1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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INTEGRATED ELECTRICAL SERVICES, INC.*
(Exact name of Registrant as specified in its charter)
DELAWARE 1731 76-0542208
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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515 POST OAK BOULEVARD, SUITE 450
HOUSTON, TEXAS 77027
(713) 860-1500
(Address, including zip code, and telephone number,
including area code, of Registrant's Principal Executive Offices)
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JOHN F. WOMBWELL
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
515 POST OAK BOULEVARD, SUITE 450
HOUSTON, TEXAS 77027
(713) 860-1500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
DAVID P. OELMAN
ANDREWS & KURTH L.L.P.
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002
(713) 220-4200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective Amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(1)
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9 3/8% Series B Senior Notes due
2009............................... $150,000,000 100% $150,000,000 $41,700
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Guarantees of 9 3/8% Series B Senior
Notes due 2009..................... -- -- -- (2)
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(1) Calculated in accordance with Rule 457(f)(2). For purposes of this
calculation, the Offering Price per Series B Note was assumed to be the
stated principal amount of each Series A Note that may be received by the
Registrant in the exchange transaction in which the Series B Notes will be
offered.
(2) Pursuant to Rule 457(n), no registration fee is required for the Guarantees
of the Senior Exchange Notes registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
* The domestic subsidiaries of Integrated Electrical Services, Inc. will
guarantee the securities being registered hereby and therefore are also
registrants. Information about such additional registrants appears on the
following pages.
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ADDITIONAL REGISTRANTS
ACE ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 1731 58-1233590
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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ALADDIN-WARD ELECTRIC & AIR, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 1731 59-2137098
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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AMBER ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 1731 59-1888807
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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ARC ELECTRIC, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0581695
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BACHOFNER ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0593514
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BEXAR ELECTRIC COMPANY, LTD.
(Exact name of registrant as specified in its charter)
TEXAS 1731 74-2767532
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BRINK ELECTRIC CONSTRUCTION CO.
(Exact name of registrant as specified in its charter)
SOUTH DAKOTA 1731 46-0322078
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BW/BEC, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1731 74-2835288
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BW/BEC, L.L.C.
(Exact name of registrant as specified in its charter)
NEVADA 1731 86-0873929
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BW/CEC, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1731 74-2835289
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BW/CEC, L.L.C.
(Exact name of registrant as specified in its charter)
NEVADA 1731 86-0873928
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BW CONSOLIDATED, INC.
(Exact name of registrant as specified in its charter)
NEVADA 1731 74-1769791
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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CALHOUN ELECTRIC COMPANY, LTD.
(Exact name of registrant as specified in its charter)
TEXAS 1731 74-2835450
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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CHARLES P. BAGBY CO., INC.
(Exact name of registrant as specified in its charter)
ALABAMA 1731 63-0751092
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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COMMERCIAL ELECTRICAL CONTRACTORS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0587343
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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CYPRESS ELECTRICAL CONTRACTORS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 72-1028256
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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DANIEL ELECTRICAL OF TREASURE COAST, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 1731 65-0548129
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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DANIEL ELECTRICAL CONTRACTORS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 1731 59-2622624
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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DAVIS ELECTRICAL CONSTRUCTORS, INC.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 1731 57-0474303
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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EAST COAST ELECTRIC CO.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0588022
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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ELECTRO-TECH, INC.
(Exact name of registrant as specified in its charter)
NEVADA 1731 88-0200302
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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FLORIDA INDUSTRIAL ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 1731 59-03508913
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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GENERAL PARTNER, INC.
(Exact name of registrant as specified in its charter)
ALABAMA 1731 63-1080687
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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GOSS ELECTRIC COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0581878
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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HATFIELD ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
ARIZONA 1731 86-0565738
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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HAYMAKER ELECTRIC, LTD.
(Exact name of registrant as specified in its charter)
ALABAMA 1731 63-1044169
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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HOLLAND ELECTRICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0576826
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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HOUSTON-STAFFORD ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1731 74-1774028
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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HOUSTON-STAFFORD ELECTRICAL CONTRACTORS LP
(Exact name of registrant as specified in its charter)
TEXAS 1731 52-2095983
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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HOUSTON-STAFFORD HOLDINGS LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2097492
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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HOUSTON-STAFFORD MANAGEMENT LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2095981
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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HOWARD BROTHERS ELECTRIC CO., INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0570227
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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H. R. ALLEN, INC.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 1731 57-0695117
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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ICS HOLDINGS LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2097490
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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ICS MANAGEMENT LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2114906
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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ICS INTEGRATED COMMUNICATION SERVICES LP
(Exact name of registrant as specified in its charter)
TEXAS 1731 52-2114914
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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IES CONTRACTORS HOLDINGS LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2131430
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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IES CONTRACTORS LP
(Exact name of registrant as specified in its charter)
TEXAS 1731 52-2129299
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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IES CONTRACTORS MANAGEMENT LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2129827
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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IES HOLDINGS LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2097490
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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IES MANAGEMENT LP
(Exact name of registrant as specified in its charter)
TEXAS 1731 76-0569183
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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INTEGRATED COMMUNICATION SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 52-2110684
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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INTEGRATED ELECTRICAL FINANCE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0559059
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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J.W. GRAY ELECTRIC CO., INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0573295
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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J.W. GRAY ELECTRICAL CONTRACTORS LP
(Exact name of registrant as specified in its charter)
TEXAS 1731 52-2097983
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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J. W. GRAY HOLDINGS LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2097988
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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J. W. GRAY MANAGEMENT LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2097977
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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KAYTON ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
NEBRASKA 1731 47-0623159
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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KEY ELECTRICAL SUPPLY, INC.
(Exact name of registrant as specified in its charter)
TEXAS 5063 76-0285442
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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9
MARK HENDERSON, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0576830
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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MENNINGA ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0575872
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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MID-STATES ELECTRIC COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 62-1746956
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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MILLS ELECTRICAL CONTRACTORS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1731 75-1394916
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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MILLS ELECTRICAL HOLDINGS LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2097491
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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MILLS ELECTRIC LP
(Exact name of registrant as specified in its charter)
TEXAS 1731 52-2095984
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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MILLS MANAGEMENT LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2095982
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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10
MUTH ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
SOUTH DAKOTA 1731 46-0324448
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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PAULIN ELECTRIC COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 61-0608088
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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PCX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 3629 74-2905706
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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POLLOCK ELECTRIC INC.
(Exact name of registrant as specified in its charter)
TEXAS 1731 76-0078839
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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POLLOCK SUMMIT ELECTRIC LP
(Exact name of registrant as specified in its charter)
TEXAS 1731 76-0569180
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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POLLOCK SUMMIT HOLDINGS INC.
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2097493
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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PRIMO ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 1731 74-2902099
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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RAINES ELECTRIC CO., INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0581935
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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RAINES ELECTRIC LP
(Exact name of registrant as specified in its charter)
TEXAS 1731 52-2132532
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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RAINES HOLDINGS LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2132528
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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RAINES MANAGEMENT LLC
(Exact name of registrant as specified in its charter)
ARIZONA 1731 52-2132530
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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REYNOLDS ELECTRIC CORP.
(Exact name of registrant as specified in its charter)
ARIZONA 1731 86-0300869
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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RKT ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0585981
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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ROCKWELL ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0593890
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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12
RODGERS ELECTRIC COMPANY, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 1731 91-1004905
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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SPECTROL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0576823
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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SPOOR ELECTRIC, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 1731 74-2899568
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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SUMMIT ELECTRIC OF TEXAS, INCORPORATED
(Exact name of registrant as specified in its charter)
TEXAS 1731 76-0214796
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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T&H ELECTRICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1731 76-0583746
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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THOMAS POPP & COMPANY
(Exact name of registrant as specified in its charter)
OHIO 1731 31-1112666
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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THURMAN & O'CONNELL CORPORATION
(Exact name of registrant as specified in its charter)
KENTUCKY 1731 61-1145474
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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13
WRIGHT ELECTRICAL CONTRACTING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1731 63-1203022
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number Identification No.)
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14
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH , 1999
PROSPECTUS
[IES LOGO]
OFFER TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF 9 3/8% SERIES B NOTES DUE 2009
FOR EACH $1,000 PRINCIPAL AMOUNT OF OUTSTANDING
9 3/8% SERIES A NOTES DUE 2009
($150,000,000 IN PRINCIPAL AMOUNT OUTSTANDING)
THE EXCHANGE OFFER
- - Expires 5:00 p.m., New York City time, , 1999, unless
extended.
- - Subject to certain customary conditions, which we may waive, the exchange
offer is not conditioned upon a minimum aggregate principal amount of existing
notes being tendered.
- - All outstanding notes validly tendered and not withdrawn will be exchanged.
- - Not subject to any condition other than that the exchange offer not violate
applicable law or any applicable interpretation of the Staff of the Securities
and Exchange Commission ("SEC" or "Commission").
THE EXCHANGE NOTES
- - The terms of the exchange notes to be issued in the exchange offer are
substantially identical to the existing notes, except that we have registered
the exchange notes with the SEC. In addition, the exchange notes will not be
subject to certain transfer restrictions, and certain provisions relating to
an increase in the stated interest rate on the existing notes will be
eliminated.
- - Interest on the exchange notes will accrue from January 28, 1999 at the rate
of 9 3/8% per annum, payable semi-annually in arrears on each February 1 and
August 1, beginning August 1, 1999.
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YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 16 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The information in this prospectus is not complete and may be changed. We
may not exchange these securities until the registration statement filed with
the SEC is effective. This prospectus is not an offer to exchange these
securities and it is not soliciting an offer to exchange these securities in any
state where the exchange is not permitted.
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THE DATE OF THIS PROSPECTUS IS , 1999.
15
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH
FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR
A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information......................... 1
Incorporation of Certain Documents by Reference............. 2
Summary..................................................... 3
Risk Factors................................................ 6
The Exchange Offer.......................................... 22
Use of Proceeds............................................. 30
Capitalization.............................................. 30
Selected Financial Data..................................... 31
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 33
Business.................................................... 41
Management.................................................. 50
Principal Stockholders...................................... 52
Description of Other Debt................................... 53
Description of the Notes.................................... 55
Plan of Distribution........................................ 85
Legal Matters............................................... 86
Experts..................................................... 86
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") on Form S-4 with respect to the
exchange notes offered by this prospectus. As allowed by SEC rules, this
prospectus does not contain all the information set forth in the registration
statement. With respect to any contract, agreement or other document filed as an
exhibit to the registration statement, please see the exhibits for a more
complete description of the matter involved.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and therefore file reports, proxy
statements and other information with the SEC. Such information can be inspected
and copied at the public reference facilities of the SEC, Judiciary Plaza 450
Fifth Street, N.W., Washington, D.C. 20549, as well as the following Regional
Offices: 7 World Trade Center, New York, New York 10048; and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 or may
be obtained on the Internet at http:www.sec.gov. Copies can be obtained by mail.
Requests for copies should be sent to the SEC's Public Reference Section,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Our Common
Stock is traded on the New York Stock Exchange and, as a result, the periodic
reports, proxy statements and other information filed with the SEC can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important
information about our company and its financial condition.
We hereby incorporate by reference our (a) Annual Report on Form 10-K for
the year ended September 30, 1998 and as amended on January 22, 1999 and March
17, 1999, (b) Quarterly Report on Form 10-Q for the quarter ended December 31,
1998, and as amended on March 17, 1999, and (c) Current Report on Form 8-K, as
filed with the SEC on February 4, 1999 and as amended on March 17, 1999.
We also incorporate by reference into this prospectus additional documents
that may be filed with the SEC from the date of this prospectus to the date of
the termination of the exchange offering. These include periodic reports, such
as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this prospectus. You may obtain documents incorporated by reference
in this prospectus by requesting them in writing or by telephone from us at the
following address:
Integrated Electrical Services, Inc.
515 Post Oak Boulevard
Suite 450
Houston, Texas 77027-9408
Attention: Corporate Secretary
(713) 860-1500
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SUMMARY
This summary highlights some information from this prospectus, but does not
contain all material features of the exchange offer. Please read the detailed
information appearing elsewhere in this prospectus.
In this prospectus, the words "Company," "IES," "we," "our," "ours," and
"us" refer to Integrated Electrical Services, Inc. and, except as otherwise
specified herein, to our subsidiaries. The words "Founding Companies" refer to
the 16 electrical businesses we purchased concurrently with our initial public
offering on January 30, 1998 and "Acquired Companies" refers to those businesses
acquired since the initial public offering and through September 30, 1998. Our
fiscal year is not a calendar year and ends on September 30. The following
summary contains basic information about this exchange offer. It may not contain
all the information that is important to you. For a more complete understanding
of this exchange offer, we encourage you to read this entire document and the
documents we have referred you to as well as to consult with your own legal and
tax advisors.
THE COMPANY
We are the third largest provider of electrical contracting and maintenance
services in the United States. In late 1997, we recognized a significant
opportunity for a well-capitalized company with critical mass and a nationwide
presence to realize substantial competitive advantages by capitalizing on the
fragmented nature of the electrical services industry. To that end, we began
operations on January 30, 1998 with the acquisition of 16 electrical businesses,
each of which had a strong identity and presence in its local markets, in order
to create a nationwide provider of electrical services and to lead the
consolidation of our industry. Since February 1998 and through December 31,
1998, we have acquired 26 additional electrical contracting and maintenance
services businesses. On a pro forma basis for the year ended September 30, 1998
we generated revenues and earnings before interest, taxes, depreciation and
amortization ("EBITDA") of $798.8 million and $81.7 million, respectively.
According to the most recently available U.S. Census data, the electrical
contracting industry generated annual revenues in excess of $40 billion in 1992.
This data also indicates that the electrical contracting industry is highly
fragmented with more than 54,000 companies, most of which are small,
owner-operated businesses. We estimate that there are only five other U.S.
electrical contractors with revenues in excess of $200 million. Government
sources indicate that total construction industry revenues have grown at an
average compound rate of approximately 6% from 1995 through 1998. Over the same
period, our pro forma combined revenues have increased at a compound annual rate
of approximately 13%. We believe this growth in revenues is primarily due to the
fact that our companies have been in business an average of 21 years, have
strong relationships with customers, have effectively employed industry best
practices and have focused on larger, higher margin projects.
We serve a broad range of markets, including the commercial, industrial,
residential and power line markets. In addition, we have recently entered into
the data communication market, which includes the installation of wiring for
computer networks and fiber optic telecommunications systems. Our revenues are
generated from a mix of new construction, renovation, maintenance and
specialized services. We focus on higher margin, larger projects that require
special expertise, such as design-and-build projects that utilize the
capabilities of our in-house engineers, as well as service, maintenance and
certain renovation and upgrade work which tends to either be recurring, have
lower sensitivity to economic cycles, or both.
INDUSTRY OVERVIEW
General. Virtually all construction and renovation in the United States
generates demand for electrical contracting services. Electrical work generally
accounts for approximately 8% to 12% of the total construction cost of
commercial and industrial projects, 5% to 10% of the total construction cost for
residential projects, and substantially all of the construction costs of power
line projects. In recent years, electrical contractors have experienced a
growing demand for their services due to more stringent electrical codes,
increased use of electrical power, demand for increased data cabling capacity
for high-speed
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computer systems and the construction of smart houses with integrated computer,
temperature control and safety systems.
THE MARKETS WE SERVE
Commercial Market. Our commercial work consists primarily of electrical
installations and renovations in office buildings, high-rise apartments and
condominiums, theaters, restaurants, hotels, hospitals and school districts. Our
commercial customers include general contractors, developers, building owners,
engineers and architects. We believe that demand for our commercial services is
driven by construction and renovation activity levels, as well as more stringent
local and national electrical codes. From fiscal 1995 through 1998, our pro
forma revenues from commercial work have grown at a compound annual rate of
approximately 11% per year and currently represent approximately 45% of our
total pro forma 1998 revenues.
Industrial Market. Our industrial work consists primarily of electrical
installations and upgrade, renovation and replacement service and maintenance
work in manufacturing and processing facilities, military installations,
airports, refineries and petrochemical and power plants. According to internal
estimates, approximately 60% of our industrial revenues are associated with new
construction with the balance derived from significant contracts for upgrade,
renovation and replacement service and maintenance work. Our industrial
customers include facility owners, general contractors, engineers, consultants
and architects. We believe that demand for our industrial services is driven by
facility upgrades and replacements as well as general activity levels in the
particular industries served, which is in turn affected by general economic
conditions. From fiscal 1995 through 1998, our pro forma revenues from
industrial work have grown at a compound annual rate of approximately 14% per
year and currently represent approximately 28% of our total pro forma 1998
revenues.
Residential Market. Our work for the residential market consists primarily
of electrical installations in new single family housing and low-rise
multifamily housing for customers which include local, regional and national
homebuilders and developers. The residential market is primarily dependent on
the number of single family and multi-family home starts, of which single-family
starts are most affected by the level of interest rates and general economic
conditions. Competitive factors particularly important in the residential market
include our ability to build relationships with homebuilders and developers by
providing services in each area of the country in which they operate. This
ability has become increasingly important as consolidation has occurred within
the residential construction industry and homebuilders and developers have
sought out service providers on whom they can rely for consistent service in all
of their operating regions. We believe we are currently one of the largest
providers of electrical contracting services to the U.S. residential
construction market and that there is significant additional opportunity for
consolidation within this highly fragmented market. In the current low interest
rate environment, our residential business has experienced significant growth.
Our pro forma revenues from residential electrical contracting have grown at a
compound annual rate of approximately 21% from fiscal 1995 through 1998 and
currently represent approximately 16% of our total pro forma 1998 revenues.
Power Line Market. Our work for the power line market consists primarily of
the installation, repair and maintenance of electric power transmission lines
and the construction of electric substations. We generally serve as the prime
contractor and perform substantially all of the construction work on these
contracts. Our customers in this market are government agencies and utilities.
Demand for power line services is driven by new infrastructure development,
utilities' efforts to reduce costs through the outsourcing of power line
installation and maintenance services in anticipation of deregulation and the
need to modernize and increase the capacity of existing transmission and
distribution systems. The power line business is a new focus for our company and
currently represents approximately 3% of our total pro forma 1998 revenues.
Service and Maintenance Market. The balance of our total pro forma 1998
revenues is derived from service calls and routine maintenance contracts. Our
service and maintenance revenues, which tend to be recurring and less sensitive
to economic fluctuations, have grown at a compound annual rate of
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approximately 14% from fiscal 1995 through 1998 and currently represent
approximately 8% of our total pro forma 1998 revenues.
Data Communication Market. We recently formed a division to specifically
target opportunities in the data communication market and completed our first
data communication acquisition in November 1998. Our data communication work
consists primarily of the installation, upgrade, maintenance and repair of
computer network cabling, telecommunication systems and wireless telephone and
microwave towers. We believe that demand for our data communication services
will be driven by the pace of technological change, the overall growth in voice
and data traffic and by the increasing use of personal computers and modems,
with particular emphasis on the speed with which information can be retrieved
from the Internet. As a result of our recent entry into the market, our data
communication revenues are not a significant component of our total pro forma
1998 revenues.
COMPETITIVE STRENGTHS
We believe several factors give us a competitive advantage in our industry,
including our:
- Size and critical mass -- which give us purchasing and other economies of
scale, as well as greater ability to compete for larger jobs that require
greater technical expertise, personnel availability and bonding capacity;
- Geographically diverse operations -- which enable us to effectively
service large customers across operating regions, including regional and
national homebuilders, national retailers and other commercial
businesses, as well as to lessen the impact of regional economic cycles;
- Diverse business lines -- which we believe provide greater stability in
sales revenue;
- Strong customer relationships -- which provide us repeat business and the
opportunity for cross-selling our services;
- Expertise in specialized markets -- which provides us with access to high
growth markets, including data cabling, wireless telecommunication,
highway lighting and traffic control, video, security and fire systems;
- Substantial number of licensed electricians -- which enables us to
deliver quality service with greater reliability than many of our
competitors, which is particularly important given a current industry
shortage of qualified electricians;
- Design technology and expertise -- which give us the ability to
participate in higher margin design-and-build projects; and
- Experienced management -- which holds in excess of 60% of the Company's
outstanding common stock and includes executive management with extensive
electrical, consolidation and public company experience, as well as
regional and local management which have established reputations in their
local markets.
BUSINESS STRATEGY
Our goal is to expand our position as a leading national provider of
electrical contracting and maintenance services by:
- continuing to realize operational efficiencies;
- expanding our business and markets through internal growth; and
- pursuing a targeted acquisition strategy.
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OPERATING STRATEGY
We believe there are significant opportunities to continue to increase our
revenues and profitability. The key elements of our operating strategy are:
Implementation of Best Practices. We continue to expand the services we
offer in our local markets by using the specialized technical and marketing
strengths of each of our companies. Through a series of forums attended by
management and other employees, we regularly identify and share best practices
that can be successfully implemented throughout our operations. We have
identified opportunities to enhance certain operational, administrative, safety,
hiring and training practices, and we have adopted the best of these practices
throughout our operations. Additional areas of focus include expanding the use
of our computer-aided-design technology and expertise and sharing information
relating to specific projects or job requirements throughout our company.
Focus on Higher Margin, High Growth Opportunities. We intend to pursue
projects and business markets which are higher value-added in nature and provide
us with opportunities to expand our revenues, gross margins and operating
margins. In particular, we intend to focus on leveraging our unique skill base
and competitive strengths to achieve leading market shares in targeted business
areas. Examples of high growth markets we have recently entered are the power
line and data communication markets in which underlying industry dynamics are
expected to lead to demand levels which will outpace the growth of the
electrical services market as a whole. Examples of higher margin opportunities
within our more established markets include the expansion of maintenance and
specialized services, as well as increasing the amount of our repeat business
with national customers.
Increase the Number of National Accounts. We intend to use our geographic
diversity to bid for additional business from new and existing customers that
operate on a regional and national basis, such as developers, contractors,
homebuilders and owners of national chains. We believe that significant demand
exists from such companies to utilize the services of a single electrical
contracting and maintenance service provider. This demand is at least partially
driven by the recent consolidation among a number of our principal customers,
including homebuilders, developers and national contractors. Because we are able
to understand the demands and needs of our customers based on prior,
substantially similar projects, we are able to configure and install systems to
their specifications on a more timely and cost-efficient basis than other
electrical contractors. Moreover, we believe that the demand for a single-source
contractor limits the opportunities for smaller contractors that may not be able
to provide services at multiple locations simultaneously. We believe our
existing local and regional relationships can be further expanded as we continue
to develop a nationwide network.
Operate on Decentralized Basis. We believe that our decentralized operating
structure helps us retain the entrepreneurial spirit present in each of our
companies while maintaining disciplined operating and financial controls. We
have recently structured our company into regional operating divisions to more
efficiently share the considerable local and regional market knowledge and
customer relationships possessed by each of our companies, as well as companies
that we may acquire in the future. We believe that this regional framework will
allow us to more effectively disseminate ideas, gather financial information and
target customers. By maintaining a local focus, we believe we are able to
continue to:
- build relationships with general contractors and other customers;
- address design preferences and code requirements;
- respond quickly to customer demands; and
- adjust to local market conditions.
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Attract and Retain Quality Employees. We believe that our ability to
attract and retain qualified electricians is a critical competitive factor. We
plan to continue to attract and train skilled employees by:
- extending active recruiting and training programs;
- offering stock-based compensation for key employees; and
- offering expanded career paths and more stable income through a larger
public company.
Achieve Additional Operating Efficiencies. We continue to focus on
operating efficiencies by combining overlapping operations and centralizing
certain administrative functions. We are also taking advantage of our combined
purchasing power to gain volume discounts on items such as electrical materials,
vehicles, bonding, employee benefits and insurance. Through sharing business
practices and providing repeat services to national accounts, we believe we can
continue to achieve operating margin improvements. In addition, we believe that
significant opportunities exist to increase our profitability through such
efforts as offsite prefabrication and standardized project management of similar
jobs.
ACQUISITION STRATEGY
Due to the highly fragmented nature of the electrical contracting and
maintenance services industry, we believe we have significant acquisition
opportunities. We focus on acquiring companies with an entrepreneurial attitude
as well as a willingness to learn and share improved business practices through
open communications. We believe that many electrical contracting and maintenance
service businesses that lack the capital necessary to expand operations will
become acquisition candidates. For these acquisition candidates, a sale of their
company to us will provide them with several benefits, including:
- the ability to improve margins through implementing best practices;
- expertise to expand in specialized markets;
- enhanced productivity through the reduction of administrative burdens;
- national name recognition;
- potential for substantial financial return through equity participation
in our company, and
- the opportunity for a continued role in management.
Other key elements of our acquisition strategy include:
Enter New Geographic Markets. We target acquisition candidates that are
financially stable, have a strong presence in the market in which they operate
and have the customer base necessary to integrate with or complement our
existing business. We expect that increasing our geographic diversity will allow
us to better serve an increasingly national customer base. It should also
further reduce the impact of local and regional economic cycles, as well as
weather-related or seasonal variations in our business.
Expand Within Existing Markets. Once we enter a market, we seek to acquire
other well-established electrical contracting and maintenance businesses
operating within that region, including "add-on" acquisitions of smaller
companies. We believe that add-on acquisitions afford the opportunity to improve
our overall cost structure through the integration of such acquisitions into
existing operations as well as to increase revenues through access to additional
specialized markets. Despite the integration opportunities afforded by such
add-on acquisitions, we maintain existing business names and identities to
retain goodwill for marketing purposes.
Diversify Business Operations. We will continue to diversify our business
operations as we identify opportunities within related electrical businesses
with similar characteristics to our current business lines. Since our inception,
we have added power line and data communication operations to our business
portfolio due to the fragmented nature of those markets, our belief in their
strong growth potential and their lower sensitivity to economic downturns. We
will continue to diversify into higher margin businesses to enhance revenue
growth and profitability.
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RECENT DEVELOPMENTS
As of March 23, 1999, we have entered into letters of intent to acquire six
additional companies and executed a definitive agreement to acquire a seventh
company with combined annual revenues of approximately $53 million. The firms to
be acquired provide services to the commercial, industrial, residential and data
communication markets. We are continually considering possible acquisitions. We
may from time to time negotiate and enter into letters of intent with potential
acquisition candidates. The consideration related to these companies remains
subject to negotiation until a definitive agreement is signed. The timing, size
or success of any acquisition effort and the associated potential capital
commitments cannot be predicted. The completion of each acquisition is subject
to a satisfactory due diligence review, negotiation of definitive acquisition
agreements, obtaining any necessary approvals and fulfilling all other
conditions to closing.
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THE EXCHANGE OFFER
Registration Rights
Agreement.................. We sold the existing notes on January 28, 1999 to
the initial purchasers under a purchase agreement
dated January 25, 1999. Pursuant to the purchase
agreement, IES, our subsidiaries who guaranteed our
obligations under the existing notes and the
initial purchasers entered into a registration
rights agreement which granted the holders of the
existing notes certain exchange and registration
rights. This exchange offer is intended to satisfy
certain of our obligations under the registration
rights agreement.
The Exchange Offer......... We are offering to exchange up to $150,000,000 of
the exchange notes for up to $150,000,000 of the
existing notes. Existing notes may be exchanged
only in $1,000 increments.
The terms of the exchange notes are identical in
all material respects to the existing notes except
for certain transfer restrictions and registration
rights relating to the existing notes and certain
provisions relating to an increase in the stated
interest rate on the existing notes.
Resale..................... We believe that you will be able to freely transfer
the exchange notes without registration or any
prospectus delivery requirement; however, certain
broker-dealers and certain of our affiliates may be
required to deliver copies of this prospectus if
they resell any exchange notes.
Expiration Date............ 5:00 p.m., New York City time, on ,
1999, unless the exchange offer is extended. You
may withdraw existing notes you tender pursuant to
the exchange offer at any time prior to
, 1999. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments."
Accrued Interest on the
Exchange Notes and the
Existing Notes........... The exchange notes will bear interest at a rate of
9 3/8% per annum, payable semi-annually on February
1 and August 1 of each year, commencing August 1,
1999. Holders of exchange notes of record at the
close of business on the January 15 and July 15
immediately preceding such interest payment date
will receive interest accruing from the most recent
date to which interest has been paid.
Termination of the Exchange
Offer.................... We may terminate the exchange offer if we determine
that our ability to proceed could be materially
impaired due to the occurrence of certain
conditions. We do not expect any of the foregoing
conditions to occur, although there can be no
assurance that such conditions will not occur. You
will have certain rights against us under the
registration rights agreement should we fail to
consummate the exchange offer. See "The Exchange
Offer -- Termination."
Procedures for Tendering
Existing Notes........... If you wish to accept the exchange offer, sign and
date the letter of transmittal in accordance with
the instructions, and deliver the letter of
transmittal, along with the existing notes and any
other required documentation, to the exchange
agent. By executing the letter of transmittal, you
will represent to us that, among other things:
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- the exchange notes you receive will be acquired
in the ordinary course of your business,
- you have no arrangement with any person to
participate in the distribution of the exchange
notes, and
- you are not an affiliate of IES or, if you are an
affiliate, you will comply with the registration
and prospectus delivery requirements of the
Securities Act to the extent applicable.
Special Procedures for
Beneficial Owners.......... If you are a beneficial owner whose existing notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
wish to tender such existing notes in the exchange
offer, please contact the registered holder as soon
as possible and instruct them to tender on your
behalf and comply with our instructions set forth
elsewhere in this prospectus.
Guaranteed Delivery
Procedures................. If you wish to tender your existing notes, you may,
in certain instances, do so according to the
guaranteed delivery procedures set forth elsewhere
in this prospectus under "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights.......... You may withdraw existing notes you tender pursuant
to the exchange offer by furnishing a written or
facsimile transmission notice of withdrawal to the
exchange agent containing the information set forth
in "The Exchange Offer -- Withdrawal of Tenders."
Acceptance of Existing
Notes and Delivery of
Exchange Notes........... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully in "The Exchange
Offer -- Termination"), we will accept for exchange
any and all existing notes that are properly
tendered in the exchange offer prior to the
expiration date. See "The Exchange
Offer -- Procedures for Tendering." The exchange
notes issued pursuant to the exchange offer will be
delivered promptly following the expiration date.
Exchange Agent............. State Street Bank and Trust Company, the trustee
under the indenture, is serving as exchange agent
in connection with the exchange offer. The mailing
address of the exchange agent and the address for
deliveries by overnight courier is State Street
Bank and Trust Company, Two International Place, P.
O. Box 77802102, Boston, Massachusetts 02110, and
the address for hand deliveries is State Street
Bank and Trust Company, Two International Place,
Boston, Massachusetts 02110. For assistance and
requests for additional copies of this Prospectus,
the Letter of Transmittal or the Notice of
Guaranteed Delivery, the telephone number for the
exchange agent is (617) 664-5587, and the facsimile
number for the exchange agent is (617) 664-5290.
See "The Exchange Offer" for more detailed information concerning the terms of
the exchange offer.
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SUMMARY OF TERMS OF EXCHANGE NOTES
Issuer..................... Integrated Electrical Services, Inc.
515 Post Oak Boulevard, Suite 450
Houston, Texas 77027-9408
(713) 860-1500
Notes Offered.............. $150,000,000 aggregate principal amount of 9 3/8%
Senior Subordinated Notes due 2009.
Maturity................... February 1, 2009.
Interest Payment Dates..... February 1 and August 1, commencing August 1, 1999.
Guarantees................. Each of our subsidiaries will fully and
unconditionally guarantee the exchange notes on a
senior subordinated basis. Future subsidiaries also
may be required to guarantee the exchange notes.
See "Description of the Notes -- Guarantees."
Ranking.................... The exchange notes will be subordinated to all
existing and future senior indebtedness. The
exchange 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
exchange notes are subordinated, in the event of
bankruptcy, liquidation or dissolution, holders of
the exchange notes will not receive any payment
until holders of senior indebtedness and guarantor
senior indebtedness have been paid in full. The
terms "senior indebtedness" and "senior guarantee
indebtedness" are defined in the "Description of
the Notes -- Certain Definitions" section of this
prospectus.
On a pro forma basis, after giving effect to the
issuance of the existing notes and our use of the
proceeds, at December 31, 1998, we would have had
$4.5 million of consolidated senior indebtedness
outstanding.
Optional Redemption........ We may redeem the exchange notes, in whole or in
part, at any time on or after February 1, 2004, at
the redemption prices set forth in this prospectus.
See "Description of the Notes -- Optional
Redemption."
Optional Redemption
Following Sales of
Equity................... Before February 1, 2002, we may redeem up to 35% of
the aggregate principal amount of the exchange
notes with the net proceeds of certain sales of
equity at the price listed in the section
"Description of Notes" under the heading "Optional
Redemption," if at least 65% of the aggregate
principal amount of the exchange notes originally
issued remains outstanding after such redemption.
Change of Control.......... If we sell assets or if a change of control occurs,
we may be required to offer to repurchase the
exchange notes at the prices listed in the section
"Description of the Notes."
Certain Covenants.......... The indenture governing the exchange notes will
contain covenants that, among other things,
restrict our ability and the ability of our
restricted subsidiaries to:
- borrow money;
- pay dividends on stock or purchase stock;
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- 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
- restrict the ability of our subsidiaries to pay
dividends and make other payments.
These covenants are subject to important exceptions
and qualifications, which are described in the
section "Description of the Notes" under the
heading "Certain Covenants" in this prospectus.
Risk Factors............... See "Risk Factors" for a discussion of factors you
should carefully consider before deciding to invest
in the notes.
See "Description of the Notes" for more detailed information concerning the
terms of the exchange notes.
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SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS)
We acquired our Founding Companies concurrently with the consummation of
the initial public offering of our common stock. Accounting rules dictated that
one of our Founding Companies, Houston-Stafford Electric, Inc., be considered,
for accounting purposes, the entity which acquired the other Founding Companies
and IES. Because of this, our consolidated historical financial statements
represent the financial position and results of operations of:
- Houston-Stafford Electric, Inc.;
- the other Founding Companies and 25 of the other 26 Acquired Companies
beginning on their respective dates of acquisition; and
- one Acquired Company, the results of which are presented for the entire
period because it was accounted for using the pooling of interests method
of accounting.
The following summary unaudited pro forma statement of operations data
present certain data for the Company, as adjusted for:
- the effects of the acquisitions of the Founding Companies and the
Acquired Companies;
- the effects of certain other pro forma adjustments to our historical
financial statements; and
- the consummation of the initial public offering of our common stock.
These data include the results of operations of the Company, the other
Founding Companies and the Acquired Companies as if their acquisitions, the
initial public offering of our common stock and related transactions were closed
on October 1, 1997.
These data are not necessarily indicative of the results that we would have
obtained had these events actually occurred at that date or of our future
results. During various portions of the periods presented below, our companies
were not under common control or management and, therefore, the data presented
may not be comparable to or indicative of future performance. The unaudited pro
forma statement of operations data are based on preliminary estimates, available
information and certain assumptions that our management deems appropriate. Since
the information in this table is only a summary and does not provide all of the
information contained in our financial statements, including the related notes,
you should read "Use of Proceeds," "Capitalization," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and pro forma financial
statements and related notes thereto included elsewhere in this registration
statement.
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You should also read our financial statements and other information filed with
the SEC and incorporated herein by reference.
YEAR ENDED QUARTER ENDED PRO FORMA PRO FORMA
SEPTEMBER 30, DECEMBER 31, YEAR ENDED QUARTER ENDED
------------------- ------------------ SEPTEMBER 30, DECEMBER 31,
1997 1998 1997 1998 1998 1998
-------- -------- ------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenues......................... $117,111 $386,721 $31,799 $197,712 $798,828 $203,116
Cost of services (including
depreciation).................. 95,937 306,052 25,262 156,745 640,482 161,530
-------- -------- ------- -------- -------- --------
Gross profit..................... 21,174 80,669 6,537 40,967 158,346 41,586
Selling, general and
administrative expenses........ 14,261 47,390 7,718 21,841 82,831 22,698
Non-cash, non-recurring
compensation charge............ -- 17,036 -- -- -- --
Goodwill amortization............ -- 3,212 -- 1,848 7,757 1,899
-------- -------- ------- -------- -------- --------
Income from operations........... 6,913 13,031 (1,181) 17,278 67,758 16,989
Interest and other income
(expense), net................. 385 (393) 1 (1,486) (3,668) (1,452)
-------- -------- ------- -------- -------- --------
Income before income taxes....... 7,298 12,638 (1,180) 15,792 64,090 15,537
Provision for income taxes....... 2,923 12,690 (499) 6,700 27,297 6,622
-------- -------- ------- -------- -------- --------
Net income (loss)................ $ 4,375 $ (52) $ (681) $ 9,092 $ 36,793 $ 8,915
======== ======== ======= ======== ======== ========
YEAR ENDED SEPTEMBER 30, 1998 QUARTER ENDED DECEMBER 31, 1998
------------------------------------------- --------------------------------------------
HISTORICAL PRO FORMA(A) AS ADJUSTED(B) HISTORICAL PRO FORMA(A) AS ADJUSTED(B)
---------- ------------ --------------- ---------- ------------- ---------------
OTHER FINANCIAL DATA RATIOS:
EBITDA(c)..................... $35,427 $81,676 $80,726 $20,339 $20,189 $20,189
Interest expense.............. 1,161 4,292 15,529 1,695 1,708 3,865
Depreciation and
amortization................ 5,360 12,968 12,968 3,061 3,200 3,200
Ratio of earnings to fixed
charges(d).................. 6.1x 12.2x 4.1x 8.8x 8.2x 4.1x
Ratio of EBITDA to interest
expense..................... -- -- 5.2x -- -- 5.2x
Ratio of total debt to
EBITDA...................... -- -- 1.9x -- -- --
Ratio of net debt to EBITDA... -- -- 1.2x -- -- --
AS OF DECEMBER 31, 1998
---------------------------
HISTORICAL AS ADJUSTED(B)
---------- --------------
(UNAUDITED)
Cash...................................................... $ 4,044 $ 58,844
Working capital........................................... 77,931 132,731
Total assets.............................................. 518,006 577,806
Total debt, net of discount............................... 93,517 153,317
Total stockholders' equity................................ 321,528 321,538
- ---------------
(a) Gives effect to our initial public offering, the acquisition of the
founding companies and the 26 companies we have acquired since our initial
public offering through December 31, 1998 and other related pro forma
adjustments, as if all such transactions had occurred on October 1, 1997.
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(b) Gives effect to the transactions described in (a) above and to the issuance
and sale of the notes and the application of a portion of the net proceeds
therefrom to repay outstanding indebtedness under our credit facility as if
such transactions had occurred on October 1, 1997.
(c) EBITDA is defined as net income (calculated excluding other income, net)
plus interest expense net of income, income taxes and depreciation and
amortization. EBITDA also excludes a $17 million non-cash, non recurring
compensation charge recognized in connection with our initial public
offering. EBITDA is presented to provide additional information concerning
our ability to meet future debt service obligations and capital expenditure
and working capital requirements. EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not
be considered as an alternative to either net income as an indicator of our
operating performance or cash flows as an indicator of our liquidity. Other
companies may not calculate EBITDA in a similar manner and, for that
reason, these measures may not be comparable.
(d) The ratio of earnings to fixed charges is calculated by dividing the fixed
charges into net income before taxes and minority interests plus fixed
charges. Fixed charges consist of interest expense, amortization of debt
issuance costs and the estimated interest component of rent expense.
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RISK FACTORS
You should carefully consider the following factors and other information
in this registration statement before deciding to invest in the notes.
OUR SUBSTANTIAL DEBT COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS AND YOUR
INVESTMENT IN THE NOTES
We have now and, after the exchange offer, will continue to have a
significant amount of debt. The following chart, with dollar amounts in
thousands, shows certain important credit statistics and is presented assuming
we had completed the offering of the existing notes as of December 31, 1998 or
at the beginning of the period ended December 31, 1998 and applied a portion of
the proceeds to repay indebtedness under our credit facility:
Total indebtedness.......................................... $153,317
Stockholders' equity........................................ $321,538
Debt to equity ratio........................................ 0.5x
Ratio of earnings to fixed charges.......................... 3.8x
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 exchange notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures
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;
- place us at a disadvantage compared to our competitors that have less
debt; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
Additionally, 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 -- Optional Redemption" and "-- Change of
Control" and "Description of Other Debt."
THE EXCHANGE NOTES AND THE SUBSIDIARY GUARANTEES RANK BEHIND ALL OF OUR AND OUR
SUBSIDIARY GUARANTORS' EXISTING AND FUTURE SENIOR INDEBTEDNESS
As a result, 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 exchange notes
or the subsidiary guarantees.
In addition, all payments on the exchange 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 exchange
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. However, because the indenture requires that amounts otherwise
payable to holders of the exchange notes in a bankruptcy or similar proceeding
be paid to holders of senior indebtedness instead, holders of the exchange notes
may receive
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less, ratably, than holders of trade payables in any such proceeding. In any of
these cases, we and the subsidiary guarantors may not have sufficient funds to
pay all of our creditors and holders of exchange notes may receive less,
ratably, than the holders of senior indebtedness.
Assuming we had completed the offering of the existing notes and applied
the proceeds as of December 31, 1998, these exchange notes and the subsidiary
guarantees would have been subordinated to approximately $4.5 million of senior
indebtedness and approximately $172.6 million 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.
BUSINESS CONDITIONS IN THE FUTURE MAY PREVENT US FROM SERVICING OUR DEBT
Our ability to make payments on and to refinance our indebtedness,
including the exchange notes, and to fund planned capital expenditures will
depend on our ability to generate cash in the future. This, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control.
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available
cash, proceeds from the sale of the existing notes and available borrowings
under our credit facility, will be adequate to meet our currently expected
liquidity needs. We cannot assure you, however, that our business will generate
sufficient cash flow from operations, that currently anticipated cost savings
and operating improvements will be realized on schedule or that future
borrowings will be available to us under our credit facility in an amount
sufficient to enable us to pay our indebtedness, including the exchange notes,
or to fund our other liquidity needs. We may need to refinance all or a portion
of our indebtedness, including the notes, on or before maturity. We cannot
assure you that we will be able to refinance any of our indebtedness, including
our credit facility and the exchange notes, on commercially reasonable terms or
at all.
WE MAY CHOOSE TO BORROW SUBSTANTIAL AMOUNTS IN THE FUTURE THAT WOULD BE SENIOR
TO THE EXCHANGE NOTES
We may be able to incur substantial additional indebtedness in the future.
The terms of the indenture do not prohibit us or our subsidiaries from doing so,
although the indenture does contain certain limitations on additional
indebtedness. Our credit facility would permit additional borrowing of up to
$172.6 million after completion of this exchange offer (subject to customary
borrowing conditions) and all of this debt would be senior in rank to the notes
and the subsidiary guarantees. The senior status of such debt means that if we
were to dissolve, all senior indebtedness would be repaid in full before any
amount would be paid to the holders of the exchange notes. If new debt is added
to our current debt levels and the current debt levels of our subsidiaries, the
related risks that we and they now face could intensify.
See "Capitalization," "Selected Financial Data," "Description of the
Notes -- Optional Redemption" and "-- Change of Control" and "Description of
Other Debt."
DOWNTURNS IN CONSTRUCTION COULD ADVERSELY AFFECT OUR BUSINESS
Presently, more than half of our business is the installation of electrical
systems in newly constructed and renovated buildings, plants and residences.
Additionally, a majority of our business is concentrated in the southeastern and
southwestern portion of the United States. Downturns in levels of construction
or housing starts could have a material adverse effect on our business,
financial condition and results of operations. Our ability to maintain or
increase revenues from new installation services will depend on the number of
new construction starts and renovations. Our revenue growth from year to year is
likely to reflect the cyclical nature of the construction industry. The number
of new building starts will be affected
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by local economic conditions, changes in interest rates and other related
factors. The housing industry is similarly affected by changes in general and
local economic conditions, such as the following:
- employment and income levels;
- interest rates and other factors affecting the availability and cost of
financing;
- tax implications for home buyers;
- consumer confidence; and
- housing demand.
OUR GROWTH COULD BE DIFFICULT TO MANAGE
If we are unable to manage our growth, or if we are unable to attract and
retain additional qualified management, there could be a material adverse effect
on our financial condition and results of operations. As we continue to grow,
there can be no assurance that our management group will be able to oversee the
company and effectively implement our operating or growth strategies. We expect
to grow both internally and through acquisitions. We expect to expend time and
effort in evaluating, completing and integrating acquisitions and opening new
facilities. We cannot guarantee that our systems, procedures and controls will
be adequate to support our expanding operations, including the timely receipt of
financial information from acquired companies. This future growth will impose
added responsibilities on our senior management, such as the need to identify,
recruit and integrate new senior managers and executives.
THERE IS CURRENTLY A SHORTAGE OF QUALIFIED ELECTRICIANS
Our ability to increase productivity and profitability has been limited by
our ability to employ, train and retain skilled electricians who meet our
requirements. There can be no assurance that, among other things:
- we will be able to maintain the skilled labor force necessary to operate
efficiently;
- our labor expenses will not increase as a result of a shortage in the
skilled labor supply; or
- we will not have to curtail internal growth as a result of labor
shortages.
INTEGRATION OF ACQUIRED COMPANIES MAY PROVE DIFFICULT
The combined financial results of recently acquired companies incorporated
by reference in this prospectus cover periods during which they were not under
the same management and, therefore, may not be indicative of our future
financial or operating results. Our success will depend on our management's
ability to integrate future acquisitions.
ACQUIRED COMPANIES MAY ADVERSELY AFFECT OUR OPERATIONS
We expect to grow through acquisitions. We cannot guarantee that we will be
able to acquire additional businesses or integrate and manage them successfully.
We cannot assure you that the businesses we acquire will achieve sales and
profitability that justify our investment. Such acquisitions may involve a
number of issues, including:
- adverse short-term effects on our financial results;
- diversion of our management's attention;
- dependence on retention, hiring and training of key personnel; and
- risks associated with unanticipated problems or legal liabilities.
In addition, if industry consolidation becomes more prevalent, the prices
for acquisition candidates may increase and the number of available candidates
may decrease. These competitors may have greater
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financial resources to finance acquisition and internal growth opportunities and
might be willing to pay higher prices than we are willing to pay for the same
acquisition opportunities.
OUR OPERATIONS ARE SUBJECT TO THE NUMEROUS HAZARDS ASSOCIATED WITH THE
CONSTRUCTION OF ELECTRICAL SYSTEMS
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. We maintain insurance coverage in the amounts and against the risks
we believe are in accordance with industry practice, but this insurance does not
cover all types or amounts of liabilities. No assurance can be given either that
(i) this insurance will be adequate to cover all losses or liabilities we may
incur in our operations or (ii) we will be able to maintain insurance of the
types or at levels that are adequate or at reasonable rates.
THE ESTIMATES WE USE IN PLACING BIDS COULD BE MATERIALLY INCORRECT
Depending upon the size of a particular project, variations from estimated
contract costs can have a significant impact on our operating results for any
fiscal quarter or year. We currently generate, and expect to continue to
generate, more than half of our revenues under fixed price contracts. We must
estimate the costs of completing a particular project to bid for such fixed
price contracts. The cost of labor and materials, however, may vary from the
costs we originally estimated. These variations 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.
WE DEPEND ON KEY PERSONNEL
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 and senior management and key management
personnel at the companies we have acquired. We cannot guarantee that any key
member of management at the corporate or subsidiary level will continue in such
capacity for any particular period of time. We do not maintain key man life
insurance.
OUR INDUSTRY IS HIGHLY COMPETITIVE
Our 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 the market. Some of our
competitors offer a greater range of services, such as mechanical construction,
plumbing and heating, ventilation and air conditioning services. Competition in
the electrical contracting industry 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 their services at lower rates.
WE MAY BE UNABLE TO REPURCHASE THE EXCHANGE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding exchange notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to make the required repurchase of exchange notes. In
addition, restrictions in our credit facility will not allow such repurchases.
In addition, 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. See "Description of
Notes -- Change of Control."
THE SUBSIDIARY GUARANTEES MAY NOT STAND UNDER FRAUDULENT CONVEYANCE LAWS
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of
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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,
- 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
- if 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.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of these exchange notes, will not be insolvent, will not have
unreasonably small capital for the business in which it is engaged and will not
have incurred debts beyond its ability to pay such debts as they mature. There
can be no assurance, however, as to what standard a court would apply in making
such determinations or that a court would agree with our conclusions in this
regard.
A TRADING MARKET FOR THE EXCHANGE NOTES MAY NOT DEVELOP
There has not been an established trading market for the notes. Although
each initial purchaser has informed us that it currently intends to make a
market in the exchange notes, it has no obligation to do so and may discontinue
making a market at any time without notice.
We do not intend to apply for listing of the exchange notes, on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
The liquidity of any market for the notes will depend upon the number of
holders of the notes, our performance, the market for similar securities, the
interest of securities dealers in making a market in the notes and other
factors. A liquid trading market may not develop for the exchange notes.
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 quarterly results may also be affected by the timing of acquisitions, the
timing and size of acquisition costs and regional economic conditions.
Accordingly, our performance in any particular quarter may not be indicative of
the results which can be expected for any other quarter or for the entire year.
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COMPUTER SYSTEMS WE RELY ON MAY FAIL TO RECOGNIZE YEAR 2000
We are dependent on our computer software programs and operating systems in
operating our business. We also depend on the proper functioning of computer
systems of third parties, such as vendors and clients. The failure of any of
these systems to appropriately interpret the upcoming calendar year 2000 could
have a material adverse effect on our financial condition, results of
operations, cash flow and business prospects. We are currently identifying our
own applications that will not be year 2000 compliant and taking steps to
determine whether third parties are doing the same. In addition, we are
implementing a plan to prepare our computer systems to be year 2000 compliant by
September 30, 1999.
Our inability to remedy our own year 2000 problems or the failure of third
parties to do so may cause business interruptions or shutdown, financial loss,
regulatory actions, reputational harm and/or legal liability. We can not assure
you that our year 2000 program will be effective or that our estimates about the
timing and cost of completing our program will be accurate. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000."
ESTIMATED LIFE OF GOODWILL MAY CHANGE
Our balance sheet after we issued the existing notes and acquired the
companies described in our Form 8-K dated February 4, 1999 has an amount called
"goodwill" that represents 56% of assets and 102% of stockholders' equity.
Goodwill is recorded when we pay more for a business than the fair value of the
tangible and separately measureable intangible net assets. GAAP requires us to
amortize this and all other intangible assets over the period benefited. We have
determined that period to be no less than 40 years.
If it turns out that the period should have been shorter, earnings reported
in periods right after the acquisition would be overstated. Then in later years,
we will be burdened by a continuing charge against earnings, without the benefit
to income we thought we would get when we agreed on the purchase price. Earnings
in later years might also be significantly worse if we determine then that the
remaining balance of goodwill is impaired.
We reviewed with our independent accountants all of the factors and related
future cash flows which we considered in agreeing on a purchase price. We
concluded that the future cash flows related to goodwill will continue
indefinitely, and there is no persuasive evidence that any material portion will
dissipate over a period shorter than 40 years.
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:
- our ability to acquire companies;
- the number and size of companies we are able to acquire;
- the effect of seasonality on our operating results;
- regional and national trends and conditions in our industry;
- our ability to integrate acquired businesses;
- regional and national economic conditions;
- our ability to compete; and
- our ability to grow our companies;
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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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The existing notes were sold by the Company on January 28, 1999, to the
initial purchasers, Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation, pursuant to a purchase
agreement. The initial purchasers subsequently placed the existing notes with
qualified institutional buyers in reliance on Rule 144A under the Securities
Act. As a condition to the purchase of the existing notes by the initial
purchasers, the Company and the guarantors entered into a registration rights
agreement with the initial purchasers, which requires, among other things, that
promptly following the issuance and sale of the existing notes, the Company and
the guarantors file with the Commission the registration statement with respect
to the exchange notes, use their reasonable best efforts to cause the
registration statement to become effective under the Securities Act and, upon
the effectiveness of the registration statement, offer to the holders of the
existing notes the opportunity to exchange their existing notes for a like
principal amount of exchange notes, which will be issued without a restrictive
legend and may be reoffered and resold by the holder without restrictions or
limitations under the Securities Act. A copy of the registration rights
agreement has been filed as an exhibit to the registration statement of which
this prospectus is a part. The term "holder" with respect to the exchange offer
means any person in whose name existing notes are registered on the Company's
books.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the exchange
notes issued pursuant to the exchange offer may be offered for resale, resold
and otherwise transferred by the holders thereof (other than holders who are
broker-dealers or a person that is an "affiliate" (within the meaning of Rule
405 of the Securities Act) of the Company) without further compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
any purchaser of notes who is an affiliate of the Company or who intends to
participate in the exchange offer for the purpose of distributing the exchange
notes, or any broker-dealer who purchased the notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act,
(i) will not be able to rely on the interpretations by the staff of the
Commission set forth in the above-mentioned no-action letters, (ii) will not be
able to tender its notes in the exchange offer; and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the notes unless such sale or transfer
is made pursuant to an exemption from such requirements. The Company does not
intend to seek its own no-action letter, and there is no assurance that the
staff of the Commission would make a similar determination with respect to the
exchange notes as it has in such no-action letters to third parties. See "Plan
of Distribution."
As a result of the filing and effectiveness of the registration statement
of which this prospectus is a part, the Company and the guarantors will not be
required to pay an increased interest rate on the existing notes. Following the
consummation of the exchange offer, holders of existing notes not tendered will
not have any further registration rights except in certain limited circumstances
requiring the filing of a shelf registration statement, and the existing notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for the existing notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, the Company will accept all existing notes
properly tendered and not withdrawn prior to 5:00 p.m. New York City time, on
the expiration date. After authentication of the exchange notes by the trustee
or an authenticating agent, the Company will issue $1,000 principal amount of
exchange notes in exchange for each $1,000 principal amount of outstanding
existing notes accepted in the exchange offer. Holders may tender some or all of
their existing notes pursuant to the exchange offer in denominations of $1,000
and integral multiples thereof.
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Each holder of the notes (other than certain specified holders) who wishes
to exchange notes for exchange notes in the exchange offer will be required to
represent that (i) it is not an affiliate of the Company or any Guarantor, (ii)
any exchange notes to be received by it were acquired in the ordinary course of
its business and (iii) it has no arrangement with any person to participate in
the distribution (within the meaning of the Securities Act) of the exchange
notes.
Each broker-dealer that receives exchange 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 exchange notes. The letter of
transmittal states that by so acknowledging 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. The staff of the SEC has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the exchange notes (other than a resale of an unsold allotment
from the original sale of the notes) with the prospectus contained in the
exchange offer registration statement. The Company will be required to allow
participating broker-dealers to use the prospectus contained in the exchange
offer registration statement (subject to certain "black out" periods) following
the exchange offer, in connection with the resale of exchange notes received in
exchange for notes acquired by such participating broker-dealers for their own
account as a result of market-making or other trading activities. See "Plan of
Distribution."
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the existing notes except that (i) the
exchange notes will be issued in a transaction registered under the Securities
Act, (ii) the exchange notes will not be subject to transfer restrictions and
(iii) certain provisions relating to an increase in the stated interest rate on
the existing notes provided for in certain circumstances will be eliminated. The
exchange notes will evidence the same debt as the existing notes. The exchange
notes will be issued under and entitled to the benefits of the indenture.
As of the date of this prospectus, $150,000,000 aggregate principal amount
of the existing notes is outstanding. In connection with the issuance of the
existing notes, the Company arranged for the existing notes, which were
initially purchased by qualified institutional buyers as defined pursuant to
Rule 144A under the Securities Act, to be issued and transferable in book-entry
form through the facilities of the depositary, acting as depositary. The
exchange notes will also be issuable and transferable in book-entry form through
the depositary.
This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders as of the close of business
on , 1999. The Company intends to conduct the exchange offer in
accordance with the applicable requirements of the Exchange Act, and the rules
and regulations of the Commission thereunder, including Rule 14e-1, to the
extent applicable. The exchange offer is not conditioned upon any minimum
aggregate principal amount of existing notes being tendered, and holders of the
existing notes do not have any appraisal or dissenters' rights under the General
Corporation Law of the State of Delaware or under the indenture in connection
with the exchange offer. The Company shall be deemed to have accepted validly
tendered existing notes when, as and if the Company has given oral or written
notice thereof to the exchange agent. See "-- Exchange Agent." The exchange
agent will act as agent for the tendering holders for the purpose of receiving
exchange notes from the Company and delivering exchange notes to such holders.
If any tendered existing notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted existing notes will be returned, at the
Company's cost, to the tendering holder thereof as promptly as practicable after
the expiration date.
Holders who tender existing notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
existing notes pursuant to the exchange offer. The Company will pay all charges
and expenses, other than certain applicable taxes, in connection with the
exchange offer. See "-- Solicitation of Tenders; Fees and Expenses."
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38
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF EXISTING NOTES AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING ALL OR ANY PORTION OF THEIR EXISTING NOTES PURSUANT TO THE
EXCHANGE OFFER. MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF EXISTING NOTES MUST MAKE THEIR OWN DECISION WHETHER
TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF
EXISTING NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN
FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 5:00 p.m., New York City time,
on , 1999, unless the Company, in its sole discretion, extends the
exchange offer, in which case the term "expiration date" shall mean the latest
date to which the exchange offer is extended.
The Company expressly reserves the right, in its sole discretion (i) to
delay acceptance of any existing notes, to extend the exchange offer or to
terminate the exchange offer and to refuse to accept existing notes not
previously accepted, if any of the conditions set forth herein under
"-- Termination" shall have occurred and shall not have been waived by the
Company (if permitted to be waived by the Company), by giving oral or written
notice of such delay, extension or termination to the exchange agent and (ii) 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 by the Company to the registered
holders of the existing notes. If the exchange offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, the Company shall have no obligation to publish, advise, or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from the date of issuance of the
existing notes that are tendered in exchange for the exchange notes (or the most
recent date on which interest was paid or duly provided for on the existing
notes surrendered in exchange for the exchange notes). Accordingly, holders of
existing notes that are accepted for exchange will not receive interest that is
accrued but unpaid on such existing notes at the time of tender. Interest on the
exchange notes will be payable semi-annually on each February 1 and August 1,
commencing on August 1, 1999.
PROCEDURES FOR TENDERING
Only a holder may tender its existing 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 thereof, have the signatures thereof guaranteed if
required by the letter of transmittal, and mail or otherwise deliver such letter
of transmittal or such facsimile, together with the existing notes (unless such
tender is being effected pursuant to the procedure for book-entry transfer
described below) and any other required documents, to the Exchange Agent, prior
to 5:00 p.m. New York City time, on the expiration date.
Any financial institution that is a participant in the depositary's
book-entry transfer facility system may make book-entry delivery of the existing
notes by causing the depositary to transfer such existing notes into the
exchange agent's account in accordance with the depositary's procedure for such
transfer. Although delivery of existing notes may be effected through book-entry
transfer into the exchange agent's account at the depositary, the letter of
transmittal (or facsimile thereof), with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
by the
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39
exchange agent at its address set forth herein under "-- Exchange Agent" prior
to 5:00 p.m., New York City time, on the expiration date. DELIVERY OF DOCUMENTS
TO THE DEPOSITARY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
The tender by a holder will constitute an agreement between such holder,
the Company and the exchange agent in accordance with the terms and subject to
the conditions set forth herein and in the letter of transmittal.
THE LETTER OF TRANSMITTAL WILL INCLUDE REPRESENTATIONS TO THE COMPANY THAT,
AMONG OTHER THINGS, (1) THE EXCHANGE NOTES RECEIVED PURSUANT TO THE EXCHANGE
OFFER ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON
RECEIVING SUCH EXCHANGE NOTES (WHETHER OR NOT SUCH PERSON IS THE HOLDER), (2)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON HAS AN ARRANGEMENT OR UNDERSTANDING
WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION OF SUCH EXCHANGE NOTES, (3)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE," AS DEFINED IN
RULE 405 UNDER THE SECURITIES ACT, OF THE COMPANY OR ANY GUARANTOR, (4) THE
HOLDER IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF
THE EXCHANGE NOTES, AND (5) IF THE TENDERING HOLDER IS A BROKER OR DEALER (AS
DEFINED IN THE EXCHANGE ACT) (A) IT ACQUIRED THE EXISTING NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND
(B) IT HAS NOT ENTERED INTO ANY ARRANGEMENT OR UNDERSTANDING WITH THE COMPANY,
ANY GUARANTOR OR ANY "AFFILIATE" OF THE COMPANY OR ANY GUARANTOR (WITHIN THE
MEANING OF RULE 405 UNDER THE SECURITIES ACT) TO DISTRIBUTE THE EXCHANGE NOTES
TO BE RECEIVED IN THE EXCHANGE OFFER. In the case of a broker-dealer that
receives exchange notes for its own account in exchange for existing notes which
were acquired by it as a result of market-making or other trading activities,
the letter of transmittal will also include an acknowledgment that the
broker-dealer will deliver a copy of this prospectus in connection with the
resale by it of exchange notes received pursuant to the exchange offer. See
"Plan of Distribution."
THE METHOD OF DELIVERY OF EXISTING NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES EFFECT SUCH TENDER FOR HOLDERS IN EACH CASE
AS SET FORTH HEREIN AND IN THE LETTER OF TRANSMITTAL.
Any beneficial owner whose existing notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the letter of transmittal and delivering his existing notes, either
make appropriate arrangements to register ownership of the existing notes in
such owner's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or 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 Exchange Act unless the existing notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Registration Instructions" or "Special Delivery Instructions"
of the letter of transmittal or (ii) for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the registered
holder listed therein, such existing notes must be endorsed or accompanied by
appropriate bond powers which authorize such person to tender the existing notes
on behalf of the registered holder, in either case signed as the name of the
registered holder or holders appears on the existing notes. If the letter of
transmittal or any existing notes or bond powers are signed or endorsed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when
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40
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority to so act must be submitted with such letter of transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered existing notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
existing notes not properly tendered or any existing notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular existing notes. The
Company's 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, any defects or irregularities in
connection with tenders of existing notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of existing notes, neither the
Company, the exchange agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of existing
notes nor shall any of them incur any liability for failure to give such
notification. Tenders of existing notes will not be deemed to have been made
until such irregularities have been cured or waived. Any existing notes received
by the Exchange Agent that the Company determines are not properly tendered or
the tender of which is otherwise rejected by the Company and as to which the
defects or irregularities have not been cured or waived by the Company will be
returned by the exchange agent to the tendering holder unless otherwise provided
in the letter of transmittal, as soon as practicable following the expiration
date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any existing notes that remain outstanding
subsequent to the expiration date, or, as set forth under "-- Termination," to
terminate the exchange offer and (b) to the extent permitted by applicable law,
purchase existing notes in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers may differ from the
terms of the exchange offer.
BOOK-ENTRY TRANSFER
The Company understands that the exchange agent will make a request
promptly after the date of this prospectus to establish accounts with respect to
the existing notes at the DTC for the purpose of facilitating the exchange
offer, and subject to the establishment thereof, any financial institution that
is a participant in the book-entry transfer facility's system may make
book-entry delivery of existing notes by causing such book-entry transfer
facility to transfer such existing notes into the exchange agent's account with
respect to the existing notes in accordance with the book-entry transfer
facility's procedures for such transfer. Although delivery of existing notes may
be effected through book-entry transfer into the exchange agent's account at the
book-entry transfer facility, an appropriate letter of transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the exchange agent at its address set forth below on or prior to the
expiration date, or, if the guaranteed delivery procedures described below are
complied with, with the time period provided under such procedures. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the exchange agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their existing notes and (i) whose existing
notes are not immediately available, or (ii) who cannot deliver their existing
notes, the letter of transmittal or any other required documents to the exchange
agent prior to the expiration date, or if such holder cannot complete the
procedure for book-entry transfer on a timely basis, may effect a tender if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration date, the exchange agent receives from
such eligible institution a properly completed and duly executed notice of
guaranteed delivery (by facsimile transmittal, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of
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41
such holder's existing notes and the principal amount of such existing
notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within five business days after the expiration date, the
letter of transmittal (or facsimile thereof), together with the
certificate(s) representing the existing notes to be tendered in proper
form for transfer and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the exchange
agent; and
(c) such properly completed and executed letter of transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered existing notes in proper form for transfer (or confirmation of a
book-entry transfer into the exchange agent's account at the depositary of
existing notes delivered electronically) and all other documents required
by the letter of transmittal are received by the exchange agent within five
business days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their existing notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of existing notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of existing notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the existing notes to be withdrawn (the
"Depositor"), (ii) identify the existing notes to be withdrawn (including the
certificate number or numbers and principal amount of such existing notes or, in
the case of existing notes transferred by book-entry transfer, the name and
number of the account at the depositary to be credited), (iii) be signed by the
Depositor in the same manner as the original signature on the letter of
transmittal by which such existing notes were tendered (including any required
signature guarantee) or be accompanied by documents of transfer sufficient to
permit the trustee with respect to the existing notes to register the transfer
of such existing notes into the name of the Depositor withdrawing the tender and
(iv) specify the name in which any such existing notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any existing notes so withdrawn will be deemed not to have been validly
tendered for purposes of the exchange offer, and no exchange notes will be
issued with respect thereto unless the existing notes so withdrawn are validly
retendered. Any existing notes that have been tendered but are not accepted for
exchange will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn existing notes may be retendered by following
one of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the exchange offer, the Company will not
be required to accept for exchange, or to exchange notes for, any existing
notes, and may terminate or amend the exchange offer as provided herein before
the acceptance of such existing notes if, in the Company's judgment, the
Company's ability to proceed with the exchange offer can reasonably be expected
to be impaired as a result of certain events set forth in the registration
rights agreement. Accordingly, the exchange offer is subject to the following
conditions: (i) that the exchange offer, or the making of any exchange by a
holder, does not violate applicable law or any applicable interpretation of the
staff of the Commission, (ii) that no action or proceeding shall have been
instituted or threatened in any court or by or before any governmental agency or
body with respect to the exchange offer, (iii) that there shall not have been
adopted or enacted any law, statute, rule or regulation that can reasonably be
expected to impair the ability of the Company to proceed with the exchange
offer, (iv) that there shall not have been declared by United States federal or
Texas or New York state authorities a banking moratorium, (v) that trading on
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the New York Stock Exchange or generally in the United States over-the-counter
market shall not have been suspended by order of the Commission or any other
governmental agency and (vi) other conditions reasonably acceptable to the
initial purchasers.
If the Company determines that it may terminate the exchange offer for any
of the reasons set forth above, the Company may (i) refuse to accept any
existing notes and return any existing notes that have been tendered to the
holders thereof, (ii) extend the exchange offer and retain all existing notes
tendered prior to the expiration date of the exchange offer, subject to the
rights of such holders of tendered existing notes to withdraw their tendered
existing notes or (iii) waive such termination event with respect to the
exchange offer and accept all properly tendered existing notes that have not
been withdrawn. If such waiver constitutes a material change in the exchange
offer, the Company will disclose such change by means of a supplement to this
prospectus that will be distributed to each registered holder, and the Company
will extend the exchange offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the exchange offer would otherwise expire during such
period.
EXCHANGE AGENT
State Street Bank and Trust Company, the trustee under the indenture, has
been appointed as exchange agent for the exchange offer. In such capacity, the
exchange agent has no fiduciary duties and will be acting solely on the basis of
directions of the Company. Requests for assistance and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent addressed as follows:
By Mail: State Street Bank and Trust Company
Two International Place
P. O. Box 77802102
Boston, Massachusetts 02110
By Hand Delivery or Overnight Courier: State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Facsimile Transmission: (617) 664-5290
Confirm by Telephone: (617) 664-5587
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the exchange offer will be
borne by the Company. The principal solicitation pursuant to the exchange offer
is being made by mail. Additional solicitations may be made by officers and
regular employees of the Company and its affiliates in person, by telegraph,
telephone or telecopier.
The Company has not retained any dealer-manager in connection with the
exchange offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the exchange offer. The Company, however, will
pay the exchange agent reasonable and customary fees for its services and will
reimburse the exchange agent for its reasonable out-of-pocket costs and expenses
in connection therewith and will indemnify the exchange agent for all losses and
claims incurred by it as a result of the exchange offer. The Company may also
pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
prospectus, letters of
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transmittal and related documents to the beneficial owners of the existing notes
and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting and
legal fees and printing costs, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of existing notes pursuant to the exchange offer. If, however, certificates
representing exchange notes or existing notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the
existing notes tendered, or if tendered existing notes are registered in the
name of any person other than the person signing the letter of transmittal, or
if a transfer tax is imposed for any reason other than the exchange of existing
notes pursuant to the exchange offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the letter of transmittal, the amount
of such transfer taxes will be billed by the Company directly to such tendering
holder.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
existing notes, as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the consummation of the exchange offer. The
expenses of the exchange offer will be amortized by the Company over the term of
the exchange notes.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of exchange notes for existing notes pursuant to the exchange
offer should not be treated as an "exchange" for United States federal income
tax purposes because the exchange notes should not be considered to differ
materially in kind or extent from the existing notes. Rather, the exchange notes
received by a United States holder should be treated as a continuation of the
existing notes in the hands of such holder. As a result, there should be no
United States federal income tax consequences to United States holders
exchanging existing notes for exchange notes pursuant to the exchange offer.
OTHER
Participation in the exchange offer is voluntary. Holders of the existing
notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered existing notes pursuant to the terms of, this exchange offer,
the Company will have fulfilled a covenant contained in the terms of the
registration rights agreement. Holders of the existing notes who do not tender
their certificates in the exchange offer will continue to hold such certificates
and will be entitled to all the rights, and subject to the limitations
applicable thereto, under the Indenture, except for any such rights under the
registration rights agreement that by their term terminate or cease to have
further effect as a result of the making of this exchange offer. See
"Description of the Notes." All untendered existing notes will continue to be
subject to the restrictions on transfer set forth in the indenture. To the
extent that existing notes are tendered and accepted in the exchange offer, the
trading market for untendered existing notes could be adversely affected.
The Company may in the future seek to acquire untendered existing notes in
the open market or through privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company intends to make any such acquisitions
of existing notes in accordance with the applicable requirements of the Exchange
Act, and the rules and regulations of the Commission thereunder, including Rule
14e-1, to the extent applicable. The Company has no present plan to acquire any
existing notes that are not tendered in the exchange offer or to file a
registration statement to permit resales of any existing notes that are not
tendered pursuant to the exchange offer.
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USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
exchange notes. In consideration for issuing the exchange notes as contemplated
in this prospectus, the Company will receive in exchange existing notes in like
principal amount, the terms of which are identical in all material respects to
the exchange notes except that the exchange notes will be issued in a
transaction registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and certain provisions relating to an increase
in the stated interest rate on the existing notes provided for under certain
circumstances will be eliminated. The existing notes surrendered in exchange for
exchange notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the exchange notes will not result in a change in the indebtedness
of the Company.
CAPITALIZATION
The following table sets forth the cash, debt and total capitalization of
the Company as of December 31, 1998, and as adjusted to reflect the sale of the
existing notes and the application of the estimated net proceeds therefrom. See
"Selected Financial Data" and "Use of Proceeds." This table should be read in
conjunction with the Unaudited Pro Forma Financial Statements and related notes
and Consolidated Financial Statements of the Company and the related notes
thereto incorporated herein by reference.
AS OF DECEMBER 31, 1998
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
Cash........................................................ $ 4,004 $ 58,844
======== ========
Debt:
Credit Facility(a)........................................ $ 89,000 $ --
Capital leases and other debt............................. 4,517 4,517
Notes offered hereby, net of discount..................... -- 148,800
-------- --------
Total debt........................................ 93,517 153,317
Stockholders' equity:
Common stock.............................................. 289 289
Restricted common stock................................... 27 27
Additional paid-in capital................................ 301,384 301,384
Retained earnings......................................... 19,838 19,838
-------- --------
Total stockholders' equity........................ 321,538 321,538
-------- --------
Total capitalization.............................. $415,055 $474,855
======== ========
- ---------------
(a) As of March 23, 1999, no amounts were outstanding under the Credit
Facility.
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SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
IES acquired the Founding Companies concurrently with the consummation of
its initial public offering of common stock on January 30, 1998 (the "IPO").
Pursuant to the SEC's Staff Accounting Bulletin No. 97, Houston-Stafford
Electric, Inc. ("Houston-Stafford") is considered for accounting purposes the
entity which acquired the other Founding Companies and IES (the "Accounting
Acquiror"). As such, IES's consolidated historical financial statements
represent the financial position and results of operations of (i)
Houston-Stafford as restated to include the financial position and results of
operations of one Acquired Company that was acquired in a pooling of interests
transaction, and (ii) the other Founding Companies and the other Acquired
Companies beginning on their respective dates of acquisition. The following
selected historical financial data for IES as of September 30, 1997 and 1998,
and for the years ended December 31, 1994, 1995 and 1996, and the years ended
September 30, 1997 and 1998, have been derived from the consolidated audited
financial statements of IES, certain of which are included elsewhere in this
offering memorandum. The selected historical financial data for the nine months
ended September 30, 1997 and as of December 31, 1997 and 1998, and for the three
months then ended has been derived from the unaudited consolidated financial
statements of IES, which have been prepared on the same basis as the audited
financial statements and, in the opinion of Company management, reflect all
adjustments consisting of normal recurring adjustments, necessary for a fair
presentation of such data. The results of operations for the interim period
presented should not be regarded as indicative of the results that may be
expected for a full year.
During the periods presented below, the Companies were not under common
control or management and, therefore, the data presented may not be comparable
to or indicative of post-combination results to be achieved by the Company.
Since the following information is only a summary and does not provide all of
the information contained in our financial statements, including the related
notes, you should read "Use of Proceeds," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated Financial Statements and Unaudited Pro Forma Financial
Statements and related notes thereto incorporated herein by reference.
THREE MONTHS
NINE MONTHS YEAR ENDED ENDED
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------- SEPTEMBER 30, ------------------- ---------------------
1994 1995 1996 1997 1997 1998 1997 1998
------- ------- -------- ------------- -------- -------- ------- -----------
(UNAUDITED) (UNAUDITED)
STATEMENTS OF OPERATIONS DATA:
Revenues....................... $65,211 $73,345 $101,431 $92,379 $117,111 $386,721 $31,799 $197,712
Cost of services (including
depreciation)................ 57,633 63,709 85,081 76,306 95,937 306,052 25,262 156,745
------- ------- -------- ------- -------- -------- ------- --------
Gross profit................... 7,578 9,636 16,350 16,073 21,174 80,669 6,537 40,967
Selling, general and
administrative expenses...... 6,786 7,905 10,228 10,222 14,261 47,390 7,718 21,841
Non-cash, non-recurring
compensation charge.......... -- -- -- -- -- 17,036 -- --
Goodwill amortization.......... -- -- -- -- -- 3,212 -- 1,848
------- ------- -------- ------- -------- -------- ------- --------
Income from operations......... 792 1,731 6,122 5,851 6,913 13,031 (1,181) 17,278
Interest and other income
(expense), net............... (80) (182) 14 292 385 (393) 1 (1,486)
------- ------- -------- ------- -------- -------- ------- --------
Income before income taxes..... 712 1,549 6,136 6,143 7,298 12,638 (1,180) 15,792
Provision for income taxes..... 287 563 2,471 2,408 2,923 12,690 (499) 6,700
------- ------- -------- ------- -------- -------- ------- --------
Net income (loss).............. $ 425 $ 986 $ 3,665 $ 3,735 $ 4,375 $ (52) $ (681) $ 9,092
======= ======= ======== ======= ======== ======== ======= ========
OTHER FINANCIAL DATA RATIOS:
Ratio of earnings to fixed
charges(a)................... 3.9x 5.8x 28.5x 25.5x 26.8x 6.1x -- 8.8x
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THREE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1998
------------- ------------
PRO FORMA STATEMENTS OF OPERATIONS:
Revenues.................................................. $798,828 $203,116
Cost of services (including depreciation)................. 640,482 161,530
-------- --------
Gross profit.............................................. 158,346 41,586
Selling, general and administrative expenses.............. 82,831 22,698
Non-cash, non-recurring compensation charge............... -- --
Goodwill amortization..................................... 7,757 1,899
-------- --------
Income from operations.................................... 67,758 16,989
Interest and other income (expense), net.................. (3,668) (1,452)
-------- --------
Income before income taxes................................ 64,090 15,537
Provision for income taxes................................ 27,297 6,622
-------- --------
Net income................................................ $ 36,793 $ 8,915
======== ========
OTHER FINANCIAL DATA RATIOS:
Ratio of earnings to fixed charges(a)..................... 12.2x 8.2x
AS OF
AS OF DECEMBER 31, AS OF SEPTEMBER 30, DECEMBER 31,
--------------------------- -------------------- ---------------------
1994 1995 1996 1997 1998 1997 1998
------- ------- ------- -------- --------- ------- -----------
(UNAUDITED)
BALANCE SHEET DATA:
Cash............................ $ 680 $ 1,772 $ 4,301 $ 4,154 $ 14,583 $ 1,751 $ 4,044
Working capital................. 3,095 3,905 7,068 7,770 75,020 8,444 77,931
Total assets.................... 13,594 14,882 23,712 35,794 502,468 32,473 518,006
Total debt...................... 3,294 1,221 1,959 2,169 94,177 2,960 93,517
Total stockholders' equity...... 4,431 5,842 8,700 12,636 302,704 11,067 321,528
- ---------------
(a) The ratio of earnings to fixed charges is calculated by dividing the fixed
charges into net income before taxes and minority interests plus fixed
charges. Fixed charges consist of interest expense, amortization of debt
issuance costs and the estimated interest component of rent expense. As a
result of the operating loss during the three months ended December 31,
1997, earnings did not cover fixed charges by $1,180.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the financial
statements, and related notes thereto incorporated herein by reference.
We are the third largest provider of electrical contracting and maintenance
services in the United States. We began operations on January 30, 1998 with the
acquisition of 16 electrical businesses and through December 31, 1998, we have
acquired 26 additional electrical contracting and maintenance services
businesses. See "Summary -- Recent Developments" for a description of
acquisitions we have completed since December 31, 1998.
We serve a broad range of markets, including the commercial, industrial and
residential and power line markets. In addition, we have recently entered into
the data communication market, which includes the installation of wiring for
computer networks and fiber optic telecommunications systems. Our revenues are
generated from a mix of new construction, renovation, maintenance and
specialized services. We also focus on higher margin, larger projects that
require special expertise, such as design-and-build projects that utilize the
capabilities of our in-house engineers, as well as service, maintenance and
certain renovation and upgrade work which tends to either be recurring, have
lower sensitivity to economic cycles, or both.
Pursuant to the SEC's Staff Accounting Bulletin No. 97, Houston-Stafford is
considered for accounting purposes the entity which acquired the other founding
companies and IES. As such, IES's consolidated historical financial statements
represent the financial position and results of operations of (i)
Houston-Stafford as restated to include the financial position and results of
operations of one Acquired Company that was acquired in a pooling of interests
transaction, and (ii) the other Founding Companies and the other Acquired
Companies beginning on their respective dates of acquisition.
Our revenues are derived primarily from electrical construction and
maintenance services provided to commercial, industrial, residential and power
line and data communications customers. Revenues from fixed-price construction
and renovation contracts are generally accounted for on a
percentage-of-completion basis, using the cost-to-cost method. The cost-to-cost
method measures the percentage completion of a contract based on total costs
incurred to date compared to total estimated costs at completion. Such contracts
generally provide that the customers accept completion of progress to date and
compensate us for services rendered measured in terms of hours expended or some
other measure of progress. Certain of our customers require us to post
performance and payment bonds upon the execution of the contract, depending upon
the nature of the work to be performed. Our fixed-price contracts often include
payment provisions pursuant to which the customer withholds up to ten percent
from each payment during the course of a job and forwards all retained amounts
to us upon completion and approval of the work. Maintenance and other service
revenues are recognized as the services are performed.
Cost of services consists primarily of salaries and benefits of employees,
subcontracted services, materials, parts and supplies, depreciation, fuel and
other vehicle expenses and equipment rentals. Our gross margin, which is gross
profit expressed as a percentage of revenues, depends on the relative
proportions of costs related to labor and materials. On jobs in which a higher
percentage of the cost of services consists of labor costs, IES typically
achieves higher gross margins than on jobs where materials represent more of the
cost of services. Materials costs can be calculated with relatively greater
accuracy than labor costs, and the Company seeks to maintain higher margins on
its labor-intensive projects to compensate for the potential variability of
labor costs for these projects. Selling, general and administrative expenses
consist primarily of compensation and related benefits for presidents,
administrative salaries and benefits, advertising, office rent and utilities,
communications and professional fees.
We believe that we have realized savings from consolidation of insurance
and bonding programs, reduction in other general and administrative expenses,
such as training and advertising, our ability to borrow at lower interest rates
than the individual companies and consolidation of operations in certain
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locations and greater volume discounts from suppliers of materials, parts and
supplies. Offsetting these savings are costs related to our corporate
management, costs of being a public company and costs of integrating acquired
companies.
As a result of the acquisitions of the Acquired Companies and the Founding
Companies that were accounted for as purchases, the excess of the consideration
paid over the fair value of the net assets acquired was recorded as goodwill on
our balance sheet and is being amortized as a non-cash charge to the statement
of operations over a 40-year period.
IES does not utilize financial instruments for trading purposes and holds
no derivative financial instruments which could expose the company to
significant market risk. Our exposure to market risk for changes in interest
rates relates primary to our long-term obligations under our credit facility, of
which $89.0 million had been borrowed as of December 31, 1998. The credit
facility matures on July 30, 2001. The weighted average interest rate of the
$89.0 million of indebtedness outstanding under the credit facility was 6.88% at
December 31, 1998.
RESULTS OF OPERATIONS
The following table presents selected historical results of operations of
IES and subsidiaries, with dollar amounts in thousands. These historical
statements of operations represent the results of operations of dollar amounts
in thousands. These historical statements of operations represent the results of
operations of (i) Houston-Stafford (as restated to include the results of
operations of one acquired company that was acquired in a pooling-of-interests
transactions) for periods ending prior January 30, 1998 and (ii) Houston-
Stafford (as restated) and the results of operations of the founding companies
and other acquired companies beginning on their respective dates of
acquisitions.
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED SEPTEMBER 30, QUARTER ENDED DECEMBER 31,
DECEMBER 31, SEPTEMBER 30, ------------------------------- -------------------------------
1996 1997 1997 1998 1997 1998
-------------- ------------- -------------- -------------- ------------- --------------
(UNAUDITED) (UNAUDITED)
Revenues..................... $101,431 100% $92,379 100% $117,111 100% $386,721 100% $31,799 100% $197,712 100%
Cost of services............. 85,081 84 76,306 83 95,937 82 306,052 79 25,262 79 156,745 79
-------- --- ------- --- -------- --- -------- --- ------- --- -------- ---
Gross profit................. 16,350 16 16,073 17 21,174 18 80,669 21 6,537 21 40,967 21
Selling, general and
administrative expenses..... 10,228 10 10,222 11 14,261 12 47,390 12 7,718 24 21,841 11
Non-cash, non-recurring
compensation charge in
connection with the Founding
Company acquisitions........ -- -- -- -- -- -- 17,036 5 -- -- -- --
Goodwill amortization........ -- -- -- -- -- -- 3,212 1 -- -- 1,848 1
-------- --- ------- --- -------- --- -------- --- ------- --- -------- ---
Income (loss) from
operations.................. 6,122 6 5,851 6 6,913 6 13,031 3 (1,181) (3) 17,278 9
Interest and other income
(expense), net.............. 14 -- 292 1 385 -- (393) -- 1 -- (1,486) (1)
-------- --- ------- --- -------- --- -------- --- ------- --- -------- ---
Income (loss) before income
taxes....................... 6,136 6 6,143 7 7,298 6 12,638 3 (1,180) (3) 15,792 8
Provision (benefit) for
income
taxes....................... 2,471 2 2,408 3 2,923 2 12,690 3 (499) (1) 6,700 3
-------- --- ------- --- -------- --- -------- --- ------- --- -------- ---
Net income (loss)............ $ 3,665 4% $ 3,735 4% $ 4,375 4% $ (52) --% $ (681) (2)% $ 9,092 5%
======== === ======= === ======== === ======== === ======= === ======== ===
Quarter ended December 31, 1998 compared to quarter ended December 31, 1997
Revenues increased $165.9 million, or 522%, from $31.8 million for the
three months ended December 31, 1997, to $197.7 million for the three months
ended December 31, 1998. The increase in revenues is principally due to the
acquisitions of the Founding Companies and the Acquired Companies.
Gross profit increased $34.5 million, or 527%, from $6.5 million for the
three months ended December 31, 1998. The increase in gross profit was
principally due to the acquisitions of the Founding Companies and the Acquired
Companies. As a percentage of revenues, gross profit increased from 20.6% in
1997 to 20.7 % in 1998
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Selling, general and administrative expenses increased $14.1 million, or
183%, from $7.7 million for the three months ended December 31, 1997, to $28.8
million for the three months ended December 31, 1998. This increase in selling,
general and administrative expenses was primarily attributable to the
acquisitions of the Founding Companies and the Acquired Companies, a
non-recurring $4.4 million bonus paid to the owners of Houston-Stafford during
the three months ended December 31, 1997 prior to the Company's IPO, and
corporate costs incurred in 1998 associated with being a public company which
did not exist in 1997. Excluding such bonuses and higher corporate costs,
selling, general and administrative expenses as a percentage of revenues
decreased from 10.4% to 10.0% in 1998.
Income from operations increased $18.5 million, or 1,563%, from $(1.2)
million for the three months ended December 31, 1997, to $17.3 million for the
three months ended December 31, 1998. This increase in operating income is
primarily attributed to the acquisitions of the Founding Companies and the
Acquired Companies, the non-recurring owner bonuses in 1997, partially offset by
higher corporate costs discussed above. As a percentage of revenues, income from
operations (excluding the owner bonuses and higher corporate costs noted above)
decreased from approximately 10.1% in 1997 to 9.8% in 1998.
Interest and other income (expense), net decreased from $0.0 million in
1997 to $(1.8) million in 1998, primarily as a result of interest expense
incurred in 1998 on borrowings to fund our acquisitions. The increase in our tax
provision from $(0.5) million in 1997 to $6.7 million in 1998 is primarily
attributed to the growth in income from operations discussed above. Our
effective tax rate increased from (42)% in 1997 to 42% in 1998, due to the
growth in income from operations discussed above. The change in net income
(loss) is primarily attributable to the factors discussed above.
Year ended September 30, 1998 compared to the year ended September 30, 1997
Revenues increased $269.6 million, or 230%, from $117.1 million for the
year ended September 30, 1997 to $386.7 million for the year ended September 30,
1998. The increase in revenue was principally due to the acquisition of the
Founding Companies and the Acquired Companies.
Gross profit increased $59.5 million, or 281%, from $21.2 million for the
year ended September 30, 1997 to $80.7 million for the year ended September 30,
1998. The increase in gross profit was principally due to the acquisition of the
Founding Companies and the Acquired Companies. As a percentage of revenues,
gross profit increased from 18% in 1997 to 21% in 1998. This increase was
attributable primarily to Houston-Stafford's lower margin on certain materials
acquired for a significant customer and higher than normal levels of overtime in
the prior year.
Selling, general and administrative expenses increased $33.1 million, or
232%, from $14.3 million for the year ended September 30, 1997 to $47.4 million
for the year ended September 30, 1998. Selling, general and administrative
expenses as a percentage of revenues remained constant at approximately 12% in
1997 and 1998. Selling, general and administrative expenses were primarily
attributable to the acquisitions of the Founding Companies and the Acquired
Companies, a $5.6 million bonus paid to the owners of Houston-Stafford during
the four months ended in January 1998, compared to a $1.5 million bonus during
the four months ended in January 1997, and approximately $3.3 million of public
company related corporate costs incurred in 1998 which did not exist in 1997.
Excluding such bonuses and higher corporate costs, selling, general and
administrative expenses as a percentage of revenues decreased from 11% in 1997
to 10% in 1998.
Income from operations increased $6.1 million, or 88%, from $6.9 million
for the year ended September 30, 1997 to $13.0 million for the year ended
September 30, 1998. This increase in operating income was primarily attributable
to acquisition of the Founding Companies and the Acquired Companies and the
non-recurring owner bonuses in 1997. These increases were partially offset by
the higher corporate costs discussed above and the $17.0 million non-cash,
nonrecurring compensation charge incurred in connection with our IPO. As a
percentage of revenues, income from operations (excluding the owner bonuses,
higher corporate costs and the non-cash, non-recurring compensation charge noted
above) increased from 7% in 1997 to 10% in 1998.
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50
Interest and other income (expense), net changed from income of $0.4
million in 1997 to $(0.4) million in 1998, primarily as a result of interest
expense on borrowings to fund our 1998 acquisitions. The increase in our tax
provision from $2.9 million in 1997 to $12.7 million in 1998 is primarily
attributed to the growth in income from operations discussed above. Our
effective tax rate increased from 40% in 1997 to 100% in 1998, due to a $17.0
million non-cash, nonrecurring compensation charge recognized during 1998 in
connection with the IPO which is not deductible for tax purposes. The change in
net income (loss) is primarily attributed to the factors discussed above.
Year ended September 30, 1997 compared to the year ended December 31, 1996
Revenues increased $15.7 million, or 15%, from $101.4 million for the year
ended December 31, 1996 to $117.1 million for the year ended September 30, 1997
primarily as a result of increased demand and the consolidation of an electrical
supply company, partially offset by the effects of unusually rainy weather in
Texas.
Gross profit increased $4.8 million, or 30%, during the year ended
September 30, 1997 to $21.2 million, and gross margin increased to 18% during
the year ended September 30, 1997 from 16% during the year ended December 31,
1996 as a result of favorable pricing related to the increase in demand and
higher discounts on certain long-term material purchase commitments.
Selling, general and administrative expenses increased 40% from $10.2
million to $14.3 million. The increase was primarily attributable to an increase
in bonuses for certain key employees and to a lesser degree higher insurance
costs.
Income from operations increased $0.8 million, or 13%, from $6.1 million
for the year ended December 31, 1996 to $6.9 million for the year ended
September 30, 1997. This increase in operating income was primarily attributable
to the changes in revenues and selling, general and administrative expenses
discussed above. As a percentage of revenues, income from operations remained
constant at 6%.
Interest and other income, net increased from $14,000 in 1996 to $0.4
million in 1997 due to an increase in other income. Our effective tax rate
remained constant at 40% in 1996 and 1997. The increase in net income is
primarily attributed to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, IES had cash of $4.0 million, working capital of
$77.8 million, borrowings of $89.0 million under its credit facility, $2.4
million of letters of credit outstanding and available capacity under its credit
facility of $83.6 million.
For the quarter ended December 31, 1998, IES generated $0.9 million of net
cash from operating activities, comprised of net income of $9.1 million,
increased by $3.1 million of non-cash charges of depreciation and amortization,
with the balance of the change due to other working capital changes. Net cash
used in investing activities was $9.3 million, including $7.5 million used for
the purchase of businesses, net of cash acquired. Net cash flow used in
financing activities was $2.1 million, resulting primarily from $19.5 million of
borrowings of debt, decreased by $21.4 million for payments of debt, further
decreased by $225,000 for other financing activities.
In January 1998, IES entered into its credit facility, which provided for
borrowings of up to $65.0 million, to be used for working capital, capital
expenditures, other corporate purposes and acquisitions. In July 1998, the
amounts available for borrowings under the credit facility were increased to
$175.0 million. The amounts borrowed under the credit facility bear interest at
an annual rate equal to either (a) the London interbank offered rate ("LIBOR")
plus 1.0% to 2.0%, as determined by the ratio of our total funded debt to EBITDA
(as defined), or (b) the higher of (i) the bank's prime rate and (ii) the
federal funds rate plus 0.5%, plus up to an additional 0.5% as determined by the
ratio of our total funded debt to EBITDA. Commitment fees of 0.25% to 0.375%, as
determined by the ratio of total funded debt to EBITDA, are due on any unused
borrowing capacity under the credit facility. The subsidiaries of the Company
have guaranteed the repayment of all amounts due under the facility, and the
facility is secured
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by the capital stock of the guarantors and the accounts receivable of IES and
the guarantors. The credit facility requires the consent of the lenders for
acquisitions exceeding a certain level of cash consideration, prohibits the
payment of cash dividends on our common stock, restricts the ability of the
Company to incur other indebtedness and requires us to comply with certain
financial covenants. Availability of the credit facility is subject to customary
drawing conditions.
The Company anticipates that its cash flow from operations, proceeds from
the issuance and sale of the existing notes and proceeds from the credit
facility will provide sufficient cash to enable it to meet its working capital
needs, debt service requirements and planned capital expenditures for property
and equipment through fiscal 1999.
Subsequent to its IPO, and through December 31, 1998, IES has acquired 26
additional electrical contracting and maintenance businesses for approximately
$100.5 million of cash and 7.1 million shares of common stock. The cash
component of the consideration paid for these companies was funded with proceeds
from the IPO, existing cash, and borrowings under the credit facility.
IES intends to continue to pursue acquisition opportunities and may be in
various stages of negotiation, due diligence and documentation of potential
acquisitions at any time. The timing, size or success of any acquisition effort
and the associated potential capital commitments cannot be predicted. IES
expects to fund future acquisitions primarily with working capital, cash flow
from operations and borrowings, including any unborrowed portion of the credit
facility, as well as issuances of additional equity or debt. To the extent IES
funds a significant portion of the consideration for future acquisitions with
cash, it may have to increase the amount available for borrowing under the
credit facility or obtain other sources of financing through the public or
private sale of debt or equity securities. There can be no assurance that IES
will be able to secure such financing if and when it is needed or on terms IES
deems acceptable. If IES is unable to secure acceptable financing, its
acquisition program could be negatively affected. Capital expenditures for
equipment and expansion of facilities are expected to be funded from cash flow
from operations and supplemented as necessary by borrowings under the credit
facility.
SEASONALITY AND QUARTERLY FLUCTUATIONS
IES's results of operations from residential construction are seasonal,
depending on weather trends, with typically higher revenues generated during the
spring and summer and lower revenues during the fall and winter. The commercial
and industrial aspect of IES's business is less subject to seasonal trends, as
this work generally is performed inside structures protected from the weather.
IES's service business is generally not affected by seasonality. In addition,
the construction industry has historically been highly cyclical. IES's volume of
business may be adversely affected by declines in construction projects
resulting from adverse regional or national economic conditions. Quarterly
results may also be materially affected by the timing of new construction
projects and acquisitions and the timing and magnitude of acquisition
assimilation costs. Accordingly, operating results for any fiscal period are not
necessarily indicative of results that may be achieved for any subsequent fiscal
period.
INFLATION
Due to the relatively low levels of inflation experienced in fiscal 1996,
1997 and 1998, inflation did not have a significant effect on the results of the
company in those fiscal years, or any of the founding companies or the acquired
companies during similar periods.
RECENT ACCOUNTING PRONOUNCEMENTS
On October 1, 1998, IES adopted SFAS No. 130 "Reporting Comprehensive
Income," which requires the display of comprehensive income and its components
in the financial statements. Comprehensive income represents all changes in
equity of an entity during the reporting period, including net income and
charges directly to equity which are excluded from net income. There was no
difference between the Company's "traditional" and "comprehensive" net income.
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52
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, "Disclosure about Segments of an Enterprise and Related Information,"
which establishes standards for the way public enterprises are to report
information about operating segments in annual financial statements and requires
the reporting of selected information about operating systems in interim
financial reports issued to shareholders. SFAS No. 131 is effective for IES for
its year ended September 30, 1999, at which time IES will adopt the provision.
IES is currently evaluating the impact on IES's financial disclosures.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which becomes effective for IES for its
year ended September 30, 2000. SFAS No. 133 requires a company to recognize all
derivative instruments (including certain derivative instruments embedded in
other contracts) as assets or liabilities in its balance sheet and measure them
at fair value. The statement requires that changes in the derivatives' fair
value be recognized as current earnings unless specific hedge accounting
criteria are met. IES is evaluating SFAS No. 133 and the impact on existing
accounting policies and financial reporting disclosures. However, IES has not to
date engaged in activities or entered into arrangements normally associated with
derivative instruments.
YEAR 2000
Year 2000 Issue. Many software applications, hardware and equipment and
embedded chip systems identify dates using only the last two digits of the year.
These products may be unable to distinguish between dates in the year 2000 and
dates in the year 1900. That inability (referred to as the "Year 2000" issue),
if not addressed, could cause applications, equipment or systems to fail or
provide incorrect information after December 31, 1999, or when using dates after
December 31, 1999. This in turn could have an adverse effect on the Company due
to the Company's direct dependence on its own applications, equipment and
systems and indirect dependence on those of other entities with which the
Company must interact.
Risk of Non-Compliance and Contingency Plans. The major applications which
pose the greatest Year 2000 risks for the Company if implementation of the Year
2000 compliance program is not successful are the Company's financial systems
applications, including related third-party software. Potential problems if the
Year 2000 compliance program is not successful could include delays and
interruptions with respect to the Company's ability to perform its financial and
accounting functions. The Company operates on a decentralized basis with each
individual reporting unit having independent information technology (IT) and
non-IT systems. The Company's most significant reporting units represent in
excess of 50% of the Company's total revenue. The Company's Year 2000 compliance
program is focused on the systems which could materially affect its business.
The Company has completed a preliminary assessment of its significant operating
units and believes that the systems at these companies are or will shortly be
Year 2000 compliant. The Company currently has assessed its remaining Year 2000
risk as low because:
- the Company is not dependent on any key customers or suppliers (none
represent as much as 5% of the Company's sales or purchases,
respectively);
- the Company has many separate PC based systems and is not dependent on
any one system;
- many of the Company's processes are performed using spreadsheets and/or
other manual processes which are not technologically dependent;
- the Company performs construction and service maintenance on site for its
customers, and the work performed is manual in nature and not dependent
on automated information technology systems to be completed; and
- the Company currently believes that most of its systems that have Year
2000 compliance issues are based on prepackaged third-party software that
can be upgraded at nominal costs through vendor supported upgrades.
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53
As a result, the Company believes that its reasonably likely worst case
Year 2000 scenario is a temporary inability for it to process the accounting
transactions representing its business activity using automated information
systems at certain of its operating units.
The goal of the Company's Year 2000 project is to ensure that all of the
critical systems and processes which are under the direct control of the Company
remain functional. However, because certain systems and processes may be
interrelated with systems outside of the control of the Company, there can be no
assurance that all implementations will be successful. Accordingly, as part of
the Year 2000 project, contingency and business plans are in the process of
being developed to respond to potential failures that may occur. Such
contingency and business plans are scheduled to be completed by the fourth
quarter of fiscal 1999. To the extent appropriate, such plans will include
emergency back up and recovery procedures, remediation of existing systems with
system upgrades or installation of new systems and replacing electronic
applications with manual processes. Due to the uncertain nature of contingency
planning, there can be no assurances that such plans actually will be sufficient
to reduce the risk of material impacts on the Company's operations due to Year
2000 issues. The Company has ongoing information systems development and
implementation projects, none of which have experienced delays due to its Year
2000 compliance program.
Compliance Program. In order to address the Year 2000 issue, the Company
has established a project team to assure that key automated systems and related
processes will remain functional through year 2000. The team is addressing the
project in the following stages:
- awareness;
- assessment;
- remediation;
- testing; and
- implementation of the necessary modifications.
The key automated systems consist of:
- project estimating, management and financial systems applications;
- hardware and equipment;
- embedded chip systems; and
- third-party developed software.
The evaluation of the Year 2000 issue includes the evaluation of the Year
2000 exposure of third parties material to the operations of the Company. The
Company has retained a Year 2000 consulting firm to assist with the review of
its systems for Year 2000 issues.
Company State of Readiness. The awareness phase of the Year 2000 project
has begun with a corporate-wide awareness program which will continue to be
updated throughout the life of the project. The Company believes that there is
not a material risk related to its non-IT systems because the Company is
primarily a manual service provider and does not rely on these types of systems.
The assessment phase of the project involves for both IT and non-IT systems,
among other things, efforts to obtain representations and assurances from third
parties, including third-party vendors, that their hardware and equipment,
embedded chip systems and software being used by or impacting the Company or any
of its business units are or will be modified to be Year 2000 compliant. To
date, the Company does not expect that responses from such third parties will be
conclusive. However, because the Company is not dependent on any key customers
or suppliers, the Company does not believe that a disruption in service with any
third party would have a material adverse effect on its business, results of
operations or financial condition. The remediation phase involves identifying
the changes which are required to be implemented by system for them to be Year
2000 compliant. The testing and implementation phases involve verifying that the
39
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identified changes address the Year 2000 problems identified through testing the
system as part of implementing such changes. Management expects that the
remediation, testing and implementation phases will be substantially completed
during the third and fourth quarters of fiscal 1999.
Costs to Address Year 2000 Compliance Issues. While the total cost to the
Company of the Year 2000 project is still being evaluated, management currently
estimates that the costs to be incurred by the Company in 1999 associated with
assessing and testing applications, hardware and equipment, embedded chip
systems, and third-party developed software will be less than $300,000, which
will be funded with existing operating cash flows and deducted from income as
incurred. The Company believes that software vendor Year 2000 releases will
address the majority of the Company's Year 2000 issues. To date, the Company has
expended approximately $20,000 related to its Year 2000 compliance. These costs
were primarily related to the assessment phase of the project. The Company
expects the majority of its costs related to the Year 2000 project will be
incurred in the third and fourth quarters of its 1999 fiscal year. Because the
Company's internal systems are PC-based, management does not expect the costs to
the Company of the Year 2000 project to have a material adverse effect on the
Company's financial position, results of operations or cash flows.
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BUSINESS
We are the third largest provider of electrical contracting and maintenance
services in the United States. In late 1997, we recognized a significant
opportunity for a well-capitalized company with critical mass and a nationwide
presence to realize substantial competitive advantages by capitalizing on the
fragmented nature of the electrical services industry. To that end, we began
operations on January 30, 1998 with the acquisition of 16 electrical businesses,
each of which had a strong identity and presence in its local markets, in order
to create a nationwide provider of electrical services and to lead the
consolidation of our industry. Since February 1998 and through December 31,
1998, we have acquired 26 additional electrical contracting and maintenance
services businesses. On a pro forma basis for the year ended September 30, 1998
we generated revenues and EBITDA of $798.8 million and $81.7 million,
respectively.
According to the most recently available U.S. Census data, the electrical
contracting industry generated annual revenues in excess of $40 billion in 1992.
This data also indicates that the electrical contracting industry is highly
fragmented with more than 54,000 companies, most of which are small,
owner-operated businesses. We estimate that there are only five other U.S.
electrical contractors with revenues in excess of $200 million. Government
sources indicate that total construction industry revenues have grown at an
average compound rate of approximately 6% from 1995 through 1998. Over the same
period, our pro forma combined revenues have increased at a compound annual rate
of approximately 13%. We believe this growth in revenues is primarily due to the
fact that our companies have been in business an average of 21 years, have
strong relationships with customers, have effectively employed industry best
practices and have focused on larger, higher margin projects.
We serve a broad range of markets, including the commercial, industrial,
residential and power line markets. In addition, we have recently entered into
the data communication market, which includes the installation of wiring for
computer networks and fiber optic telecommunications systems. Our revenues are
generated from a mix of new construction, renovation, maintenance and
specialized services. We focus on higher margin, larger projects that require
special expertise, such as design-and-build projects that utilize the
capabilities of our in-house engineers, as well as service, maintenance and
certain renovation and upgrade work which tends to either be recurring, have
lower sensitivity to economic cycles, or both.
INDUSTRY OVERVIEW
General. Virtually all construction and renovation in the United States
generates demand for electrical contracting services. Electrical work generally
accounts for approximately 8% to 12% of the total construction cost of
commercial and industrial projects, 5% to 10% of the total construction cost for
residential projects, and substantially all of the construction costs of power
line projects. In recent years, electrical contractors have experienced a
growing demand for their services due to more stringent electrical codes,
increased use of electrical power, demand for increased data cabling capacity
for high-speed computer systems and the construction of smart houses with
integrated computer, temperature control and safety systems.
THE MARKETS WE SERVE
Commercial Market. Our commercial work consists primarily of electrical
installations and renovations in office buildings, high-rise apartments and
condominiums, theaters, restaurants, hotels, hospitals and school districts. Our
commercial customers include general contractors, developers, building owners,
engineers and architects. We believe that demand for our commercial services is
driven by construction and renovation activity levels, as well as more stringent
local and national electrical codes. From fiscal 1995 through 1998, our pro
forma revenues from commercial work have grown at a compound annual rate of
approximately 11% per year and currently represent approximately 45% of our
total pro forma 1998 revenues.
Industrial Market. Our industrial work consists primarily of electrical
installations and upgrade, renovation and replacement service and maintenance
work in manufacturing and processing facilities,
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military installations, airports, refineries and petrochemical and power plants.
According to internal estimates, approximately 60% of our industrial revenues
are associated with new construction with the balance derived from significant
contracts for upgrade, renovation and replacement service and maintenance work.
Our industrial customers include facility owners, general contractors,
engineers, consultants and architects. We believe that demand for our industrial
services is driven by facility upgrades and replacements as well as general
activity levels in the particular industries served, which is in turn affected
by general economic conditions. From fiscal 1995 through 1998, our pro forma
revenues from industrial work have grown at a compound annual rate of
approximately 14% per year and currently represent approximately 28% of our
total pro forma 1998 revenues.
Residential Market. Our work for the residential market consists primarily
of electrical installations in new single family housing and low-rise
multifamily housing for customers which include local, regional and national
homebuilders and developers. The residential market is primarily dependent on
the number of single family and multi-family home starts, of which single-family
starts are most affected by the level of interest rates and general economic
conditions. Competitive factors particularly important in the residential market
include our ability to build relationships with homebuilders and developers by
providing services in each area of the country in which they operate. This
ability has become increasingly important as consolidation has occurred within
the residential construction industry and homebuilders and developers have
sought out service providers on whom they can rely for consistent service in all
of their operating regions. We believe we are currently one of the largest
providers of electrical contracting services to the U.S. residential
construction market and that there is significant additional opportunity for
consolidation within this highly fragmented market. In the current low interest
rate environment, our residential business has experienced significant growth.
Our pro forma revenues from residential electrical contracting have grown at a
compound annual rate of approximately 21% from fiscal 1995 through 1998 and
currently represent approximately 16% of our total pro forma 1998 revenues.
Power Line Market. Our work for the power line market consists primarily of
the installation, repair and maintenance of electric power transmission lines
and the construction of electric substations. We generally serve as the prime
contractor and perform substantially all of the construction work on these
contracts. Our customers in this market are government agencies and utilities.
Demand for power line services is driven by new infrastructure development,
utilities' efforts to reduce costs through the outsourcing of power line
installation and maintenance services in anticipation of deregulation and the
need to modernize and increase the capacity of existing transmission and
distribution systems. The power line business is a new focus for our company and
currently represents approximately 3% of our total pro forma 1998 revenues.
Service and Maintenance Market. The balance of our total pro forma 1998
revenues is derived from service calls and routine maintenance contracts. Our
service and maintenance revenues, which tend to be recurring and less sensitive
to economic fluctuations, have grown at a compound annual rate of approximately
14% from fiscal 1995 through 1998 and currently represent approximately 8% of
our total pro forma 1998.
Data Communication Market. We recently formed a division to specifically
target opportunities in the data communication market and completed our first
data communication acquisition in November 1998. Our data communication work
consists primarily of the installation, upgrade, maintenance and repair of
computer network cabling, telecommunication systems and wireless telephone and
microwave towers. We believe that demand for our data communication services
will be driven by the pace of technological change, the overall growth in voice
and data traffic and by the increasing use of personal computers and modems,
with particular emphasis on the speed with which information can be retrieved
from the Internet. As a result of our recent entry into the market, our data
communication revenues are not a significant component of our total pro forma
1998 revenues.
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COMPETITIVE STRENGTHS
We believe several factors give us a competitive advantage in our industry,
including our:
- Size and critical mass -- which give us purchasing and other economies of
scale, as well as greater ability to compete for larger jobs that require
greater technical expertise, personnel availability and bonding capacity;
- Geographically diverse operations -- which enable us to effectively
service large customers across operating regions, including regional and
national homebuilders, national retailers and other commercial
businesses, as well as to lessen the impact of regional economic cycles;
- Diverse business lines -- which we believe provide greater stability in
sales revenue;
- Strong customer relationships -- which provide us repeat business and the
opportunity for cross selling our services;
- Expertise in specialized markets -- which provides us with access to high
growth markets, including data cabling, wireless telecommunication,
highway lighting and traffic control, video, security and fire systems;
- Substantial number of licensed electricians -- which enables us to
deliver quality service with greater reliability than many of our
competitors, which is particularly important given a current industry
shortage of qualified electricians;
- Design technology and expertise -- which give us the ability to
participate in higher margin design-and-build projects; and
- Experienced management -- which holds in excess of 60% of the Company's
outstanding common stock and includes executive management with extensive
electrical, consolidation and public company experience, as well as
regional and local management which have established reputations in their
local markets.
BUSINESS STRATEGY
Our goal is to expand our position as a leading national provider of
electrical contracting and maintenance services by:
- continuing to realize operational efficiencies;
- expanding our business and markets through internal growth; and
- pursuing a targeted acquisition strategy.
OPERATING STRATEGY
We believe there are significant opportunities to continue to increase our
revenues and profitability. The key elements of our operating strategy are:
Implementation of Best Practices. We continue to expand the services we
offer in our local markets by using the specialized technical and marketing
strengths of each of our companies. Through a series of forums attended by
management and other employees, we regularly identify and share best practices
that can be successfully implemented throughout our operations. We have
identified opportunities to enhance certain operational, administrative, safety,
hiring and training practices, and we have adopted the best of these practices
throughout our operations. Additional areas of focus include expanding the use
of our computer-aided-design technology and expertise and sharing information
relating to specific projects or job requirements throughout our company.
Focus on Higher Margin, High Growth Opportunities. We intend to pursue
projects and business markets which are higher value-added in nature and provide
us with opportunities to expand our revenues, gross margins and operating
margins. In particular, we intend to focus on leveraging our unique skill base
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and competitive strengths to achieve leading market shares in targeted business
areas. Examples of high growth markets we have recently entered are the power
line and data communication markets in which underlying industry dynamics are
expected to lead to demand levels which outpace the growth of the electrical
service market as a whole. Examples of higher margin opportunities within our
more established markets include the expansion of maintenance and specialized
services, as well as an increasing amount of our repeat business with national
customers.
Increase the Number of National Accounts. We intend to use our geographic
diversity to bid for additional business from new and existing customers that
operate on a regional and national basis, such as developers, contractors,
homebuilders and owners of national chains. We believe that significant demand
exists from such companies to utilize the services of a single electrical
contracting and maintenance service provider. This demand is at least partially
driven by the recent consolidation among a number of our principal customers,
including homebuilders, developers and national contractors. Because we are able
to understand the demands and needs of our customers based on prior,
substantially similar projects, we are able to configure and install systems to
their specifications on a more timely and cost-efficient basis than other
electrical contractors. Moreover, we believe that the demand for a single-source
contractor limits the opportunities for smaller contractors that may not be able
to provide services at multiple locations simultaneously. We believe our
existing local and regional relationships can be further expanded as we continue
to develop a nationwide network.
Operate on Decentralized Basis. We believe that our decentralized operating
structure helps us retain the entrepreneurial spirit present in each of our
companies while maintaining disciplined operating and financial controls. We
have recently structured our company into regional operating divisions to more
efficiently share the considerable local and regional market knowledge and
customer relationships possessed by each of our companies, as well as companies
that we may acquire in the future. We believe that this regional framework will
allow us to more effectively disseminate ideas, gather financial information and
target customers. By maintaining a local focus, we believe we are able to
continue to:
- build relationships with general contractors and other customers;
- address design preferences and code requirements;
- respond quickly to customer demands; and
- adjust to local market conditions.
Attract and Retain Quality Employees. We believe that our ability to
attract and retain qualified electricians is a critical competitive factor. We
plan to continue to attract and train skilled employees by:
- extending active recruiting and training programs;
- offering stock-based compensation for key employees; and
- offering expanded career paths and more stable income through a larger
public company.
Achieve Additional Operating Efficiencies. We continue to focus on
operating efficiencies by combining overlapping operations and centralizing
certain administrative functions. We are also taking advantage of our combined
purchasing power to gain volume discounts on items such as electrical materials,
vehicles, bonding, employee benefits and insurance. Through sharing business
practices and providing repeat services to national accounts, we believe we can
continue to achieve operating margin improvements. In addition, we believe that
significant opportunities exist to increase our profitability through such
efforts as offsite prefabrication and standardized project management of similar
jobs.
ACQUISITION STRATEGY
Due to the highly fragmented nature of the electrical contracting and
maintenance services industry, we believe we have significant acquisition
opportunities. We focus on acquiring companies with an entrepreneurial attitude
as well as a willingness to learn and share improved business practices through
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open communications. We believe that many electrical contracting and maintenance
service businesses that lack the capital necessary to expand operations will
become acquisition candidates. For these acquisition candidates, a sale of their
company to us will provide them with several benefits, including:
- the ability to improve margins through implementing best practices;
- expertise to expand in specialized markets;
- enhanced productivity through the reduction of administrative burdens;
- national name recognition;
- potential for substantial financial return through equity participation
in our company; and
- the opportunity for a continued role in management.
Other key elements of our acquisition strategy include:
Enter New Geographic Markets. We target acquisition candidates that are
financially stable, have a strong presence in the market in which they operate
and have the customer base necessary to integrate with or complement our
existing business. We expect that increasing our geographic diversity will allow
us to better serve an increasingly national customer base. It should also
further reduce the impact of local and regional economic cycles, as well as
weather-related or seasonal variations in our business.
Expand Within Existing Markets. Once we enter a market, we seek to acquire
other well-established electrical contracting and maintenance businesses
operating within that region, including "add-on" acquisitions of smaller
companies. We believe that add-on acquisitions afford the opportunity to improve
our overall cost structure through the integration of such acquisitions into
existing operations as well as to increase revenues through access to additional
specialized markets. Despite the integration opportunities afforded by such
add-on acquisitions, we maintain existing business names and identities to
retain goodwill for marketing purposes.
Diversify Business Operations. We will continue to diversify our business
operations as we identify opportunities within related electrical businesses
with similar characteristics to our current business lines. Since our inception,
we have added power line and data communication operations to our business
portfolio due to the fragmented nature of those markets, our belief in their
strong growth potential and their lower sensitivity to economic downturns. We
will continue to diversify into higher margin businesses to enhance revenue
growth and profitability.
INTEGRATION OF ACQUISITIONS
We believe that we have been successful in integrating the companies we
have acquired. Much of the work necessary to integrate the operations of an
acquired company is begun prior to the closing of the transaction. In the
process of extensive financial, operational and legal due diligence, we often
identify a number of areas in which efficiencies can be realized in the
integration process. In addition, industrial psychologists often test key
management personnel of the target company to determine whether they possess the
qualities that we look for in our management. Further, outside accountants who
specialize in the construction industry conduct extensive financial due
diligence with respect to the books and financial records of the target. As a
condition to the closing of the acquisition and in order to retain the key
management of the acquired company, the president of the acquired company is
typically required to enter into an employment contract. Additionally, at the
closing, the acquired company is added to our insurance and bonding policies,
which typically results in an immediate cost savings. Our financial reporting
package is put into place shortly after closing so that the results of
operations of the acquired company can be reported to IES in a timely
standardized format and easily incorporated into our consolidated reports. In
addition, the management of acquired companies is introduced to our policies and
financial goals and attend regularly scheduled best practices forums as well as
regional management meetings on an ongoing basis. In this manner, we attempt to
share efficiencies throughout our operations while maintaining the
entrepreneurial atmosphere of the acquired business.
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COMPANY OPERATIONS
We offer a broad range of electrical contracting services, including
installation and design, for both new and renovation projects in the commercial,
industrial and residential markets. We also offer long-term and per call
maintenance services, which generally provide recurring revenues that are
relatively independent of levels of construction activity.
In certain markets we offer design-and-build expertise and specialized
services, which typically require specific skills and equipment, in order to
provide value added services to the customer and to earn higher margins than
those generated by general electrical contracting and maintenance services which
are often obtained by competitive bid. We also act as a subcontractor for a
variety of national, regional and local builders in the installation of
electrical and other systems.
Commercial and Industrial. New commercial and industrial work begins with
either a design request or engineer's plans from the owner or general
contractor. Initial meetings with the parties allow the contractor to prepare
preliminary and then more detailed design specifications, engineering drawings
and cost estimates. Once a project is awarded, it is conducted in scheduled
phases, and progress billings are rendered to the owner for payment, less a
retainage of 5% to 10% of the construction cost of the project. Actual field
work (ordering of equipment and materials, fabrication or assembly of certain
components, delivery of materials and components to the job site, scheduling of
work crews and inspection and quality control) is coordinated during these
phases. We generally provide the materials to be installed as a part of these
contracts, which vary significantly in size from a few hundred dollars to
several million dollars and vary in duration from less than a day to more than a
year.
Residential. New residential installations begin with a builder providing
architectural or electrical drawings for the residences within the tract being
developed. We typically submit a bid or contract proposal for the work. IES
personnel analyze the plans and drawings and estimate the equipment, materials
and parts and the direct and supervisory labor required for the project. We
deliver a written bid or negotiates an arrangement for the job. The installation
work is coordinated by our field supervisors along with the builder's personnel.
Payments for the project are generally obtained within 30 days, at which time
any mechanics' and materialmen's liens securing such payments are released.
Interim payments are often obtained to cover labor and materials costs on larger
projects.
Power Line. Power line work begins with a request for bids from either an
electric utility or a general contractor. We will analyze the plans provided and
determine the amount of its bid. Once the project is awarded, it is conducted in
scheduled phases, and progress billings are rendered for payment. This work is
capital intensive, requiring the use of various pieces of heavy equipment.
Additionally, the electricians that perform power line work must be highly
skilled in order to work with the high voltage power lines. In addition to
running the lines, the Company often will construct the towers that carry the
lines as well as electrical substations.
Data Communication. Data communication work can be either regional
infrastructure, which involves running lines cross country, or site specific
installation of cabling in a new or existing structure. Infrastructure work is
similar in nature to power line work. Installation of cabling in a new or
existing structure is usually done for general contractors, computer network
consultants or end users. The work is similar to the installation of electrical
wiring in commercial or residential structures. However, because the materials
and certain of the methods used in the installation of data cabling differ from
those used in the installation of electrical wiring, the work is typically
performed by technicians who specialize in data cabling. Large data cabling
projects often include traditional electrical contracting elements and create an
opportunity for us to better serve the overall needs of the customer and to
capture a larger percentage of that project's contractor expenditures. Our
operations in the data communication market are currently focused on site
specific installations.
Maintenance Services. Our maintenance services are supplied on a long-term
and per call basis. Our long-term maintenance services are provided through
service contracts that require the customer to pay an annual or semiannual fee
for periodic diagnostic services at a specific discount from standard prices for
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repair and replacement services. Our per call maintenance services are initiated
when a customer requests emergency repair service we call the client to schedule
periodic maintenance work. Service technicians are scheduled for the call or
routed to the customer's residence or business by the dispatcher. Service
personnel work out of our service vehicles, which carry an inventory of
equipment, tools, parts and supplies needed to complete the typical variety of
jobs. The technician assigned to a service call travels to the residence or
business, interviews the customer, diagnoses the problem, prepares and discusses
a price quotation, performs the work and often collects payment from the
customer. Most work is warrantied for one year.
Major Customers. We have a diverse customer base, with no single customer
accounting for more than 5% of our pro forma combined revenues for the year
ended September 30, 1998. As a result of emphasis on quality and worker
reliability, our management and a dedicated sales and work force have been
responsible for developing and maintaining successful relationships with key
customers. Customers generally include general contractors; developers;
consulting engineers; architects; owners and managers of large retail
establishments, office buildings, apartments and condominiums, theaters and
restaurants; hotels and casinos; manufacturing and processing facilities; arenas
and convention centers; hospitals; school districts; military and other
government agencies; airports and car lots. We intend to continue our emphasis
on developing and maintaining relationships with its customers by providing
superior, high-quality service.
Employee Screening, Training and Development. We are committed to providing
the highest level of customer service through the development of a highly
trained workforce. Employees are encouraged to complete a progressive training
program to advance their technical competencies and to ensure that they
understand and follow the applicable codes, our safety practices and other
internal policies. We support and fund continuing education for our employees,
as well as apprenticeship training for our technicians under the Bureau of
Apprenticeship and Training of the Department of Labor and similar state
agencies. Employees who train as apprentices for four years may seek to become
journeymen electricians and, after additional years of experience, master
electricians. We pay progressive increases in compensation to employees who
acquire such additional training, and more highly trained employees serve as
foremen, estimators and project managers. Our master electricians are licensed
in one or more cities or other jurisdictions in order to obtain the permits
required in our business, and certain employees have also obtained specialized
licenses in areas such as security systems and fire alarm installation. In some
areas, licensing boards have set continuing education requirements for
maintenance of licenses. Because of the lengthy and difficult training and
licensing process for electricians, we believe that the number, skills and
licenses of our employees constitute a competitive strength in the industry.
We actively recruit and screen applicants for our technical positions and
have established programs in some locations to recruit apprentice technicians
directly from high schools and vocational technical schools. Prior to
employment, we make an assessment of the technical competence level of all
potential new employees, confirm background references, conduct random drug
testing and check criminal and driving records.
Purchasing. As a result of economies of scale derived through its
acquisitions, we have been able to purchase equipment, parts and supplies at
discounts to historical levels. In addition, as a result of our size, we are
also able to lower our costs for (i) the purchase or lease of vehicles; (ii)
bonding, casualty and liability insurance; (iii) health insurance and related
benefits; (iv) retirement benefits administration; (v) office and computer
equipment; and (vi) marketing and advertising.
Substantially all the equipment and component parts we sell or install are
purchased from manufacturers and other outside suppliers. We are not materially
dependent on any of these outside sources.
MANAGEMENT INFORMATION AND CONTROLS
We have centralized its consolidation accounting and certain other
financial reporting activities at its operational headquarters in Houston,
Texas, while basic accounting activities are conducted at the
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operating level. We believe that our current information systems hardware and
software are adequate to meet current needs for financial reporting, internal
management control and other necessary information and the needs of newly
acquired corporations.
PROPERTY AND EQUIPMENT
We operate a fleet of owned and leased service trucks, vans and support
vehicles. We believe these vehicles generally are adequate for our current
operations.
At September 30, 1998, we maintained warehouses, sales facilities and
administrative offices at 89 locations. Substantially all of our facilities are
leased. We lease our corporate headquarters located in Houston, Texas.
We believe that our properties are generally adequate for our present
needs. Furthermore, we believe that suitable additional or replacement space
will be available as required.
COMPETITION
The electrical contracting industry is highly fragmented and competitive.
Most of our competitors are small, owner-operated companies that typically
operate in a limited geographic area. There are few public companies focused on
providing electrical contracting services. In the future, competition may be
encountered from new market entrants. Competitive factors in the electrical
contracting industry include (i) the availability of qualified and licensed
electricians, (ii) safety record, (iii) cost structure, (iv) relationships with
customers, (v) geographic diversity, (vi) ability to reduce project costs, (vii)
access to technology, (viii) experience in specialized markets and (ix) ability
to obtain bonding. See "Risk Factors -- Competition."
REGULATIONS
Our operations are subject to various federal, state and local laws and
regulations, including (i) licensing requirements applicable to electricians;
(ii) building and electrical codes; (iii) regulations relating to consumer
protection, including those governing residential service agreements and (iv)
regulations relating to worker safety and protection of the environment. We
believe we have all required licenses to conduct our operations and are in
substantial compliance with applicable regulatory requirements. Our failure to
comply with applicable regulations could result in substantial fines or
revocation of our operating licenses.
Many state and local regulations governing electricians require permits and
licenses to be held by individuals. In some cases, a required permit or license
held by a single individual may be sufficient to authorize specified activities
for all our electricians who work in the state or county that issued the permit
or license. We intend to implement a policy to ensure that, where possible, any
such permits or licenses that may be material to our operations in a particular
geographic region are held by at least two IES employees within that region.
LITIGATION
Subsidiaries of IES are involved in various legal proceedings that have
arisen in the ordinary course of business. While it is not possible to predict
the outcome of such proceedings with certainty, in the opinion of IES, all such
proceedings are either adequately covered by insurance or, if not so covered
should not ultimately result in any liability which would have a material
adverse effect on our financial position, liquidity or results of operations.
RISK MANAGEMENT AND INSURANCE
The primary risks in our operations include bodily injury, property damage
and injured worker's compensation. We maintain automobile and general liability
insurance for third party bodily injury and
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property damage and workers' compensation coverage which it considers a
appropriate to insure against these risks, subject to deductibles.
EMPLOYEES
At December 31, 1998, we had approximately 8,300 employees. We are not a
party to any collective bargaining agreements with our employees. We believe
that our relationship with our employees is satisfactory.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Following table sets forth information concerning the Company's
directors and executive officers:
NAME AGE POSITION
- ---- --- --------
Jim P. Wise........................... 55 President, Chief Executive Officer and
Director
Jerry M. Mills........................ 58 Senior Vice President and Chief
Operating Officer -- Commercial and
Industrial Director
Ben L. Mueller........................ 52 Senior Vice President and Chief
Operating Officer-- Residential and
Director
John F. Wombwell...................... 37 Senior Vice President, General Counsel
and Secretary
C. Byron Snyder....................... 50 Chairman of the Board of Directors
Jon Pollock........................... 52 Vice Chairman of the Board of
Directors
Donald Paul Hodel..................... 63 Director
Richard Muth.......................... 51 Director
Alan R. Sielbeck...................... 45 Director
Robert Stalvey........................ 48 Director
Richard L. Tucker..................... 63 Director
Bob Weik.............................. 63 Director
Jim P. Wise has been President, Chief Executive Officer and a director of
the Company since November 1998. Mr. Wise joined the Company in September 1997
as Senior Vice President and Chief Financial Officer. From September 1994 to
September 1997, he was Vice President -- Finance and Chief Financial Officer at
Sterling Chemicals, Inc., a publicly held manufacturer of commodity
petrochemicals and pulp chemicals. From July 1994 to September 1994, he was
Senior Vice President and Chief Financial Officer of U.S. Delivery Systems,
Inc., a delivery service consolidator. From September 1991 to July 1994, he was
Chairman and Chief Executive Officer of Neostar Group, Inc., a private
investment banking and financial advisory firm. Mr. Wise was employed by Transco
Energy Company as Executive Vice President, Chief Financial Officer and was a
member of the Board of Directors from November 1982 until September 1991.
Jerry M. Mills has been Senior Vice President and Chief Operating
Officer -- Commercial and industrial and a director of the Company since January
1998. Prior to that time, Mr. Mills was the President of Mills Electrical
Contractors, Inc., one of the Company's subsidiaries, since he began that
company in 1972. Mr. Mills is a past board member of the Independent Electrical
Contractors, the Associated Builders and Contractors, the Associated General
Contractors and the Richardson Electrical Board.
Ben L. Mueller has been Senior Vice President, Chief Operating Officer
- -- Residential and a director of the Company since January 1998. Prior to that
time, Mr. Mueller was the Executive Vice President of Houston-Stafford since
1993 and served as vice president of Houston-Stafford since 1975. Mr. Mueller is
a past member of the board of the IEC, Houston Chapter, and has served on the
Electrical Board for the City of Sugar Land, Texas.
John F. Wombwell has been Senior Vice President, General Counsel and
Secretary of the Company since January 1998. Prior to that time, Mr. Wombwell
was a partner at Andrews & Kurth L.L.P., where he practiced law in the area of
corporate and securities matters for more than five years.
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C. Byron Snyder has been Chairman of the Board of Directors of the Company
since its inception. Mr. Snyder is the president and owner of Sterling City
Capital, L.L.C., a merchant banking firm. Mr. Snyder was owner and President of
Relco Refrigeration Co., a distributor of refrigerator equipment from 1992 to
1998. Prior to 1992, Mr. Snyder was the owner and Chief Executive Officer of
Southwestern Graphics International, Inc., a diversified holding company which
owned Brandt & Lawson Printing Co., a Houston-based general printing business,
and Acco Waste Paper Company, an independent recycling business. Brandt & Lawson
Printing Co. was sold to Hart Graphics in 1989, and Acco Waste Paper Company was
sold to Browning-Ferris Industries in 1991. Mr. Snyder is a director of Carriage
Services, Inc., a publicly held death care company.
Jon Pollock has been Vice Chairman of the Board of Directors since November
1998. Mr. Pollock served as President, Chief Executive Officer and a director of
the Company from January 1998 to November 1998. Mr. Pollock was the president of
Pollock Electric Inc., one of the Company's subsidiaries, from the date he
founded that company in 1983 until 1998. Mr. Pollock is a Registered
Professional Engineer in Texas and several other states and holds Master
Electrician licenses from 50 different jurisdictions. Mr. Pollock is past
National President of the Independent Electrical Contractors Association and
received the IEC Electrical Man of the Year award in 1996.
Donald Paul Hodel has been a director of the Company since April 1998. Mr.
Hodel has served as President of the Christian Coalition since June 1997. He is
Managing Director of Summit Group International, Ltd,. an energy and natural
resources consulting firm he founded in 1989. Mr. Hodel served as United States
Secretary of the Interior from 1985 to 1989 and Untied States Secretary of
Energy from 1982 to 1985. Mr. Hodel has served as director of both publicly
traded and privately held companies and is the recipient of the Presidential
Citizens Medal and honorary degrees from three universities. Mr. Hodel serves on
the board of directors of Columbia Energy Group.
Richard Muth has been a director of the Company since January 1998. Mr.
Muth founded Muth Electric, Inc., one of the Company's subsidiaries, in 1970 and
has been president since that time. Mr. Muth served on the South Dakota State
Electrical Commission from 1980 to 1991 and the Associated General Contractors
Associate Division Board. Mr. Muth also received the South Dakota Electrical
Council "Man of the Year" award in 1993. Mr. Muth holds electrical contractors'
licenses in five states.
Alan R. Sielbeck has been a director of the Company since January 1998. Mr.
Sielbeck has served as Chairman of the Board and Chief Executive Officer of
Service Experts, Inc., a publicly traded heating, ventilation and air
conditioning service company, since its inception in March 1996. Mr. Sielbeck
has served as Chairman of the Board and President of AC Service and Installation
Co. Inc. and Donelson Air Conditioning Company, Inc. since 1990 and 1991,
respectively. From 1985 to 1990, Mr. Sielbeck served as President of RC Mathews
Contractor, Inc., a commercial building general contractor, and Chief Financial
Officer of RCM Interests, Inc., a commercial real estate development company.
Robert Stalvey has been a director of the Company since January 1998. Mr.
Stalvey has served as Vice President of Ace Electric, Inc., one of the Company's
subsidiaries, since 1976.
Richard L. Tucker has been a director of the Company since January 1998.
Dr. Tucker holds the Joe C. Walter Jr. Chair in Engineering, is Director of the
Construction Industry Institute, and is Director of the Sloan Program for the
Construction Industry at the University of Texas at Austin. Dr. Tucker has been
on the faculty at the University of Texas since 1976. Dr. Tucker is a registered
engineer.
Bob Weik has been a director of the Company since January 1998. Mr. Weik
has served as President, Treasurer and a director of BW Consolidated, Inc.,
Bexar Electric Company, Ltd., Calhoun Electric Company, Ltd. and related
entities since their inception in 1958.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Company's common stock, par value $.01 per share (the "Common
Stock") and the Company's restricted voting common stock, par value $.01 per
share (the "Restricted Common Stock") as of November 15, 1998, by (i) all
persons known to the Company to be the beneficial owner of 5% or more thereof,
(ii) each director and executive officer and (iii) all executive officers and
directors as a group. Unless otherwise indicated, the address of each such
person is c/o Integrated Electrical Services, Inc., 515 Post Oak Blvd., Suite
450, Houston, Texas 77027. All persons listed have sole voting and investment
power with respect to their shares unless otherwise indicated.
BENEFICIAL OWNERSHIP
---------------------
SHARES PERCENT
---------- --------
Jim P. Wise(a).............................................. 130,000 *
Jerry M. Mills.............................................. 2,436,662 8.4%
Ben L. Mueller(b)........................................... 1,296,609 4.5
John F. Wombwell(a)......................................... 130,000 *
C. Byron Snyder(c).......................................... 2,655,709 8.4
Jon Pollock(d).............................................. 785,743 2.7
Donald Paul Hodel(e)........................................ -- *
Richard Muth(f)............................................. 473,324 1.6
Alan R. Sielbeck(e)......................................... 95,528 *
Robert Stalvey.............................................. -- *
Richard L. Tucker(e)........................................ -- *
Bob Weik(g)................................................. 1,499,469 5.2
Roy D. Brown(e)............................................. 1,608,979 5.6
Directors and officers as a group (12 persons)(h)......... 9,503,044 30.1%
- ---------------
* Indicates ownership of less than one percent of the outstanding shares of
Common Stock of the Company.
(a) Includes 30,000 shares of Common Stock underlying options which are
exercisable within 60 days; excludes 170,000 options held by Mr. Wise and
120,000 options held by Mr. Wombwell.
(b) Includes 7,000 shares held by a trust for the benefit of Mr. Mueller's
daughter.
(c) All of the stock attributed to Mr. Snyder is held by the 1996 Snyder Family
Partnership (the "Partnership"). This stock consists entirely of Restricted
Common Stock, which represents all of the Company's outstanding Restricted
Common Stock. Such shares may be converted to Common Stock in certain
circumstances. Mr. Snyder disclaims beneficial ownership as to 1,118,193 of
these shares which are attributable to the interests in the Partnership
held by Mr. Snyder's children. The holders of Restricted Common Stock,
voting together as a single class, are entitled to elect one member of the
Company's Board of Directors and to one-half of one vote for each share
held on all other matters on which they are entitled to vote. Holders of
Restricted Common Stock are not entitled to vote on the election of any
other directors.
(d) Includes 465,914 shares of Common Stock held by the Pollock Family
Partnership, Ltd.
(e) Mr. Hodel's address is Christian Coalition, 1801-L Sara Drive, Chesapeake,
VA 23320-2647. Mr. Sielbeck's address is Service Experts, Inc., III
Westwood Place, Suite 420, Brentwood TN 37027. Dr. Tucker's address is The
University of Texas at Austin, ECJ 5.2, Suite 300, Austin, TX 78712. Mr.
Brown's address is Houston-Stafford Electric, 10203 Mula Circle, Stafford,
Texas 77477. Excludes 10,000 options held by each of Mr. Sielbeck and Dr.
Tucker and 5,000 options held by Mr. Hodel.
(f) Includes 25,689 shares of Common Stock owned by Mr. Muth's wife, as to
which Mr. Muth disclaims beneficial ownership.
(g) Includes 74,536 shares of Common Stock owned by two related trusts, as to
which Mr. Weik disclaims beneficial ownership.
(h) Includes 2,655,709 shares of Restricted Common Stock described in Note (c)
above.
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DESCRIPTION OF OTHER DEBT
CREDIT FACILITY
The following is a summary of the credit facility and is qualified in its
entirety by reference to the agreement evidencing such credit facility (the
"Credit Agreement"), a copy of which is available as described under "Available
Information".
The credit facility provides for three types of borrowings, with a maximum
indebtedness allowed of $175,000,000. The three types of borrowings are (i)
revolving borrowings in a maximum amount of $175,000,000, (ii) letter of credit
borrowings with a sublimit under revolving borrowings of $15,000,000, and (iii)
swing line borrowings with a sublimit under revolving borrowings of $5,000,000.
The revolving borrowings and the letter of credit borrowings are provided
through a syndicate of ten banks; the swing line is provided by NationsBank,
N.A., which also serves as agent for the credit facility. The credit facility is
secured by (i) all of the assets of the Company and its subsidiaries, (ii) all
of the stock in the subsidiaries held by the Company, and (iii) guaranties from
all of the subsidiaries of the Company. The credit facility matures on July 30,
2001, at which time all amounts outstanding under any type of borrowing come
due. Revolving borrowings bear interest, at the Company's option, at either (i)
LIBOR, plus a margin of up to 2.0%, based on the Company's Total Debt to EBITDA
ratio (as such terms are defined in the Credit Agreement) or (ii) the greater of
the NationsBank prime rate or the Federal Funds Rate plus 0.5%, plus a margin of
up to 0.5%, based on the Company's Total Debt to EBITDA ratio. Applicable
interest rates will be increased by 2.0% per annum during the continuance of any
specified event of default under the Credit Agreement. A commitment fee ranging
from 0.25% to 0.375%, based on the Company's Total Debt to EBITDA ratio, is
payable on the unused portion of the revolving borrowing commitment. Letter of
credit fees are payable for each letter of credit issued, in an amount equal to
the product of the face amount of such letter of credit and a percentage ranging
from 1.0% to 2.0% based on the Company's Total Debt to EBITDA ratio. The Credit
Agreement restricts the Company's ability to make distributions, including, but
not limited to, prohibiting the Company from declaring or paying any dividends.
As of March 23, 1999, the Company had no amounts outstanding under the credit
facility in revolving borrowings, $2.4 million in letters of credit and no
amounts outstanding under the swing line, resulting in a remaining availability
of $172.6 million under the credit facility.
The obligations of the lenders under the credit facility to advance funds
is subject to the satisfaction of certain conditions customary in agreements of
this type. In addition, the Company and its subsidiaries are subject to certain
customary affirmative and negative covenants contained in the Credit Agreement,
including, without limitation, covenants that restrict, subject to specified
exceptions: (i) incurring additional indebtedness and other obligations; (ii) a
merger or consolidation with any other person, or a liquidation, dissolution or
winding up; (iii) engaging in transactions with affiliates; (iv) acquisitions;
(v)investing funds of the Company; (vi) granting of liens to secure any other
indebtedness; and (vii) changing the character of its business.
The Credit Agreement requires the Company to comply with certain financial
covenants, including maintaining: (A) consolidated Net Worth (as defined in the
Credit Agreement) at a level not less than $187,500,000, plus (i) 90% of the
cumulative quarterly consolidated net income of the Company after March 31,
1998, for each fiscal quarter of the Company during which the Company has
positive consolidated net earnings; (ii) 100% of the net proceeds received by
the Company after March 31, 1998, from any sale or issuance of any equity
securities of, or any other additions to capital by the Company or its
subsidiaries; and (iii) to the extent that consolidated Net Worth is not
increased in clauses (i) and (ii) above as a result of any Acquisition (as
defined in the Credit Agreement), 100% of any increase in the consolidated Net
Worth of the Company resulting from any Acquisition, minus the aggregate amount
of consideration paid in connection with the repurchase of capital stock); (B) a
ratio of consolidated Total Debt to consolidated EBITDA (each as defined in the
Credit Agreement), on a rolling four quarters basis, not greater than 3.50 to
1.0 and a ratio of consolidated Senior Debt (as defined in the Credit Agreement)
to consolidated EBITDA, on a rolling four quarters basis, not greater than 2.50
to 1.0; (C) a ratio (the "Fixed Charge Ratio") of (i) consolidated EBITDA on a
rolling four quarters basis, less consolidated
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Cash Taxes and Capital Expenditures (as defined in the Credit Agreement) paid by
the Company during such period to (ii) (1) consolidated Interest Expense (as
defined in the Credit Agreement) for such period, plus (2) aggregate Restricted
Payments (as defined in the Credit Agreement) declared or paid by the Company,
plus (3) consolidated current maturities of the Company, plus (4) the greater of
20% of the outstanding amount of revolving borrowings or $4,000,000, of not less
than 1.25 to 1.0; and (D) a limitation on Capital Expenditures to less than 6%
of the consolidated Net Worth of the Company on a rolling four quarters basis.
As of December 31, 1998, the consolidated Net Worth of the Company was $321.5
million; the Company's ratio of consolidated Total Debt to consolidated EBITDA
was 1.17 to 1; the Company's ratio of consolidated Senior Debt to consolidated
EBITDA was 1.14 to 1 and the Company's Fixed Charge Ratio was 2.02 to 1.
The Credit Agreement provides for customary events of default. Occurrence
of any such events of default could result in acceleration of the Company's
obligations under the credit facility and foreclosure on the collateral securing
such obligations, with material adverse results to holders of the Exchange
Notes. See "Risk Factors."
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DESCRIPTION OF THE NOTES
The exchange notes will be issued, and the existing notes were issued under
an indenture among the Company, each of the guarantors and State Street Bank and
Trust Company, as trustee (the "Trustee"). The indenture is qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), upon
effectiveness of this registration statement for the exchange offer. See
"Exchange Offer, Registration Rights." By its terms, however, the indenture
incorporates certain provisions of the Trust Indenture Act and, upon
consummation of this exchange offer, the indenture is subject to and governed by
the Trust Indenture Act. References to the notes include the exchange notes
unless the context otherwise requires. The following summary of the material
provisions of the indenture and the notes does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of the
indenture and the notes, including the definitions of certain terms contained
therein and those terms made part of the indenture by reference to the Trust
Indenture Act. The definitions of certain capitalized terms used in the
following summary are set forth below under "-- Certain Definitions." As used in
this "Description of the Notes," the term "Company" refers only to Integrated
Electrical Services, Inc. and not to any of its subsidiaries.
GENERAL
The notes will be unsecured senior subordinated obligations of the Company
limited to $150 million aggregate principal amount and will be guaranteed by
each of the guarantors (which will initially be all of the Company's
subsidiaries) on a senior subordinated basis as described below. The 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 the option of the Company 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.
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, 1999, 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 issuance (the "Issue
Date"). Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
Initial settlement for the notes will be made in same day funds. The notes
are expected to trade in the Same-day Funds Settlement System of The Depository
Trust Company ("DTC") until maturity, and secondary market trading activity for
the notes will therefore settle in same day funds.
ADDITIONAL INTEREST
As discussed under "Exchange Offer, Registration Rights," pursuant to the
registration rights agreement, the Company has agreed to file with the SEC the
exchange offer registration statement, of which this prospectus is a part, and
to offer to the holders of notes who are able to make certain representations
the opportunity to exchange their notes for exchange notes. In the event that
the Company is not permitted to consummate the exchange offer because the
exchange offer is not permitted by applicable law or SEC policy or in certain
other circumstances, including if for any reason the exchange offer is not
consummated within 120 days after the Issue Date, the Company will file with the
SEC a shelf registration statement with respect to resales of the notes by the
holders thereof. The interest rate on
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the notes is subject to increase under certain circumstances if the Company is
not in compliance with its obligations under the registration rights agreement.
See "Exchange Offer, Registration Rights."
OPTIONAL REDEMPTION
Optional Redemption. The notes will be redeemable at the option of the
Company, 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:
YEAR REDEMPTION 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, the Company may, at its 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, the Company 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 such 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 thereof will be issued in the name of the holder thereof upon
surrender for cancellation of the Existing Note. On and after the redemption
date, interest will cease to accrue on notes or portions thereof called for
redemption, unless the Company defaults 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 provides that the holders of the notes and the exchange 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
notes and the exchange 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, the Company 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
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Control 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. The Company 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, the Company 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 the
Company 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 the Company's debt instruments will permit such offer to be made.
The Credit Facility does not permit the Company to make a Change of Control
Offer and, in order to make such offer, the Company would be required to pay off
the Credit Facility in full or seek a waiver from the lenders under the Credit
Facility to allow the Company 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 the Company becomes a party
may contain similar restrictions and provisions. Moreover, the exercise by the
holders of their rights to require the Company 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 the Company. Failure
to make a Change of Control Offer, even if prohibited by the Company's debt
instruments, would constitute a default under the indenture. See "Risk Factors."
The Company 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 the Company 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.
The Company 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 the
Company is 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.
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SUBORDINATION
The indebtedness evidenced by the notes is 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 are unsecured senior subordinated indebtedness of 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 indenture provides 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 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
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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 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 the Company fails 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
the Company 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 existing notes
and the application of the estimated net proceeds, the Company and the
guarantors would have had, without duplication, $4.5 million of Senior
Indebtedness and Guarantor Senior Indebtedness (as defined) outstanding as of
December 31, 1998. 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.
"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,
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(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 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 guarantor fully and unconditionally guarantees, 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 are 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."
Each guarantor that makes a payment or distribution under a guarantee is
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 "-- Certain Covenants -- Limitation on Asset Sales" or the
guarantor is designated an Unrestricted Subsidiary in accordance with the terms
of the indenture, then the guarantors 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.
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Separate financial statements of the guarantors are not included herein
because such guarantors are 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.
CERTAIN COVENANTS
The indenture contains the following covenants, among others:
Limitation on Indebtedness. The 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.
Limitation on Restricted Payments. The 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 and after the Issue
Date 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 the Issue Date 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 the Issue Date;
(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 the Issue
Date;
(5) the aggregate net cash proceeds received after the Issue Date
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 the Issue Date,
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 the Issue Date, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after
the Issue Date 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.
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
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Indebtedness so purchased, exchanged, redeemed, acquired or retired, (iv)
payments to purchase Capital Stock of the 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 the Issue Date.
In computing Consolidated Net Income of the Company under clause (C)(1) of
the first paragraph of this covenant, (i) 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 (ii) 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. The 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. The 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 the
Issue Date 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
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replace 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 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.
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) The Company 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.
The 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. The
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 Subsidiaries)
to own any Capital Stock of any Restricted Subsidiary; provided, however, that
this covenant
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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. The 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
speciality 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 the Issue Date, (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. The 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, or (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 of a person acquired by the Company or any
Restricted Subsidiary in existence at the time of such
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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 the Issue Date, (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. The 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.
The Company 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.
The 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.
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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. The 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. The 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. The 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 provides 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 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
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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 shall remain in full force and effect; (b) immediately after
giving effect to such transaction or series of transactions on a pro forma
basis, 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 provides that for all purposes of the indenture and the notes
(including the provision of this covenant and the covenants described in
"-- Certain 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.
EVENTS OF DEFAULT
The following are "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
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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 "-- Certain
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 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
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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 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.
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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
noteholders.
The indenture requires 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. The 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
The 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 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 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 "-- Certain 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),
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(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.
The 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 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.
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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 noteholders.
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.
THE TRUSTEE
The indenture provides 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 contains 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 permits 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, Two International Place, Boston,
Massachusetts 02110, is the Trustee under the indenture.
GOVERNING LAW
The indenture and the notes are governed by the laws of the State of New
York.
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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 the 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 covenant
described under "-- Certain 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 "Certain
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.
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"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 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.
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"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) and (iv) elimination of Consolidated Cash Flow Available for
Fixed Charges and Consolidated Fixed 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.
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"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.
"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 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
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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 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
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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.
"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.
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"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, 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
notes and the guarantees;
(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 "-- Certain Covenants Disposition of
Proceeds of Asset Sales";
(c) Indebtedness of the Company or any guarantor outstanding on the
Issue Date;
(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 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), (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;
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(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 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
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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 "-- Certain 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;
(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.
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"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 S4) 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.
"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 "-- Certain 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
83
98
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
Notes offered and sold to QIBs in reliance on Rule 144A under the
Securities Act are represented by a single, permanent global note in definitive,
fully registered book-entry form (the "Global Security") which will be
registered in the name of a nominee of DTC and deposited on behalf of purchasers
of the notes represented thereby with a custodian for DTC for credit to the
respective accounts of the purchasers (or to such other accounts as they may
direct) at DTC.
The Global Security. The Company expects that, pursuant to procedures
established by DTC, ownership of the notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC or
its nominee (with respect to interests of Participants (as defined below)) and
the records of Participants (with respect to interests of persons other than
Participants). Such accounts initially will be designated by or on behalf of the
initial purchasers and ownership of beneficial interests in the Global Security
will be limited to persons who have accounts with DTC ("Participants") or
persons who hold interests through Participants. QIBs may hold their interests
in the Global Security directly through DTC if they are Participants in such
system, or indirectly through organizations which are Participants in such
system.
So long as DTC or its nominee is the registered owner or holder of any of
the notes, DTC or such nominee will be considered the sole owner or holder of
such notes represented by the Global Security for all purposes under the
indenture and under the notes represented thereby. No beneficial owner of an
interest in the Global Security will be able to transfer such interest except in
accordance with the applicable procedures of DTC in addition to those provided
for under the indenture. The laws of some states require that certain persons
take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interest in the Global Security
to such persons will be limited to that extent. Because DTC can act only on
behalf of Participants, which in turn act on behalf of Indirect Participants (as
defined herein), the ability of a person having beneficial interests in the
Global Security to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing such
interests.
Payments of the principal of, premium, if any, and interest on the notes
represented by the Global Security will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. None of the Company, the Trustee
or any paying agent under the indenture will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium, if any, and interest on the notes represented by the
Global Security, will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the Global Security as
shown in the records of DTC or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in the Global
Security held through such Participants will be governed by standing
instructions and customary practice as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payment will be the responsibility of such Participants.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of notes (including the presentation of notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Security are credited and only in
respect of the aggregate principal amount as to which such Participant or
Participants has or have given such direction.
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99
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Security among Participants of
DTC, it is under no obligation to perform such procedures, and such procedures
may be discontinued at any time. Neither the Company nor the Trustee will have
any responsibility for the performance by DTC or its direct or indirect
participants of their obligations under the rules and procedures governing their
operations.
REGISTRATION RIGHTS
The Company has entered into a registration rights agreement with the
Initial Purchasers pursuant to which the Company and the guarantors have agreed,
for the benefit of the holders of the notes, at the Company's cost, to use their
reasonable best efforts (i) to file with the SEC the registration statement of
which this prospectus is a part with respect to the exchange offer of the
exchange notes within 60 days after the Issue Date, (ii) to cause this exchange
offer registration statement to be declared effective under the Securities Act
within 120 days of the Issue Date, (iii) to keep this exchange offer
registration statement effective until the closing of the exchange offer and
(iv) to cause this exchange offer to be consummated within 150 days of the Issue
Date.
Under the registration rights agreement, the Company is required to allow
participating broker-dealers to use the prospectus contained in the exchange
offer registration statement (subject to certain "black out" periods) following
the exchange offer, in connection with the resale of exchange notes received in
exchange for notes acquired by such participating broker-dealers for their own
account as a result of market-making or other trading activities.
The registration rights agreement shall be governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration rights agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the registration rights agreement, a copy of which is
available upon request to the Company. The registration rights agreement is also
attached as an exhibit to this registration statement. In addition, the
information set forth above concerning certain interpretations of and positions
taken by the staff of the SEC is not intended to constitute legal advice, and
prospective investors should consult their own advisors with respect to such
matters.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange 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 exchange notes. 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 exchange notes received in
exchange for existing notes where such existing notes were acquired as a result
of market-making activities or other trading activities. In addition, until
, 1999 all dealers effecting transactions in the exchange notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of exchange notes
by broker-dealers. Exchange notes received by broker-dealers for their own
account pursuant to the exchange offer may be
85
100
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
exchange notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at 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 exchange notes. Any broker-dealer that resells exchange
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
exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of exchange notes and any
commission or concessions received by any such person may be deemed to be
underwriting compensation under the Securities Act. 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.
The Company has agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the notes), other than
commissions or concessions of any broker-dealers, and will indemnify the holders
of the notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the notes being offered hereby
will be passed upon for the Company by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The financial statements of Integrated Electrical Services, Inc. and its
subsidiaries and PCX Corporation incorporated by reference in this prospectus
have been audited by Arthur Andersen LLP, independent public accounts, as
indicated in their reports, and upon the authority of the firm as experts in
giving audit reports.
The financial statements of Primo Electric Company incorporated by
reference in this prospectus have been audited by Hertzbach & Company, P.A.,
Independent Public Accountants, as stated in their report.
The financial statements of Kayton Electric, Inc. incorporated by reference
in this prospectus have been audited by KPMG Peat Marwick LLP, Independent
Public Accountants, as stated in their report.
The financial statements of Bachofner Electric, Inc. incorporated by
reference in this prospectus have been audited by Peck & Kopacek, P.C.,
Independent Public Accountants, as stated in their report.
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101
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Integrated Electrical Services, Inc.
Unaudited Pro Forma Financial Statements Basis of
Presentation........................................... F-2
Unaudited Pro Forma Balance Sheet......................... F-3
Unaudited Pro Forma Statement of Operations for the Year
Ended September 30, 1998............................... F-4
Unaudited Pro Forma Statement of Operations for the
Quarter Ended December 31, 1998........................ F-5
Notes to Unaudited Pro Forma Financial Statements......... F-6
F-1
102
INTEGRATED ELECTRICAL SERVICES, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma financial statements give effect to (i)
the acquisitions by Integrated Electrical Services, Inc. ("IES"), of 16
companies and related entities engaged in all facets of electrical contracting
and maintenance services on January 30, 1998 (together, the "Founding
Companies"), and related transactions, (ii) the acquisitions of 26 additional
electrical contracting and maintenance businesses from April 1998 through
December 31, 1998 (the "Acquired Companies") and (iii) the issuance of the
Senior Subordinated Notes due 2009 (the "Notes") and the application of the net
proceeds therefrom. The unaudited pro forma balance sheet reflects the issuance
of the Notes and the application of the net proceeds therefrom as if it had
occurred on December 31, 1998. The unaudited pro forma combined statements of
operations present the statement of operations data from the consolidated
financial statements of IES for the fiscal year ended and quarter ended
September 30, 1998 and December 31, 1998, respectively, presented elsewhere in
this prospectus, combined with the pre-acquisition results of operations for the
Founding Companies through January 30, 1998 and the Acquired Companies through
their date of acquisition and give effect to the pro forma adjustments related
to these transactions as if they had occurred on October 1, 1997.
IES has analyzed the savings that it expects to realize from reductions in
salaries, bonuses and certain benefits to the owners. To the extent the owners
of the Founding Companies and the Acquired Companies have contractually agreed
to changes in salary, bonuses, benefits and lease payments, these changes have
been reflected in the unaudited pro forma combined statement of operations.
Certain pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that Company management deems appropriate
and may be revised as additional information becomes available. The pro forma
financial data do not purport to represent what IES's combined financial
position or results of operations would actually have been if such transactions
in fact had occurred on those dates and are not necessarily representative of
IES's combined financial position or results of operations for any future
period. Since the acquired entities were not under common control or management
prior to their acquisition by IES, historical combined results may not be
comparable to, or indicative of, future performance. The unaudited pro forma
combined financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto included elsewhere in this
prospectus. See also "Risk Factors" included elsewhere herein.
F-2
103
INTEGRATED ELECTRICAL SERVICES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
ASSETS
IES AND OFFERING PRO FORMA
SUBSIDIARIES ADJUSTMENTS AS ADJUSTED
------------ ----------- -----------
CURRENT ASSETS:
Cash..................................................... $ 4,044 $ 54,800 $ 58,844
Receivables, net......................................... 153,380 -- 153,380
Inventories, net......................................... 7,756 -- 7,756
Cost and estimated earnings in excess of billings on
uncompleted contracts................................. 14,445 -- 14,445
Prepaid expenses and other current assets................ 3,380 -- 3,380
-------- -------- --------
Total current assets............................. 183,005 54,800 237,805
GOODWILL, NET.............................................. 305,972 -- 305,972
PROPERTY AND EQUIPMENT, NET................................ 25,872 -- 25,872
OTHER NON-CURRENT ASSETS................................... 3,157 5,000 8,157
-------- -------- --------
Total assets..................................... $518,006 $ 59,800 $577,806
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current maturities of long-term
debt.................................................. $ 3,637 $ -- $ 3,637
Accounts payable and accrued expenses.................... 71,017 -- 71,017
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. 27,175 -- 27,175
Income taxes payable..................................... 2,809 -- 2,809
Other current liabilities................................ 436 -- 436
-------- -------- --------
Total current liabilities........................ 105,074 -- 105,074
-------- -------- --------
LONG-TERM BANK DEBT........................................ 89,000 (89,000) --
OTHER LONG-TERM DEBT, NET.................................. 880 -- 880
SENIOR SUBORDINATED NOTES, net of $1,200 discount.......... -- 148,800 148,800
OTHER NON-CURRENT LIABILITIES.............................. 1,514 -- 1,514
-------- -------- --------
Total liabilities................................ 196,468 59,800 256,268
STOCKHOLDERS' EQUITY:
Common stock............................................. 289 -- 289
Restricted common stock.................................. 27 -- 27
Additional paid-in capital............................... 301,384 -- 301,384
Retained earnings........................................ 19,838 -- 19,838
-------- -------- --------
Total stockholders' equity....................... 321,538 -- 321,538
-------- -------- --------
Total liabilities and stockholders' equity....... $518,006 $ 59,800 $577,806
======== ======== ========
F-3
104
INTEGRATED ELECTRICAL SERVICES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
IES AND FISCAL 1998 FISCAL 1999 PRO FORMA PRO FORMA OFFERING PRO FORMA
SUBSIDIARIES ACQUISITIONS ACQUISITIONS ADJUSTMENTS TOTAL ADJUSTMENTS AS ADJUSTED
------------ ------------ ------------ ----------- --------- ----------- -----------
REVENUES....................... $386,721 $363,728 $48,379 $ -- $798,828 $ -- $798,828
COST OF SERVICES............... 306,052 295,349 39,081 -- 640,482 -- 640,482
-------- -------- ------- -------- -------- -------- --------
GROSS PROFIT................... 80,669 68,379 9,298 -- 158,346 -- 158,346
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES...... 47,390 62,621 6,640 (33,820) 82,831 -- 82,831
NON-CASH, NON-RECURRING
COMPENSATION CHARGE.......... 17,036 -- -- (17,036) -- -- --
GOODWILL AMORTIZATION.......... 3,212 -- -- 4,545 7,757 -- 7,757
-------- -------- ------- -------- -------- -------- --------
INCOME FROM OPERATIONS......... 13,031 5,758 2,658 46,311 67,758 -- 67,758
OTHER INCOME (EXPENSE):
Interest expense............. (1,161) -- (90) (3,041) (4,292) (11,237) (15,529)
Interest income.............. 433 730 37 (902) 298 -- 298
Other, net................... 335 404 49 (462) 326 -- 326
-------- -------- ------- -------- -------- -------- --------
OTHER INCOME (EXPENSE), NET.... (393) 1,134 (4) (4,405) (3,668) (11,237) (14,905)
INCOME BEFORE INCOME TAXES..... 12,638 6,892 2,654 41,906 64,090 (11,237) 52,853
PROVISION FOR INCOME TAXES..... 12,690 5,473 110 9,024 27,297 (4,326) 22,971
-------- -------- ------- -------- -------- -------- --------
NET INCOME (LOSS).............. $ (52) $ 1,419 $ 2,544 $ 32,882 $ 36,793 $ (6,911) $ 29,882
======== ======== ======= ======== ======== ======== ========
F-4
105
INTEGRATED ELECTRICAL SERVICES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1998
(IN THOUSANDS)
IES AND FISCAL 1999 PRO FORMA PRO FORMA OFFERING PRO FORMA
SUBSIDIARIES ACQUISITIONS ADJUSTMENTS TOTAL ADJUSTMENTS AS ADJUSTED
------------ ------------ ----------- --------- ----------- -----------
REVENUES...................................... $197,712 $5,404 $ -- $203,116 $ -- $203,116
COST OF SERVICES.............................. 156,745 5,187 (402) 161,530 -- 161,530
-------- ------ ----- -------- ------- --------
GROSS PROFIT.................................. 40,967 217 402 41,586 -- 41,586
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES.................................... 21,841 1,101 (244) 22,698 -- 22,698
GOODWILL AMORTIZATION......................... 1,848 -- 51 1,899 -- 1,899
-------- ------ ----- -------- ------- --------
INCOME FROM OPERATIONS........................ 17,278 (884) 595 16,989 -- 16,989
OTHER INCOME (EXPENSE):
Interest expense............................ (1,695) (13) -- (1,708) (2,157) (3,865)
Interest income............................. 151 14 -- 165 -- 165
Other, net.................................. 58 33 -- 91 -- 91
-------- ------ ----- -------- ------- --------
OTHER INCOME (EXPENSE), NET................... (1,486) 34 -- (1,452) (2,157) (3,609)
INCOME BEFORE INCOME TAXES.................... 15,792 (850) 595 15,537 (2,157) 13,380
PROVISION (BENEFIT) FOR INCOME TAXES.......... 6,700 (327) 249 6,622 (830) 5,792
-------- ------ ----- -------- ------- --------
NET INCOME (LOSS)............................. $ 9,092 $ (523) $ 346 $ 8,915 $(1,327) $ 7,588
======== ====== ===== ======== ======= ========
F-5
106
INTEGRATED ELECTRICAL SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. UNAUDITED PRO FORMA BALANCE SHEET:
The Pro Forma Adjustments reflect the application of the cash proceeds from
the issuance of the Notes, net of estimated offering costs of $5.0 million, to
reduce amounts outstanding under the Credit Facility.
2. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS:
The Unaudited Pro Forma Statement of Operations for the year ended
September 30, 1998 and the quarter ended December 31, 1998 for IES and
Subsidiaries reflect the historical results of Houston-Stafford Electric, Inc.
("Houston-Stafford") as the accounting acquirer restated for the effect of an
acquisition accounted for as a pooling-of-interest combined with the other
Founding Companies beginning February 1, 1998, and the Acquired Companies on
their respective dates of acquisition.
The Fiscal 1998 Acquisitions reflect the historical results of the Founding
Companies other than Houston-Stafford for the period prior to February 1, 1998,
and the Fiscal 1998 Acquisitions through their date of acquisition. The Fiscal
1999 Acquisitions reflect the historical results of operations for 1998 and the
period from October 1, 1998 through their respective date of acquisition of the
5 Acquired Companies which were acquired subsequent to September 30, 1998.
The following table summarizes the Pro Forma Adjustments for the Year Ended
September 30, 1998 (in thousands):
ADJUSTMENTS
-------------------------------------- PRO FORMA
(A) (B) (C) (D) ADJUSTMENTS
-------- ------- ------- ------- -----------
Selling, general and
administrative expenses......... $(33,820) $ -- $ -- $ -- $(33,820)
Non-cash, non-recurring
compensation charge............. (17,036) -- -- -- (17,036)
Goodwill amortization............. -- 4,545 -- -- 4,545
-------- ------- ------- ------- --------
Income (loss) from operations... 50,856 (4,545) -- -- 46,311
Other income (expense):
Interest expense................ -- -- (3,041) -- (3,041)
Interest income................. -- -- (902) -- (902)
Other, net...................... -- 316 (778) -- (462)
-------- ------- ------- ------- --------
Other income (expense), net..... -- 316 (4,721) -- (4,405)
-------- ------- ------- ------- --------
Income (loss) before income
taxes........................ 50,856 (4,229) (4,721) -- 41,906
Provision for income taxes........ -- -- -- 9,024 9,024
-------- ------- ------- ------- --------
Net income (loss)................. $ 50,856 $(4,229) $(4,721) $(9,024) $ 32,882
======== ======= ======= ======= ========
F-6
107
INTEGRATED ELECTRICAL SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Pro Forma Adjustments for the Quarter
Ended December 31, 1998 (in thousands):
ADJUSTMENTS
------------------------------- PRO FORMA
(A) (B) (C) (D) ADJUSTMENTS
----- ---- ----- ----- -----------
Cost of services............................... $(402) $ -- $ -- $ -- $(402)
Gross profit................................... 402 -- -- -- 402
Selling, general and administrative expenses... (244) -- -- -- (244)
Goodwill amortization.......................... -- 51 -- -- 51
----- ---- ----- ----- -----
Income (loss) from operations................ 646 (51) -- -- 595
Other income (expense):
Interest expense............................. -- -- -- -- --
Interest income.............................. -- -- -- -- --
Other, net................................... -- -- -- -- --
----- ---- ----- ----- -----
Other income (expense), net.................. -- -- -- -- --
----- ---- ----- ----- -----
Income (loss) before income taxes............ 646 (51) -- -- 595
Provision for income taxes..................... -- -- -- 249 249
----- ---- ----- ----- -----
Net income (loss).............................. $ 646 $(51) $ -- $(249) $ 346
===== ==== ===== ===== =====
- ---------------
(a) Reflects the reduction in salaries, bonuses and benefits and lease payments
to the owners of the Founding Companies and the Acquired Companies. These
reductions in salaries, bonuses and benefits and lease payments have been
agreed to in accordance with the terms of employment agreements executed as
part of the acquisitions. Such employment agreements are primarily for five
years, contain restrictions related to competition and provide severance
for termination of employment in certain circumstances. Also, for the year
ended September 30, 1998, includes the reversal of the $17.0 million
non-cash, non-recurring compensation charge in connection with the
acquisition of the Founding Companies.
(b) Reflects the amortization of goodwill recorded as a result of these
acquisitions over a 40-year estimated life, as well as a reduction in
historical minority interest expense attributable to minority interests
that were acquired as part of the related acquisitions.
(c) Reflects additional interest expense on borrowings to fund the cash portion
of the consideration paid, net of reduction of interest expense
attributable to historical debt repaid using proceeds from the Company's
initial public offering or transferred to the owners of the Founding
Companies. The additional interest expense was calculated utilizing an
assumed annual effective interest rate of approximately 8.0%. Also,
reflects elimination of interest income recognized by the Founding
Companies and the Acquired Companies from October 1, 1997, through their
respective date of acquisition.
(d) Reflects the incremental provision for federal and state income taxes at a
38.5% overall tax rate, before non-deductible goodwill and other permanent
items, related to the other statements of operations adjustments and for
income taxes on the pretax income of acquired companies that have
historically elected S Corporation tax status.
The Offering Adjustments for the year ended September 30, 1998 reflect the
incremental interest expense of $10.3 million using an interest rate of 9.375%,
amortization of deferred financing cost and amortization of the note discount of
$0.5 million and $0.1 million, respectively, incurred as a result of the
issuance of the notes and incremental amortization of deferred financing cost of
$0.3 million related to the Credit Facility. The Offering Adjustments for the
quarter ended December 31, 1998, reflect the incremental interest expense of
$2.1 million using an interest rate of 9.375%, amortization of deferred
financing cost and amortization of the note discount of $0.1 million and
$15,500, respectively, incurred as a result of the issuance of the notes.
Additionally, reflects the incremental provision for federal and state income
taxes at an assumed effective tax rate of 38.5% for the offering adjustments.
F-7
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[IES LOGO]
OFFER TO EXCHANGE 9 3/8% SENIOR
SUBORDINATED NOTES DUE 2009, SERIES B
FOR ALL OUTSTANDING 9 3/8% SENIOR
SUBORDINATED NOTES DUE 2009, SERIES A
---------------------
PROSPECTUS
---------------------
, 1999
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by Integrated Electrical Services, Inc.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or any
offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of Integrated Electrical Services, Inc. since the date hereof or that
the information contained herein is correct as of any time subsequent to its
date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
109
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of section 145 of the General Corporation Law of the State
of Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
II-1
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Article Eighth of the Company's Amended and Restated Certificate of
Incorporation states that:
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article Eighth
shall not eliminate or limit the liability of a director to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. No amendment to or repeal of this Article
Eighth shall apply to, or have any effect on, the liability or alleged liability
of any director of the Corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment or repeal. If the DGCL is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
In addition, Article VI of the Company's Bylaws further provides that the
Company shall indemnify its officers, directors and employees to the fullest
extent permitted by law.
The Company has entered into indemnification agreements with each of its
executive officers and directors.
These limitations on liability would apply to violations of the federal
securities laws. However, the registrant has been advised that in the opinion of
the SEC, indemnification for liabilities under the Securities Act of 1933 is
against public policy and therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
3.1 -- Amended and Restated Certificate of Incorporation as
amended. (Incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 (File No. 333-38715) of
the Company)
3.2 -- Bylaws, as amended. (Incorporated by reference to Exhibit
3.2 to the Annual Report on Form 10-K for the year ended
September 30, 1998 of the Company)
4.1 -- Indenture, dated January 28, 1999, by and among Integrated
Electrical Services, Inc. and the subsidiaries named therein
and State Street Bank and Trust Company covering up to
$150,000,000 9 3/8% Senior Subordinated Notes due 2009.
(Incorporated by reference to Exhibit 4.2 to Post-Effective
Amendment No. 3 to the Registration Statement on Form S-4
(File No. 333-50031) of the Company)
+4.2 -- Exchange and Registration Rights Agreement dated January 28,
1999 by and among Integrated Electrical Services, Inc.,
Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette
Securities Corporation
4.3 -- Form of Integrated Electrical Services, Inc. 9 3/8% Senior
Subordinated Note due 2009 (Included in Exhibit A to Exhibit
4.1)
+5.1 -- Opinion of Andrews & Kurth L.L.P.
10.1 -- Form of Employment Agreement (Incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-1 (File
No. 333-38715) of the Company)
10.2 -- Form of Officer and Director Indemnification Agreement.
(Incorporated by reference to Exhibit 10.2 to the
Registration Statement on Form S-1 (File No. 333-38715) of
the Company)
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10.3 -- Integrated Electrical Services, Inc. 1997 Stock Plan. (Incorporated by reference to
Exhibit 10.3 to the Registration Statement on Form S-1 (File No. 333-38715) of the
Company)
10.4 -- Integrated Electrical Services, Inc. 1997 Directors Stock Plan. (Incorporated by
reference to Exhibit 10.4 to the Registration Statement on Form S-1 (File No.
333-38715) of the Company)
10.5 -- Credit Agreement dated July 30, 1998, among the Company, the Financial Institutions
named therein and NationsBank of Texas, N.A., including Guaranty, Pledge Agreement,
Security Agreement, form of promissory note, and form of swing line note. (Incorporated
by reference to Exhibit 10.5 to Post-Effective Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-50031) of the Company)
10.6 -- Amendment No. 1 dated September 30, 1998, to the Credit Agreement dated July 30, 1998,
among the Company, the Financial Institutions named therein and NationsBank of Texas,
N.A. (Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form
10-K/A for the year ended September 30, 1998)
10.7 -- Amendment No. 2 dated January 18, 1999, to the Credit Agreement dated July 30, 1998,
among the Company, the Financial Institutions named therein and NationsBank of Texas,
N.A. (Incorporated by reference to Exhibit 10.7 to Post-Effective Amendment No. 2 to
the Registration Statement on Form S-1 (Reg. No. 333-50031) of the Company)
10.8 -- Form of Lock-up Agreement entered into by the Company and the stockholders set forth on
Schedule A thereto. (Incorporated by reference to 10.6 to the Registration Statement on
Form S-1 (File No. 333-38715) of the Company)
+12 -- Ratio of Earnings to Fixed Charges
+23.1 -- Consent of Andrews & Kurth L.L.P. (Included in Exhibit 5.1)
+23.2 -- Consent of Arthur Andersen, LLP
+23.3 -- Consent of Hertzbach & Company, P.A.
+23.4 -- Consent of KPMG Peat Marwick LLP
+23.5 -- Consent of Peck & Kopacek, P.C.
+23.6 -- Consent of Arthur Andersen, LLP
+25.1 -- Statement of Eligibility of State Street Bank and Trust Company, Trustee on Form T-1
+99.1 -- Form of Letter of Transmittal
+99.2 -- Form of Notice of Guaranteed Delivery
+99.3 -- Form of Letter to Clients
+99.4 -- Form of Letter to Nominees
+99.5 -- Form of Instruction to Registered Holder from Beneficial Owner
- ---------------
+ Filed herewith
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant
II-3
112
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class main or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
II-4
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 25th day of March,
1999.
INTEGRATED ELECTRICAL SERVICES, INC.
By: /s/ JIM P. WISE
-------------------------------------
Jim P. Wise
President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of Integrated Electrical Services, Inc., hereby constitutes and
appoints John F. Wombwell and Jim P. Wise (with full power to each of them to
act alone) his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and on his behalf and in his name, place and stead, in any
and all capacities, to sign, execute and file this registration statement under
the Securities Act of 1933, as amended, and any or all amendments (including,
without limitation, post-effective amendments), with all exhibits and any and
all documents required to be filed with respect thereto, with the Securities and
Exchange Commission or any regulatory authority, granting unto such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same, as fully to all intents
and purposes as he himself might or could do, if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE President and Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer and
Jim P. Wise Principal Financial Officer)
/s/ DONALD PAUL HODEL Director
- -----------------------------------------------------
Donald Paul Hodel
/s/ JERRY M. MILLS Senior Vice President and Chief Operating
- ----------------------------------------------------- Officer -- Commercial and Industrial and
Jerry M. Mills Director
/s/ BEN L. MUELLER Senior Vice President and Chief Operating
- ----------------------------------------------------- Officer -- Residential and Director
Ben L. Mueller
/s/ RICHARD MUTH Director
- -----------------------------------------------------
Richard Muth
/s/ JON POLLOCK Vice Chairman of the Board of Directors
- -----------------------------------------------------
Jon Pollock
II-5
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SIGNATURE TITLE
--------- -----
/s/ ALAN R. SIELBECK Director
- -----------------------------------------------------
Alan R. Sielbeck
/s/ C. BYRON SNYDER Chairman of the Board of Directors
- -----------------------------------------------------
C. Byron Snyder
/s/ ROBERT STALVEY Director
- -----------------------------------------------------
Robert Stalvey
/s/ RICHARD L. TUCKER Director
- -----------------------------------------------------
Richard L. Tucker
/s/ BOB WEIK Director
- -----------------------------------------------------
Bob Weik
/s/ J. PAUL WITHROW Vice President and Chief Accounting Officer
- ----------------------------------------------------- (Principal Accounting Officer)
J. Paul Withrow
II-6
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
set forth below have duly caused this registration statement to be signed on
their behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on the 25th day of March, 1999.
EACH OF THE GUARANTORS
NAMED ON SCHEDULE A-1
HERETO (the "Guarantors")
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer of each of
the Guarantors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer of each of the Guarantors (Principal
Jim P. Wise Executive and Financial Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer of each of the
- ----------------------------------------------------- Guarantors (Principal Accounting Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Director of each of the Guarantors
- -----------------------------------------------------
John F. Wombwell
II-7
116
SCHEDULE A-1
Ace Electric, Inc.
Aladdin-Ward Electric & Air, Inc.
Amber Electric, Inc.
ARC Electric, Incorporated
Bachofner Electric, Inc.
Brink Electric Construction Co.
BW/BEC, Inc.
BW/CEC, Inc.
BW Consolidated, Inc.
Charles P. Bagby Co., Inc.
Commercial Electrical Contractors, Inc.
Cypress Electrical Contractors, Inc.
Daniel Electrical of Treasure Coast, Inc.
Daniel Electrical Contractors, Inc.
Davis Electrical Constructors, Inc.
East Coast Electric Co.
Electro-Tech, Inc.
Florida Industrial Electric, Inc.
General Partner, Inc.
Goss Electric Company, Inc.
H. R. Allen, Inc.
Hatfield Electric, Inc.
Holland Electrical Systems, Inc.
Houston-Stafford Electric, Inc.
Howard Brothers Electric Co., Inc.
Integrated Communication Services, Inc.
Integrated Electrical Finance, Inc.
J.W. Gray Electric Co., Inc.
Kayton Electric, Inc.
Key Electrical Supply, Inc.
Mark Henderson, Incorporated
Menninga Electric, Inc.
Mid-States Electric Company, Inc.
Mills Electrical Contractors, Inc.
Muth Electric, Inc.
Paulin Electric Company, Inc.
PCX Corporation
Pollock Electric, Inc.
Primo Electric Company
Raines Electric Co., Inc.
Reynolds Electric Corp.
RKT Electric, Inc.
Rockwell Electric, Inc.
Rodgers Electric Company, Inc.
Spectrol, Inc.
Spoor Electric, Inc.
Summit Electric of Texas, Incorporated
T&H Electrical Corporation
Thomas Popp & Company
Thurman & O'Connell Corporation
Wright Electrical Contracting, Inc.
II-8
117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
set forth below have duly caused this registration statement to be signed on
their behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on the 25th day of March, 1999.
EACH OF THE GUARANTORS
NAMED ON SCHEDULE A-2
HERETO (the "Guarantors")
By: /s/ ADRIANNE M. HORNE
----------------------------------
Adrianne M. Horne
President of each of the
Guarantors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ ADRIANNE M. HORNE President, Secretary, Treasurer and Manager of
- ----------------------------------------------------- each of the Guarantors (Principal Executive,
Adrianne M. Horne Financial and Accounting Officer)
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118
SCHEDULE A-2
BW/BEC, L.L.C.
BW/CEC, L.L.C.
Houston-Stafford Holdings LLC
ICS Holdings LLC
IES Contractors Holdings LLC
IES Holdings LLC
J.W. Gray Holdings LLC
Mills Electrical Holdings LLC
Raines Holdings LLC
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119
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
set forth below have duly caused this registration statement to be signed on
their behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on the 25th day of March, 1999.
EACH OF THE GUARANTORS
NAMED ON SCHEDULE A-3
HERETO (the "Guarantors")
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer of each of
the Guarantors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer of each of the Guarantors (Principal
Jim P. Wise Executive and Financial Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer of each of the
- ----------------------------------------------------- Guarantors (Principal Accounting Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Manager of each of the Guarantors
- -----------------------------------------------------
John F. Wombwell
II-11
120
SCHEDULE A-3
Houston-Stafford Management LLC
ICS Management LLC
IES Contractors Management LLC
J.W. Gray Management LLC
Mills Management LLC
Raines Management LLC
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121
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
POLLOCK SUMMIT HOLDINGS INC.
By: /s/ ADRIANNE M. HORNE
----------------------------------
Adrianne M. Horne
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ ADRIANNE M. HORNE President, Secretary, Treasurer and Director
- ----------------------------------------------------- (Principal Executive, Financial and
Adrianne M. Horne Accounting Officer)
II-13
122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
BEXAR ELECTRIC COMPANY, LTD.
By: BW/BEC, Inc., its general
partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Director
- -----------------------------------------------------
John F. Wombwell
II-14
123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
CALHOUN ELECTRIC COMPANY, LTD.
By: BW/CEC, Inc., its general
partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Director
- -----------------------------------------------------
John F. Wombwell
II-15
124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
HAYMAKER ELECTRIC, LTD.
By: General Partner, Inc., its
general partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Director
- -----------------------------------------------------
John F. Wombwell
II-16
125
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
HOUSTON-STAFFORD ELECTRICAL
CONTRACTORS LP
By: Houston-Stafford Management LLC,
its general partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Director
- -----------------------------------------------------
John F. Wombwell
II-17
126
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
ICS INTEGRATED COMMUNICATION
SERVICES LP
By: ICS Management LLC, its general
partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Manager
- -----------------------------------------------------
John F. Wombwell
II-18
127
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
IES CONTRACTORS LP
By: IES Contractors Management LLC,
its
general partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Manager
- -----------------------------------------------------
John F. Wombwell
II-19
128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
IES MANAGEMENT LP
By: Integrated Electrical Finance,
Inc., its
general partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
J. PAUL WITHROW Chief Accounting Officer (Principal
- ----------------------------------------------------- Accounting Officer)
J. Paul Withrow
JOHN F. WOMBWELL Director
- -----------------------------------------------------
John F. Wombwell
II-20
129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
J.W. GRAY ELECTRICAL CONTRACTORS LP
By: J. W. Gray Management LLC, its
general partner
By: /s/ JIM P. WISE
------------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Manager
- -----------------------------------------------------
John F. Wombwell
II-21
130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
MILLS ELECTRIC LP
By: Mills Management LLC, its
general partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
- --------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Manager
- -----------------------------------------------------
John F. Wombwell
II-22
131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
POLLOCK SUMMIT ELECTRIC LP
By: Pollock Electric Inc., its
general partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Director
- -----------------------------------------------------
John F. Wombwell
II-23
132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
set forth below has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 25th day of March, 1999.
RAINES ELECTRIC LP
By: Raines Management LLC, its
general partner
By: /s/ JIM P. WISE
----------------------------------
Jim P. Wise
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John F. Wombwell and Jim P. Wise (with
full power to each of them to act alone) his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act of 1933, as amended, and any or
all amendments (including, without limitation, post-effective amendments), with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 25, 1999.
SIGNATURE TITLE
--------- -----
/s/ JIM P. WISE Chief Executive Officer and Chief Financial
- ----------------------------------------------------- Officer (Principal Executive and Financial
Jim P. Wise Officer)
/s/ J. PAUL WITHROW Chief Accounting Officer (Principal Accounting
- ----------------------------------------------------- Officer)
J. Paul Withrow
/s/ JOHN F. WOMBWELL Manager
- -----------------------------------------------------
John F. Wombwell
II-24
133
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 -- Amended and Restated Certificate of Incorporation as
amended. (Incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 (File No. 333-38715) of
the Company)
3.2 -- Bylaws, as amended. (Incorporated by reference to Exhibit
3.2 to the Annual Report on Form 10-K for the year ended
September 30, 1998 of the Company)
4.1 -- Indenture, dated January 28, 1999, by and among Integrated
Electrical Services, Inc. and the subsidiaries named therein
and State Street Bank and Trust Company covering up to
$150,000,000 9 3/8% Senior Subordinated Notes due 2009.
(Incorporated by reference to Exhibit 4.2 to Post-Effective
Amendment No. 3 to the Registration Statement on Form S-4
(File No. 333-50031) of the Company)
+4.2 -- Exchange and Registration Rights Agreement dated January 28,
1999 by and among Integrated Electrical Services, Inc.,
Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette
Securities Corporation
4.3 -- Form of Integrated Electrical Services, Inc. 9 3/8% Senior
Subordinated Note due 2009 (Included in Exhibit A to Exhibit
4.1)
+5.1 -- Opinion of Andrews & Kurth L.L.P.
10.1 -- Form of Employment Agreement (Incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-1 (File
No. 333-38715) of the Company)
10.2 -- Form of Officer and Director Indemnification Agreement.
(Incorporated by reference to Exhibit 10.2 to the
Registration Statement on Form S-1 (File No. 333-38715) of
the Company)
10.3 -- Integrated Electrical Services, Inc. 1997 Stock Plan.
(Incorporated by reference to Exhibit 10.3 to the
Registration Statement on Form S-1 (File No. 333-38715) of
the Company)
10.4 -- Integrated Electrical Services, Inc. 1997 Directors Stock
Plan. (Incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-1 (File No. 333-38715) of
the Company)
10.5 -- Credit Agreement dated July 30, 1998, among the Company, the
Financial Institutions named therein and NationsBank of
Texas, N.A., including Guaranty, Pledge Agreement, Security
Agreement, form of promissory note, and form of swing line
note. (Incorporated by reference to Exhibit 10.5 to
Post-Effective Amendment No. 1 to the Registration Statement
on Form S-1 (File No. 333-50031) of the Company)
10.6 -- Amendment No. 1 dated September 30, 1998, to the Credit
Agreement dated July 30, 1998, among the Company, the
Financial Institutions named therein and NationsBank of
Texas, N.A. (Incorporated by reference to Exhibit 10.6 to
the Company's Annual Report on Form 10-K/A for the year
ended September 30, 1998)
10.7 -- Amendment No. 2 dated January 18, 1999, to the Credit
Agreement dated July 30, 1998, among the Company, the
Financial Institutions named therein and NationsBank of
Texas, N.A. (Incorporated by reference to Exhibit 10.7 to
Post-Effective Amendment No. 2 to the Registration Statement
on Form S-1 (Reg. No. 333-50031) of the Company)
134
EXHIBIT
NO. DESCRIPTION
------- -----------
10.8 -- Form of Lock-up Agreement entered into by the Company and
the stockholders set forth on Schedule A thereto.
(Incorporated by reference to 10.6 to the Registration
Statement on Form S-1 (File No. 333-38715) of the Company)
+12 -- Ratio of Earnings to Fixed Charges
+23.1 -- Consent of Andrews & Kurth L.L.P. (Included in Exhibit 5.1)
+23.2 -- Consent of Arthur Andersen, LLP
+23.3 -- Consent of Hertzbach & Company, P.A.
+23.4 -- Consent of KPMG Peat Marwick LLP
+23.5 -- Consent of Peck & Kopacek, P.C.
+23.6 -- Consent of Arthur Andersen, LLP
+25.1 -- Statement of Eligibility of State Street Bank and Trust
Company, Trustee on Form T-1
+99.1 -- Form of Letter of Transmittal
+99.2 -- Form of Notice of Guaranteed Delivery
+99.3 -- Form of Letter to Clients
+99.4 -- Form of Letter to Nominees
+99.5 -- Form of Instruction to Registered Holder from Beneficial
Owner
- ---------------
+ Filed herewith
1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into this 28th day of January 1999, among Integrated Electrical
Services, Inc., a Delaware corporation (the "Company"), the Guarantors named on
Schedule A hereto (the "Guarantors") and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation
(collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated
January 25, 1999, among the Company, the Guarantors and the Initial Purchasers
(the "Purchase Agreement"), which provides for the sale by the Company and the
Guarantors to the Initial Purchasers of an aggregate of $150 million principal
amount of the Company's 9 3/8% Senior Subordinated Notes due 2009, Series A (the
"Notes"), together with the related guarantees of such Notes by the Guarantors
(the Guarantees, and together with the Notes, the "Securities"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Company
and the Guarantors have agreed to provide to the Initial Purchasers and their
direct and indirect transferees the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under
the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of l934, as amended
from time to time.
"Closing Date" shall mean the Closing Time as defined in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company, provided, however, that such depositary
must have an address in the Borough of Manhattan, in the City of New York.
"Exchange Offer" shall mean the offer by the Company and the
Guarantors to exchange Exchange Securities for Registrable Securities pursuant
to Section 2.1 hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2.1 hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement,
including the Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2.1
hereof.
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"Exchange Securities" shall mean the 9 3/8% Senior Subordinated Notes
due 2009, Series B and related guarantees issued by the Company and the
Guarantors under the Indenture containing terms identical to the Securities in
all material respects (except for references to certain interest rate
provisions, restrictions on transfers and restrictive legends), to be offered
to Holders of Securities in exchange for Registrable Securities pursuant to the
Exchange Offer.
"Guarantors" has the meaning set forth in the preamble, and shall
include any additional guarantors of the Notes added pursuant to the Indenture.
"Holder" shall mean an Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities
under the Indenture and each Participating Broker-Dealer that holds Exchange
Securities for so long as such Participating Broker-Dealer is required to
deliver a prospectus meeting the requirements of the 1933 Act in connection
with any resale of such Exchange Securities.
"Indenture" shall mean the Indenture relating to the Securities, dated
as of January 28, 1999, between the Company, the Guarantors and State Street
Bank and Trust Company, as trustee, as the same may be amended, supplemented,
waived or otherwise modified from time to time in accordance with the terms
thereof.
"Initial Purchaser" or "Initial Purchasers" shall have the meaning set
forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of Outstanding (as defined in the Indenture)
Registrable Securities; provided that whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company and other obligors on the
Securities or any Affiliate (as defined in the Indenture) of the Company shall
be disregarded in determining whether such consent or approval was given by the
Holders of such required percentage amount.
"Notes" shall have the meaning set forth in the preamble.
"Participating Broker-Dealer" shall mean any of Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation and any other broker-dealer which makes a market in the Securities
and exchanges Registrable Securities in the Exchange Offer for Exchange
Securities.
"Person" shall mean an individual, partnership (general or limited),
corporation, limited liability company, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2.1
hereof.
"Private Exchange Securities" shall have the meaning set forth in
Section 2.1 hereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including any such
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Shelf Registration Statement, and by
all other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all information incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
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"Registrable Securities" shall mean the Securities and, if issued, the
Private Exchange Securities; provided, however, that the Securities and, if
issued, the Private Exchange Securities, shall cease to be Registrable
Securities when (i) a Registration Statement with respect to such Securities
shall have been declared effective under the 1933 Act and such Securities shall
have been disposed of pursuant to such Registration Statement, (ii) such
Securities have been sold to the public pursuant to Rule l44 under the
Securities Act or have become eligible for resale without restriction pursuant
to Rule 144(k) under the Securities Act (in each case, or any similar provision
then in force, but not Rule 144A), (iii) such Securities shall have ceased to
be outstanding or (iv) such Securities have been exchanged for freely tradeable
Exchange Securities in the Exchange Offer (except in the case of Securities
purchased from the Company and continued to be held by the Initial Purchasers).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees, including,
if applicable, the fees and expenses of any "qualified independent underwriter"
(and its counsel) that is required to be retained by any holder of Registrable
Securities in accordance with the rules and regulations of the NASD, (ii) all
fees and expenses incurred in connection with compliance with state securities
or blue sky laws and compliance with the rules of the NASD (including
reasonable fees and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange Securities or
Registrable Securities and any filings with the NASD), (iii) all expenses of
any Persons in preparing or assisting in preparing, word processing, printing
and distributing any Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements, securities sales agreements
and other documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the listing,
if any, of any of the Registrable Securities on any securities exchange or
exchanges, (v) all rating agency fees, (vi) the fees and disbursements of
counsel for the Company and of the independent public accountants of the
Company, including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, (vii) the fees and
expenses of the Trustee, and any escrow agent or custodian, (viii) the
reasonable fees and expenses of the Initial Purchasers in connection with the
Exchange Offer, including the reasonable fees and expenses of counsel to the
Initial Purchasers in connection therewith, (ix) the reasonable fees and
disbursements of one counsel representing the Majority Holders and (x) any fees
and disbursements of the underwriters customarily required to be paid by
issuers or sellers of securities and the fees and expenses of any special
experts retained by the Company in connection with any Registration Statement,
but excluding underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the
Company which covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission or any
successor agency or government body performing the functions currently
performed by the United States Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2.2 of this
Agreement which covers all of the Registrable Securities or all of the Private
Exchange Securities on an appropriate form under Rule 415 under the 1933 Act,
or any similar rule
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that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Suspension Period" shall have the meaning set forth in Section 2.2(b).
"Trustee" shall mean the trustee with respect to the Securities under
the Indenture.
2. Registration Under the 1933 Act.
2.1 Exchange Offer. The Company and the Guarantors shall, for the
benefit of the Holders, at the Company's cost, (A) prepare and, as soon as
practicable but not later than 60 days following the Closing Date, file with
the SEC an Exchange Offer Registration Statement on an appropriate form under
the 1933 Act with respect to a proposed Exchange Offer and the issuance and
delivery to the Holders, in exchange for the Registrable Securities (other than
Private Exchange Securities), of a like principal amount of Exchange
Securities, (B) use their reasonable best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the 1933 Act within 120
days of the Closing Date, (C) use their reasonable best efforts to keep the
Exchange Offer Registration Statement effective until the closing of the
Exchange Offer and (D) use their reasonable best efforts to cause the Exchange
Offer to be consummated not later than 150 days following the Closing Date. The
Exchange Securities will be issued under the Indenture. Upon the effectiveness
of the Exchange Offer Registration Statement, the Company and the Guarantors
shall promptly commence the Exchange Offer, it being the objective of such
Exchange Offer to enable each Holder eligible and electing to exchange
Registrable Securities for Exchange Securities (assuming that such Holder (a)
is not an affiliate of the Company within the meaning of Rule 405 under the
1933 Act, (b) is not a broker-dealer tendering Registrable Securities acquired
directly from the Company for its own account, (c) acquired the Registrable
Securities in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of distributing the Exchange Securities) to transfer such
Exchange Securities from and after their receipt without any limitations or
restrictions under the 1933 Act or under state securities or blue sky laws.
In connection with the Exchange Offer, the Company shall:
(a) mail as promptly as practicable to each Holder a copy of
the Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) keep the Exchange Offer open for acceptance for a period
of not less than 30 calendar days after the date notice thereof is mailed to
the Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
(c) utilize the services of the Depositary for the Exchange
Offer;
(d) permit Holders to withdraw tendered Registrable Securities
at any time prior to 5:00 p.m. (Eastern Time) on the last business day of the
Exchange Period, by sending to the institution specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for exchange,
and a statement that such Holder is withdrawing such Holder's election to have
such Securities exchanged;
(e) notify each Holder that any Registrable Security not
tendered will remain outstanding and continue to accrue interest, but will not
retain any rights under this Agreement (except in the case of the Initial
Purchasers and Participating Broker-Dealers as provided herein); and
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(f) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Securities acquired by them and having the status of an
unsold allotment in the initial distribution, the Company and the Guarantors
upon the request of any Initial Purchaser shall, simultaneously with the
delivery of the Exchange Securities in the Exchange Offer, issue and deliver to
such Initial Purchaser in exchange (the "Private Exchange") for the Securities
held by such Initial Purchaser, a like principal amount of debt securities of
the Company and related guarantees by the Guarantors that are identical (except
that such securities shall bear appropriate transfer restrictions) to the
Exchange Securities (the "Private Exchange Securities").
The Exchange Securities and the Private Exchange Securities shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from such
qualification and shall provide that the Exchange Securities shall not be
subject to the transfer restrictions applicable to the Registrable Securities
set forth in the Indenture but that the Private Exchange Securities shall be
subject to such transfer restrictions. The Indenture or such indenture shall
provide that the Exchange Securities, the Private Exchange Securities and the
Securities shall vote and consent together on all matters as one class and that
none of the Exchange Securities, the Private Exchange Securities or the
Securities will have the right to vote or consent as a separate class on any
matter. The Private Exchange Securities shall be of the same series as and the
Company shall use all commercially reasonable efforts to have the Private
Exchange Securities bear the same CUSIP number as the Exchange Securities. The
Company shall not have any liability under this Agreement solely as a result of
such Private Exchange Securities not bearing the same CUSIP number as the
Exchange Securities.
As soon as practicable after the close of the Exchange Offer and/or
the Private Exchange, as the case may be, the Company and the Guarantors shall:
(i) accept for exchange all Registrable Securities
duly tendered and not validly withdrawn pursuant to the
Exchange Offer in accordance with the terms of the Exchange
Offer Registration Statement and the letter of transmittal
which shall be an exhibit thereto;
(ii) accept for exchange all Securities properly
tendered pursuant to the Private Exchange;
(iii) deliver to the Trustee for cancellation all
Registrable Securities so accepted for exchange; and
(iv) cause the Trustee promptly to authenticate and
deliver Exchange Securities or Private Exchange Securities,
as the case may be, to each Holder of Registrable Securities
so accepted for exchange in a principal amount equal to the
principal amount of the Registrable Securities of such Holder
so accepted for exchange.
Interest on each Exchange Security and Private Exchange Security will
accrue from the last date on which interest was paid on the Registrable
Securities surrendered in exchange therefor or, if no interest has been paid on
the Registrable Securities, from the date of original issuance. The Exchange
Offer and the Private Exchange shall not be subject to any conditions, other
than (i) that the Exchange Offer or the Private Exchange, or the making of any
exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) the due tendering of Registrable
Securities in accordance with the
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Exchange Offer and the Private Exchange, (iii) that each Holder of Registrable
Securities exchanged in the Exchange Offer shall have represented that all
Exchange Securities to be received by it shall be acquired in the ordinary
course of its business and that at the time of the consummation of the Exchange
Offer it shall have no arrangement or understanding with any person to
participate in the distribution (within the meaning of the 1933 Act) of the
Exchange Securities and shall have made such other representations as may be
reasonably necessary under applicable SEC rules, regulations or interpretations
to render the use of Form S-4 or other appropriate form under the 1933 Act
available, (iv) that no action or proceeding shall have been instituted or
threatened in any court or by or before any governmental agency with respect to
the Exchange Offer or the Private Exchange which, in the Company's judgment,
would reasonably be expected to impair the ability of the Company to proceed
with the Exchange Offer or the Private Exchange, and (v) such other conditions
that may be reasonably acceptable to the Initial Purchasers, which, in the
Company's judgment, would be reasonably expected to impair the ability of the
Company to proceed with the Exchange Offer or the Private Exchange. The Company
shall inform the Initial Purchasers of the names and addresses of the Holders to
whom the Exchange Offer is made, and the Initial Purchasers shall have the right
to contact such Holders and otherwise facilitate the tender of Registrable
Securities in the Exchange Offer.
2.2 Shelf Registration. (i) If, because of any changes in law, SEC
rules or regulations or applicable interpretations thereof by the staff of the
SEC, the Company is not permitted to effect the Exchange Offer as contemplated
by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer
Registration Statement is not declared effective within 120 days following the
original issue of the Registrable Securities or the Exchange Offer is not
consummated within 150 days after the original issue of the Registrable
Securities, (iii) upon the request of any of the Initial Purchasers or (iv) if
a Holder is not permitted to participate in the Exchange Offer or does not
receive fully tradeable Exchange Securities pursuant to the Exchange Offer,
then in case of each of clauses (i) through (iv) the Company and the Guarantors
shall, at the Company's cost:
(a) As promptly as practicable, file with the SEC, and
thereafter shall use their reasonable best efforts to cause to be
declared effective as promptly as practicable but no later than 120
days after the date the obligation to file the Shelf Registration
Statement arises, a Shelf Registration Statement relating to the offer
and sale of the Registrable Securities by the Holders from time to
time in accordance with the methods of distribution elected by the
Majority Holders participating in the Shelf Registration and set forth
in such Shelf Registration Statement.
(b) Use their reasonable best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period
of two years from the date the Shelf Registration Statement is
declared effective by the SEC, or for such shorter period that will
terminate when all Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf
Registration Statement or cease to be outstanding or otherwise cease to
be Registrable Securities (the "Effectiveness Period"); provided,
however, that the Effectiveness Period in respect of the Shelf
Registration Statement shall be extended to the extent required to
permit dealers to comply with the applicable prospectus delivery
requirements of Rule 174 under the 1933 Act and as otherwise provided
herein; and provided, further, that the Company and the Guarantors
shall not be obligated to keep the Shelf Registration Statement
effective or to permit the use of any Prospectus forming a part of the
Shelf Registration Statement if (A) the Company determines, in its
reasonable judgment, upon advice of counsel, that the continued
effectiveness and use of the Shelf Registration Statement would (x)
require the disclosure of material information which the Company has a
bona fide business reason for preserving as confidential, or (y)
interfere with any financing, acquisition, corporate reorganization or
other material transaction involving the Company or any of its
subsidiaries, and provided, further, that the failure to keep the Shelf
Registration Statement effective and usable for offers and sales of
Registrable Securities for such reasons shall last no longer than an
aggregate of 30 days in any consecutive twelve-month period
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(whereafter a Registration Default, as defined in Section 2.5, shall
occur), and (B) the Company promptly thereafter complies with the
requirements of Section 3(k) hereof, if applicable (any such period
during which the Company is excused from keeping the Shelf Registration
Statement effective and usable for offers and sales of Registrable
Securities is referred to herein as a "Suspension Period", and a
Suspension Period shall commence on and include the date that the
Company gives notice to the Holders that the Shelf Registration
Statement is no longer effective or the prospectus included therein is
no longer usable for offers and sales of Registrable Securities as a
result of the foregoing provisions and shall end on the earlier to
occur of the date on which each seller of Registrable Securities
covered by the Shelf Registration Statement either receives the copies
of the supplemented or amended prospectus contemplated by Section 3(k)
hereof or is advised in writing by the Company that use of the
prospectus may be resumed); and
(c) use their reasonable best efforts to ensure that (i) any
Shelf Registration Statement and any amendment thereto and any
Prospectus forming part thereof and any supplement thereto complies in
all material respects with the 1933 Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and (iii) subject to Section 2(b) above, any Prospectus
forming part of any Shelf Registration Statement, and any supplement
to such Prospectus (as amended or supplemented from time to time),
does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in
light of the circumstances under which they were made, not misleading.
The Company shall not permit any securities other than Registrable
Securities to be included in the Shelf Registration Statement. The Company and
the Guarantors further agree, if necessary, to supplement or amend the Shelf
Registration Statement, as required by Section 3(b) below, and to furnish to
the Holders of Registrable Securities copies of any such supplement or
amendment promptly after its being used or filed with the SEC.
2.3 Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1 or 2.2. Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
2.4. Effectiveness. (a) The Company and the Guarantors will be deemed
not to have used their reasonable best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if they
voluntarily take any action that would, or omits to take any action which
omission would, result in any such Registration Statement not being declared
effective or in the Holders of Registrable Securities covered thereby not being
able to exchange or offer and sell such Registrable Securities during that
period as and to the extent contemplated hereby, unless such action is required
by applicable law.
(b) An Exchange Offer Registration Statement pursuant to Section 2.1
hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to an Exchange Offer Registration
Statement or a Shelf Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be deemed not to
have become effective during the period of such interference, until the
offering of Registrable Securities pursuant to such Registration Statement may
legally resume.
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2.5 Additional Interest. The Indenture executed in connection with the
Securities will provide that in the event that either (a) the Exchange Offer
Registration Statement is not filed with the Commission on or prior to the 60th
calendar day following the date of original issue of the Securities, (b) the
Exchange Offer Registration Statement has not been declared effective on or
prior to the 120th calendar day following the date of original issue of the
Securities , (c) the Exchange Offer is not consummated on or prior to the 150th
calendar day following the date of original issue of the Securities or a Shelf
Registration Statement is not declared effective prior to the 120th day
following the date the obligation to file such Shelf Registration Statement
arises or (d) after the Shelf Registration Statement has been filed and
declared effective, the Shelf Registration Statement is unusable by the Holders
for any reason during the Effectiveness Period, and the aggregate number of
days in any consecutive twelve-month period for which the Shelf Registration
Statement shall not be usable exceeds 30 days in the aggregate (each such event
referred to in clauses (a) through (d) above, a "Registration Default"), the
interest rate borne by the Registrable Securities shall be increased
("Additional Interest") by 0.25% per annum upon the occurrence of each
Registration Default, which rate will increase by 0.25% per annum each 90-day
period that such Additional Interest continues to accrue under any such
circumstance, provided that the maximum aggregate increase in the interest rate
will in no event exceed 0.5% per annum. Additional Interest shall be computed
based on the actual number of days elapsed in each period in which a
Registration Default occurs. Following the cure of all Registration Defaults
the accrual of Additional Interest will cease and the interest rate will revert
to the original rate.
The Company shall notify the Trustee within three business days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Additional Interest shall be
paid by depositing with the Trustee, in trust, for the benefit of the Holders
of Registrable Securities, on or before the applicable semiannual interest
payment date, immediately available funds in sums sufficient to pay the
Additional Interest then due. The Additional Interest due shall be payable on
each interest payment date to the record Holder of Securities entitled to
receive the interest payment to be paid on such date as set forth in the
Indenture. Each obligation to pay Additional Interest shall be deemed to accrue
from and including the day following the applicable Event Date.
3. Registration Procedures. In connection with the obligations of the
Company with respect to Registration Statements pursuant to Sections 2.1 and
2.2 hereof, the Company (and, as necessary, the Guarantors) shall:
(a) prepare and file with the SEC a Registration Statement, within the
relevant time period specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the
case of a Shelf Registration, be available for the sale of the Registrable
Securities by the selling Holders thereof, (iii) shall comply as to form in all
material respects with the requirements of the applicable form and include or
incorporate by reference all financial statements required by the SEC to be
filed therewith or incorporated by reference therein, and (iv) shall comply in
all respects with the requirements of Regulation S-T under the 1933 Act, and use
its reasonable best efforts to cause such Registration Statement to become
effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under applicable
law to keep such Registration Statement effective for the applicable period;
and cause each Prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provision then in force) under the 1933 Act and comply with the
provisions of the 1933 Act, the 1934 Act and the rules and regulations
thereunder applicable to them with respect to the disposition of all securities
covered by each Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the selling
Holders thereof (including sales by any Participating Broker-Dealer);
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(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities, at least five business days prior to filing, that a
Shelf Registration Statement with respect to the Registrable Securities is
being filed and advising such Holders that the distribution of Registrable
Securities will be made in accordance with the method selected by the Majority
Holders participating in the Shelf Registration; (ii) furnish to each Holder of
Registrable Securities and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or underwriter may
reasonably request, including financial statements and schedules, in order to
facilitate the public sale or other disposition of the Registrable Securities;
and (iii) hereby consent to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Registrable Securities in
connection with the offering and sale of the Registrable Securities covered by
the Prospectus or any amendment or supplement thereto;
(d) use its reasonable best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue sky" laws
of such jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement and each underwriter of an underwritten offering of
Registrable Securities shall reasonably request by the time the applicable
Registration Statement is declared effective by the SEC, and do any and all
other acts and things which may be reasonably necessary or advisable to enable
each such Holder and underwriter to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
however, that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), or (ii) take any
action which would subject it to general service of process or taxation in any
such jurisdiction where it is not then so subject;
(e) notify promptly each Holder of Registrable Securities included in
a Shelf Registration or any Participating Broker-Dealer who has notified the
Company that it is utilizing the Exchange Offer Registration Statement as
provided in paragraph (f) below and, if requested by such Holder or
Participating Broker-Dealer, confirm such advice in writing promptly (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for post-effective amendments and
supplements to a Registration Statement and Prospectus or for additional
information after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) of the happening of any event or the
discovery of any facts during the period a Shelf Registration Statement is
effective which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or Prospectus in order to make the
statements therein not misleading or to include omitted material information,
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities or the Exchange
Securities, as the case may be, for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose and (vi) of any determination
by the Company that a post-effective amendment to such Registration Statement
would be appropriate;
(f) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution", and which shall contain a summary statement of the positions
taken or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that holds Registrable Securities
acquired for its own account as a result of market-making activities or other
trading activities and that will be the beneficial owner (as defined in Rule
13d-3 under the Exchange Act) of Exchange Securities to be received by such
broker-dealer in the Exchange Offer, whether such positions or policies have
been publicly disseminated by the staff of the SEC or such positions or
policies represent the prevailing views of the staff of the SEC, including a
statement that any such broker-dealer who receives Exchange Securities for
Registrable Securities pursuant to the Exchange Offer may be deemed a statutory
underwriter and must deliver a prospectus meeting the requirements of the
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1933 Act in connection with any resale of such Exchange Securities, (ii) furnish
to each Participating Broker-Dealer who has delivered to the Company the notice
referred to in Section 3(e), without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such Participating
Broker-Dealer may reasonably request, (iii) hereby consent to the use of the
Prospectus forming part of the Exchange Offer Registration Statement or any
amendment or supplement thereto, by any Person subject to the prospectus
delivery requirements of the SEC, including all Participating Broker-Dealers, in
connection with the sale or transfer of the Exchange Securities covered by the
Prospectus or any amendment or supplement thereto (except during any Suspension
Period), and (iv) include in the transmittal letter or similar documentation to
be executed by an exchange offeree in order to participate in the Exchange Offer
(x) the following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Securities acquired for its own account as a
result of market-making activities or other trading
activities, it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
Exchange Securities received in respect of such Registrable
Securities pursuant to the Exchange Offer;" and
(y) a statement to the effect that by a broker-dealer making the acknowledgment
described in clause (x) and by delivering a Prospectus in connection with the
exchange of Registrable Securities, the broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the 1933 Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company agrees to deliver to the Initial Purchasers on behalf of the
Participating Broker-Dealers upon the effectiveness of the Exchange Offer
Registration Statement (i) an opinion of counsel or opinions of counsel
substantially in the form attached hereto as Exhibit A, (ii) officers'
certificates substantially in the form customarily delivered in a public
offering of debt securities and (iii) a comfort letter or comfort letters in
customary form to the extent permitted by Statement on Auditing Standards No.
72 of the American Institute of Certified Public Accountants (or if such a
comfort letter is not permitted, an agreed upon procedures letter in customary
form) from the Company's independent certified public accountants (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements are, or are required to be, included in the Registration Statement)
at least as broad in scope and coverage as the comfort letter or comfort letters
delivered to the Initial Purchasers in connection with the initial sale of the
Securities to the Initial Purchasers;
(g) (i) in the case of an Exchange Offer, furnish counsel for the
Initial Purchasers and (ii) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Securities copies of any comment letters
received from the SEC or any other request by the SEC or any state securities
authority for amendments or supplements to a Registration Statement and
Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, and each underwriter, if any, without charge, at least
one conformed copy of each Registration Statement and any post-effective
amendment thereto, including financial statements and schedules (without
documents incorporated therein by reference and all exhibits thereto, unless
requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be
in such denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders or the
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underwriters, if any, may reasonably request at least three business days prior
to the closing of any sale of Registrable Securities;
(k) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Sections 3(e)(iv)
and 3(e)(v) hereof, as promptly as practicable after the occurrence of such an
event, subject to Section 2.2(b), use its reasonable best efforts to prepare a
supplement or post-effective amendment to the Registration Statement or the
related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities or Participating Broker-Dealers, such Prospectus
will not contain at the time of such delivery any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading or will remain so qualified. At such time as such public disclosure
is otherwise made or the Company determines that such disclosure is not
necessary, in each case to correct any misstatement of a material fact or to
include any omitted material fact, the Company agrees promptly to notify each
Holder of such determination and to furnish each Holder such number of copies
of the Prospectus as amended or supplemented, as such Holder may reasonably
request;
(l) in the case of a Shelf Registration, a reasonable time prior to
the filing of any Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus or any
document which is to be incorporated by reference into a Registration Statement
or a Prospectus after initial filing of a Registration Statement, provide
copies of such document to the Initial Purchasers on behalf of such Holders;
and make representatives of the Company as shall be reasonably requested by the
holders of a majority of the Registrable Securities being sold, or the Initial
Purchasers on behalf of such Holders, available for discussion of such
document;
(m) obtain a CUSIP number for all Exchange Securities, Private
Exchange Securities or Registrable Securities, as the case may be, not later
than the effective date of a Registration Statement, and provide the Trustee
with printed certificates for the Exchange Securities, Private Exchange
Securities or the Registrable Securities, as the case may be, in a form
eligible for deposit with the Depositary;
(n) (i) cause the Indenture to be qualified under the TIA in
connection with the registration of the Exchange Securities or Registrable
Securities, as the case may be, (ii) cooperate with the Trustee and the Holders
to effect such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and (iii) execute, and
use its reasonable best efforts to cause the Trustee to execute, all documents
as may be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so qualified in
a timely manner;
(o) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities:
(i) make such representations and warranties to the Holders
of such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters
in similar underwritten offerings as may be reasonably requested by
them;
(ii) if requested by the managing underwriters, obtain
opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the holders of
a majority in principal amount of the Registrable Securities being
sold) addressed to each selling Holder and the underwriters, if any,
covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
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(iii) if requested by the managing underwriters, obtain "cold
comfort" letters and updates thereof from the Company's independent
certified public accountants (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements
are, or are required to be, included in the Registration Statement)
addressed to the underwriters, if any, and use reasonable efforts to
have such letter addressed to the selling Holders of Registrable
Securities (to the extent consistent with Statement on Auditing
Standards No. 72 of the American Institute of Certified Public
Accounts), such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters to
underwriters in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Securities, which agreement shall
be in form, substance and scope customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the
same to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and
procedures set forth in Section 4 hereof with respect to the
underwriters and all other parties to be indemnified pursuant to said
Section or, at the request of any underwriters, in the form
customarily provided to such underwriters in similar types of
transactions; and
(vi) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings to the Holders of a majority in principal amount of the
Registrable Securities being sold and the managing underwriters, if
any.
The above shall be done at each closing of any sale of Registrable Securities,
whether under any underwriting or similar agreement or otherwise;
(p) in the case of a Shelf Registration or if a Prospectus is required
to be delivered by any Participating Broker-Dealer in the case of an Exchange
Offer, make available at reasonable times for inspection by representatives
appointed by the Majority Holders, any underwriters participating in any
disposition pursuant to a Shelf Registration Statement, any Participating
Broker-Dealer and any counsel or accountant retained by any of the foregoing,
all financial and other records, pertinent corporate documents and properties
of the Company reasonably requested by any such persons, and cause the
respective officers, directors, employees, and any other agents of the Company
to supply all information reasonably requested by any such representative,
underwriter, special counsel or accountant in connection with a Registration
Statement, and make such representatives of the Company available for
discussion of such documents as shall be reasonably requested by the Initial
Purchasers;
(q) (i) in the case of an Exchange Offer Registration Statement, a
reasonable time prior to the filing of any Exchange Offer Registration
Statement, any Prospectus forming a part thereof, any amendment to an Exchange
Offer Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Initial Purchasers and to counsel to the
Majority Holders and make such changes in any such document prior to the filing
thereof as the Initial Purchasers may reasonably request and, except as
otherwise required by applicable law, not file any such document in a form to
which the Initial Purchasers on behalf of the Holders of Registrable Securities
and counsel to the Majority Holders shall not have previously been advised and
furnished a copy of or to which the Initial Purchasers on behalf of the Holders
of Registrable Securities or counsel to the Majority Holders shall reasonably
object, and make the representatives of the Company available for discussion of
such documents as shall be reasonably requested by the Initial Purchasers; and
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(ii) in the case of a Shelf Registration, a reasonable time
prior to filing any Shelf Registration Statement, any Prospectus
forming a part thereof, any amendment to such Shelf Registration
Statement or amendment or supplement to such Prospectus, provide
copies of such document to the Holders of Registrable Securities, to
the Initial Purchasers, to counsel for the Holders and to the
underwriter or underwriters of an underwritten offering of Registrable
Securities, if any, make such changes in any such document prior to
the filing thereof as the Initial Purchasers, the counsel to the
Holders or the underwriter or underwriters reasonably request and not
file any such document in a form to which the Majority Holders, the
Initial Purchasers on behalf of the Holders of Registrable Securities,
counsel for the Holders of Registrable Securities or any underwriter
shall not have previously been advised and furnished a copy of or to
which the Majority Holders, the Initial Purchasers of behalf of the
Holders of Registrable Securities, counsel to the Holders of
Registrable Securities or any underwriter shall reasonably object, and
make the representatives of the Company available for discussion of
such document as shall be reasonably requested by the Holders of
Registrable Securities, the Initial Purchasers on behalf of such
Holders, counsel for the Holders of Registrable Securities or any
underwriter.
(r) otherwise comply with all applicable rules and regulations of the
SEC and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering at least 12 months which shall
satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158
thereunder;
(s) cooperate and assist in any filings required to be made with the
NASD and, in the case of a Shelf Registration, in the performance of any due
diligence investigation by any underwriter and its counsel (including any
"qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD); and
(t) upon consummation of an Exchange Offer or a Private Exchange,
obtain a customary opinion of counsel to the Company and the Guarantors
addressed to the Trustee for the benefit of all Holders of Registrable
Securities participating in the Exchange Offer or Private Exchange, and which
includes an opinion that (i) the Company and the Guarantors have duly
authorized, executed and delivered the Exchange Securities and/or Private
Exchange Securities, as applicable, and the related indenture, and (ii) each of
the Exchange Securities and related indenture constitute a legal, valid and
binding obligation of the Company and the Guarantors, enforceable against the
Company and the Guarantors in accordance with its respective terms (with
customary exceptions).
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require
each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder
of such Registrable Securities as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of (a) the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(iv) hereof or (b) the Company's election to begin a Suspension Period
pursuant to Section 2.2(b), such Holder will forthwith discontinue disposition
of Registrable Securities pursuant to a Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(k) hereof or written notice from the Company of
termination of such Suspension Period, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies in
such Holder's possession, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering
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will be selected by the Majority Holders of such Registrable Securities included
in such offering and shall be acceptable to the Company. No Holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
4. Indemnification; Contribution.
(a) The Company and the Guarantors jointly and severally agree to
indemnify and hold harmless the Initial Purchasers, each Holder, each
Participating Broker-Dealer, each Person who participates as an underwriter
(any such Person being an "Underwriter") and each Person, if any, who controls
any Holder or Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment or supplement thereto)
pursuant to which Exchange Securities or Registrable Securities were
registered under the 1933 Act, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 4(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by any
indemnified party), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any
such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to
any loss, liability, claim, damage or expense to the extent arising
out of any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written
information furnished to the Company by the Holder or Underwriter
expressly for use in a Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto).
(b) Each Holder severally, but not jointly, agrees to indemnify and
hold harmless the Company, the Guarantors, the Initial Purchasers, each
Underwriter and the other selling Holders, and each of their respective
directors and officers, and each Person, if any, who controls the Company, any
Guarantor, any Initial Purchaser, any Underwriter or any other selling Holder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 4(a) hereof, as incurred, but only with respect
to untrue statements or
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omissions, or alleged untrue statements or omissions, made in any Registration
Statement (or any amendment thereto) or any Prospectus included therein (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information with respect to such Holder furnished to the Company by such Holder
expressly for use in such Registration Statement (or any amendment thereto) or
such Prospectus (or any amendment or supplement thereto); provided, however,
that no such Holder shall be liable for any claims hereunder in excess of the
amount of net proceeds received by such Holder from the sale of Registrable
Securities pursuant to such Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action or proceeding commenced
against it in respect of which indemnity may be sought hereunder, but failure
so to notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which
it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying party or parties be
liable for the fees and expenses of more than one counsel (in addition to any
local counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 4 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement; provided,
that an indemnifying party shall not be liable for any such settlement effected
without its consent if such indemnifying party, prior to the date of such
settlement, (1) reimburses such indemnified party in accordance with such
request for the amount of such fees and expenses of counsel as the indemnifying
party believes in good faith to be reasonable, and (2) provides written notice
to the indemnified party that the indemnifying party disputes in good faith the
reasonableness of the unpaid balance of such fees and expenses.
(e) If the indemnification provided for in this Section 4 is for any
reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, in such proportion as is appropriate to reflect
the relative fault of the Company and the Guarantors on the one hand and the
Holders and the Initial Purchasers on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company and the Guarantors on the one hand
and the Holders and the Initial Purchasers on the other hand shall be
determined by reference to, among other things, whether any such untrue
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or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by the Company, the
Guarantors, the Holders or the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Guarantors, the Holders and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to this
Section 4 were determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this Section 4. The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Section 4 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section 4, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities sold by it were offered exceeds the amount
of any damages which such Initial Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4, each Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Initial Purchaser or Holder, and each director of the Company or any Guarantor,
and each Person, if any, who controls the Company or any Guarantor within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Company and the Guarantors. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 4 are
several in proportion to the principal amount of Securities set forth opposite
their respective names in Schedule A to the Purchase Agreement and not joint.
5. Miscellaneous.
5.1 Rule 144 and Rule 144A. For so long as the Company is subject to
the reporting requirements of Section 13 or 15 of the 1934 Act, the Company
covenants that it will file the reports required to be filed by it under the
1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will upon the
request of any Holder of Registrable Securities (a) make publicly available
such information as is necessary to permit sales pursuant to Rule 144 under the
1933 Act, (b) deliver such information to a prospective purchaser as is
necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will
take such further action as any Holder of Registrable Securities may reasonably
request, and (c) take such further action that is reasonable in the
circumstances, in each case, to the extent required from time to time to enable
such Holder to sell its Registrable Securities without registration under the
1933 Act within the limitation of the exemptions provided by (i) Rule 144 under
the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A
under the 1933 Act, as such Rule may be amended from time to time, or (iii) any
similar rules or regulations hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
5.2 No Inconsistent Agreements. The Company has not entered into and
the Company will not after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the
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Holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders hereunder do not and
will not for the term of this Agreement in any way conflict with the rights
granted to the holders of the Company's other issued and outstanding securities
under any such agreements.
5.3 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure.
5.4 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 5.4, which address initially is the address set forth in the
Purchase Agreement with respect to the Initial Purchasers; and (b) if to the
Company or any Guarantor, initially at the Company's address set forth in the
Purchase Agreement, and thereafter at such other address of which notice is
given in accordance with the provisions of this Section 5.4.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture, at the address specified in such Indenture.
5.5 Successor and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such person shall be entitled
to receive the benefits hereof.
5.6 Third Party Beneficiaries. The Initial Purchasers (even if the
Initial Purchasers are not Holders of Registrable Securities) shall be third
party beneficiaries to the agreements made hereunder between the Company and
the Guarantors, on the one hand, and the Holders, on the other hand, and shall
have the right to enforce such agreements directly to the extent they deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights hereunder.
5.7. Specific Enforcement. Without limiting the remedies available to
the Initial Purchasers and the Holders, the Company and the Guarantors
acknowledge that any failure by the Company and the Guarantors to comply with
their obligations under Sections 2.1 through 2.4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders for which there is
no adequate remedy at law, that
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it would not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, the Initial Purchasers or any Holder may
obtain such relief as may be required to specifically enforce the obligations of
the Company and the Guarantors under Sections 2.1 through 2.4 hereof.
5.8. Restriction on Resales. Until the expiration of two years after
the original issuance of the Securities, the Company and the Guarantors will
not resell any Securities which are "restricted securities" (as such term is
defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by
any of them and shall immediately upon any purchase of any such Securities
submit such Securities to the Trustee for cancellation.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
5.10 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
5.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
5.12 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
-18-
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTEGRATED ELECTRICAL SERVICES, INC.
By: /s/ JIM P. WISE
--------------------------------------------
Name: Jim P. Wise
Title: President and Chief Executive Officer
EACH OF THE GUARANTORS NAMED ON SCHEDULE A
HERETO
By: /s/ JOHN F. WOMBWELL
--------------------------------------------
John F. Wombwell
Acting in his capacity as (i) Vice President of
the Guarantors listed in Part I of Schedule A;
(ii) Vice President of the general partners of
the Guarantors listed in Part II of Schedule A
(such general partners acting on behalf of such
Guarantors) and (iii) President of the
Guarantors (or general partner thereof) listed
in Part III of Schedule A.
By: /s/ HARVEY FREIDMAN
--------------------------------------------
Harvey Freidman
Acting in his capacity as President of the
Guarantors listed in Part IV of Schedule C.
-19-
20
Confirmed and accepted as of the first
date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ BERTRAM MICHEL
----------------------------------------------------
Name: Bertram Michel
Title: Vice President
-20-
21
SCHEDULE A
LIST OF GUARANTORS
PART I Primo Electric Company
Raines Electric Co., Inc.
Ace Electric, Inc. Raines Management LLC
Aladdin-Ward Electric & Air, Inc. Reynolds Electric Corp.
Amber Electric, Inc. RKT Electric, Inc.
ARC Electric, Incorporated Rockwell Electric, Inc.
Bachofner Electric, Inc. Rodgers Electric Company, Inc.
Brink Electric Construction Co. Spectrol, Inc.
BW/BEC, Inc. Spoor Electric, Inc.
BW/BEC, L.L.C. Summit Electric of Texas, Incorporated
BW/CEC, Inc. T&H Electrical Corporation
BW/CEC, L.L.C. Thomas Popp & Company
BW Consolidated, Inc. Thurman & O'Connell Corporation
Charles P. Bagby Co., Inc. Wright Electrical Contracting, Inc.
Commercial Electrical Contractors, Inc.
Cypress Electrical Contractors, Inc. PART II
Daniel Electrical of Treasure Coast, Inc.
Daniel Electrical Contractors, Inc. Bexar Electric Company, Ltd.
Davis Electrical Constructors, Inc. (GP is BW/BEC, Inc.)
East Coast Electric Co. Calhoun Electric Company, Ltd.
Electro-Tech, Inc. (GP is BW/CEC, Inc.)
Florida Industrial Electric, Inc. Haymaker Electric, Ltd.
General Partner, Inc. (GP is General Partner, Inc.)
Goss Electric Company, Inc. Houston-Stafford Electrical Contractors, LP
H. R. Allen, Inc. (GP is Houston Stafford Management LLC)
Hatfield Electric, Inc. ICS Integrated Communication Services LP
Holland Electrical Systems, Inc. (GP is ICS Management LLC)
Houston-Stafford Electric, Inc. IES Management LP
Houston-Stafford Management LLC (GP is Integrated Electrical Finance, Inc.)
Howard Brothers Electric Co., Inc. J. W. Gray Electrical Contractors LP
ICS Management LLC (GP is JW Gray Management LLC)
Integrated Communication Services, Inc. Mills Electric LP
Integrated Electrical Finance, Inc. (GP is Mills Management LLC)
J. W. Gray Electric Co., Inc. Pollock Summit Electric LP
J. W. Gray Management LLC (GPs are Pollock Electric, Inc and Summit
Kayton Electric, Inc. Electric of Texas, Inc.)
Key Electrical Supply, Inc. Raines Electric LP
Mark Henderson, Incorporated (GP is Raines Management LLC)
Menninga Electric, Inc.
Mid-States Electric Company, Inc.
Mills Electrical Contractors, Inc.
Mills Management LLC
Muth Electric, Inc.
Paulin Electric Company, Inc.
PCX Acquisition Corporation
Pollock Electric Inc.
-21-
22
PART III
IES Contractors Management LLC
IES Contractors LP
(GP is IES Contractors Management LLC)
PART IV
Houston-Stafford Holdings LLC
IES Contractors Holdings LLC
ICS Holdings LLC
IES Holdings LLC
J. W. Gray Holdings LLC
Mills Electrical Holdings LLC
Pollock Summit Holdings, Inc.
Raines Holdings LLC
-22-
23
EXHIBIT A
FORM OF OPINION OF COUNSEL
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
We have acted as counsel for Integrated Electrical Services, Inc., a
Delaware corporation (the "Company") and the Guarantors described below in
connection with the sale by the Company to the Initial Purchasers (as defined
below) of $150,000,000 aggregate principal amount of 9 3/8% Senior Subordinated
Notes due 2009 (the "Notes") of the Company together with the related
guarantees of the obligation of the Company under such Notes, pursuant to the
Purchase Agreement dated January 25, 1999 (the "Purchase Agreement") among the
Company, the Guarantors named therein (the "Guarantors") and Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation (collectively, the "Initial Purchasers") and the filing by the
Company and the Guarantors of an Exchange Offer Registration Statement (the
"Registration Statement") in connection with an Exchange Offer to be effected
pursuant to the Registration Rights Agreement (the "Registration Rights
Agreement"), dated January 28, 1999 between the Company, the Guarantors and the
Initial Purchasers. This opinion is furnished to you pursuant to Section
3(f)(B) of the Registration Rights Agreement. Unless otherwise defined herein,
capitalized terms used in this opinion that are defined in the Registration
Rights Agreement are used herein as so defined.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion. In rendering this opinion, as to
all matters of fact relevant to this opinion, we have assumed the completeness
and accuracy of, and are relying solely upon, the representations and
warranties of the Company and the Guarantors set forth in the Purchase
Agreement and the statements set forth in certificates of public officials and
officers of the Company and the Guarantors, without making any independent
investigation or inquiry with respect to the completeness or accuracy of such
representations, warranties or statements, other than a review of the
certificate of incorporation, by-laws and relevant minute books of the Company
and the Guarantors.
Based on and subject to the foregoing, we are of the opinion that:
1. The Exchange Offer Registration Statement and the Prospectus (other
than the financial statements, notes or schedules thereto and other financial
data and supplemental schedules included or incorporated by reference therein
or omitted therefrom and the Form T-1, as to which such counsel need express no
opinion), comply as to form in all material respects with the requirements of
the 1933 Act and the applicable rules and regulations promulgated under the
1933 Act.
2. We have participated in the preparation of the Registration
Statement and the Prospectus and in the course thereof have had discussions
with representatives of the Underwriters, officers and other
-1-
24
representatives of the Company and the Company's independent public accountants,
during which the contents of the Registration Statement and the Prospectus were
discussed. We have not, however, independently verified and are not passing
upon, and do not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus. Based on our participation as described above, nothing has come to
our attention that would lead us to believe that the Registration Statement
(except for financial statements and schedules and other financial data included
therein as to which we make no statement) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein, as to which
such counsel need make no statement), at the time the Prospectus was issued, at
the time any such amended or supplemented Prospectus was issued or at the
Closing Time, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
This opinion is being furnished to you solely for your benefit in
connection with the transactions contemplated by the Registration Rights
Agreement, and may not be used for any other purpose or relied upon by any
person other than you. Except with our prior written consent, the opinions
herein expressed are not to be used, circulated, quoted or otherwise referred
to in connection with any transactions other than those contemplated by the
Registration Rights Agreement by or to any other person.
Very truly yours,
-2-
1
Exhibit 5.1
March 25, 1999
Board of Directors
Integrated Electrical Services, Inc.
515 Post Oak Boulevard
Suite 450
Houston, Texas 77027
Ladies and Gentlemen:
We have acted as counsel to Integrated Electrical Services, Inc., a
Delaware corporation (the "Company") and are delivering this opinion in
connection with the Company's Registration Statement on Form S-4 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended (the "Securities Act"), of the offer by the Company to
exchange up to $150,000,000 aggregate principal amount of its 9 % Senior
Subordinated Notes Due 2009, Series B (the "Exchange Notes") for its existing 9
% Senior Subordinated Notes Due 2009, Series A (the "Existing Notes"). The
Exchange Notes are proposed to be issued in accordance with the provisions of
the indenture (the "Indenture"), dated as of January 28, 1999, between the
Company, the guarantors named therein (the "Guarantors") and State Street Bank
and Trust Company, as Trustee.
In arriving at the opinions expressed below, we have examined the
Registration Statement, the Prospectus contained therein, the Indenture which is
filed as an exhibit to the Registration Statement, and the originals or copies
certified or otherwise identified to our satisfaction of such other instruments
and other certificates of public officials and officers and representatives of
the Company. In such examination, we have assumed and have not verified (i)
that the signatures on all documents that we have examined are genuine, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
with the authentic originals of all documents submitted to us as certified,
photostatic or faxed copies, and (iv) that all documents in respect of which
forms were filed with the Securities and Exchange Commission as exhibits to the
Registration Statement will conform in all material respects to the forms
thereof that we have examined. In addition, as the basis for the opinion
hereinafter expressed, we have examined such statutes, regulations, corporate
records and documents, certificates of corporate and public officials and other
instruments as we have deemed necessary or advisable for the purposes of this
opinion.
2
Board of Directors
Integrated Electrical Services, Inc.
March 25, 1999
Based upon the foregoing, having due regard for such legal considerations
as we deem relevant, we are of the opinion that the Exchange Notes and the
guarantee of each of the Guarantors (the "Guarantees"), (a) when the Notes have
been exchanged in the manner described in the Registration Statement, (b) when
the Exchange Notes have been duly executed, authenticated, issued and delivered
in accordance with the terms of the Indenture, (c) when the Indenture has been
duly qualified under the Trust Indenture Act of 1939, as amended, and (d) when
applicable provisions of "blue sky" laws have been complied with, will
constitute valid and binding obligations of the Company and the Guarantors, as
applicable, enforceable against the Company and the Guarantors, as applicable,
in accordance with their terms, under the laws of the State of New York which
are expressed to govern the same, except as the enforcement thereof may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium (including,
without limitation, all laws relating to fraudulent transfers), (b) other
similar laws relating to or affecting enforcement of creditors' rights
generally, (c) general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law) and (d) limitations on the
waiver of rights under usury laws, and will be entitled to the benefits of the
Indenture.
This opinion is limited in all respects to the laws of the State of Texas,
the State of New York and the Delaware General Corporation Law. We express no
opinion as to, and for the purposes of the opinions set forth herein, we have
conducted no investigation of, and do not purport to be experts on, any other
laws. With respect to each Guarantor which was not organized under the laws of
the State of Texas or the State of Delaware, we have assumed that the laws of
the jurisdiction, organization or formation of such Guarantor with respect to
matters of authorization, execution and delivery do not differ in any material
respect from the laws of the State of Texas in those regards and have undertaken
no investigation of the laws of any jurisdiction or their effect, if any, on any
legal conclusion herein expressed other than, the laws of the State of Texas,
the State of New York and the Delaware General Corporation Law. We hereby
consent to the use of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Andrews & Kurth L.L.P.
1
EXHIBIT 12
INTEGRATED ELECTRICAL SERVICES, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
Nine Months Year Ended Quarter Ended
Years Ended December 31, Ended September 30, December 31,
------------------------------------ September 30, ---------------------- -----------------------
1994 1995 1996 1997 1997 1998 1997 1998
----------- ----------- ---------- ------------ ---------- ---------- ----------- -----------
CONSOLIDATED
Earnings:
Income before income
taxes . . . . . . . . . $ 712 $ 1,549 $ 6,136 $ 6,143 $ 7,298 $12,638 $(1,180) $15,792
Fixed charges . . . . . . 249 325 223 251 283 2,486 265 2,026
------- ------- -------- ------- ------- ------- ------- -------
$ 961 $ 1,874 $ 6,359 $ 6,394 $ 7,581 $15,124 $ (915) $17,818
======= ======= ======== ======= ======= ======= ======= =======
Fixed Charges:
Interest expense . . . . . $ 172 $ 286 $ 171 $ 164 $ 214 $ 1,161 $ 225 $ 1,695
Portion of rental cost
representing interest . 77 39 52 87 69 1,325 40 331
------- ------- -------- ------- ------- ------- ------- -------
$ 249 $ 325 $ 223 $ 251 $ 283 $ 2,486 $ 265 $ 2,026
======= ======= ======== ======= ======= ======= ======= =======
Ratio of earnings to fixed
charges . . . . . . . . . 3.9x 5.8x 28.5x 25.5x 26.8x 6.1x -- x 8.8x
======= ======= ======== ======= ======= ======= ======= =======
PRO FORMA:
Earnings:
Income before income
taxes . . . . . . . . . $64,090 $15,537
Fixed charges . . . . . . 5,736 2,145
------- -------
$69,826 $17,682
Fixed Charges:
Interest expense . . . . . $ 4,292 $ 1,708
Portion of rental cost
representing interest . 1,444 437
------- -------
$ 5,736 $ 2,145
======= =======
Ratio of earnings to fixed
charges . . . . . . . . . 12.2x 8.2x
======= =======
PRO FORMA AS ADJUSTED:
Earnings:
Income before income
taxes . . . . . . . . . $52,853 $13,380
Fixed charges . . . . . . 16,973 4,302
------- -------
$69,826 $17,682
======= =======
Fixed Charges:
Interest expense . . . . . $15,529 $ 3,865
Portion of rental cost
representing interest . 1,444 437
------- -------
$16,973 $ 4,302
======= =======
Ratio of earnings to fixed
charges . . . . . . . . . 4.1x 4.1x
======= =======
1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
November 12, 1998 included in Integrated Electrical Services, Inc.'s Annual
Report on Form 10-K for the year ended September 30, 1998, and to all
references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
March 24, 1999
1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form S-4 of
Integrated Electrical Services, Inc. of our report dated July 14, 1998, on the
financial statements of Primo Electric Company included in Integrated
Electrical Services, Inc.'s Current Report on Form 8-K, filed with the
Securities and Exchange Commission on February 4, 1999, and to all references
to our firm in this registration statement.
/s/ HERTZBACH & COMPANY, P.A.
HERTZBACH & COMPANY, P.A.
Owings Mills, Maryland
March 24, 1999
1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Kayton Electric, Inc.
We consent to the incorporation by reference in this Registration Statement on
Form S-4 of Integrated Electrical Services, Inc. of our report dated January
28, 1998 (November 19, 1998 as to note 8) on the financial statements of Kayton
Electric, Inc. included in Integrated Electrical Services, Inc.'s Current
Report on Form 8-K/A, filed with the Securities and Exchange Commission on
March 17, 1999, including references to our firm in the Form S-4.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Lincoln, Nebraska
March 24, 1999
1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accounts, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of Integrated Electrical
Services, Inc. of our report dated January 25, 1999, on the financial
statements of Bachofner Electric, Inc. included in Integrated Electrical
Services, Inc.'s Current Report on Form 8-K, filed with the Securities and
Exchange Commission on February 4, 1999, and to all references to our firm in
this registration statement.
/s/ PECK & KOPACEK, P.C.
PECK & KOPACEK
Beaverton, Oregon
March 24, 1999
1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Integrated Electrical Services:
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of Integrated Electrical
Services, Inc. of our report dated March 17, 1998 on the balance sheet of PCX
Corporation as of December 31, 1997 and the related statements of operations,
stockholders' equity and cash flows for the year then ended included in
Integrated Electrical Services, Inc.'s current report on Form 8-K, filed with
the Securities and Exchange Commission on February 4, 1999, and to all
references to our firm in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Raleigh, North Carolina
March 24, 1999
1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
INTEGRATED ELECTRICAL SERVICES, INC.
(Exact name of obligor as specified in its charter)
Delaware 76-0542208
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 Post Oak Boulevard, Suite 450
Houston, TX 77027
(Address of principal executive offices) (Zip Code)
9 3/8% Series B Senior Notes due 2009
(Title of indenture securities)
2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance Corporation,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement
of Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference
thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities and Exchange Commission as Exhibit
2 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with the Registration Statement
of Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
1
3
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Hartford and The
State of Connecticut, on the 23rd of March 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ MICHAEL M. HOPKINS
-------------------------------------
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
2
4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by INTEGRATED
ELECTRICAL SERVICES, INC.of its 9 3/8% Series B Senior Notes due 2009, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ MICHAEL M. HOPKINS
-----------------------------------------
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
Dated: March 23, 1999
3
5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business December 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........................................ 1,209,293
Interest-bearing balances ................................................................. 12,007,895
Securities ......................................................................................... 9,705,731
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ....................................................... 9,734,476
Loans and lease financing receivables:
Loans and leases, net of unearned income ....................... 6,973,125
Allowance for loan and lease losses ............................ 84,308
Allocated transfer risk reserve ................................ 0
Loans and leases, net of unearned income and allowances ................................... 6,888,817
Assets held in trading accounts .................................................................... 1,574,999
Premises and fixed assets .......................................................................... 523,514
Other real estate owned ............................................................................ 0
Investments in unconsolidated subsidiaries ......................................................... 612
Customers' liability to this bank on acceptances outstanding ....................................... 47,334
Intangible assets .................................................................................. 212,743
Other assets ....................................................................................... 1,279,224
-----------
Total assets ....................................................................................... 43,184,638
===========
LIABILITIES
Deposits:
In domestic offices ....................................................................... 10,852,862
Noninterest-bearing ................................... 8,331,830
Interest-bearing ...................................... 2,521,032
In foreign offices and Edge subsidiary .................................................... 16,761,573
Noninterest-bearing ................................... 83,010
Interest-bearing ...................................... 16,678,563
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ....................................................... 10,041,324
Demand notes issued to the U.S. Treasury ........................................................... 108,420
Trading liabilities ............................................................... 1,240,938
Other borrowed money ............................................................................... 322,331
Subordinated notes and debentures .................................................................. 0
Bank's liability on acceptances executed and outstanding ........................................... 47,334
Other liabilities .................................................................................. 1,126,058
Total liabilities .................................................................................. 40,500,840
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ...................................................... 0
Common stock ....................................................................................... 29,931
Surplus ............................................................................................ 468,511
Undivided profits and capital reserves/Net unrealized holding gains (losses) ....................... 2,164,055
Net unrealized holding gains (losses) on available-for-sale securities ............ 21,638
Cumulative foreign currency translation adjustments ................................................ (337)
Total equity capital ............................................................................... 2,683,798
-----------
Total liabilities and equity capital ............................................................... 43,184,638
===========
4
6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
1
EXHIBIT 99.1
INTEGRATED ELECTRICAL SERVICES, INC.
LETTER OF TRANSMITTAL
FOR TENDER OF ALL OUTSTANDING
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
IN EXCHANGE FOR
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED _____________, 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON __________________, 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED.
TO: STATE STREET BANK AND TRUST COMPANY (THE "EXCHANGE AGENT")
By Hand or Overnight Delivery: By Registered or Certified Mail:
State Street Bank and Trust Company State Street Bank and Trust Company
Two International Place Two International Place
Boston, Massachusetts 02110 P. O. Box 77802102
Attention: Kellie Mullen Boston, Massachusetts 02110
Attention: Kellie Mullen
By Facsimile Transmission:
(for Eligible Institutions only)
State Street Bank and Trust Company
(617) 664-5290
Attention: Kellie Mullen
For Information or Confirmation by Telephone:
(617) 664-5587
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION TO A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES, IS
AT THE RISK OF THE HOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received the
Prospectus, dated _____________, 1999 (the "Prospectus") of Integrated
Electrical Services, Inc., a Delaware Corporation (the "Company") and this
Letter of Transmittal and the instructions hereto (the "Letter of
Transmittal"), which together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 9 3/8% Senior Subordinated
Notes due 2009, Series B (the "Exchange Notes") that have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which the Prospectus is a part, for each $1,000
principal amount of its outstanding 9 3/8% Senior Subordinated Notes due 2009,
Series A (the "Old Notes"), of which
2
$150,000,000 aggregate principal amount is outstanding, upon the terms and
subject to the conditions set forth in the Prospectus. The term "Expiration
Date" shall mean 5:00 p.m., New York City time, on _____________, 1999, unless
the Company, in its sole discretion, extends the Exchange Offer, in which case
the term shall mean the latest date and time to which the Exchange Offer is
extended by the Company.
This Letter of Transmittal is to be used either if (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders, (ii) tender of Old Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company ("DTC"), pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus by any financial institution
that is a participant in DTC and whose name appears on a security position
listing as the owner of Old Notes or (iii) tender of Old Notes is to be made
according to the guaranteed delivery procedures set forth in the Prospectus
under "The Exchange Offer--Guaranteed Delivery Procedures." Delivery of this
Letter of Transmittal and any other required documents must be made to the
Exchange Agent. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
The term "Holder" as used herein means any person in whose name Old
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder.
All Holders of Old Notes who wish to tender their Old Notes must,
prior to the Expiration Date: (1) complete, sign, and deliver this Letter of
Transmittal, or a facsimile thereof, to the Exchange Agent, in person or to the
address set forth above; and (2) tender (and not withdraw) his or her Old Notes
or, if a tender of Old Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at DTC, confirm such book-entry
transfer (a "Book- Entry Confirmation"), in each case in accordance with the
procedures for tendering described in the instructions to this Letter of
Transmittal. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or Book-Entry
Confirmation and all other documents required by this Letter of Transmittal to
be delivered to the Exchange Agent on or prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer -- Guaranteed Delivery Procedures"
in the Prospectus. (See Instruction 2.)
Upon the terms and subject to the conditions of the Exchange Offer,
the acceptance for exchange of the Old Notes validly tendered and not withdrawn
and the issuance of the Exchange Notes will be made promptly following the
Expiration Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and if
the Company has given written notice thereof to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED IN THIS
LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE
OR FOR ADDITIONAL COPIES OF THE PROSPECTUS, THIS LETTER OF TRANSMITTAL AND THE
NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO THE EXCHANGE AGENT. SEE
INSTRUCTION 12 HEREIN.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY AND COMPLY WITH
ALL OF ITS TERMS.
-2-
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List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and
Principal Amounts should be listed on a separate signed schedule, attached
hereto. The minimum permitted tender is $1,000 in principal amount of 9 3/8%
Senior Subordinated Notes due 2009, Series A. All other tenders must be in
integral multiples of $1,000.
DESCRIPTION OF 9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
BOX I
======================================================================================================================
Name(s) and Address(es) of Registered Holder(s) *
(Please fill in, if blank)
- ----------------------------------------------------------------------------------------------------------------------
(A) (B)
Aggregate Principal
Amount Tendered
Certificate Number(s)* (if less than all)**
-------------------------- -----------------------
-------------------------- -----------------------
-------------------------- -----------------------
-------------------------- -----------------------
-------------------------- -----------------------
Total Principal
Amount of Old Notes
Tendered
================================================================= ========================== =======================
- ---------
* Need not be completed by book-entry holders.
** Need not be completed by Holders who wish to tender with respect to all Old
Notes listed.
-3-
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PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
BOX II
- -------------------------------------------------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5, 6 AND 7)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or Exchange Notes issued in exchange for Old Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned.
Issue certificate(s) to:
Name
-------------------------------------------------------------------------------
(PLEASE PRINT)
- ------------------------------------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
- ------------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- ------------------------------------------------------------------------------------
BOX III
- -------------------------------------------------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5, 6 AND 7)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or Exchange Notes issued in exchange for Old Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned.
Deliver certificate(s) to:
Name
--------------------------------------------------------------------------------
(PLEASE PRINT)
- ------------------------------------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
- ------------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- ------------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER
WITH THE CERTIFICATE(S) FOR OLD NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER
OF SUCH OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR, IF GUARANTEED DELIVERY
PROCEDURES ARE TO BE COMPLIED WITH, A NOTICE OF GUARANTEED DELIVERY, MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY DTC TO AN ACCOUNT
MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution [ ] The Depository Trust Company
-----------------------
Account Number
--------------------------------------------------------------------------
Transaction Code Number
----------------------------------------------------------------
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date may tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." (See Instruction
2.)
-4-
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[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of tendering Holder(s)
---------------------------------------
Date of Execution of Notice of Guaranteed Delivery
------------------
Name of Institution which Guaranteed Delivery
------------------------
Transaction Code Number
---------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
----------------------------------------------------------------
Address:
-------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undesigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to Integrated Electrical Services, Inc. (the
"Company") the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the
principal amount of Old Notes tendered hereby in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Old Notes tendered
hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee and
Registrar under the Indenture for the Old Notes and the Exchange Notes) with
respect to the tendered Old Notes with full power of substitution (such power
of attorney being deemed an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (i)
deliver certificates for such Old Notes to the Company or transfer ownership of
such Old Notes on the account books maintained by DTC, together, in either such
case, with all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (ii) present such Old Notes for transfer on the
books of the Company and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Old Notes, all in accordance with the terms of
the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is being made in
reliance upon interpretative advice given by the staff of the Securities and
Exchange Commission to third parties in connection with transactions similar to
the Exchange Offer, so that the Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than a broker-dealer who
purchased
-5-
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such Old Notes directly from the Company for resale pursuant to Rule 144A or
any other available exemption under the Securities Act or a person that is an
"affiliate" of the Company or any Guarantor within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business
and such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes.
The undersigned agrees that acceptance of any tendered Old Notes by
the Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
registration rights agreement, (as referred to in the Prospectus) and that,
upon the issuance of the Exchange Notes, the Company will have no further
obligations or liabilities thereunder (except in certain limited
circumstances).
The undersigned represents and warrants that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving Exchange Notes (which shall be the
undersigned unless otherwise indicated in the box entitled "Special Delivery
Instructions" above) (the "Recipient"), (ii) neither the undersigned nor the
Recipient (if different) is engaged in, intends to engage in or has any
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes, and (iii) neither the undersigned nor the Recipient (if
different) is an "affiliate" of the Company or any Guarantor as defined in Rule
405 under the Securities Act. If the undersigned is not a broker-dealer, the
undersigned further represents that it is not engaged in, and does not intend
to engage in, a distribution of the Exchange Notes. If the undersigned is a
broker-dealer, the undersigned further (x) represents that it acquired Old
Notes for the undersigned's own account as a result of market-making activities
or other trading activities, (y) represents that it has not entered into any
arrangement or understanding with the Company or any "affiliate" of the Company
(within the meaning of Rule 405 under the Securities Act) to distribute the
Exchange Notes to be received in the Exchange Offer and (z) acknowledges that
it will deliver a prospectus meeting the requirements of the Securities Act
(for which purposes delivery of the Prospectus, as the same may be hereafter
supplemented or amended, shall be sufficient) in connection with any resale of
Exchange Notes received in the Exchange Offer. Such a broker-dealer will not be
deemed, solely by reason of such acknowledgment and prospectus delivery, to
admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned understands and agrees that the Company reserves the
right not to accept tendered Old Notes from any tendering holder if the Company
determines, in its sole and absolute discretion, that such acceptance could
result in a violation of applicable securities laws.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, exchange, assign and transfer the Old
Notes tendered hereby and to acquire Exchange Notes issuable upon the exchange
of such tendered Old Notes, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed to be necessary or
desirable by the Exchange Agent or the Company in order to complete the
exchange, assignment and transfer of tendered Old Notes or transfer of
ownership of such Old Notes on the account books maintained by a book-entry
transfer facility.
The undersigned understands and acknowledges that the Company reserves
the right in its sole discretion to purchase or make offers for any Old Notes
that remain outstanding subsequent to the Expiration Date or, as set forth in
the Prospectus under the caption "The Exchange Offer--Procedures for
Tendering," to terminate the Exchange Offer and, to the extent permitted by
applicable law, purchase Old Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
The undersigned understands that the Company may accept the
undersigned's tender by delivering written notice of acceptance to the Exchange
Agent, at which time the undersigned's right to withdraw such tender will
terminate. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted validly tendered Old Notes when, as and if the Company has given
oral (which shall be confirmed in writing) or written notice thereof to the
Exchange Agent.
-6-
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The undersigned understands that the first interest payment following
the Expiration Date will include unpaid interest on the Old Notes accrued
through the date of issuance of the Exchange Notes.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is subject to the
more detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter of Transmittal, the
Prospectus shall prevail.
If any tendered Old Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Old
Notes will be returned (except as noted below with respect to tenders through
DTC), at the Company's cost and expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. This tender may be withdrawn only in
accordance with the procedures set forth in this Letter of Transmittal.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees
that upon the receipt of notice by the Company of the happening of any event
which makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented prospectus to such broker-dealer.
Unless otherwise indicated under "Special Registration Instructions,"
please issue the certificates representing the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and return any certificates
for Old Notes not tendered or not exchanged, in the name(s) of the undersigned
(or, in either such event in the case of Old Notes tendered by DTC, by credit
to the account at DTC). Similarly, unless otherwise indicated under "Special
Delivery Instructions," please send the certificates representing the Exchange
Notes issued in exchange for the Old Notes accepted for exchange and any
certificates for Old Notes not tendered or not exchanged (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s), unless, in either event, tender is being made
through DTC. In the event that both "Special Registration Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Old Notes accepted
for exchange in the name(s) of, and return any certificates for Old Notes not
tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligations pursuant to the "Special
Registration Instructions" or "Special Delivery Instructions" to transfer any
Old Notes from the name of the registered Holder(s) thereof if the Company does
not accept for exchange any of the Old Notes so tendered.
Holders who wish to tender the Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date, may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1
regarding the completion of the Letter of Transmittal.
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
AND WHETHER OR NOT TENDER IS TO BE MADE
-7-
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PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES
This Letter of Transmittal must be signed by the registered holder(s)
as their name(s) appear on the Old Notes or, if tendered by a participant in
DTC, exactly as such participant's name appears on a security listing as the
owner of Old Notes, or by person(s) authorized to become registered holder(s)
by a properly completed bond power from the registered holder(s), a copy of
which must be transmitted with this Letter of Transmittal. If Old Notes to
which this Letter of Transmittal relate are held of record by two or more joint
holders, then all such holders must sign this Letter of Transmittal. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (ii) unless waived by the Company, submit evidence satisfactory
to the Company of such person's authority so to act. (See Instruction 4.)
X Date
- --------------------------------------------------- -----------------------------
X Date
- --------------------------------------------------- -----------------------------
Signature(s) of Holder(s) or
Authorized Signatory
Name(s): Address:
------------------------------- -------------------------
------------------------------- -------------------------
(Please Print) (including Zip Code)
Capacity: Area Code and Telephone Number:
------------------------------ ---------------------
Social Security No.:
-------------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
-8-
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BOX IV
- -------------------------------------------------------------------------------
SIGNATURE GUARANTEE (SEE INSTRUCTION 1)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- -------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- -------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including area code)of Firm)
- -------------------------------------------------------------------------------
(Authorized Signature)
- -------------------------------------------------------------------------------
(Printed Name)
- -------------------------------------------------------------------------------
(Title)
Date:
---------------------
- -------------------------------------------------------------------------------
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of Transmittal
need not be guaranteed if (a) this Letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered herewith and such holder(s) have
not completed the box set forth herein entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" or (b) such
Old Notes are tendered for the account of an Eligible Institution. (See
Instruction 6.) Otherwise, all signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States (an "Eligible Institution"). All
signatures on bond powers and endorsements on certificates must also be
guaranteed by an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Notes. Certificates
for all physically delivered Old Notes or confirmation of any book-entry
transfer to the Exchange Agent at DTC of Old Notes tendered by book-entry
transfer, as well as, in each case (including cases where tender is affected by
book-entry transfer), a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date.
The method of delivery of the tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and the delivery will be deemed made only when
actually received by the Exchange Agent. If Old Notes are sent by mail,
registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery. No Letter of Transmittal or Old Notes should be sent to the Company.
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Depositary for purposes of the Exchange Offer
within two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Depositary may make book-entry delivery
of Old Notes by causing the Depositary to transfer
-9-
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such Old Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of Old
Notes may be effected through book-entry transfer at the Depositary, the Letter
of Transmittal, with any required signature guarantees or an Agent's Message (as
defined below) in connection with a book-entry transfer and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address specified on the cover page of the Letter of Transmittal on
or prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
A Holder may tender Old Notes that are held through the Depositary by
transmitting its acceptance through the Depositary's Automatic Tender Offer
Program, for which the transaction will be eligible, and the Depositary will
then edit and verify the acceptance and send an Agent's Message to the Exchange
Agent for its acceptance. The term "Agent's Message" means a message
transmitted by the Depositary to, and received by, the Exchange Agent and
forming part of the Book-Entry Confirmation, which states that the Depositary
has received an express acknowledgment from each participant in the Depositary
tendering the Old Notes and that such participant has received the Letter of
Transmittal and agrees to be bound by the terms of the Letter of Transmittal
and the Company may enforce such agreement against such participant.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis must tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus. See "Exchange Offer
- --Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, overnight courier, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the Expiration
Date, this Letter of Transmittal (or facsimile hereof) together with the
certificate(s) representing the Old Notes and any other required documents will
be deposited by the Eligible Institution with the Exchange Agent; and (iii)
such properly completed and executed Letter of Transmittal (or facsimile
hereof), as well as all other documents required by this Letter of Transmittal
and the certificate(s) representing all tendered Old Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC), must be received by the Exchange Agent within
three New York Stock Exchange trading days after the Expiration Date, all in
the manner provided in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." Any Holder who wishes to tender his Old
Notes pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior
to 5:00 p.m., New York City time, on the Expiration Date. Upon request to the
Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who
wish to tender their Old Notes according to the guaranteed delivery procedures
set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes, and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. All tendering holders, by execution of
this Letter of Transmittal (or facsimile thereof), shall waive any right to
receive notice of the acceptance of the Old Notes for exchange. The Company
reserves the absolute right to reject any and all Old Notes not properly
tendered or any Old Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any irregularities or conditions of tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in this Letter of Transmittal) shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them
incur any liability for failure to give such notification. Tenders of Old Notes
will not be deemed to have been made until such defects or irregularities have
been cured to the Company's satisfaction or waived. Any Old 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 by the
Exchange Agent to the tendering Holders pursuant to the Company's
determination, unless otherwise provided in this Letter of Transmittal as soon
as practicable following the Expiration Date. The Exchange Agent has no
fiduciary duties to the Holders with respect to the Exchange Offer and is
acting solely on the basis of directions of the Company.
-10-
11
3. Inadequate Space. If the space provided is inadequate, the
certificate numbers and/or the number of Old Notes should be listed on a
separate signed schedule attached hereto.
4. Tender by Holder. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial owner of Old Notes who is not the
registered Holder and who wishes to tender should arrange with such registered
holder to execute and deliver this Letter of Transmittal on such beneficial
owner's behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such beneficial owner's name or
obtain a properly completed bond power from the registered holder or properly
endorsed certificates representing such Old Notes.
5. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted
only in integral multiples of $1,000. If less than the entire principal amount
of any Old Notes is tendered, the tendering Holder should fill in the principal
amount tendered in the third column of the box entitled "Description of 9 3/8%
Senior Subordinated Notes due 2009, Series A" above. The entire principal
amount of any Old Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated. If the entire principal amount of all
Old Notes is not tendered, then Old Notes for the principal amount of Old Notes
not tendered and a certificate or certificates representing Exchange Notes
issued in exchange for any Old Notes accepted will be sent to the Holder at his
or her registered address, unless a different address is provided in the
"Special Delivery Instructions" box above on this Letter of Transmittal or
unless tender is made through DTC, promptly after the Old Notes are accepted
for exchange.
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes, or, in the case of Old Notes
transferred by book-entry transfer the name and number of the account at DTC to
be credited), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Registrar with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions as
to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange by the Company will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old Notes
may be retendered by following one of the procedures described in the
Prospectus under "The Exchange Offer--Procedures for Tendering" at any time
prior to the Expiration Date.
6. Signatures on the Letter of Transmittal; Bond Powers and
Endorsements. If this Letter of Transmittal (or facsimile hereof) is signed by
the registered holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the Old Note without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many copies of this Letter
of Transmittal as there are different registrations of Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders (which term, for the Purposes described herein,
shall include a book-entry transfer facility whose name appears on a security
listing as the owner of the Old Notes) of Old Notes tendered and the
certificate or certificates for Exchange Notes issued in exchange
-11-
12
therefor is to be issued (or any untendered principal amount of Old Notes to be
reissued) to the registered Holder, then such Holder need not and should not
endorse any tendered Old Notes, nor provide a separate bond power. In any other
case, such Holder must either properly endorse the Old Notes tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal with the signatures on the endorsement or bond power guaranteed by
an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder or Holders of any Old Notes listed,
such Old Notes must be endorsed or accompanied by appropriate bond powers in
each case signed as the name of the registered Holder or Holders appears on the
Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by
this Instruction 6 must be guaranteed by an Eligible Institution.
7. Special Registration and Delivery Instructions. Tendering Holders
should indicate, in the applicable box or boxes, the name and address to which
Exchange Notes or substitute Old Notes for principal amounts not tendered or
not accepted for exchange are to be issued or sent, if different from the name
and address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
8. Backup Federal Income Tax Withholding and Substitute Form W-9.
Under the federal income tax laws, payments that may be made by the Company on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute Form
W-9 included in this Letter of Transmittal and either (a) provide the correct
taxpayer identification number ("TIN") and certify, under penalties of perjury,
that the TIN provided is correct and that (i) the holder has not been notified
by the Internal Revenue Service (the "IRS") that the holder is subject to
backup withholding as a result of failure to report all interest or dividends
or (ii) the IRS has notified the holder that the holder is no longer subject to
backup withholding; or (b) provide an adequate basis for exemption. If the
tendering holder has not been issued a TIN and has applied for one, or intends
to apply for one in the near future, such holder should write "Applied For" in
the space provided for the TIN in Part I of the Substitute Form W-9, sign and
date the Substitute Form W-9 and sign the Certificate of Payee Awaiting
Taxpayer Identification Number. If "Applied For" is written in Part I, the
Company (or the Paying Agent under the indenture governing the Exchange Notes)
shall retain 31% of payments made to the tendering holder during the sixty-day
period following the date of the Substitute Form W-9. If the Holder furnishes
the Exchange Agent or the Company with its TIN within sixty days after the date
of the Substitute Form W-9, the Company (or the Paying Agent) shall remit such
amounts retained during the sixty-day period to the Holder and no further
amounts shall be retained or withheld from payments made to the Holder
thereafter. If, however, the Holder has not provided the Exchange Agent or the
Company with its TIN within such sixty-day period, the Company (or the Paying
Agent) shall remit such previously retained amounts to the IRS as backup
withholding. In general, if a Holder is an individual, the TIN is the Social
Security number of such individual. If the Exchange Agent or the Company are
not provided with the correct TIN, the Holder may be subject to a $50 penalty
imposed by the IRS. Certain Holders (including, among others, certain
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such Holder must submit a statement (generally,
IRS Form W-8), signed under penalties of perjury, attesting to that
individual's exempt status. Such statements can be obtained from the Exchange
Agent. For further information concerning backup withholding and instructions
for completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Old Notes are registered in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Old Notes to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
-12-
13
the Exchange Notes. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If backup
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS.
9. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered in the name of, any person other than the registered holder of
the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of a person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or on any other persons) will
be payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder. See the Prospectus under "The Exchange Offer--Solicitation of Tenders;
Fees and Expenses."
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
10. Waiver of Conditions. The Company reserves the right, in their
sole discretion, to amend, waive or modify specified conditions in the Exchange
Offer in the case of any Old Notes tendered.
11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering
Holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
12. Requests for Assistance or Additional Copies. Requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified
in the Prospectus. Holder may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
-13-
14
(DO NOT WRITE IN SPACE BELOW)
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
----------------------- ----------------------- ------------------------
----------------------- ----------------------- ------------------------
Date Received Accepted by Checked by
----------------- ----------- -------------
Delivery Prepared by Checked by Date
----------- ----------- ------------------
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the IRS, and payments
made pursuant to the Exchange Offer may be subject to backup withholding.
Certain Holders (including, among others, certain corporations and
certain foreign persons) are not subject to these backup withholding and
reporting requirements. Exempt Holders should indicate their exempt status on
Substitute Form W-9. A foreign person may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed IRS Form W-8, signed
under penalties of perjury, attesting to that Holder's exempt status. A Form
W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 31% of any payments made to the Holder or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the
Exchange Offer, the Holder is required to provide the Exchange Agent with
either: (i) the Holder's correct TIN by completing the Substitute Form W-9
below, certifying that the TIN provided on Substitute Form W-9 is correct (or
that such Holder is awaiting a TIN) and that (A) the Holder has not been
notified by the IRS that the Holder is subject to backup withholding as a
result of failure to report all interest or dividends or (B) the IRS has
notified the Holder that the Holder is no longer subject to backup withholding
or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the registered
Holder of the Old Notes. If the Old Notes are held in more than one name or are
held not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
-14-
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- -------------------------------------------------------------------------------
CERTIFICATION OF PAYEE AWAITING TAXPAYER INDEMNIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31% of all payments made
to me on account of the Exchange Notes shall be retained until I provide a
Taxpayer Identification Number to the payer and that, if I do not provide my
Taxpayer Identification Number within sixty days, such retained amounts shall
be remitted to the Internal Revenue Service as backup withholding and 31% of
all reportable payments made to me thereafter will be withheld and remitted to
the Internal Revenue Service until I provide a Taxpayer Identification Number.
SIGNATURE DATE
------------------------------ -----------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE
EXCHANGE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
- -------------------------------------------------------------------------------
-15-
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TO BE COMPLETED BY ALL TENDERING HOLDERS DEPARTMENT OF THE TREASURY
(SEE INSTRUCTION 8) INTERNAL REVENUE SERVICE
PAYER'S NAME: INTEGRATED ELECTRICAL SERVICES, INC.
SUBSTITUTE PART I - TAXPAYER IDENTIFICATION NUMBER (TIN) SOCIAL SECURITY NUMBER
FORM W-9 ENTER YOUR TIN IN THE APPROPRIATE BOX. FOR ----------------------------------
INDIVIDUALS, THIS IS YOUR SOCIAL SECURITY NUMBER (SSN). OR
DEPARTMENT OF THE TREASURY FOR SOLE PROPRIETORS, SEE THE INSTRUCTIONS IN THE
INTERNAL REVENUE SERVICE ENCLOSED GUIDELINES. FOR OTHER ENTITIES, IT IS YOUR EMPLOYER IDENTIFICATION NUMBER
EMPLOYER IDENTIFICATION NUMBER (EIN). IF YOU DO NOT HAVE A
NUMBER, SEE HOW TO GET A TIN IN THE ENCLOSED GUIDELINES. -----------------------------------
REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER
AND CERTIFICATION
NOTE: IF THE ACCOUNT IS IN MORE THAN ONE NAME, SEE
THE CHART ON PAGE 2 OF THE ENCLOSED GUIDELINES FOR
INSTRUCTIONS ON WHOSE NUMBER TO ENTER.
---------------------------------------------------------------------------------------------------
PART II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
(See Part II instructions in the enclosed Guidelines.)
- ----------------------------------------------------------------------------------------------------------------------------------
PART III - CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.
Signature Date , 1999
---------------------------------- -----------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS.-You must cross out item 2 above if you have
been notified by the IRS that you are currently subject to backup withholding
because you have failed to report all interest or dividends on your tax return.
For real estate transactions, item 2 does not apply. For mortgage interest
paid, the acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN.
-16-
1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR 9 3/8% SENIOR SUBORDINATED NOTES DUE 2009,
Series A OF INTEGRATED ELECTRICAL
SERVICES, INC.
As set forth in the Prospectus dated , 1999 (the "Prospectus") of
Integrated Electrical Services, Inc. (the "Company") and in the Letter of
Transmittal (the "Letter of Transmittal"), this form or a form substantially
equivalent to this form must be used to accept the Exchange Offer (as defined
below) if the certificates for the outstanding 9 3/8% Senior Subordinated Notes
due 2009, Series A (the "Old Notes") of the Company and all other documents
required by the Letter of Transmittal cannot be delivered to the Exchange Agent
by the expiration of the Exchange Offer or compliance with book-entry transfer
procedures cannot be effected on a timely basis. Such form may be delivered by
hand or transmitted by facsimile transmission, telex or mail to the Exchange
Agent no later than the Expiration Date, and must include a signature guarantee
by an Eligible Institution as set forth below.
TO:
State Street Bank and Trust Company (the "Exchange Agent")
By Mail or Hand Delivery: By Registered or Certified Mail:
State Street Bank and Trust Company State Street Bank and Trust Company
Two International Place Two International Place
Boston, Massachusetts 02110 P.O. Box 77802102
Attention: Kellie Mullen Boston, Massachusetts 02110
Attention: Kellie Mullen
By Facsimile Transmission:
(for Eligible Institutions only)
State Street Bank and Trust Company
(617) 664-5290
Attention: Kellie Mullen
For Information or Confirmation by Telephone:
(617) 664-5587
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE METHOD OF DELIVERY OF ALL
DOCUMENTS, INCLUDING CERTIFICATES, IS AT THE RISK OF THE HOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. THE INSTRUCTIONS ACCOMPANYING THE LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS NOTICE OF GUARANTEED DELIVERY IS COMPLETED.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signatures must appear in the applicable space provided on the Letter of
Transmittal for Guarantee of Signature(s).
2
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus and the related
Letter of Transmittal which describes the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of a new series of 9 3/8% Senior
Subordinated Notes due 2009, Series B (the "Exchange Notes") for each $1,000 in
principal amount of the Old Notes.
The undersigned hereby tenders to the Company the aggregate principal
amount of Old Notes set forth below on the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal pursuant to the guaranteed
delivery procedure set forth in the "The Exchange Offer--Guaranteed Delivery
Procedures" section in the Prospectus and the accompanying Letter of
Transmittal.
The undersigned understands that no withdrawal of a tender of Old
Notes may be made on or after the expiration date of the Exchange Offer. The
undersigned understands that for a withdrawal of a tender of Old Notes to be
effective, a written notice of withdrawal that complies with the requirements
of the Exchange Offer must be timely received by the Exchange Agent at one of
its addresses specified on the cover of this Notice of Guaranteed Delivery
prior to the Expiration Date.
The undersigned understands that the exchange of Old Notes for
Exchange Notes pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of (i) such Old Notes (or Book-Entry Confirmation
of the transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company (the "Depositary" or "DTC")) and (ii) a Letter of
Transmittal (or facsimile thereof) with respect to such Old Notes, properly
completed and duly executed, with any required signature guarantees, this
Notice of Guaranteed Delivery and any other documents required by the Letter of
Transmittal or a properly transmitted Agent's Message. The term "Agent's
Message" means a message transmitted by the Depositary to, and received by, the
Exchange Agent and forming part of the confirmation of a book-entry transfer,
which states that the Depositary has received an express acknowledgment from
each participant in the Depositary tendering the Old Notes and that such
participant has received the Letter of Transmittal and agrees to be bound by
the terms of the Letter of Transmittal and the Company may enforce such
agreement against such participant.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
-2-
3
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Owner(s) or Authorized
Signatory:
----------------------------------------
- --------------------------------------------------
- --------------------------------------------------
Principal Amount of Old Notes Tendered:
- --------------------------------------------------
Certificate No(s) of Old Notes (if available):
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
Date:
---------------------------------------------
Name(s) of Registered Holder(s)
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
Address:
------------------------------------------
- --------------------------------------------------
Area Code and Telephone No.:
---------------------
If Old Notes will be delivered by book-entry transfer
at The Depository Trust Company, insert
Depository Account No.:
---------------------------
This Notice of Guaranteed Delivery must be signed by the registered Holder(s)
of Old Notes exactly as its (their) name(s) appear on certificates for Old
Notes or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
Address(es): ----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
-3-
4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States, or otherwise an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
hereby (a) represents that each holder of Old Notes on whose behalf this tender
is being made "own(s)" the Old Notes covered hereby within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (b) represents that such tender of Old Notes complies with Rule 14e-4 of
the Exchange Act and (c) guarantees that, within three New York Stock Exchange
trading days from the expiration date of the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof),
together with certificates representing the Old Notes covered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Old Notes
into the Exchange Agent's account at The Depository Trust Company, pursuant to
the procedure for book-entry transfer set forth in the Prospectus) and required
documents will be deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Old Notes tendered hereby to the Exchange Agent within the time
period set forth above and that failure to do so could result in financial loss
to the undersigned.
Name of Firm:
-------------------------- ----------------------------------
Authorized Signature
Address: Name:
------------------------------ -----------------------------
Title:
- --------------------------------------- ---------------------------
Area Code and Telephone No.: Date:
---------- -----------------------------
-4-
1
EXHIBIT 99.3
INTEGRATED ELECTRICAL SERVICES, INC.
OFFER TO EXCHANGE
ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B
FOR ANY AND ALL OF ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
To Our Clients:
Enclosed for your consideration are the Prospectus dated ___________,
1999 (the "Prospectus") and the related Letter of Transmittal (which together
with the Prospectus constitute the "Exchange Offer") in connection with the
offer by Integrated Electrical Services, Inc., a Delaware corporation (the
"Company"), to exchange its outstanding 9 3/8% Senior Subordinated Notes due
2009, Series A (the "Exchange Notes") for any and all of the outstanding 9 3/8%
Senior Subordinated Notes due 2009, Series B (the "Old Notes"), upon the terms
and subject to the conditions set forth in the Exchange Offer.
We are the Registered Holders of Old Notes held for your account. An
exchange of the Old Notes can be made only by us as the Registered Holders and
pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to exchange the Old Notes
held by us for your account. The Exchange Offer provides a procedure for
holders to tender by means of guaranteed delivery.
We request information as to whether you wish us to exchange any or
all of the Old Notes held by us for your account upon the terms and subject to
the conditions of the Exchange Offer.
Your attention is directed to the following:
1. The Exchange Notes will be exchanged for the Old Notes at the
rate of $1,000 principal amount of Exchange Notes for each $1,000
principal amount of Old Notes. Interest on the Notes will accrue at
the rate of 9 3/8% per annum and will be payable semi-annually on each
February 1 and August 1 commencing August 1, 1999, 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 issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. The form and terms of
the Exchange Notes are identical in all material respects to the form
and terms of the Old Notes, except that (i) the offering of the
Exchange Notes has been registered under the Securities Act of 1933,
as amended (the "Securities Act"), (ii) the Exchange Notes will not be
subject to transfer restrictions and (iii) certain provisions relating
to an increase in the stated interest rate on the Old Notes provided
for under certain circumstances will be eliminated.
2. Based on an interpretation by the staff of the Securities and
Exchange Commission, Exchange Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or a "broker" or "dealer" registered under
the Securities Exchange Act of 1934, as amended) without compliance
with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. See the discussion in the
Prospectus under "The Exchange Offer--Purpose and Effect of the
Exchange Offer."
2
3. The Exchange Offer is not conditioned on any minimum principal
amount of Old Notes being tendered.
4. Notwithstanding any other term of the Exchange Offer, the
Company will not be required to accept for exchange, or exchange
Exchange Notes for, any Old Notes not theretofore accepted for
exchange, and may terminate or amend the Exchange Offer as provided
herein before the acceptance of such Old Notes, if any of the
conditions described in the Prospectus under "The Exchange
Offer--Conditions to the Exchange Offer" exist.
5. Tendered Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on ______ , 1999.
6. Any transfer taxes applicable to the exchange of the Old Notes
pursuant to the Offer will be paid by the Company, except as otherwise
provided in the Prospectus under "The Exchange Offer--Solicitation of
Tenders; Fees and Expenses" and in Instruction 9 of the Letter of
Transmittal.
If you wish to have us tender any or all of your Old Notes, please so
instruct us by completing, detaching and returning to us the instruction form
attached hereto. An envelope to return your instructions is enclosed. If you
authorize a tender of your Old Notes, the entire principal amount of Old Notes
held for your account will be tendered unless otherwise specified on the
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf by the Expiration Date.
The Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, holders of the Old Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable security law.
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1
EXHIBIT 99.4
INTEGRATED ELECTRICAL SERVICES, INC.
OFFER TO EXCHANGE
ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B
FOR ANY AND ALL OF ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
To Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees:
We are enclosing herewith an offer by Integrated Electrical Services,
Inc., a Delaware corporation (the "Company"), to exchange its 9 3/8% Senior
Subordinated Notes due 2009, Series B (the "Exchange Notes") for any and all of
its outstanding 9 3/8% Senior Subordinated Notes due 2009, Series A (the "Old
Notes"), upon the terms and subject to the conditions set forth in the
accompanying Prospectus dated , 1999 (the "Prospectus") and related Letter of
Transmittal (which together with the Prospectus constitutes the "Exchange
Offer").
The Exchange Offer provides a procedure for holders to tender the Old
Notes by means of guaranteed delivery.
The Exchange Offer will expire at 5:00 p.m., New York City time, on,
1999, unless extended (the "Expiration Date"). Tendered Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
Based on an interpretation by the staff of the Securities and Exchange
Commission, Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or a "broker"
or "dealer" registered under the Securities Exchange Act of 1934, as amended)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
with any person to participate in the distribution of such Exchange Notes. See
the discussion in the Prospectus under "The Exchange Offer--Purpose and Effect
of the Exchange Offer."
The Exchange Offer is not conditioned on any minimum principal amount
of Old Notes being tendered.
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to accept for exchange, or Exchange Notes for, any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes, if any of the
conditions described in the Prospectus under "The Exchange Offer--Conditions to
the Exchange Offer" exist.
The Company reserves the right not to accept tendered Old Notes from
any tendering holder if the Company determines, in its sole and absolute
discretion, that such acceptance could result in a violation of applicable
securities laws.
For your information and for forwarding to your clients for whom you
hold Old Notes registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. A Prospectus dated _______________ , 1999.
2. A Letter of Transmittal for your use and for the information of
your clients.
2
3. A printed form of letter which may be sent to your clients for
whose accounts you hold Old Notes registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer.
4. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 of the Internal Revenue Service (included in Letter of
Transmittal).
WE URGE YOU TO CONTACT YOUR
CLIENTS AS PROMPTLY AS POSSIBLE.
Any inquiries you may have with respect to the Exchange Offer may be
addressed to, and additional copies of the enclosed materials may be obtained
from, the Exchange Agent at the following telephone number: (617) 664-5587.
Very truly yours,
INTEGRATED ELECTRICAL SERVICES, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU AS
THE AGENT OF THE COMPANY, THE EXCHANGE AGENT OR ANY OTHER PERSON OR AUTHORIZE
YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF
ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
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1
EXHIBIT 99.5
INTEGRATED ELECTRICAL SERVICES, INC.
OFFER TO EXCHANGE
ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B
FOR ANY AND ALL OF ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus and the related Letter of Transmittal, in connection with the offer
by Integrated Electrical Services, Inc. (the "Company") to exchange the 9 3/8%
Senior Subordinated Notes due 2009, Series A (the "Old Notes").
This will instruct you to tender the principal amount of Old Notes
indicated below held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Prospectus and the related
Letter of Transmittal.
The undersigned represents that (i) the 9 3/8% Senior Subordinated
Notes due 2009, Series B (the "Exchange Notes") to be acquired pursuant to the
Exchange Offer in exchange for the Old Notes designated below are being
obtained in the ordinary course of business of the person receiving such
Exchange Notes, (ii) neither the undersigned nor any other person receiving
such Exchange Notes is participating, intends to participate, or has any
arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes, and (iii) it is not an "affiliate," as
defined under Rule 405 of the Securities Act of 1933 (the "Securities Act"), of
the Company or, if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
If the undersigned is a "broker" or "dealer" registered under the
Securities Exchange Act of 1934 that acquired Old Notes for its own account
pursuant to its market-making or other trading activities (other than Old Notes
acquired directly from the Company), the undersigned understands and
acknowledges that it may be deemed to be an "underwriter" within the meaning of
the Securities Act and, therefore, must deliver a prospectus relating to the
Exchange Notes in connection with any resales by it of Exchange Notes acquired
for its own account in the Exchange Offer. Notwithstanding the foregoing, the
undersigned does not thereby admit that it is an "underwriter" within the
meaning of the Securities Act.
YOU ARE HEREBY INSTRUCTED TO TENDER ALL OLD NOTES HELD FOR THE ACCOUNT OF THE
UNDERSIGNED UNLESS OTHERWISE INDICATED BELOW.
[ ] DO NOT TENDER ANY OLD NOTES
[ ] TENDER OLD NOTES IN THE AGGREGATE PRINCIPAL AMOUNT OF $____________
SIGNATURE:
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NAME OF BENEFICIAL OWNER (PLEASE PRINT)
BY
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SIGNATURE
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ADDRESS
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AREA CODE AND TELEPHONE NUMBER
DATED: , 1999
