notes. Our determination will be final and
binding. We reserve the absolute right to reject any outstanding notes not
properly tendered or any outstanding notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the right to waive any
defect, irregularities or conditions of tender as to particular outstanding
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, all defects or irregularities in
connection with tenders of outstanding notes must be cured within such time as
we shall determine. Although we intend to notify holders of defects or
irregularities with respect to tenders of outstanding notes, neither we, the
exchange agent nor any other person will incur any liability for failure to give
such notification. Tenders of outstanding notes will not be deemed made until
such defects or irregularities have been cured or waived. Any outstanding notes
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned to
the tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
When We Will Issue New Notes
In all cases, we will issue new notes for outstanding notes that we have
accepted for exchange under the exchange offer only after the exchange agent
timely receives:
- outstanding notes or a timely book-entry confirmation of such outstanding
notes into the exchange agent's account at DTC; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
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Return of Outstanding Notes Not Accepted or Exchanged
If we do not accept any tendered outstanding notes for exchange or if
outstanding notes are submitted for a greater principal amount than the holder
desires to exchange, the unaccepted or non-exchanged outstanding notes will be
returned without expense to their tendering holder. In the case of outstanding
notes tendered by book-entry transfer in the exchange agent's account at DTC
according to the procedures described below, such non-exchanged outstanding
notes will be credited to an account maintained with DTC. These actions will
occur as promptly as practicable after the expiration or termination of the
exchange offer.
Your Representations to Us
By signing or agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
- any new notes that you receive will be acquired in the ordinary course of
your business;
- you have no arrangement or understanding with any person or entity to
participate in the distribution of the new notes;
- you are not engaged in and do not intend to engage in the distribution of
the new notes;
- if you are a broker-dealer that will receive new notes for your own
account in exchange for outstanding notes, you acquired those notes as a
result of market-making activities or other trading activities and you
will deliver a prospectus, as required by law, in connection with any
resale of such new notes; and
- you are not our "affiliate," as defined in Rule 405 of the Securities
Act.
BOOK-ENTRY TRANSFER
The exchange agent will establish an account with respect to the
outstanding notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus. Any financial institution participating in DTC's system
may make book-entry delivery of outstanding notes by causing DTC to transfer
such outstanding notes into the exchange agent's account at DTC in accordance
with DTC's procedures for transfer. Holders of outstanding notes who are unable
to deliver confirmation of the book-entry tender of their outstanding notes into
the exchange agent's account at DTC or all other documents required by the
letter of transmittal to the exchange agent on or prior to 5:00 p.m. New York
City time on the expiration date must tender their outstanding notes according
to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your outstanding notes but your outstanding notes are
not immediately available or you cannot deliver your outstanding notes, the
letter of transmittal or any other required documents to the exchange agent or
comply with the applicable procedures under DTC's automated tender offer program
prior to the expiration date, you may tender if:
- the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an eligible guarantor institution,
- prior to the expiration date, the exchange agent receives from such
member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., commercial bank or
trust company having a office or correspondent in the United States, or
eligible guarantor institution either a properly completed and duly
executed notice of guaranteed delivery by facsimile
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transmission, mail or hand delivery or a properly transmitted agent's
message and notice of guaranteed delivery:
- setting forth your name and address, the registered number(s) of your
outstanding notes and the principal amount of outstanding notes
tendered,
- stating that the tender is being made thereby, and
- guaranteeing that, within three (3) New York Stock Exchange ("NYSE")
trading days after the expiration date, the letter of transmittal or
facsimile thereof, together with the outstanding notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal will be deposited by the eligible guarantor institution with
the exchange agent, and
- the exchange agent receives such properly completed and executed letter
of transmittal or facsimile thereof, as well as all tendered outstanding
notes in proper form for transfer or a book-entry confirmation, and all
other documents required by the letter of transmittal, within three (3)
NYSE trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent you if you wish to tender your outstanding notes according to the
guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
tender at any time prior to 5:00 p.m. New York City time on the expiration date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice of withdrawal at the
address indicated on the cover page of the letter of transmittal or
- you must comply with the appropriate procedures of DTC's automated tender
offer program system.
Any notice of withdrawal must:
- specify the name of the person who tendered the outstanding notes to be
withdrawn, and
- identify the outstanding notes to be withdrawn, including the principal
amount of such outstanding notes.
If outstanding notes have been tendered under the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with withdrawn outstanding notes and
otherwise comply with the procedures of DTC.
We will determine all questions as to the validity, form, eligibility and
time of receipt of notice of withdrawal. Our determination shall be final and
binding on all parties. We will deem any outstanding notes so withdrawn not to
have been validly tendered for exchange for purposes of the exchange offer.
Any outstanding notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder. In the case of outstanding notes tendered by book-entry transfer into
the exchange agent's account at DTC according to the procedures described above,
such outstanding notes will be credited to an account maintained with DTC for
the outstanding notes. This return or crediting will take place as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. You may retender properly withdrawn outstanding notes by following one of
the procedures described under "-- Procedures for Tendering" above at any time
on or prior to the expiration date.
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FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the
exchange offer. They include:
- SEC registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
- certificates representing outstanding notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered;
- tendered outstanding notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer.
If satisfactory evidence of payment of any transfer taxes payable by a note
holder is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to that tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange new notes for your outstanding notes under the
exchange offer, you will remain subject to the existing restrictions on transfer
of the outstanding notes. In general, you may not offer or sell the outstanding
notes unless they are registered under the Securities Act, or if the offer or
sale is exempt from the registration under the Securities Act and applicable
state securities laws. Except as required by the registration rights agreement,
we do not intend to register resales of the outstanding notes under the
Securities Act.
ACCOUNTING TREATMENT
We will record the new notes in our accounting records at the same carrying
value as the outstanding notes. This carrying value is the aggregate principal
amount of the outstanding notes less the original issue discount, as reflected
in our accounting records on the date of exchange. Accordingly, we will not
recognize any gain or loss for accounting purposes in connection with the
exchange offer.
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OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered outstanding notes.
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USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
registration rights agreement. We will not receive any cash proceeds from the
issuance of the new notes in the exchange offer. In consideration for issuing
the new notes as contemplated by this prospectus, we will receive outstanding
notes in a like principal amount. The form and terms of the new notes are
identical in all respects to the form and terms of the outstanding notes, except
the new notes do not include certain transfer restrictions. Outstanding notes
surrendered in exchange for the new notes will be retired and cancelled and will
not be reissued. Accordingly, the issuance of the new notes will not result in
any change in our outstanding indebtedness.
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BUSINESS
We are the second largest provider of electrical contracting services in
the United States. We are also a growing provider of solutions in the data
communications and utilities markets. We provide a broad range of services
including designing, building and maintaining electrical, data communications
and utilities systems for commercial, industrial and residential customers.
Additional information concerning our company is included in our reports
and other documents incorporated by reference in this prospectus. See "Where You
Can Find More Information."
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DESCRIPTION OF THE NEW NOTES
The new notes will be issued, and the outstanding notes were issued,
pursuant to an indenture dated as of May 29, 2001 (the "Indenture") among the
Company, as issuer, the Subsidiaries, as guarantors, and State Street Bank and
Trust Company, as trustee (the "Trustee"). The terms of the new notes include
those stated in the Indenture and those made part of the Indenture by the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The definitions
of certain capitalized terms used in the following summary are set forth below
under "-- Certain Definitions." References to the "notes" in this section of the
prospectus include both the outstanding notes and the new notes.
The following description is a summary of the material provisions of the
Indenture. It does not restate that agreement in its entirety. The Company urges
Holders to read the Indenture because it, and not this description, defines the
rights of Holders of these notes. The Company has filed the Indenture as an
exhibit to the registration statement which includes this prospectus.
If the exchange offer contemplated by this prospectus (the "Exchange
Offer") is consummated, Holders of outstanding notes who do not exchange those
notes for new notes in the Exchange Offer will vote together with Holders of new
notes for all relevant purposes under the Indenture. In that regard, the
Indenture requires that certain actions by the Holders thereunder (including
acceleration following an Event of Default) must be taken, and certain rights
must be exercised, by specified minimum percentages of the aggregate principal
amount of the outstanding securities issued under the Indenture. In determining
whether Holders of the requisite percentage in principal amount have given any
notice, consent or waiver or taken any other action permitted under the
Indenture, any outstanding notes that remain outstanding after the Exchange
Offer will be aggregated with the new notes, and the Holders of such outstanding
notes and the new notes will vote together as a single series for all such
purposes. Accordingly, all references herein to specified percentages in
aggregate principal amount of the notes outstanding shall be deemed to mean, at
any time after the Exchange Offer is consummated, such percentages in aggregate
principal amount of the outstanding notes and the new notes then outstanding.
GENERAL
The new notes will be unsecured senior subordinated obligations of the
company initially limited to $125.0 million aggregate principal amount and will
be guaranteed by each of the Guarantors (which will initially be all of the
subsidiaries) on a senior subordinated basis as described below. The Indenture
will permit the company to issue an unlimited amount of notes, subject to
compliance with the terms of the covenants described under "-- Material
Covenants -- Limitation on Indebtedness."
The new notes will be issued only in registered form without coupons, in
denominations of $1,000 and integral multiples thereof. Principal of, premium,
if any, and interest on the notes will be payable, and the notes will be
transferable, at the corporate trust office or agency of the Trustee in the City
of New York maintained for such purposes. In addition, interest may be paid at
our option on any notes not issued in global form by check mailed to the person
entitled thereto as shown on the security register subject to the right of any
holder of notes in the principal amount of $500,000 or more to request payment
by wire transfer. No service charge will be made for any transfer, exchange or
redemption of notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith. The notes may
be issued with original issue discount for federal income tax purposes. The
notes will be substantially identical to the 9 3/8% senior subordinated notes
due 2009 that we issued in 1999, except that this series of notes will be issued
under a different indenture.
MATURITY, INTEREST AND PRINCIPAL
The notes will mature on February 1, 2009. Interest on the notes will
accrue at the rate of 9 3/8% per annum and will be payable semi-annually in
arrears on each February 1 and August 1 commencing August 1, 2001, to the
holders of record of notes at the close of business on the January 15 and July
15, respectively, immediately preceding such interest payment date. Interest on
the notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the original date of
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issuance of the outstanding notes (the "Issue Date"). Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
OPTIONAL REDEMPTION
Optional Redemption. The notes will be redeemable at our option, in whole
or in part, at any time on or after February 1, 2004, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, to the redemption date, if redeemed during the 12-month
period beginning February 1 of the years indicated below:
REDEMPTION
YEAR PRICE
---- ----------
2004...................................................... 104.688%
2005...................................................... 103.125%
2006...................................................... 101.563%
2007 and thereafter....................................... 100.000%
In addition, at any time, or from time to time, on or prior to February 1,
2002, we may, at our option, use the net cash proceeds of one or more Qualified
Equity Offerings to redeem up to an aggregate of 35% of the principal amount of
the notes originally issued, at a redemption price equal to 109.375% of the
principal amount thereof plus accrued and unpaid interest, if any, thereon to
the redemption date; provided that at least 65% of the originally issued
principal amount of notes remains outstanding immediately after the occurrence
of such redemption. In order to effect the foregoing redemption with the
proceeds of any Qualified Equity Offering, we must consummate such redemption
not later than 60 days after the closing of any such Qualified Equity Offering.
Selection and Notice. In the event that less than all of the notes are to
be redeemed at any time, selection of notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the notes are listed or, if the notes are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate (subject to the rules of
DTC); provided, however, that notes shall only be redeemable in principal
amounts of $1,000 or an integral multiple of $1,000. Notice of redemption shall
be mailed by first-class mail at least 30 but not more than 60 days before the
redemption date to each holder of notes to be redeemed at its registered
address. If any note is to be redeemed in part only, the notice of redemption
that relates to such note shall state the portion of the principal amount
thereof to be redeemed. A new note in a principal amount equal to the unredeemed
portion of the original note will be issued in the name of the holder thereof
upon surrender for cancellation of the original note. On and after the
redemption date, interest will cease to accrue on notes or portions thereof
called for redemption, unless we default in the payment of the redemption price.
SINKING FUND
The notes will not be entitled to the benefit of any mandatory sinking
fund.
VOTING
The Indenture will provide that the holders of the outstanding notes and
the new notes will vote and consent together on all matters (to which such
holders are entitled to vote or consent) as one class and that none of the
holders of the outstanding notes and the new notes shall have the right to vote
or consent as a separate class on any matter (to which such holders are entitled
to vote or consent).
CHANGE OF CONTROL
Upon the occurrence of a Change of Control we shall be obligated to make an
offer to purchase (a "Change of Control Offer"), and shall purchase, on a
business day (the "Change of Control Purchase Date") not more than 60 nor less
than 30 days following the mailing of notice of such Change of Control
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Offer as described below, all of the then outstanding notes tendered at a
purchase price in cash (the "Change of Control Purchase Price") equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, thereon
to the Change of Control Purchase Date. We shall be required to purchase all
notes tendered into the Change of Control Offer and not withdrawn. The Change of
Control Offer will be required to remain open for at least 20 business days.
In order to effect such Change of Control Offer, we shall, not later than
the 30th day after the Change of Control, mail to each holder of notes notice of
the Change of Control Offer, which notice shall govern the terms of the Change
of Control Offer and shall state, among other things, the procedures that
holders of notes must follow to accept the Change of Control Offer.
If a Change of Control Offer is made, there can be no assurance that we
will have available funds sufficient to pay the Change of Control Purchase Price
for all of the notes that might be delivered by holders of notes seeking to
accept the Change of Control Offer. In addition, there can be no assurance that
our debt instruments will permit such offer to be made. The Credit Facility does
not permit us to make a Change of Control Offer and, in order to make such
offer, we would be required to pay off the Credit Facility in full or seek a
waiver from the lenders under the Credit Facility to allow us to make the Change
of Control Offer. The occurrence of a Change of Control is also an event of
default under the Credit Facility and would entitle the lenders thereunder to
accelerate all amounts owing under the Credit Facility. Any future credit
agreements or other agreements relating to Senior Indebtedness to which we
become a party may contain similar restrictions and provisions. Moreover, the
exercise by the holders of their rights to require us to repurchase the notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on us. Failure
to make a Change of Control Offer, even if prohibited by our debt instruments,
would constitute a default under the Indenture. See "Risk Factors -- Possible
Inability to Repurchase Notes upon Change of Control."
We shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer at the same purchase
price, at the same time and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the company and purchases all
notes validly tendered and not withdrawn under such Change of Control Offer.
The provisions of the Indenture may not afford note holders protection in
the event of a highly leveraged transaction, reorganization, restructuring,
merger or similar transaction involving the company if such transaction is not a
transaction defined as a "Change of Control." The existence of a holder's right
to require, subject to certain conditions, the company to repurchase the notes
upon a Change of Control may deter a third party from acquiring us in a
transaction that constitutes, or results in, a Change of Control.
The use of the term "all or substantially all" in provisions of the
Indenture such as clause (b) of the definition of "Change of Control" and under
"-- Consolidation, Merger, Sale of Assets, Etc." has no clearly established
meaning under New York law (which will govern the Indenture) and has been the
subject of limited judicial interpretation in only a few jurisdictions.
Accordingly, there may be a degree of uncertainty in ascertaining whether any
particular transaction would involve a disposition of "all or substantially all"
of the assets of a person, which uncertainty should be considered by prospective
purchasers of notes.
We will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws or
regulations are applicable, in the event that a Change of Control occurs and we
are required to purchase notes as described above, and any violation of the
provisions of the Indenture relating to such Offer to Purchase occurring as a
result of such compliance shall not be deemed a Default or an Event of Default.
SUBORDINATION
The indebtedness evidenced by the notes will be subordinated in right of
payment, to the extent set forth in the Indenture, to the prior payment in full
in cash of all Senior Indebtedness (including Indebtedness under the Credit
Facility). The notes will be unsecured senior subordinated indebtedness of
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the company ranking senior in right of payment to all existing and future
Subordinated Indebtedness of the company. The Credit Facility provides that the
subordination provisions of the notes may not be modified or amended without the
prior written consent of the lenders under the Credit Facility. The notes will
rank equal to right of payment to the $150 million in aggregate principal amount
of 9 3/8% senior subordinated notes issued by the company in 1999.
The Indenture will provide that in the event of (a) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
company or its assets, (b) any liquidation, dissolution or other winding-up of
the company, whether voluntary or involuntary, or (c) any assignment for the
benefit of creditors or other marshaling of assets or liabilities of the
company, all Senior Indebtedness (including, in the case of Designated Senior
Indebtedness, any interest accruing subsequent to the filing of a petition for
bankruptcy regardless of whether such interest is an allowed claim in the
bankruptcy proceeding) must be paid in full in cash before any direct or
indirect payment (other than payments from trusts previously created pursuant to
the provisions described under "-- Legal Defeasance or Covenant Defeasance of
Indenture") by or on behalf of the company of any kind or character (excluding
Permitted Junior Securities) may be made on account of the principal of,
premium, if any, or interest on, or the purchase, redemption or other
acquisition of, the notes.
During the continuance of any default in the payment of principal, premium,
if any, or interest on any Senior Indebtedness, when the same becomes due, and
after receipt by the Trustee and the company from representatives of holders of
such Senior Indebtedness of written notice of such default, no direct or
indirect payment (other than payments from trusts previously created pursuant to
the provisions described under "-- Legal Defeasance or Covenant Defeasance of
Indenture") by or on behalf of the company of any kind or character (excluding
Permitted Junior Securities) may be made on account of the principal of,
premium, if any, or interest on, or the purchase, redemption or other
acquisition of, the notes unless and until such default has been cured or waived
or has ceased to exist or such Senior Indebtedness shall have been paid in full
in cash or indefeasibly discharged, after which the company shall promptly
resume making any and all required payments in respect of the notes, including
any missed payments.
In addition, during the continuance of any other default with respect to
any Designated Senior Indebtedness that permits, or would permit with the
passage of time or the giving of notice or both, the maturity thereof to be
accelerated (a "Non-payment Default") and upon the earlier to occur of (a)
receipt by the Trustee and the company from the representatives of holders of
such Designated Senior Indebtedness of a written notice of such Non-payment
Default or (b) if such Non-payment Default results from the acceleration of the
maturity of the notes, the date of such acceleration, no direct or indirect
payment (other than payments from trusts previously created pursuant to the
provisions described under "-- Legal Defeasance or Covenant Defeasance of
Indenture") of any kind or character (excluding Permitted Junior Securities) may
be made on account of the principal of, premium, if any, or interest on, or the
purchase, redemption, or other acquisition of, the notes for the period
specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of a
Non-payment Default by the Trustee and the company from the representatives of
holders of Designated Senior Indebtedness or the date of the acceleration
referred to in clause (b) of the preceding paragraph, as the case may be, and
shall end on the earliest to occur of the following events: (i) 179 days have
elapsed since the receipt of such notice or the date of the acceleration
referred to in clause (b) of the preceding paragraph (provided the maturity of
such Designated Senior Indebtedness shall not theretofore have been
accelerated), (ii) such default is cured or waived or ceases to exist or such
Designated Senior Indebtedness is paid in full in cash or indefeasibly
discharged, or (iii) such Payment Blockage Period has been terminated by written
notice to the company or the Trustee from the representatives of holders of
Designated Senior Indebtedness initiating such Payment Blockage Period, after
which the company shall promptly resume making any and all required payments in
respect of the notes, including any missed payments. Only one Payment Blockage
Period with respect to the notes may be commenced within any 360 consecutive day
period. No Non-payment Default with respect to Designated Senior Indebtedness
that existed or was
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continuing on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period will be, or can be, made the basis for the commencement of a second
Payment Blockage Period, whether or not within a period of 360 consecutive days,
unless such default has been cured or waived for a period of not less than 90
consecutive days. In no event will a Payment Blockage Period extend beyond 179
days from the date of the receipt by the Trustee of the notice or the date of
the acceleration initiating such Payment Blockage Period, and there must be a
181 consecutive day period in any 360 day period during which no Payment
Blockage Period is in effect.
If we fail to make any payment on the notes when due on account of the
payment blockage provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the holders of the notes
to accelerate the maturity thereof. See "-- Events of Default."
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the notes, and funds which would be otherwise
payable to the holders of the notes will be paid to the holders of Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full, and
we may be unable to meet its obligations fully with respect to the notes.
On a pro forma basis after giving effect to the sale of the notes offered
hereby and the application of the estimated net proceeds, the company and the
Guarantors would have had, without duplication, $1.9 million of Senior
Indebtedness and Guarantor Senior Indebtedness (as defined) outstanding as of
March 31, 2001. The Indenture will limit, but not prohibit, the incurrence by
the company of additional Indebtedness which is senior to the notes and will
prohibit the incurrence by the company of Indebtedness which is subordinated in
right of payment to any other Indebtedness of the company and senior in right of
payment to the notes. As of March 31, 2001, after giving effect to this offering
and our new credit facility, approximately $144.7 million would have been
available for additional borrowing under our new credit facility.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Credit Facility and (ii) any other Senior Indebtedness which (a) at the time
of the determination is equal to or greater than $25 million in aggregate
principal amount and (b) is specifically designated by the company in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
"Permitted Junior Securities" means Capital Stock of the company or debt
securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to at least the same
extent as the notes are subordinated to Senior Indebtedness.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of the company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the notes. Without limiting the generality
of the foregoing, (x) "Senior Indebtedness" shall include the principal of,
premium, if any, and interest on all obligations of every nature of the company
from time to time owed to the lenders under the Credit Facility, including,
without limitation, principal of and interest on, and all fees, indemnities and
expenses payable under, the Credit Facility, and (y) in the case of Designated
Senior Indebtedness, "Senior Indebtedness" shall include interest accruing
thereon subsequent to the occurrence of any Event of Default specified in clause
(vii) or (viii) under "-- Events of Default" relating to the company, whether or
not the claim for such interest is allowed under any applicable Bankruptcy Code.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (a)
Indebtedness evidenced by the notes, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any other Indebtedness of the
company, (c) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is by its terms
without recourse to the company, (d) Indebtedness which is represented by
Redeemable Capital Stock, (e) to the extent it constitutes Indebtedness, any
liability for federal, state, local or other taxes owed or owing by the company,
(f) Indebtedness of the company to a Subsidiary of the company or any other
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Affiliate of the company or any of such Affiliate's Subsidiaries, and (g) that
portion of any Indebtedness which is incurred by the company in violation of the
Indenture.
GUARANTEES
Each of our Subsidiaries (each, a "Guarantor") will fully and
unconditionally guarantee, on a senior subordinated basis, jointly and
severally, to each holder of notes and the Trustee, the full and prompt
performance of the company's obligations under the Indenture and the notes,
including the payment of principal of and interest on the notes. The Guarantees
will be subordinated to Guarantor Senior Indebtedness on the same basis as the
notes are subordinated to Senior Indebtedness.
The obligations of each Guarantor are limited to the maximum amount which,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, will result in the obligations of such Guarantor under the
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. See "Risk Factors -- Fraudulent Transfer Considerations."
Each Guarantor that makes a payment or distribution under a Guarantee shall
be entitled to a contribution from each other Guarantor in an amount pro rata,
based on the net assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
company or another Guarantor without limitation, or with other persons upon the
terms and conditions set forth in the Indenture. See "-- Consolidation, Merger,
Sale of Assets, Etc." In the event all or substantially all of the assets or the
Capital Stock of a Guarantor is sold and the sale complies with the provisions
set forth in "-- Material Covenants -- Limitation on Disposition of Proceeds of
Asset Sales" or the Guarantor is designated an Unrestricted Subsidiary in
accordance with the terms of the Indenture, then the Guarantor's Guarantee will
be automatically and unconditionally discharged and released.
"Guarantor Senior Indebtedness" of a Guarantor means the principal of,
premium, if any, and interest on any Indebtedness of such Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to such
Guarantor's Guarantee. Without limiting the generality of the foregoing, (x)
"Guarantor Senior Indebtedness" shall include the principal of, premium, if any,
and interest on all obligations of every nature of such Guarantor from time to
time owed to the lenders under the Credit Facility, including, without
limitation, principal of and interest on, and all fees, indemnities and expenses
payable under, the Credit Facility, and (y) in the case of amounts owing under
the Credit Facility and guarantees of Designated Senior Indebtedness, "Guarantor
Senior Indebtedness" shall include interest accruing thereon subsequent to the
occurrence of any Event of Default specified in clause (vii) or (viii) under
"-- Events of Default" relating to such Guarantor, whether or not the claim for
such interest is allowed under any applicable Bankruptcy Code. Notwithstanding
the foregoing, "Guarantor Senior Indebtedness" shall not include (a)
Indebtedness evidenced by the notes or the Guarantees, (b) Indebtedness that is
expressly subordinate or junior in right of payment to any other Indebtedness of
such Guarantor, (c) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is by its terms
without recourse to such Guarantor, (d) Indebtedness which is represented by
Redeemable Capital Stock, (e) to the extent it constitutes Indebtedness, any
liability for federal, state, local or other taxes owed or owing by such
Guarantor, (f) Indebtedness of such Guarantor to the company or a Subsidiary of
the company or any other Affiliate of the company or any of such Affiliate's
Subsidiaries, and (g) that portion of any Indebtedness which is incurred by such
Guarantor in violation of the Indenture.
We are structured as a holding company and substantially all of our assets
are held and substantially all of our operations are conducted by our
subsidiaries. There are currently no significant restrictions on our ability to
obtain funds from our subsidiaries by dividend or loan. Separate financial
statements of the
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Guarantors are not included herein because the Guarantors will be jointly and
severally liable with respect to the company's obligations pursuant to the
notes, and the aggregate net assets, earnings and equity of the Guarantors and
the company are substantially equivalent to the net assets, earnings and equity
of the company on a consolidated basis.
MATERIAL COVENANTS
Limitation on Indebtedness. Our company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or in any manner become directly or indirectly liable,
contingently or otherwise (in each case, to "incur"), for the payment of any
Indebtedness (including any Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, that the company and any Guarantor will be
permitted to incur Indebtedness (including Acquired Indebtedness), if (A) the
Consolidated Fixed Charge Coverage Ratio of the company is at least 2.0 to 1 and
(B) no Default or Event of Default would occur or be continuing. As of March 31,
2001, after giving proforma effect to this offering, the Consolidated Fixed
Charge Coverage Ratio of our company would be 4.4.
Limitation on Restricted Payments. Our company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the company or any of its
Restricted Subsidiaries or make any payment to the direct or indirect
holders (in their capacities as such) of Capital Stock of the company or
any of its Restricted Subsidiaries (other than dividends or distributions
payable solely in Capital Stock of the company (other than Redeemable
Capital Stock) or in options, warrants or other rights to purchase Capital
Stock of the company (other than Redeemable Capital Stock)) (other than the
declaration or payment of dividends or other distributions to the extent
declared or paid to the company or any Restricted Subsidiary),
(b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the company or any of its Restricted Subsidiaries or any
options, warrants or other rights to purchase any such Capital Stock (other
than any such securities owned by the company or a Restricted Subsidiary),
(c) make any principal payment on, or purchase, defease, redeem or
otherwise acquire or retire for value, prior to any scheduled maturity,
scheduled repayment, scheduled sinking fund payment or other Stated
Maturity, any Subordinated Indebtedness (other than any such Subordinated
Indebtedness owed to the company or a Restricted Subsidiary), or
(d) make any Investment (other than any Permitted Investment) in any
person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, after
giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the Fair Market Value of the
asset(s) proposed to be transferred by the company or such Restricted
Subsidiary, as the case may be, pursuant to such Restricted Payment), (A) no
Default or Event of Default shall have occurred and be continuing, (B) after
giving pro forma effect to such Restricted Payment, the company would be able to
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
accordance with the "Limitation on Indebtedness" covenant described above and
(C) the aggregate amount of all Restricted Payments declared or made from
January 28, 1999 would not exceed the sum of:
(1) 50% of the aggregate Consolidated Net Income of the company
accrued on a cumulative basis during the period beginning on January 1,
1999 and ending on the last day of the fiscal quarter of the company ending
immediately prior to the date of such proposed Restricted Payment (or, if
such aggregate cumulative Consolidated Net Income of the company for such
period shall be a loss, minus 100% of such loss);
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(2) the aggregate net cash proceeds received by the company as capital
contributions to the company after January 28, 1999 and which constitute
shareholders' equity of the company in accordance with GAAP;
(3) the aggregate net cash proceeds received by the company from the
issuance or sale of Capital Stock (excluding Redeemable Capital Stock) of
the company to any person (other than to a Subsidiary of the company) after
January 28, 1999;
(4) the aggregate net cash proceeds received by the company from any
person (other than a Subsidiary of the company) upon the exercise of any
options, warrants or rights to purchase shares of Capital Stock (other than
Redeemable Capital Stock) of the company after January 28, 1999;
(5) the aggregate net cash proceeds received after January 28, 1999 by
the company from any person (other than a Subsidiary of the company) for
debt securities that have been converted into or exchanged for Capital
Stock of the company (other than Redeemable Capital Stock) to the extent
such debt securities were originally sold for cash, plus the aggregate
amount of cash received by the company (other than from a Subsidiary of the
company) at the time of such conversion or exchange;
(6) to the extent not otherwise included in the company's Consolidated
Net Income, in the case of the disposition or repayment of any Investment
constituting a Restricted Payment after January 28, 1999, an amount equal
to the lesser of the return of capital with respect to such Investment and
the initial amount of such Investment, in either case, less the cost of the
disposition of such Investment;
(7) so long as the Designation thereof was treated as a Restricted
Payment made after January 28, 1999, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after
January 28, 1999 in accordance with "-- Limitation on Designations of
Unrestricted Subsidiaries" below, the Fair Market Value of the company's
interest in such Subsidiary at the time of such redesignation; provided
that such amount shall not in any case exceed the Designation Amount with
respect to such Restricted Subsidiary upon its Designation; and
(8) $10 million.
For purposes of the preceding clause (C)(4), the value of the aggregate net
proceeds received by the company upon the issuance of Capital Stock upon the
exercise of options, warrants or rights will be the net cash proceeds received
upon the issuance of such options, warrants or rights plus the incremental
amount received by the company upon the exercise thereof. As of March 31, 2001,
under the preceding clause (C), we had approximately $35.1 million available for
future Restricted Payments, including amounts available under clause (8) above.
None of the foregoing provisions will prohibit, so long as, in the case of
clause (v) below, there is no Default or Event of Default continuing, (i) the
payment of any dividend or distribution within 60 days after the date of its
declaration, if at the date of declaration such payment would be permitted by
the first paragraph of this covenant; (ii) the redemption, repurchase or other
acquisition or retirement of any shares of any class of Capital Stock of the
company in exchange for, or out of the net cash proceeds of a substantially
concurrent issue and sale of, other shares of Capital Stock of the company
(other than Redeemable Capital Stock) to any person (other than to a Subsidiary
of the company); provided, however, that such net cash proceeds are excluded
from clause (C) of the first paragraph of this covenant; (iii) any redemption,
repurchase or other acquisition or retirement of Subordinated Indebtedness of
the company in exchange for, or out of the net cash proceeds of a substantially
concurrent issue and sale of, (1) Capital Stock (other than Redeemable Capital
Stock) of the company to any person (other than to a Subsidiary of the company);
provided, however, that any such net cash proceeds are excluded from clause (C)
of the first paragraph of this covenant; or (2) other Subordinated Indebtedness
of the company which (w) has no scheduled principal payment prior to the 91st
day after the Maturity Date, (x) has an Average Life to Stated Maturity greater
than the remaining Average Life to Stated Maturity of the notes and (y) is
subordinated to the notes to at least the same extent as the Subordinated
Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv)
payments to purchase Capital Stock of the
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company from management or employees of the company or any of its Subsidiaries,
or their authorized representatives, upon the death, disability or termination
of employment of such employees, in aggregate amounts under this clause (iv) not
to exceed $3 million in any fiscal year of the company; (v) payments relating to
Permitted Founder Stock Repurchases so long as the Consolidated Fixed Charge
Coverage Ratio of the company is at least 3.0 to 1; (vi) cash payments in lieu
of fractional shares issuable as dividends on preferred securities of the
company or any of its Restricted Subsidiaries, in aggregate amounts under this
clause (vi) not to exceed $20,000 in any fiscal year of the company; (vii)
repurchases of Capital Stock deemed to occur upon exercise of stock options if
such Capital Stock represents a portion of the exercise price of such options;
and (viii) the payment of the redemption price of rights issued pursuant to any
shareholders' rights plan not in excess of $0.05 per right and not in excess of
$1,000,000 in the aggregate. Any payments made pursuant to clause (i) of this
paragraph shall be taken into account in calculating the amount of Restricted
Payments made from and after January 28, 1999.
In computing Consolidated Net Income of the company under clause (C)(1) of
the first paragraph of this covenant, (1) the company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the company for the remaining portion of such period and (2) the
company shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the company that are
available on the date of determination. If the company makes a Restricted
Payment which, at the time of the making of such Restricted Payment would in the
good faith determination of the company be permitted under the requirements of
the Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the company's financial statements affecting Consolidated Net
Income of the company for any period.
Limitation on Liens. Our company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens
of any kind securing Indebtedness upon any of its property or assets, or any
proceeds therefrom, unless the notes are equally and ratably secured (except
that Liens securing Subordinated Indebtedness shall be expressly subordinate to
Liens securing the notes to the same extent such Subordinated Indebtedness is
subordinate to the notes), except for (a) Liens securing Senior Indebtedness and
Guarantor Senior Indebtedness; (b) Liens securing the notes; (c) Liens securing
Indebtedness which is incurred to refinance Indebtedness which has been secured
by a Lien (other than a Lien in favor of the company or a Restricted Subsidiary)
permitted under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; provided, however, that such Liens do not extend to
or cover any property or assets of the company or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced; and (d) Permitted
Liens.
Disposition of Proceeds of Asset Sales. Our company will not, and will not
permit any of its Restricted Subsidiaries to, make any Asset Sale unless (a) the
company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the shares or assets sold or otherwise disposed of and (b) at least 75%
of the consideration in such Asset Sale, plus all other Asset Sales since
January 28, 1999 on a cumulative basis, consists of cash or Cash Equivalents;
provided, however, that the amount of any Indebtedness (as shown on the most
recent balance sheet of the company or such Restricted Subsidiary) of the
company or such Restricted Subsidiary that is assumed by the transferee of such
assets as a result of which the company and its Restricted Subsidiaries are no
longer liable thereon, and any securities, notes or other obligations received
by the company or such Restricted Subsidiary from such transferee that are
converted within 60 days into cash or Cash Equivalents (to the extent of the
cash or Cash Equivalents received) shall be deemed to be cash for the purposes
of this provision. To the extent that the Net Cash Proceeds, or portion thereof,
of any Asset Sale are not applied to repay, and permanently reduce the
commitments under Senior Indebtedness or Guarantor Senior Indebtedness in
accordance with the terms thereof, the company or such Restricted Subsidiary, as
the case may be, may apply the Net Cash Proceeds, or portion thereof, from such
Asset Sale, within 360 days of such Asset Sale, to an investment in properties
and assets that replace
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the properties and assets that were the subject of such Asset Sale or in
properties and assets that (as determined in good faith by the Board of
Directors of the company or the Restricted Subsidiary, as the case may be) are
used or useful in the business of the company and its Restricted Subsidiaries
conducted at such time or in businesses reasonably related thereto or in Capital
Stock of a person, the principal portion of whose assets consist of such
property or assets ("Replacement Assets"). Any Net Cash Proceeds from any Asset
Sale that has occurred on or after January 28, 1999, that are neither used to
repay, and permanently reduce the commitments under, Senior Indebtedness or
Guarantor Senior Indebtedness in accordance with the terms thereof nor invested
in Replacement Assets within such 360-day period will constitute "Excess
Proceeds" subject to disposition as provided below. As of March 31, 2001, we
have no Excess Proceeds.
When the aggregate amount of Excess Proceeds equals or exceeds $10 million,
the company shall make an offer to purchase, from all holders of the notes and
any then outstanding Pari Passu Indebtedness required to be repurchased or
repaid on a permanent basis in connection with an Asset Sale, an aggregate
principal amount of notes and any then outstanding Pari Passu Indebtedness equal
to such Excess Proceeds as follows:
(i) (A) We shall make an offer to purchase (an "Asset Sale Offer")
from all holders of the notes in accordance with the procedures set forth
in the Indenture the maximum principal amount (expressed as a multiple of
$1,000) of notes that may be purchased out of an amount (the "Asset Sale
Offer Amount") equal to the product of such Excess Proceeds, multiplied by
a fraction, the numerator of which is the outstanding principal amount of
the notes and the denominator of which is the sum of the outstanding
principal amount of the notes and such Pari Passu Indebtedness, if any
(subject to proration in the event such amount is less than the aggregate
Offered Price (as defined herein) of all notes tendered), and (B) to the
extent required by such Pari Passu Indebtedness and provided there is a
permanent reduction in the principal amount of such Pari Passu
Indebtedness, the company shall make an offer to purchase Pari Passu
Indebtedness (a "Pari Passu Offer") in an amount (the "Pari Passu
Indebtedness Amount") equal to the excess of the Excess Proceeds over the
Asset Sale Offer Amount;
(ii) The offer price for the notes shall be payable in cash in an
amount equal to 100% of the principal amount of the notes tendered pursuant
to an Asset Sale Offer, plus accrued and unpaid interest, if any, to the
date such Asset Sale Offer is consummated (the "Offered Price"), in
accordance with the procedures set forth in the Indenture. To the extent
that the aggregate Offered Price of the notes tendered pursuant to an Asset
Sale Offer is less than the Asset Sale Offer Amount relating thereto or the
aggregate amount of the Pari Passu Indebtedness that is purchased or repaid
pursuant to the Pari Passu Offer is less than the Pari Passu Indebtedness
Amount (such shortfall constituting an "Asset Sale Deficiency"), the
company may use such Asset Sale Deficiency for general corporate purposes,
subject to the limitations described above under the caption "-- Limitation
on Restricted Payments;" and
(iii) If the aggregate Offered Price of notes validly tendered and not
withdrawn by holders thereof exceeds the Asset Sale Offer Amount, notes to
be purchased will be selected on a pro rata basis. Upon completion of such
Asset Sale Offer and Pari Passu Offer, the amount of Excess Proceeds shall
be reset to zero.
Our company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder, to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
company is required to purchase notes as described above, and any violation of
the provisions of the Indenture relating to such Asset Sale Offer occurring as a
result of such compliance shall not be deemed a Default or an Event of Default.
Limitation on Issuances and Sales of Restricted Subsidiary Stock. Our
company (i) will not permit any Restricted Subsidiary to issue any Capital Stock
(other than to the company or a Restricted Subsidiary) and (ii) will not permit
any Person (other than the company and/or one or more Restricted
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Subsidiaries) to own any Capital Stock of any Restricted Subsidiary; provided,
however, that this covenant shall not prohibit (1) the issuance and sale of all,
but not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary owned by the company or any of its Restricted Subsidiaries
in compliance with the other provisions of the Indenture, or (2) the ownership
by directors of directors' qualifying shares or the ownership by foreign
nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated
by applicable law.
Limitation on Transactions with Affiliates. Our company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any of its
Affiliates, except (a) on terms that are no less favorable to the company or
such Restricted Subsidiary, as the case may be, than those which could have been
obtained at the time in a comparable transaction or series of related
transactions from persons who are not Affiliates of the company, (b) with
respect to a transaction or series of related transactions involving aggregate
payments or value equal to or greater than $5 million, the company shall have
delivered an officers' certificate to the Trustee certifying that such
transaction or transactions comply with the preceding clause (a) and have been
approved by the Board of Directors of the company, and (c) with respect to a
transaction or series of related transactions involving aggregate payments or
value equal to or greater than $10 million, the officers' certificate referred
to in clause (b) above also includes a certification that such transaction or
transactions have been approved by a majority of the Disinterested Members of
the Board of Directors of the company or, in the event there are no such
Disinterested Members of the Board of Directors, that the company has obtained a
written opinion from an independent nationally recognized investment banking
firm, accounting firm or appraisal firm, in each case specializing or having a
specialty in the type and subject matter of the transaction or series of
transactions at issue, which opinion shall be to the effect set forth in clause
(a) above or shall state that such transaction or series of related transactions
is fair from a financial point of view to the company or such Restricted
Subsidiary.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions between or among the company and its
Restricted Subsidiaries, (ii) customary directors' fees, indemnification and
similar arrangements, consulting fees, employee salaries, bonuses or employment
agreements, compensation or employee benefit arrangements and incentive
arrangements with any officer, director or employee of the company or any
Restricted Subsidiary entered into in the ordinary course of business, (iii) any
dividends made in compliance with "-- Limitation on Restricted Payments" above,
(iv) loans and advances to officers, directors and employees of the company or
any Restricted Subsidiary made in the ordinary course of business in an
aggregate amount not to exceed $1,000,000 outstanding at any one time, (v)
transactions pursuant to agreements in effect on January 28, 1999, (vi) written
agreements entered into or assumed in connection with acquisitions of other
businesses with persons who were not Affiliates prior to such transactions, or
(vii) leases of property or equipment entered into in the ordinary course of
business on terms that are substantially similar to those which could have been
obtained at the time in a comparable transaction with non-Affiliates.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. Our company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock to the
company or any other Restricted Subsidiary, (b) pay any Indebtedness owed to the
company or any other Restricted Subsidiary, (c) make loans or advances to the
company or any other Restricted Subsidiary, (d) transfer any of its properties
or assets to the company or any other Restricted Subsidiary or (e) guarantee any
Indebtedness of the company or any other Restricted Subsidiary, except for such
encumbrances or restrictions existing under or by reason of (i) applicable law
or any applicable rule, regulation or order, (ii) customary nonassignment
provisions of any contract or any lease governing a leasehold interest of the
company or any Restricted Subsidiary, (iii) customary restrictions on transfers
of property subject to a Lien permitted under the Indenture (including purchase
money Liens permitted under the Indenture), (iv) any agreement or other
instrument
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of a person acquired by the company or any Restricted Subsidiary in existence at
the time of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any person, or the properties or
assets of any person, other than the person, or the property or assets of the
person, so acquired, (v) an agreement entered into for the sale or disposition
of Capital Stock or assets of a Restricted Subsidiary or an agreement entered
into for the sale of specified assets (in either case, so long as such
encumbrance or restriction, by its terms, terminates on the earlier of the
termination of such agreement or the consummation of such agreement and so long
as such restriction applies only to the Capital Stock or assets to be sold),
(vi) any agreement in effect on January 28, 1999, (vii) the Indenture and the
Guarantees, and (viii) any agreement that amends, extends, refinances, renews or
replaces any agreement described in the foregoing clauses; provided that the
terms and conditions of any such agreement are not materially less favorable to
the holders of the notes with respect to such encumbrances or restrictions than
those under or pursuant to the agreement amended, extended, refinanced, renewed
or replaced.
Limitation on Designations of Unrestricted Subsidiaries. Our company may
designate after the Issue Date any Restricted Subsidiary as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(ii) the company would be permitted to make an Investment (other than
a Permitted Investment covered by clause (x) of the definition thereof) at
the time of Designation (assuming the effectiveness of such Designation)
pursuant to the first paragraph of "-- Limitation on Restricted Payments"
above in an amount (the "Designation Amount") equal to the Fair Market
Value of the company's interest in such Subsidiary on such date; and
(iii) the company would be permitted under the Indenture to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described under "-- Limitation on Indebtedness" at
the time of such Designation (assuming the effectiveness of such
Designation).
In the event of any such Designation, the company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
"-- Limitation on Restricted Payments" for all purposes of the Indenture in the
Designation Amount.
Our ability to designate a Subsidiary as an Unrestricted Subsidiary allows
us to more freely pursue additional financing for future projects. To the extent
we participate in projects that require financing in addition to the notes, we
may need the ability to create Subsidiaries that can pursue the project
financing without being subject to the restrictions of the indenture and the
obligations under the guarantees. A Subsidiary that is not subject to the
restrictions of the indenture and the guarantees may be able to procure project
financing more easily than a Subsidiary that has guaranteed the notes.
We shall not, and shall not cause or permit any Restricted Subsidiary to,
at any time (x) provide credit support for or subject any of its property or
assets (other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final Stated Maturity upon the occurrence of a default with
respect to any Indebtedness of any Unrestricted Subsidiary (including any right
to take enforcement action against such Unrestricted Subsidiary). All
Subsidiaries of Unrestricted Subsidiaries shall automatically be deemed to be
Unrestricted Subsidiaries.
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Our company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred under the Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the company delivered to the Trustee certifying compliance with the foregoing
provisions.
Limitation on the Issuance of Subordinated Indebtedness. Our company will
not, and will not permit any Guarantor to, directly or indirectly, incur any
Indebtedness (including Acquired Indebtedness) that is expressly subordinate or
junior in right of payment to any other Indebtedness of the company or such
Guarantor and senior in right of payment to the notes or the Guarantee of such
Guarantor, as the case may be.
Additional Subsidiary Guarantees. If the company or any of its Restricted
Subsidiaries acquires, creates or designates another Restricted Subsidiary
organized under the laws of the United States or any possession or territory
thereof, any State of the United States or the District of Columbia, then such
newly acquired, created or designated Restricted Subsidiary shall, within 30
days after the date of its acquisition, creation or designation, whichever is
later, execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall
unconditionally guarantee (on a senior subordinated basis) all of the company's
obligations under the notes and the Indenture on the terms set forth in the
Indenture; provided, that such Restricted Subsidiary shall not be obligated to
become a Guarantor in the manner set forth above if such Restricted Subsidiary
is not, either individually or when considered in the aggregate with all other
Restricted Subsidiaries that are not Guarantors, a Significant Subsidiary.
Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of
the Indenture. The Indenture will also provide that any Restricted Subsidiary
that is not a Guarantor shall become a Guarantor in the manner provided above
within 30 days of such time as it becomes, either individually or when
considered in the aggregate with all other Restricted Subsidiaries that are not
Guarantors, a Significant Subsidiary. Our company at its option may also cause
any other Restricted Subsidiary to so become a Guarantor.
Reporting Requirements. For so long as the notes are outstanding, whether
or not the company is subject to Section 13(a) or 15(d) of the Exchange Act, or
any successor provision thereto, the company shall file with the SEC (if
permitted by SEC practice and applicable law and regulations) the annual
reports, quarterly reports and other documents which the company would have been
required to file with the SEC pursuant to such Section 13(a) or 15(d) or any
successor provision thereto if the company were so subject, such documents to be
filed with the SEC on or prior to the respective dates (the "Required Filing
Dates") by which the company would have been required so to file such documents
if the company were so subject. Our company shall also in any event within 15
days after each Required Filing Date (whether or not permitted or required to be
filed with the SEC) file with the Trustee, copies of the annual reports,
quarterly reports and other documents which the company would be required to
file with the SEC if the notes were then registered under the Exchange Act and
to make such information available to holders of notes upon request. In
addition, if the company is not subject to the reporting requirements of the
Exchange Act, for so long as any notes remain outstanding, the company will
furnish to the holders of notes and prospective investors, upon their request,
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Indenture will provide that the company will not, in any transaction or
series of transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or
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substantially all of its properties and assets to, any person or persons, and
the company will not permit any of its Restricted Subsidiaries to enter into any
such transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of the company and its Restricted Subsidiaries, on a
consolidated basis, to any other person or persons, unless at the time and after
giving effect thereto (a) either (i) if the transaction or series of
transactions is a merger or consolidation, the company or such Restricted
Subsidiary, as the case may be, shall be the surviving person of such merger or
consolidation, or (ii) the person formed by such consolidation or into which the
company or such Restricted Subsidiary, as the case may be, is merged or to which
the properties and assets of the company or such Restricted Subsidiary, as the
case may be, are disposed of (any such surviving person or transferee person
being the "Surviving Entity") shall be a corporation organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia and shall expressly assume by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the company under the notes, the Indenture and the
registration rights agreement, and in each case, the Indenture, the notes and
the registration rights agreement shall remain in full force and effect; (b)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions), no Default or Event of Default shall have occurred
and be continuing; and (c) except in the case of any merger of the company with
any Restricted Subsidiary or any merger of Guarantors (and, in each case, no
other persons), the company or the Surviving Entity, as the case may be, after
giving effect to such transaction or series of transactions on a pro forma basis
on the assumption that the transaction or transactions had occurred on the first
day of the period of four fiscal quarters ending immediately prior to the
consummation of such transaction or transactions, with the appropriate
adjustments with respect to such transaction or transactions being included in
such pro forma calculation, could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in accordance with the "Limitation of Indebtedness"
covenant described above (assuming a market rate of interest with respect to
such additional Indebtedness).
In connection with any consolidation, merger, sale, assignment, conveyance,
transfer, lease, assignment or other disposition contemplated hereby, the
company shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an officers' certificate and
an opinion of counsel, each stating that such consolidation, merger, transfer,
lease, assignment or other disposition and the supplemental indenture in respect
thereof comply with the requirements under the Indenture.
Upon any such consolidation, merger, or any sale, assignment, conveyance,
transfer, lease or other disposition in accordance with the immediately
preceding paragraphs, the successor person formed by such consolidation or into
which the company or a Restricted Subsidiary, as the case may be, is merged or
the successor person to which such sale, assignment, conveyance, transfer, lease
or other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of the company under the notes, the Indenture
and/or the registration rights agreement, as the case may be, with the same
effect as if such successor had been named as the company in the notes, the
Indenture and/or the registration rights agreement, as the case may be, and,
except in the case of a lease, the company or such Restricted Subsidiary shall
be released and discharged from its obligations thereunder.
The Indenture will provide that for all purposes of the Indenture and the
notes (including the provision of this covenant and the covenants described in
"-- Material Covenants -- Limitation on Indebtedness," "-- Limitation on
Restricted Payments," and "-- Limitation on Liens"), Subsidiaries of any
surviving person shall, upon such transaction or series of related transactions,
become Restricted Subsidiaries unless and until designated Unrestricted
Subsidiaries pursuant to and in accordance with "-- Limitation on Designations
of Unrestricted Subsidiaries" and all Indebtedness, and all Liens on property or
assets, of the company and the Restricted Subsidiaries in existence immediately
after such transaction or series of related transactions will be deemed to have
been incurred upon such transaction or series of related transactions.
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EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any,
when due and payable, on any of the notes (at Stated Maturity, upon
optional redemption, required purchase or otherwise); or
(ii) default in the payment of an installment of interest on any of
the notes, when due and payable, for 30 days; or
(iii) default in the performance, or breach, of any covenant or
agreement of the company under the Indenture (other than a default in the
performance or breach of a covenant or agreement which is specifically
dealt with in clause (i), (ii) or (iv)) and such default or breach shall
continue for a period of 30 days after written notice has been given, by
certified mail, (x) to the company by the Trustee or (y) to the company and
the Trustee by the holders of at least 25% in aggregate principal amount of
the outstanding notes; or
(iv) (a) there shall be a default in the performance or breach of the
provisions of "-- Consolidation, Merger and Sale of Assets, Etc."; (b) the
company shall have failed to make or consummate an Asset Sale Offer in
accordance with the provisions of the Indenture described under
"-- Material Covenants -- Dispositions of Proceeds of Asset Sales"; or (c)
the company shall have failed to make or consummate a Change of Control
Offer in accordance with the provisions of the Indenture described under
"-- Change of Control"; or
(v) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the company or any Restricted Subsidiary then has outstanding Indebtedness
in excess of $10 million, individually or in the aggregate, and (a) such
default or defaults include a failure to make a payment of principal, (b)
such Indebtedness is already due and payable in full or (c) such default or
defaults have resulted in the acceleration of the maturity of such
Indebtedness; provided that if any such default is cured or waived or any
such acceleration rescinded, or such Indebtedness is repaid, within a
period of 10 days from the continuation of such default beyond the
applicable grace period or the occurrence of such acceleration, as the case
may be, such Event of Default under the Indenture and any consequential
acceleration of the notes shall be automatically rescinded, so long as such
rescission does not conflict with any judgment or decree; or
(vi) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $10 million, either individually or in the
aggregate (net of applicable insurance coverage which is acknowledged in
writing by the insurer or which has been determined to be applicable by a
final nonappealable determination by a court of competent jurisdiction),
shall be entered against the company or any Restricted Subsidiary or any of
their respective properties and shall not be discharged and there shall
have been a period of 60 days after the date on which any period for appeal
has expired and during which a stay of enforcement of such judgment, order
or decree shall not be in effect; or
(vii) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of the company or any Significant
Subsidiary or one or more Restricted Subsidiaries that, taken together,
would constitute a Significant Subsidiary, in an involuntary case or
proceeding under the Federal Bankruptcy Code or any other federal, state or
foreign bankruptcy, insolvency, reorganization or similar law or (B)
adjudging the company or any Significant Subsidiary or one or more
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the company or any Significant Subsidiary or one or more
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, under the Federal Bankruptcy Code or any other
similar federal, state or foreign law, or appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or other similar official)
of the company or any Significant Subsidiary or one or more Restricted
Subsidiaries that, taken together, would constitute a Significant
Subsidiary or of
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any substantial part of any of their properties, or ordering the winding up
or liquidation of any of their affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days;
or
(viii) the institution by the company or any Significant Subsidiary or
one or more Restricted Subsidiaries that, taken together, would constitute
a Significant Subsidiary of a voluntary case or proceeding under the
Federal Bankruptcy Code or any other similar federal, state or foreign law
or any other case or proceedings to be adjudicated a bankrupt or insolvent,
or the consent by the company or any Significant Subsidiary or one or more
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary to the entry of a decree or order for relief in
respect of the company or such Significant Subsidiary or group of
Restricted Subsidiaries in any involuntary case or proceeding under the
Federal Bankruptcy Code or any other similar federal, state or foreign law
or to the institution of bankruptcy or insolvency proceedings against the
company or such Significant Subsidiary or group of Restricted Subsidiaries,
or the filing by the company or any Significant Subsidiary or one or more
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
similar federal, state or foreign law, or the consent by it to the filing
of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of any of the company or any Significant Subsidiary
or one or more Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due or the taking of corporate action by the
company or any Significant Subsidiary or one or more Restricted
Subsidiaries that, taken together, would constitute a Significant
Subsidiary in furtherance of any such action; or
(ix) any of the Guarantees of any Significant Subsidiary or one or
more Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary ceases to be in full force and effect or any of such
Guarantees is declared to be null and void and unenforceable or any of such
Guarantees is found to be invalid or any of such Guarantors denies its
liability under its Guarantee (other than by reason of release of such
Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than those covered by clause (vii) or (viii)
above) shall occur and be continuing, the Trustee, by notice to the company, or
the holders of at least 25% in aggregate principal amount of the notes then
outstanding, by notice to the Trustee and the company, may declare the principal
of, premium, if any, and accrued and unpaid interest, if any, on all of the
outstanding notes due and payable immediately, upon which declaration, all
amounts payable in respect of the notes shall be due and payable. If an Event of
Default specified in clause (vii) or (viii) above occurs and is continuing, then
the principal of, premium, if any, and accrued and unpaid interest, if any, on
all the outstanding notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding notes, by written notice to the company and the Trustee, may rescind
such declaration if: (a) the company or any Guarantor has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
all notes, (iii) the principal of and premium, if any, on any notes which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the notes, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest and overdue principal at
the rate borne by the notes which has become due otherwise than by such
declaration of acceleration; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (c) all
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Events of Default, other than the non-payment of principal of, premium, if any,
and interest on the notes that has become due solely by such declaration of
acceleration, have been cured or waived.
No holder of any of the notes will have any right to institute any
proceeding with respect to the Indenture or any remedy thereunder, unless the
holders of at least 25% in aggregate principal amount of the outstanding notes
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee under the notes and the Indenture, the
Trustee has failed to institute such proceeding within 45 days after receipt of
such notice and the Trustee, within such 45-day period, has not received
directions inconsistent with such written request by holders of a majority in
aggregate principal amount of the outstanding notes. Such limitations will not
apply, however, to a suit instituted by a holder of a note for the enforcement
of the payment of the principal of, premium, if any, or interest on such note on
or after the respective due dates expressed in such note. These limitations
would also not affect a noteholder's ability to enforce the provisions of the
guarantee on or after the respective due dates expressed in a note.
During the existence of an Event of Default, the Trustee will be required
to exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
under the Indenture will not be under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each holder of the notes notice of the
Default or Event of Default within 30 days after obtaining knowledge thereof.
Except in the case of a Default or an Event of Default in payment of principal
of, premium, if any, or interest on any notes, the Trustee may withhold the
notice to the holders of such notes if a committee of its trust officers in good
faith determines that withholding the notice is in the interest of the note
holders.
The Indenture will require the company to furnish to the Trustee annual and
quarterly statements as to the performance by the company of its obligations
under the Indenture and as to any default in such performance. Our company also
will be required to notify the Trustee within five business days of any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
NO LIABILITY FOR CERTAIN PERSONS
No director, officer, employee or stockholder of the company, nor any
director, officer or employee of any Guarantor, as such, will have any liability
for any obligations of the company or any Guarantor under the notes, the
Guarantees or the Indenture based on, in respect of or by reason of such
obligations or their creation. Each holder by accepting a note waives and
releases all such liability. The foregoing waiver and release are an integral
part of the consideration for the issuance of the notes. Such waiver may not be
effective to waive liabilities under the federal securities laws.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Our company may, at its option and at any time, terminate the obligations
of the company and the Guarantors with respect to the outstanding notes ("legal
defeasance") to the extent set forth below. Such legal defeasance means that the
company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding notes, except for (i) the rights of holders of
outstanding notes to receive solely from the trust fund described below payment
in respect of the principal of, premium, if any, and interest on such notes when
such payments are due, (ii) the company's obligations to issue
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temporary notes, register the transfer or exchange of any notes, replace
mutilated, destroyed, lost or stolen notes and maintain an office or agency for
payments in respect of the notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the legal defeasance provisions of the
Indenture. In addition, the company may, at its option and at any time, elect to
terminate the obligations of the company and the Guarantors with respect to
certain covenants that are set forth in the Indenture, some of which are
described under "-- Material Covenants" above, and any subsequent failure to
comply with such obligations shall not constitute a Default or an Event of
Default with respect to the notes ("covenant defeasance").
In order to exercise either legal defeasance or covenant defeasance, (i)
the company or any Guarantor must irrevocably deposit with the Trustee, in
trust, for the benefit of the holders of the notes, cash in United States
dollars, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding notes to
redemption or maturity (except lost, stolen or destroyed notes which have been
replaced or paid); (ii) the company shall have delivered to the Trustee an
opinion of counsel to the effect that the holders of the outstanding notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such legal defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such legal defeasance or covenant defeasance had not
occurred (in the case of legal defeasance, such opinion must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax laws); (iii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default relating to the borrowing of funds to be applied to such
deposit); (iv) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities of the
company; (v) such legal defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the company is a party or by which it is bound; (vi) the
company shall have delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (vii) the company shall
have delivered to the Trustee an officers' certificate stating that the deposit
was not made by the company with the intent of preferring the holders of the
notes over the other creditors of the company with the intent of hindering,
delaying or defrauding creditors of the company or others; (viii) no event or
condition shall exist that would prevent the company from making payments of the
principal of, premium, if any, and interest on the notes on the date of such
deposit or at any time ending on the 91st day after the date of such deposit;
and (ix) the company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent under the Indenture to either legal defeasance or covenant defeasance,
as the case may be, have been complied with.
Our company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the Indenture) as to all outstanding notes
when: (i) either (a) all the notes theretofore authenticated and delivered
(except lost, stolen or destroyed notes which have been replaced or repaid and
notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the company and thereafter repaid to the company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all notes not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed notes which have been replaced or
paid) have become due and payable or will become due and payable at their Stated
Maturity within one year, or are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the serving of notice of
redemption by the Trustee in the name, and at the
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expense, of the company, and the company or any Guarantor has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the notes to the date of deposit (in the case
of notes which have become due and payable) or to the Stated Maturity or date
for redemption, as the case may be, together with irrevocable instructions from
the company directing the Trustee to apply such funds to the payment thereof at
Stated Maturity or redemption, as the case may be; (ii) the company or the
Guarantors have paid all other sums payable under the Indenture by the company
or the Guarantors; and (iii) the company has delivered to the Trustee an
officers' certificate and an opinion of counsel which, taken together, state
that all conditions precedent under the Indenture relating to the satisfaction
and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, the company and the Guarantors, when authorized by a
resolution of its Board of Directors, and the Trustee may, without the consent
of the holders of any outstanding notes, amend or modify the Indenture or the
notes for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act, as long as any
such change does not adversely affect the rights of any holder of notes. Other
amendments and modifications of the Indenture or the notes may be made by the
company, the Guarantors and the Trustee with the consent of the holders of not
less than a majority of the aggregate principal amount of the outstanding notes;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding note affected thereby, (i) change the
Stated Maturity of the principal of, or any installment of interest on, any note
or alter the redemption provisions of the notes, (ii) reduce the principal
amount of (or the premium, if any, on), or interest on, any notes, (iii) change
the currency in which any notes or any premium or the interest thereon is
payable, (iv) reduce the above-stated percentage in principal amount of
outstanding notes that must consent to an amendment or modification of the
Indenture or the notes, (v) impair the right to institute suit for the
enforcement of any payment on or with respect to the notes or the Guarantees,
(vi) reduce the percentage in aggregate principal amount of outstanding notes
necessary to waive compliance with certain provisions of the Indenture or to
waive certain defaults under the Indenture, (vii) amend or modify the obligation
of the company to make and consummate a Change of Control Offer after the
occurrence of a Change of Control or make and consummate the Asset Sale Offer
with respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto, (viii) to modify or amend any
provision of the Indenture relating to the Guarantees in a manner adverse to the
holders of the notes or (ix) modify or change any provision of the Indenture or
the related definitions affecting the subordination or ranking of the notes or
any Guarantee in a manner which adversely affects the note holders.
The holders of not less than a majority in aggregate principal amount of
the outstanding notes may on behalf of the holders of all the notes waive (i)
compliance by the company with certain restrictive provisions of the Indenture
and (ii) any past defaults under the Indenture, except a default in the payment
of the principal of, premium, if any, or interest on any note, or in respect of
a covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each note outstanding.
FURTHER ISSUES
We may from time to time, without notice to or the consent of the holders
of the notes, create and issue further notes ranking equally and ratably with
the notes we are offering hereby in all respects, so that such further notes
shall be consolidated and form a single series with the notes and shall have the
same terms as to status, redemption or otherwise as the notes.
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THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein will contain limitations on the rights of the Trustee
thereunder, should it become a creditor of the company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Indenture will permit
the Trustee to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined in the Trust Indenture Act) it
must eliminate such conflict or resign.
State Street Bank and Trust Company, Goodwin Square, 225 Asylum Street,
23rd Floor, Hartford, Connecticut 06103, will be the Trustee under the
Indenture. State Street is also the trustee under the Indenture governing our
$150 million principal amount of 9 3/8% senior subordinated notes due 2009 that
we issued in 1999.
GOVERNING LAW
The Indenture and the notes will be governed by the laws of the State of
New York.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes or is merged into a Subsidiary of any other person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of Voting Stock, by agreement or otherwise;
provided that beneficial ownership of 10% of more of the Voting Stock of a
person shall be deemed to be control.
"Asset Acquisition" means (a) an Investment by or company or any Restricted
Subsidiary in any other person pursuant to which such person shall become a
Restricted Subsidiary, or shall be merged with or into the company or any
Restricted Subsidiary, or (b) the acquisition by the company or any Restricted
Subsidiary of the assets of any person which constitute all or substantially all
of the assets of such person, any division or line of business of such person
or, other than in the ordinary course of business, any other properties or
assets of such person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition by the company or any Restricted Subsidiary to any person other than
the company or a Restricted Subsidiary, of (a) any Capital Stock of any
Restricted Subsidiary; (b) all or substantially all of the properties and assets
of any division or line of business of the company or any Restricted Subsidiary;
or (c) any other properties or assets of the company or any Restricted
Subsidiary outside of the ordinary course of business, other than (i) sales of
obsolete, damaged or used equipment or other equipment or inventory sales in the
ordinary course of business, (ii) sales of assets in one or a series of related
transactions for an aggregate consideration of less than $2 million and (iii)
sales of accounts receivable for financing purposes. For the purposes of this
definition, the term "Asset Sale" shall not include (i) any sale, issuance,
conveyance, transfer, lease or other disposition of properties or assets that is
governed by the provisions described under "-- Consolidation, Merger, Sale of
Assets, Etc.," (ii) a Restricted Payment that is permitted by the
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covenant described under "-- Material Covenants -- Limitation on Restricted
Payments," or (iii) the trade or exchange by the company or any Restricted
Subsidiary of any property or assets owned or held by the company or such
Restricted Subsidiary for any property or assets owned or held by another
person, provided that the Fair Market Value of the properties traded or
exchanged by the company or such Restricted Subsidiary (including any cash or
Cash Equivalents to be delivered by the company or such Restricted Subsidiary)
is reasonably equivalent to the Fair Market Value of the properties (together
with any cash or Cash Equivalents) to be received by the company or such
Restricted Subsidiary, and provided further that any such cash or Cash
Equivalents shall be deemed to constitute Net Cash Proceeds of an Asset Sale for
purposes of the covenant described under "Material Covenants -- Disposition of
Proceeds of Asset Sales."
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years (and any portion thereof) from such
date of such determination to the date or dates of each successive scheduled
principal payment (including, without limitation, any sinking fund or mandatory
redemption payment requirements) of such Indebtedness, and (b) the amount of
each such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means the board of directors of a company or its
equivalent, including managers of a limited liability company, general partners
of a partnership or trustees of a business trust, or any duly authorized
committee thereof.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock or equity participations, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock and including, without
limitation, with respect to partnerships, limited liability companies or
business trusts, ownership interests (whether general or limited) and any other
interest or participation that confers on a person the right to receive a share
of the profits and losses of, or distributions of assets of, such partnerships,
limited liability companies or business trusts.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purpose of
the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (a) any evidence of Indebtedness,
maturing not more than one year after such time, issued or guaranteed by the
United States Government or any agency thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof), (b)
commercial paper, maturing not more than one year from the date of issue, rated
at least A-2 by Standard & Poor's Ratings Group or P-2 by Moody's Investors
Service, Inc., (c) any certificate of deposit (or time deposits represented by
such certificates of deposit) or bankers acceptance, maturing not more than one
year after such time, or overnight Federal Funds transactions that are issued or
sold by a banking institution that is a member of the Federal Reserve System and
has a combined capital and surplus and undivided profits of not less than $500
million, (d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered into
with any bank meeting the specifications of clause (c) above, and (e)
investments in funds investing primarily in investments of the types described
in clauses (a) through (d) above.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total Voting Stock of
the company; (b) the company consolidates with, or merges with or into, another
person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or
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substantially all of its assets to any person, or any person consolidates with,
or merges with or into, the company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the company is converted
into or exchanged for Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation and (ii) immediately after such transaction
no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting Stock of the
surviving or transferee corporation; (c) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
company was approved by a vote of 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the company then in office;
or (d) the company is liquidated or dissolved or adopts a plan of liquidation.
"Common Stock" means the common stock of the company, par value $0.01 per
share, and the company's Restricted Voting Common Stock, par value $0.01 per
share.
"Consolidated Cash Flow Available for Fixed Charges" as of any date of
determination means, with respect to any person for any period, the sum of,
without duplication, the amounts for such period, taken as a single accounting
period, of (a) Consolidated Net Income, (b) Consolidated Non-cash Charges, (c)
Consolidated Interest Expense, and (d) Consolidated Income Tax Expense (other
than income tax expense (either positive or negative) attributable to
extraordinary gains or losses).
"Consolidated Fixed Charge Coverage Ratio" as of any date of determination
means, with respect to any person, the ratio of the aggregate amount of
Consolidated Cash Flow Available for Fixed Charges of such person for the four
full fiscal quarters, treated as one period, for which financial information in
respect thereof is available immediately preceding the date of the transaction
(the "Transaction Date") giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (such four full fiscal quarter period being referred
to herein as the "Four Quarter Period") to the aggregate amount of Consolidated
Fixed Charges of such person for the Four Quarter Period. For purposes of making
the computation referred to above, Consolidated Cash Flow Available for Fixed
Charges and Consolidated Fixed Charges shall be calculated giving pro forma
effect (in a manner consistent with Rule 11-02 of Regulation S-X) to the
following events (without duplication): (i) any Asset Sale or Asset Acquisition
occurring since the first day of the Four Quarter Period (including to the date
of calculation) as if such acquisition or disposition occurred at the beginning
of the Four Quarter Period (including giving effect to (A) the amount of any
reduction in expenses related to any compensation, remuneration or other benefit
paid or provided to any employee, consultant, Affiliate or equity owner of the
entity involved in any such Asset Sale or Asset Acquisition to the extent such
costs are eliminated or reduced (or public announcement has been made of the
intent to eliminate or reduce such costs) prior to the date of such calculation
and not replaced and (B) the amount of any reduction in general, administrative
or overhead costs of the entity involved in any such Asset Sale or Asset
Acquisition), (ii) the incurrence of Indebtedness giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness were incurred at the beginning of the Four
Quarter Period, (iii) the incurrence, repayment or retirement of any other
Indebtedness by the company and its Restricted Subsidiaries since the first day
of the Four Quarter Period and prior to the date of making this calculation as
if such Indebtedness or obligations were incurred, repaid or retired at the
beginning of the Four Quarter Period (except that, in making such computation,
the amount of Indebtedness under any revolving credit facility shall be computed
based upon the average daily balance of such Indebtedness during the Four
Quarter Period), (iv) elimination of Consolidated Cash Flow Available for Fixed
Charges and Consolidated Fixed
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Charges attributable to discontinued operations, as determined in accordance
with GAAP, but, with respect to Consolidated Fixed Charges, only to the extent
that the obligations giving rise to such Consolidated Fixed Charges will not be
obligations of the referent person or any of its Restricted Subsidiaries
following the Transaction Date. In calculating Consolidated Fixed Charges for
purposes of determining the denominator (but not the numerator) of the
Consolidated Fixed Charge Coverage Ratio, (i) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
Eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period. If such person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third person, the above
provisions shall give effect to the incurrence of such guaranteed Indebtedness
as if such person or such Subsidiary had directly incurred or otherwise assumed
such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense, and (ii) the aggregate amount of dividends and
other distributions paid or accrued during such period in respect of Redeemable
Capital Stock or Preferred Stock of such person and its Restricted Subsidiaries
on a consolidated basis.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of such
person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense of such person
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount and capitalized debt issuance costs, (b) the net
cost under Interest Rate Protection Obligations (including any amortization of
discounts), (c) the interest portion of any deferred payment obligation, (d) all
commissions, discounts and other fees and charges owed with respect to letters
of credit, bankers' acceptance financing or similar facilities and (e) all
accrued interest and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any
period, the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses (net of fees and expenses
relating to the transaction giving rise thereto), (ii) the portion of net income
of such person and its Restricted Subsidiaries allocable to minority interests
in unconsolidated persons or to Investments in Unrestricted Subsidiaries to the
extent that cash dividends or distributions have not actually been received by
such person or one of its Restricted Subsidiaries, (iii) net income (or loss) of
any person combined with such person or one of its Restricted Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) gains or losses in respect of any Asset Sales by such person
or one of its Restricted Subsidiaries (net of fees and expenses relating to the
transaction giving rise thereto), on an after-tax basis, (v) the net income of
any Restricted Subsidiary of such person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permitted, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
stockholders and (vi) any gain or loss realized as a result of the cumulative
effect of a change in accounting principles.
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"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization (including amortization of
goodwill and other intangibles) and other non-cash charges of such person and
its Restricted Subsidiaries reducing Consolidated Net Income of such person and
its Restricted Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such non-cash charges constituting an
extraordinary item or loss).
"Credit Facility" means the Credit Agreement, dated as of May 22, 2001,
among our company, The Chase Manhattan Bank, as Administrative Agent and the
banks named therein (which replaces the Credit Agreement dated as of July 30,
1998 among the company, NationsBank, N.A., as the Agent, and the banks named
therein), including any notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended
(including any amendment and restatement thereof), modified, extended, renewed,
refunded, substituted or replaced or refinanced from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder or adding Subsidiaries of the company as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agents, creditor, lender or group of creditors or lenders.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Member of the Board of Directors of the company" means, with
respect to any transaction or series of related transactions, a member of the
Board of Directors of the company other than a member who has any material
direct or indirect financial interest in or with respect to such transaction or
series of related transactions or is an Affiliate, or an officer, director or an
employee of any person (other than the company) who has any direct or indirect
financial interest in or with respect to such transaction or series of related
transactions (in each case other than an interest arising solely from the
beneficial ownership of Capital Stock of the company).
"Event of Default" has the meaning set forth under "-- Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's length free market transaction between a willing seller
and a willing buyer, neither of which is under pressure or compulsion to
complete the transaction. Fair Market Value shall be determined by the Board of
Directors of the company in good faith.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are in effect from time to
time.
"Guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or any
part of such obligation, including, without limiting the foregoing, the payment
of amounts available to be drawn down under letters of credit of another person.
When used as a verb, "guarantee" shall have a corresponding meaning.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such person in
connection with any letters of
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credit, banker's acceptance or other similar credit transaction, if, and to the
extent, any of the foregoing would appear as a liability on a balance sheet of
such person prepared in accordance with GAAP, (b) all obligations of such person
evidenced by bonds, notes, debentures or other similar instruments, if, and to
the extent, any of the foregoing would appear as a liability on a balance sheet
of such person prepared in accordance with GAAP, (c) all indebtedness of such
person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
consignments and trade accounts payable arising in the ordinary course of
business, (d) all Capitalized Lease Obligations of such person, (e) all
Indebtedness referred to in the preceding clauses of other persons and all
dividends of other persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and contract rights) owned by such person, even though such person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the Fair Market Value of such
property or asset or the amount of the obligation so secured), (f) all
guarantees of Indebtedness referred to in this definition by such person, (g)
all Redeemable Capital Stock of such person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued dividends,
and (h) all Interest Rate Protection Obligations of such person; provided,
however, that Indebtedness shall not include (i) Indebtedness arising from
agreements of the company or any Restricted Subsidiary providing for
indemnification, adjustment or holdback of purchase price or similar
obligations, in each case, incurred or assumed in connection with the
acquisition or disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any person acquiring all or any portion
of such business, assets or Subsidiary for the purpose of financing such
acquisition, or (ii) obligations under performance bonds, performance
guarantees, surety bonds, appeal bonds, security deposits or similar
obligations. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be approved in good faith by the board of
directors of the issuer of such Redeemable Capital Stock; provided, however,
that if such Redeemable Capital Stock is not at the date of determination
permitted or required to be repurchased, the "maximum fixed repurchase price"
shall be the book value of such Redeemable Capital Stock.
"Interest Rate Protection Agreement" means, with respect to any person, any
arrangement with any other person whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements or arrangements designed to protect against or manage
such person's exposure to fluctuations in interest rates.
"Interest Rate Protection Obligations" means the net obligations of any
person pursuant to any Interest Rate Protection Agreements.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any other person, provided that the term "Investment" shall not include (a)
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices and (b) Interest Rate Protection Obligations entered into
in the ordinary course of business.
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"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or other
encumbrance upon or with respect to any property of any kind. A person shall be
deemed to own subject to a Lien any property which such person has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"Maturity Date" means February 1, 2009.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof received by the company or any Restricted Subsidiary in the form of cash
or Cash Equivalents including payments in respect of deferred payment
obligations when received in the form of cash or Cash Equivalents (except to the
extent that such obligations are financed or sold with recourse to the company
or any Restricted Subsidiary) net of (i) brokerage commissions and other fees
and expenses (including, without limitation, fees and expenses of legal counsel
and investment bankers, recording fees, transfer fees and appraisers' fees)
related to such Asset Sale, (ii) provisions for all taxes payable as a result of
such Asset Sale, (iii) amounts required to be paid to any person (other than the
company or any Restricted Subsidiary) owning a beneficial interest in the assets
subject to the Asset Sale, (iv) payments made to permanently retire Indebtedness
where payment of such Indebtedness is secured by the assets or properties the
subject of such Asset Sale, and (v) appropriate amounts to be provided by the
company or any Restricted Subsidiary, as the case may be, as a reserve required
in accordance with GAAP against any liabilities associated with such Asset Sale
and retained by the company or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale; provided, however, that any amounts remaining after
adjustments, revaluations or liquidations of such reserves shall constitute Net
Cash Proceeds.
"Pari Passu Indebtedness" means any Indebtedness of the company that is
pari passu in right of payment to the notes.
"Permitted Founder Stock Repurchases" means one or more repurchases by the
company, for an aggregate purchase price not to exceed $10 million since January
29, 1999, of shares of Common Stock owned by former owners of Subsidiaries of
the company, that were, as of the date of acquisition of such stock by such
persons, subject to contractual agreements with the company restricting their
resale.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness of the company and the Guarantors evidenced by the
outstanding notes issued on the Issue Date, the new notes issued in
exchange for those notes and the Guarantees thereof;
(b) Indebtedness of the company and any Guarantor under the Credit
Facility in an aggregate principal amount at any one time outstanding not
to exceed $250 million, less any amounts permanently repaid in accordance
with the covenant described under "-- Material Covenants -- Disposition
of Proceeds of Asset Sales";
(c) Indebtedness of the company or any Guarantor outstanding as of the
Issue Date after giving effect to the application of the proceeds of this
offering as contemplated by this offering memorandum;
(d) Indebtedness of the company or any Restricted Subsidiary incurred
in respect of bankers' acceptances and letters of credit in the ordinary
course of business, including Indebtedness evidenced by letters of credit
issued in the ordinary course of business to support the insurance or
self-insurance obligations of the company or any of its Restricted
Subsidiaries (including to secure workers' compensation and other similar
insurance coverages), in an aggregate amount not to exceed $15 million at
any time, but excluding letters of credit issued in respect of or to secure
money borrowed;
(e) (i) Interest Rate Protection Obligations of the company or a
Guarantor covering Indebtedness of the company or a Guarantor and (ii)
Interest Rate Protection Obligations of any
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Restricted Subsidiary covering Permitted Indebtedness or Acquired
Indebtedness of such Restricted Subsidiary; provided that, in the case of
either clause (i) or (ii), (x) any Indebtedness to which any such Interest
Rate Protection Obligations correspond bears interest at fluctuating
interest rates and is otherwise permitted to be incurred under the
"Limitation on Indebtedness" covenant and (y) the notional principal amount
of any such Interest Rate Protection Obligations that exceeds 105% of the
principal amount of the Indebtedness to which such Interest Rate Protection
Obligations relate shall not constitute Permitted Indebtedness;
(f) Indebtedness of a Restricted Subsidiary owed to and held by the
company or another Restricted Subsidiary, except that (i) any transfer of
such Indebtedness by the company or a Restricted Subsidiary (other than to
the company or another Restricted Subsidiary), (ii) the sale, transfer or
other disposition by the company or any Restricted Subsidiary of Capital
Stock of a Restricted Subsidiary which is owed Indebtedness of another
Restricted Subsidiary such that it shall no longer be a Restricted
Subsidiary and (iii) the designation of a Restricted Subsidiary which is
owed Indebtedness of another Restricted Subsidiary as an Unrestricted
Subsidiary shall, in each case, be an incurrence of Indebtedness by such
Restricted Subsidiary subject to the other provisions of the Indenture;
(g) Indebtedness of the company owed to and held by a Restricted
Subsidiary which is unsecured and expressly subordinated in right of
payment to the payment and performance of the obligations of the company
under the Indenture and the notes, except that (i) any transfer of such
Indebtedness by a Restricted Subsidiary (other than to another Restricted
Subsidiary) and (ii) the sale, transfer or other disposition by the company
or any Restricted Subsidiary of Capital Stock of a Restricted Subsidiary
which is owed Indebtedness of the company such that it shall no longer be a
Restricted Subsidiary and (iii) the designation of a Restricted Subsidiary
which is owed Indebtedness of the company shall, in each case, be an
incurrence of Indebtedness by the company, subject to the other provisions
of the Indenture;
(h) Indebtedness of the company or any Guarantor represented by
Capitalized Lease Obligations, mortgage financings or purchase money
obligations, in each case incurred for the purpose of financing all or any
part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the company or such
Guarantor, in an aggregate principal amount not to exceed $25 million at
any time outstanding;
(i) Subordinated Indebtedness of the company, in an aggregate
principal amount not to exceed $10 million at any time outstanding, that is
convertible into Common Stock and issued in connection with an Asset
Acquisition of a business engaged in the provision of electrical
contracting and maintenance services to the commercial, industrial, power
line and data cabling markets and any other businesses reasonably related
thereto;
(j) Indebtedness of the company, in addition to that described in
clauses (a) through (i) of this definition, in an aggregate principal
amount not to exceed $30 million at any time outstanding;
(k) (i) Indebtedness of the company the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the company or any of the Guarantors incurred pursuant to
the Consolidated Fixed Charge Coverage Ratio test of the proviso of the
"Limitation on Indebtedness" covenant or clause (a), (c) or (k) of this
definition and (ii) Indebtedness of any Guarantor the proceeds of which are
used solely to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of such Guarantor incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio test of the proviso of the
"Limitation on Indebtedness" covenant or clause (c) or (k) of this
definition; provided, however, that (x) the principal amount of
Indebtedness incurred pursuant to this clause (k) (or if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of maturity thereof, the
original issue price of such Indebtedness) shall not exceed the sum of the
principal amount of Indebtedness so refinanced, plus the amount of any
premiums and fees required to be paid in connection with such refinancing
pursuant to the terms of
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such Indebtedness, and (y) any Indebtedness incurred pursuant to this
clause (k) (A) has no scheduled principal payment prior to the 91st day
after the Maturity Date, (B) has an Average Life to Stated Maturity greater
than the remaining Average Life to Stated Maturity of the notes and (C) is
subordinated to the notes or the Guarantees, as the case may be, at least
to the same extent that the Indebtedness being refinanced is subordinated
to the notes or the Guarantees, as the case may be;
(l) Indebtedness of any Restricted Subsidiary that constitutes
Acquired Indebtedness not incurred in contemplation of the acquisition of
such Restricted Subsidiary; provided that such Indebtedness is repaid
within 90 days following the consummation of the Asset Acquisition in which
the company acquired such Restricted Subsidiary; and
(m) Guarantees by the company or guarantees by a Guarantor of
Indebtedness that was permitted to be incurred under the Indenture.
For purposes of determining compliance with the "Limitation on
Indebtedness" covenant, (A) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the clauses
of the preceding paragraph, the company, in its sole discretion, shall classify
such item of Indebtedness and only be required to include the amount and type of
such Indebtedness in one such clause, and (B) the amount of Indebtedness issued
at a price that is either less or greater than the principal amount thereof
shall be equal to the amount of the liability in respect thereof determined in
conformity with GAAP.
"Permitted Investments" means any of the following: (i) Investments in the
company or in a Restricted Subsidiary; (ii) Investments in another person, if as
a result of such Investment (A) such other person becomes a Restricted
Subsidiary or (B) such other person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to the company or a
Restricted Subsidiary; (iii) Investments representing Capital Stock or
obligations issued to the company or any of its Restricted Subsidiaries in
settlement of debts created in the ordinary course of business or claims against
any other person by reason of a composition or readjustment of debt or a
reorganization of any debtor of the company or such Restricted Subsidiary or in
satisfaction of judgments; (iv) Investments in Interest Rate Protection
Agreements on commercially reasonable terms entered into by the company or any
of its Restricted Subsidiaries in the ordinary course of business in connection
with the operations of the business of the company or its Restricted
Subsidiaries to hedge against fluctuations in interest rates on its outstanding
Indebtedness; (v) Investments in the notes; (vi) Investments in Cash
Equivalents; (vii) Investments acquired by the company or any Restricted
Subsidiary in connection with an Asset Sale permitted under "-- Material
Covenants -- Disposition of Proceeds of Asset Sales" to the extent such
Investments are non-cash proceeds as permitted under such covenant; (viii) any
Investment to the extent that the consideration therefor is Capital Stock (other
than Redeemable Capital Stock) of the company; (ix) any loans or other advances
made pursuant to any employee benefit plans (including plans for the benefit of
directors) or employment agreements or other compensation arrangements
(including for the purchase of Capital Stock by such employees), in each case as
approved by the Board of Directors of the company in its good faith judgment,
not to exceed $1 million at any one time outstanding; and (x) other Investments
not to exceed $5 million at any time outstanding.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the date of the Indenture;
(b) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the company or any Restricted Subsidiary, if such Lien does
not attach to any property or assets of the company or any Restricted
Subsidiary other than the property or assets subject to the Lien prior to
such incurrence;
(c) Liens in favor of the company or a Restricted Subsidiary;
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(d) Liens on and pledges of the Capital Stock of any Unrestricted
Subsidiary securing any Indebtedness of such Unrestricted Subsidiary;
(e) Liens for taxes, assessments or governmental charges or claims, to
the extent any such changes or claims constitute Indebtedness, either (i)
not delinquent or (ii) contested in good faith by appropriate proceedings
and as to which the company or its Restricted Subsidiaries shall have set
aside on its books such reserves as may be required pursuant to GAAP;
(f) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance or other
kinds of social security, old age pension or public liability obligations;
(g) Liens to secure Indebtedness (including Capitalized Lease
Obligations) permitted by clause (h) under the definition of Permitted
Indebtedness covering only the assets acquired with such indebtedness;
(h) Liens securing Interest Rate Protection Obligations permitted to
be entered into pursuant to the debt incurrence covenant;
(i) judgment and attachment Liens not giving rise to an Event of
Default or Liens created by or existing from any litigation or legal
proceeding that are currently being contested in good faith by appropriate
proceedings and for which adequate reserves have been made;
(j) Liens in favor of collecting or payor banks having a right of
setoff, revocation, refund or chargeback with respect to money or
instruments of the company or any Subsidiary on deposit with or in
possession of such bank; and
(k) Liens not otherwise permitted by clauses (a) through (j) that are
incurred in the ordinary course of business of the company or any
Restricted Subsidiary with respect to Indebtedness that does not exceed $5
million at any one time outstanding.
"person" means any individual, corporation, partnership (general or
limited), limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock," as applied to any person, means Capital Stock of any
class or series (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such person, over shares
of Capital Stock of any other class or series of such person.
"Qualified Equity Offering" means (i) any public sale of Common Stock of
the company pursuant to a registration statement filed with the SEC in
accordance with the Securities Act (other than any public offerings with respect
to the company's Common Stock registered on Form S-8 or Form S-4) or (ii) any
private placement for aggregate proceeds of at least $25 million to a third
party of Common Stock or Capital Stock (other than Redeemable Capital Stock)
that is convertible into Common Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is or upon the happening of an
event or passage of time would be required to be redeemed prior to the 91st day
after the Maturity Date or is redeemable at the option of the holder thereof at
any time prior to the 91st day after the Maturity Date, or is convertible into
or exchangeable for debt securities at any time prior to the 91st day after the
Maturity Date; provided that Capital Stock will not constitute Redeemable
Capital Stock solely because the holders thereof have the right to require the
company to repurchase or redeem such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale.
"Restricted Subsidiary" means any Subsidiary of the company that is not an
Unrestricted Subsidiary.
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"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of the Indenture.
"Stated Maturity" means, when used with respect to any note or any
installment of interest thereon, the date specified in such note as the fixed
date on which the principal of such note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to the company,
Indebtedness of the company which is expressly subordinated in right of payment
to the notes.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a partnership, limited liability
company, business trust or joint venture, in which such person, one or more
Subsidiaries thereof or such person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, have at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other person performing similar functions). For
purposes of this definition, any directors' qualifying shares or investments by
foreign nationals mandated by applicable law shall be disregarded in determining
the ownership of a Subsidiary.
"Unrestricted Subsidiary" means (i) each Subsidiary of the company
designated as such pursuant to and in compliance with the covenant described
under "-- Material Covenants -- Limitation on Designations of Unrestricted
Subsidiaries" and (ii) each Subsidiary of any Subsidiary described in clause (i)
of this definition.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency), and, with respect to the company, shall be
deemed to include the Common Stock.
BOOK-ENTRY DELIVERY AND FORM
The new notes will be issued in the form of one or more global securities.
The global securities will be deposited with, or on behalf of, DTC and
registered in the name of DTC or its nominee. Except as set forth below, the
global securities may be transferred, in whole and not in part, only to DTC or
another nominee of DTC. Investors may hold their beneficial interests in the
global securities directly through DTC if they have an account with DTC or
indirectly through organizations which have accounts with DTC.
Notes that are issued as described below under "-- Certificated Notes" will
be issued in definitive form. Upon the transfer of notes in definitive form,
such notes will, unless the global securities have previously been exchanged for
notes in definitive form, be exchanged for an interest in the global securities
representing the aggregate principal amount of notes being transferred.
BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Clearstream set forth below are provided solely as a matter of convenience.
These operations and procedures are solely within the control of these
settlement systems and are subject to change by them from time to time. Neither
we nor the initial purchasers take any responsibility for these operations or
procedures, and investors are urged to contact the relevant system or its
participants directly to discuss these matters.
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DTC has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended; and
- a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934.
DTC was created to hold securities for its participants and facilitates the
clearance and settlement of securities transactions between its participants
through electronic book-entry changes to the accounts of its participants, which
eliminates the need for physical transfer and delivery of certificates.
Participants in DTC include securities brokers and dealers, including the
initial purchasers; banks and trust companies; clearing corporations and some
other organizations. Indirect access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies; these indirect
participants clear through or maintain a custodial relationship with a
participant in DTC, either directly or indirectly. Investors who are not DTC
participants may beneficially own securities held by or on behalf of DTC only
through participants or indirect participants in DTC.
We expect that pursuant to procedures established by DTC:
- upon deposit of each global note, DTC will credit the accounts of
participants in DTC designated by the initial purchasers with an interest
in the global note; and
- ownership of the notes will be shown on, and the transfer of ownership of
the notes will be effected only through, records maintained by DTC, with
respect to the interests of participants in DTC, and the records of
participants and indirect participants, with respect to the interests of
persons other than participants in DTC.
- The laws of some jurisdictions may require that some purchasers of
securities take physical delivery of the securities in definitive form.
Accordingly, the ability to transfer interests in the notes represented
by a global note to these persons may be limited. In addition, because
DTC can act only on behalf of its participants, who in turn act on behalf
of persons who hold interests through participants, the ability of a
person having an interest in notes represented by a global note to pledge
or transfer that interest to persons or entities that do not participate
in DTC's system, or to otherwise take actions in respect of that
interest, may be affected by the lack of a physical definitive security
in respect of the interest.
So long as DTC or its nominee is the registered owner of a global note, DTC
or the nominee, as the case may be, will be considered the sole owner or holder
of the notes represented by the global note for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
note:
- will not be entitled to have notes represented by the global note
registered in their names;
- will not receive or be entitled to receive physical delivery of
certificated notes; and
- will not be considered the owners or holders of the notes under the
indenture for any purpose, including with respect to the giving of any
direction, instruction or approval to the trustee under the indenture.
Accordingly, each holder owning a beneficial interest in a global note must
rely on the procedures of DTC and, if the holder is not a participant or an
indirect participant in DTC, on the procedures of the DTC participant through
which the holder owns its interest, to exercise any rights of a holder of notes
under the indenture or the global note. We understand that under existing
industry practice, if we request any action of holders of notes, or a holder
that is an owner of a beneficial interest in a global note desires to take any
action that DTC, as the holder of the global note, is entitled to take, then DTC
would
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authorize its participants to take the action and the participants would
authorize holders owning through participants to take the action or would
otherwise act upon the instruction of such holders. Neither we nor the trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of notes by DTC, or for maintaining, supervising
or reviewing any records of DTC relating to the notes.
Payments with respect to the principal of, and premium, if any, liquidated
damages, if any, and interest on, any notes represented by a global note
registered in the name of DTC or its nominee on the applicable record date will
be payable by the trustee to or at the direction of DTC or its nominee in its
capacity as the registered holder of the global note representing those notes
under the indenture. Under the terms of the indenture, we and the trustee may
treat the persons in whose names the notes, including the global notes, are
registered as the owners of the notes for the purpose of receiving payment on
the notes and for any and all other purposes whatsoever. Accordingly, neither we
nor the trustee has or will have any responsibility or liability for the payment
of amounts to owners of beneficial interests in a global note, including
principal, premium, if any, liquidated damages, if any, and interest. Payments
by the participants and the indirect participants in DTC to the owners of
beneficial interests in a global note will be governed by standing instructions
and customary industry practice and will be the responsibility of the
participants or the indirect participants and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Clearstream will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes, cross-market transfers between the participants in DTC, on the one hand,
and Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary. These
cross-market transactions, however, will require delivery of instructions to
Euroclear or Clearstream, as the case may be, by the counterparty in that system
in accordance with the rules and procedures and within the established
deadlines, Brussels time, of that system. If the transaction meets its
settlement requirements, Euroclear or Clearstream, as the case may be, will
deliver instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
global notes in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any crediting will be reported to the
relevant Euroclear or Clearstream participant, during the securities settlement
processing day, which must be a business day for Euroclear and Clearstream,
immediately following the settlement date of DTC. Cash received in Euroclear or
Clearstream as a result of sales of interest in a global note by or through a
Euroclear or Clearstream participant to a participant in DTC will be received
with value on the settlement date of DTC but will be available in the relevant
Euroclear or Clearstream cash account only as of the business day for Euroclear
or Clearstream following DTC's settlement date.
Although DTC, Euroclear and Clearstream have agreed to the above procedures
to facilitate transfers of interests in the global notes among participants in
DTC, Euroclear and Clearstream, they are under no obligation to perform or to
continue to perform the procedures, and the procedures may be discontinued at
any time. Neither we nor the trustee will have any responsibility for the
performance by DTC, Euroclear or Clearstream or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
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CERTIFICATED NOTES
If:
- DTC notifies us that it is at any time unwilling or unable to continue as
a depositary or DTC ceases to be registered as a clearing agency under
the Securities Exchange Act of 1934 and a successor depositary is not
appointed within 90 days of such notice or cessation;
- we, at our option, notify the trustee in writing that we elect to cause
the issuance of notes in definitive form under the indenture; or
- upon the occurrence of some other events as provided in the indenture;
then, upon surrender by DTC of the global notes, certificated notes will be
issued to each person that DTC identifies as the beneficial owner of the notes
represented by the global notes. Upon the issuance of certificated notes, the
trustee is required to register the certificated notes in the name of that
person or persons, or their nominee, and cause the certificated notes to be
delivered thereto.
Neither we nor the trustee will be liable for any delay by DTC or any
participant or indirect participant in DTC in identifying the beneficial owners
of the related notes and each of those persons may conclusively rely on, and
will be protected in relying on, instructions from DTC for all purposes,
including with respect to the registration and delivery, and the respective
principal amounts, of the notes to be issued.
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FEDERAL INCOME TAX CONSIDERATIONS
FEDERAL INCOME TAX CONSIDERATIONS OF THE EXCHANGE OF OUTSTANDING NOTES FOR NEW
NOTES
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of outstanding notes for new notes, but
does not purport to be a complete analysis of all potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations, Internal Revenue Service rulings and
pronouncements and judicial decisions now in effect, all of which may be subject
to change at any time by legislative, judicial or administrative action. These
changes may be applied retroactively in a manner that could adversely affect a
holder of new notes. The description does not consider the effect of any
applicable foreign, state, local or other tax laws or estate or gift tax
considerations.
We believe that the exchange of outstanding notes for new notes should not
be an exchange or otherwise a taxable event to a holder for United States
federal income tax purposes. Accordingly, a holder should have the same adjusted
issue price, adjusted basis and holding period in the new notes as it had in the
outstanding notes immediately before the exchange.
FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS OF OWNERSHIP AND
DISPOSITION OF NEW NOTES
The following discussion summarizes certain U.S. federal income tax
consequences of the ownership and disposition of the new notes by an initial
holder of outstanding notes who is a non-U.S. holder. This discussion is based
upon the Code, existing and proposed Treasury Regulations, and judicial
decisions and administrative interpretations thereunder, as of the date hereof,
all of which are subject to change, possibly with retroactive effect, or are
subject to different interpretations. We cannot assure you that the Internal
Revenue Service (the "IRS") will not challenge one or more of the tax
consequences described herein, and we have not obtained, nor do we intend to
obtain, a ruling from the IRS or an opinion of counsel with respect to the U.S.
federal tax consequences of acquiring, holding or disposing of the notes.
In this discussion, we do not purport to address all tax considerations
that may be important to a particular non-U.S. holder in light of the non-U.S.
holder's circumstances, or to certain categories of investors (such as certain
financial institutions, insurance companies, tax-exempt organizations, dealers
in securities, persons who hold the notes through partnerships or other
pass-through entities, U.S. expatriates, or persons who hold the new notes as
part of a hedge, conversion transaction, straddle or other risk reduction
transaction) that may be subject to special rules. This discussion is limited to
initial non-U.S. holders who purchased the outstanding notes for cash at the
original offering price and who held those notes and will hold the new notes
received in exchange therefor as capital assets. This discussion also does not
address the tax considerations arising under the laws of any foreign, state or
local jurisdiction.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO YOU OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NEW
NOTES, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL OR FOREIGN TAX
LAWS.
You are a non-U.S. holder for purposes of this discussion if you are not:
- an individual U.S. citizen or resident alien;
- a corporation, or other entity taxable as a corporation for U.S. federal
income tax purposes, that was created or organized in or under U.S. law
(federal or state);
- an estate whose world-wide income is subject to U.S. federal income
taxation; or
- a trust that either is subject to the supervision of a court within the
United States and which has one or more U.S. persons with authority to
control all substantial decisions, or has a valid election in effect
under applicable U.S. Treasury regulation to be treated as a U.S. person.
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If a partnership holds notes, the tax treatment of a partner generally will
depend upon the status of the partner and upon the activities of the
partnership. If you are a partner of a partnership holding outstanding notes, we
suggest that you consult your tax advisor.
U.S. Federal Withholding Tax
The 30% U.S. federal withholding tax will not apply to any payment of
principal or interest (which, for purposes of this discussion, includes the
accrual of original issue discount) to you on the new notes provided that:
- you do not actually (or constructively) own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and the U.S. Treasury regulations;
- you are not a controlled foreign corporation that is related to us
through stock ownership; and
- you are not a bank whose receipt of interest on the new notes is pursuant
to a loan agreement entered into in the ordinary course of business.
In each case, (a) you must provide your name and address on an IRS Form W-8BEN
(or successor form), and certify under penalty of perjury, that you are not a
U.S. person, (b) a financial institution holding the new notes on your behalf
must certify, under penalty of perjury, that it has received an IRS Form W-8BEN
(or successor form) from you and must provide us with a copy, or (c) you must
hold your new notes directly through a "qualified intermediary," and the
qualified intermediary must have sufficient information in its files indicating
that you are a non-U.S. holder. A qualified intermediary is a bank, broker or
other intermediary that is acting out of a non-U.S. branch or office and has
signed an agreement with the IRS providing that it will administer all or part
of the U.S. tax withholding rules under specified procedures.
If you cannot satisfy the requirements described above, payments of
principal and interest made to you will be subject to the 30% U.S. federal
withholding tax, unless you provide us with a properly executed (1) IRS Form
W-8BEN (or successor form) claiming an exemption from (or a reduction of)
withholding under the benefit of a tax treaty or (2) IRS Form W-8ECI (or
successor form) stating that interest paid on the new notes is not subject to
withholding tax because it is effectively connected with your conduct of a trade
or business in the United States.
The 30% U.S. federal withholding tax generally will not apply to any gain
or income that you realize on the sale, exchange, or other disposition of the
new notes.
U.S. Federal Estate Tax
If you are an individual, your estate will not be subject to U.S. federal
estate tax on new notes beneficially owned by you at the time of your death,
provided that (1) you do not own 10% or more of the total combined voting power
of all classes of our voting stock (within the meaning of the Code and the U.S.
Treasury Regulations) and (2) interest on such notes would not have been, if
received at the time of your death, effectively connected with the conduct by
you of a trade or business in the United States.
U.S. Federal Income Tax
If you are engaged in a trade or business in the United States and interest
on the new notes is effectively connected with the conduct of that trade or
business, you will be subject to U.S. federal income tax on the interest on a
net income basis (although exempt from the 30% withholding tax) in the same
manner as if you were a U.S. person as defined under the Code. In addition, if
you are a foreign corporation, you may be subject to a branch profits tax equal
to 30% (or lower applicable treaty rate) of your earnings and profits for the
taxable year, including earnings and profits from an investment in the new
notes, that are effectively connected with the conduct by you of a trade or
business in the United States.
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Any gain or income realized on the sale, exchange, or redemption of the new
notes generally will not be subject to U.S. federal income tax unless:
- that gain or income is effectively connected with the conduct of a trade
or business in the United States by you,
- you are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition, and certain other
conditions are present, or
- the gain represents accrued interest, in which case the rules for
interest would apply.
Backup Withholding and Information Reporting
Backup withholding and information reporting will not apply to payments of
principal and interest on the new notes by us or our agent to you if you certify
as to your non-U.S. holder status under penalties of perjury or you otherwise
qualify for an exemption (provided that neither we nor our agent know or have
reason to know that you are a U.S. person or that the conditions of any other
exemptions are not in fact satisfied).
The payment of the proceeds of the disposition of new notes to or through
the U.S. office of a U.S. or foreign broker will be subject to information
reporting and backup withholding unless you provide the certification described
above or you otherwise qualify for an exemption. The proceeds of a disposition
effected outside the United States by a non-U.S. holder to or through a foreign
office of a broker generally will not be subject to backup withholding or
information reporting. However, if such broker is a U.S. person, a controlled
foreign corporation for U.S. tax purposes, a foreign person 50% or more of whose
gross income from all sources for certain periods is effectively connected with
a trade or business in the United States, or a foreign partnership that is
engaged in the conduct of a trade or business in the United States or that has
one or more partners that are U.S. persons who in the aggregate hold more than
50 percent of the income or capital interests in the partnership, information
reporting requirements will apply unless such broker has documentary evidence in
its files of your non-U.S. status and has no actual knowledge or reason to know
to the contrary or unless you otherwise qualify for an exemption. Any amount
withheld under the backup withholding rules will be refunded or is allowable as
a credit against your federal income tax liability, if any, provided the
required information or appropriate claim for refund is provided to the IRS.
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PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Securities and Exchange
Commission in no action letters issued to third parties, we believe that you may
transfer new notes issued under the exchange offer in exchange for the
outstanding notes if:
- you acquire the new notes in the ordinary course of your business; and
- you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of such new notes.
You may not participate in the exchange offer if you are:
- our "affiliate" within the meaning of Rule 405 under the Securities Act
of 1933; or
- a broker-dealer that acquired outstanding notes directly from us.
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. To date, the staff of the
Securities and Exchange Commission has taken the position that broker-dealers
may fulfill their prospectus delivery requirements with respect to transactions
involving an exchange of securities such as this exchange offer, other than a
resale of an unsold allotment from the original sale of the outstanding notes,
with the prospectus contained in this registration statement. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of new notes received in exchange for
outstanding notes where such outstanding notes were acquired as a result of
market-making activities or other trading activities. We have agreed that, for a
period of up to 180 days after the effective date of this registration
statement, we will make this prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale. In addition,
until such date, all dealers effecting transactions in new notes may be required
to deliver a prospectus.
If you wish to exchange new notes for your outstanding notes in the
exchange offer, you will be required to make representations to us as described
in "Exchange Offer -- Purpose and Effect of the Exchange Offer" and
"-- Procedures for Tendering -- Your Representations to Us" in this prospectus
and in the letter of transmittal. In addition, if you are a broker-dealer who
receives new notes for your own account in exchange for outstanding notes that
were acquired by you as a result of market-making activities or other trading
activities, you will be required to acknowledge that you will deliver a
prospectus in connection with any resale by you of such new notes.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market:
- in negotiated transactions;
- through the writing of options on the new notes or a combination of such
methods of resale;
- at market prices prevailing at the time of resale; and
- at prices related to such prevailing market prices or negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such new notes. Any
broker-dealer that resells new notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933.
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For a period of 180 days after the effective date of this registration
statement, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. We have agreed to pay all expenses
incident to the exchange offer (including the expenses of one counsel for the
holders of the outstanding notes) other than commissions or concessions of any
broker-dealers and will indemnify the holders of the outstanding notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act of 1933.
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LEGAL MATTERS
The validity of the new notes offered in this exchange offer was passed
upon for us by Vinson & Elkins L.L.P.
EXPERTS
The annual consolidated financial statements incorporated by reference in
this prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and included
herein in reliance upon the authority of said firm as experts in giving said
report.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may inspect and copy such material at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as at the SEC's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
World Trade Center, Suite 1300, New York, New York 10048. Please call the SEC at
1-800-SEC-0330 for more information on the public reference rooms. You can also
find our SEC filings at the SEC's website at www.sec.gov and on our website at
www.ielectric.com. Information contained on our website is not part of this
prospectus.
In addition, reports, proxy statements and other information concerning us
can be inspected at the NYSE, 20 Broad Street, New York, New York 10005, where
our common stock is listed.
The following documents we filed with the SEC pursuant to the Exchange Act
are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended September 30,
2000;
2. Proxy Statement dated December 28, 2000 for our Annual Meeting of
Stockholders;
3. Current Report on Form 8-K dated May 24, 2001; and
4. Quarterly Reports on Form 10-Q for the quarters ended December 31,
2000 and March 31, 2001.
All documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this prospectus and prior to the
termination of the notes offering shall be deemed to be incorporated in this
prospectus and to be a part hereof from the date of the filing of such document.
Any statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this prospectus, or in any other subsequently filed
document which is also incorporated or deemed to be incorporated by reference,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this prospectus.
We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request of such person, a copy of any or all
documents incorporated by reference in this prospectus. Requests for such copies
should be directed to John F. Wombwell, Executive Vice President and General
Counsel, Integrated, Electrical Services, Inc., 1800 West Loop South, Suite 500,
Houston, Texas 77027, by mail, and if by telephone at (713) 860-1500.
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:
- inherent uncertainties relating to estimating future results;
- fluctuation in operating results because of downturns in levels of
construction;
- incorrect estimates used in entering into fixed price contracts;
- difficulty in managing the operation and growth of existing and newly
acquired businesses;
- our ability to incur additional debt in order to fund working capital or
acquisitions;
- the high level of competition in the construction industry; and
- seasonality.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
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