EXHIBIT 10.3
CONSENT LETTER
This Consent Letter is entered into this 15th day of October,
2002 by and among Quanta Services, Inc., a Delaware corporation (the "Company"),
Aquila, Inc., a Delaware corporation (the "Investor") and the other parties
hereto.
Reference is hereby made to (i) that certain Certificate of
Designation, Rights, and Limitations of the Series A Convertible Preferred Stock
of the Company dated September 21, 1999 (as amended and corrected from time to
time, the "Series A Certificate of Designation"), (ii) that certain Amended and
Restated Investor's Rights Agreement dated as of May 20, 2002 (the "IRA") by and
between the Company and the Investor and (iii) that certain Settlement and
Governance Agreement dated as of May 20, 2002 (the "Settlement Agreement") by
and between Company and the Investor. Capitalized terms used herein are used as
defined in the Settlement Agreement.
WHEREAS, the Investor is the Company's largest stockholder;
WHEREAS, the Company desires to sell and issue (the "Sale")
8,666,666 shares of its common stock, par value $0.00001 per share (the "Common
Stock"), and up to 2,430,741 shares of its Series E preferred stock, par value
$0.00001 per share (the "Series E Preferred Stock") (each share of which is
convertible into 10 shares of Common Stock), to First Reserve Fund IX, L.P., a
Delaware limited partnership ("First Reserve"), pursuant to the terms of that
certain Securities Purchase Agreement to be dated as of October 15, 2002 (the
"Securities Purchase Agreement") between the Company and First Reserve;
WHEREAS, in connection with the Sale, the Company desires to
enter into that certain First Reserve Investor's Rights Agreement with First
Reserve to be dated as of October 15, 2002 (the "First Reserve IRA") pursuant to
which the Company will grant to First Reserve, among other things, certain
registration rights and pre-emptive rights and First Reserve will agree to
certain restrictions on its ownership and transfer of the Common Stock and
Series E Preferred Stock;
WHEREAS, in connection with the issuance of the Series E
Preferred Stock, the Company shall designate a new series of preferred stock and
file a Certificate of Designation, Rights, and Limitations (the "Series E
Certificate of Designation", collectively with the Securities Purchase Agreement
and the First Reserve IRA, the "Transaction Documents") with the Secretary of
State of the State of Delaware setting forth the rights and privileges of the
Series E Preferred Stock;
WHEREAS, the Investor desires to sell 3,303,100 shares of
Common Stock and 939,380 shares of Series A convertible preferred stock, par
value $0.00001 per share (the "Series A Preferred Stock"), to First Reserve
pursuant to the terms of that certain Letter Agreement to be dated as of October
15, 2002 between Investor and First Reserve (the "Letter Agreement");
WHEREAS, the Investor has had an opportunity (i) to review the
Transaction Documents and any other materials it has deemed necessary to review
in order for it to grant its
consents, waivers or agreements, as applicable, hereunder and (ii) to ask
questions of the management of the Company regarding the Sale and the
Transaction Documents; and
WHEREAS, the Investor desires to consent to certain actions of
the Company and waive certain of its rights in connection with the Sale and the
other transactions contemplated by the Transaction Documents.
NOW, THEREFORE, in consideration of the premises set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Investor hereby agrees as
follows:
Notwithstanding any provisions set forth in the Series A
Certificate of Designation, the IRA or the Settlement Agreement (collectively,
the "Aquila Documents"), or any other rights or preferences that the Investor
may have, the Investor hereby represents and warrants that, prior to the
transactions contemplated by the Letter Agreement to be consummated
contemporaneously herewith, it owns all of the outstanding shares of Series A
Preferred Stock. Without limiting the foregoing, the Investor hereby:
(a) consents to the designation of a class of Series E
Preferred Stock which shall rank pari passu with the
Series A Preferred Stock with respect to rights in
dividends and liquidation, dissolution and winding up,
and consents to any redemption obligations of the
Company in respect of the Series E Preferred Stock,
including, in each case, for purposes of Section 3 of
the Series A Certificate of Designation;
(b) waives (and agrees, in connection with any transfer of
the Series A Preferred Stock, to obtain the written
waiver of the transferee of) any and all rights and
benefits in and to anti dilution adjustment provisions
set forth in Section 5 of the Series A Certificate of
Designation with respect to the issuance of the Common
Stock, the Series E Preferred Stock, the shares of
Common Stock issuable upon conversion of the Series E
Preferred Stock, the shares of Series E Preferred Stock
issuable as pay in kind dividends on the Series E
Preferred Stock and the shares of Common Stock issuable
upon conversion of any pay in kind dividends with
respect to the Series E Preferred Stock;
(c) waives any and all rights and benefits in and to any
accrued and unpaid dividends that Investor may have (it
being agreed and understood that Investor makes no such
waiver in respect of First Reserve's, or any other
transferee's, right to such dividends), whether
declared or undeclared, with respect to any Series A
Preferred Stock being sold by the Investor to First
Reserve (the "Transferred Series A Shares") or any
shares of Common Stock issuable upon conversion of the
Transferred Series A Shares;
(d) agrees to vote, at any special or annual meeting of the
Company's stockholders, its shares of the Company's
voting securities in favor of permitting the conversion
of the Series E Preferred Stock into Common Stock and
the corresponding issuance of Common Stock upon
conversion of the Series E Preferred Stock;
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(e) consents to and agrees that First Reserve shall have
the right to designate three directors to the Board of
Directors of the Company, subject to the limitations
set forth in the Series E Certificate of Designation,
and, to effect the foregoing, consents and agrees to
the increasing of the size of the Board of Directors of
the Company to up to twelve (12) members to the extent
required by the Securities Purchase Agreement or the
First Reserve IRA and for purposes of Section 3(c)(v)
of the Series A Certificate of Designation;
(f) subject to the mutual agreement of First Reserve,
agrees that the Company's Board of Directors shall
consist of a majority of independent directors, and
notwithstanding anything to the contrary, the directors
designated by each of the undersigned and First Reserve
shall be deemed, and shall be treated as being, not
independent, and, to effect the foregoing, consents and
agrees to the increasing of the size of the Board of
Directors of the Company to up to 12 directors to the
extent required by the Securities Purchase Agreement or
the First Reserve IRA and for purposes of Section
3(c)(v) of the Series A Certificate of Designation;
(g) consents to the registration rights granted in the
First Reserve IRA (including the priority thereof) and
to the dividends provided for in the Series E
Certificate of Designation; and
(h) waives any preemptive rights it may have under the IRA
with respect to the Sale.
Investor, Everest Connections Corp. ("ECC"), Everest I
Engineering & Design LLC ("Everest I") and Everest Oklahoma LLC ("Everest
Oklahoma") agree to release and waive any claims, losses, suits, expenses,
indemnities, fees, warranties, back charges or other rights they, and their
affiliates and subsidiaries (collectively, the "Investor Parties"), have, had or
may have or assert against the Company, Par (as defined below) or Spalj (as
defined below, and collectively with the Company and Par, and their affiliates
and subsidiaries, the "Company Parties") with respect to any contracts,
agreements or other arrangements, whether written or oral, related to
construction services provided in connection with the overbuild of cable
television, telephony and internet systems in the Kansas City, Missouri,
Minneapolis, Minnesota and Tulsa, Oklahoma metropolitan areas (the "Covered
Matters"), including any such claims, losses, suits, expenses, indemnities,
fees, warranties, back charges or other rights arising under or related to the
following agreements: (i) Master Construction And Purchase Agreement between Par
Electrical Contractor, Inc. ("Par") and ECC, dated April 25, 2000; (ii) Standard
Provisions For Construction Contracts between Par and ECC, dated April 25, 2000;
(iii) Pole Attachment Make Ready Engineering/Planning Services Agreement between
Par and Everest I, dated October 9, 2000; (iv) Master Agreement between Spalj
Construction Company ("Spalj") and ECC, dated April 16, 2000; (v) Standard
Provisions For Construction Contracts between Spalj and ECC, dated April 16,
2000; (vi) Master Construction And Purchase Agreement between Par and Everest
Oklahoma, dated November 20, 2000; and (vii) Standard Provisions For
Construction Contracts between Par and Everest Oklahoma, dated November 20,
2000.
The consents, waivers and agreements set forth in this Consent
Letter are limited to the specific purposes for which they are granted and shall
not be construed as a consent,
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waiver, forbearance or other modification with respect to any term, condition or
other provision of the Aquila Documents or any other document purporting to
grant certain rights to the Investor in respect of its ownership interests in
the Company. To give effect to the intent of this Consent Letter, Investor
agrees to take any such action and to execute any such documents as may be
reasonably necessary to carry out the provisions of this Consent Letter
(including any amendments, consents or waivers of, or under, the IRA, the Series
A Certificate of Designation and the Settlement Agreement).
In addition, Investor hereby irrevocably and unconditionally
constitutes and appoints James H. Haddox and John R. Colson, and each of them or
any of them, and any individual designated in writing by any of them, and each
of them individually, with full power of substitution and resubstitution, the
true and lawful attorneys in fact, agents and proxies, in accordance with
Delaware General Corporation Law, to vote at any special or annual meeting of
the Company's stockholders called for the purpose of approving the following
matters, and any and all adjournments or postponements thereof, all of its
shares of the Company's voting securities in favor of permitting the conversion
of the Series E Preferred Stock into Common Stock and the corresponding issuance
of Common Stock upon conversion of the Series E Preferred Stock. Investor
acknowledges that this appointment of proxies shall in all cases be subject to
the direction of the Special Committee of the Board of Directors of the Company.
Investor agrees that this proxy is coupled with an interest. The Investor hereby
revokes all other proxies and powers of attorney that it may have heretofore
appointed or granted and no subsequent proxy or power of attorney shall be
granted (and if granted, shall not be effective) by the Investor with respect to
its shares of Common Stock and Series A Preferred Stock, other than for the sole
purpose of voting its shares as contemplated hereby.
In consideration of the waivers and consents given by the
Investor Parties pursuant to this Consent Letter and in lieu of any cash
consideration, the Company Parties hereby agree to release and waive any claims,
losses, suits, expenses, indemnities, fees, warranties, back charges or other
rights the Company Parties have, had or may have or assert against the Investor
Parties with respect to any Covered Matters.
Delivery of an executed signature page to this Consent Letter
by telecopy shall be effective as delivery of a manually executed signature page
to this Consent Letter.
[signature page follows]
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IN WITNESS WHEREOF, this Consent Letter has been duly executed
as of October 15, 2002.
AQUILA, INC.
By: /s/ Keith G. Stamm
--------------------------------
Name: Keith G. Stamm
Title: Chief Operating Officer
EVEREST CONNECTIONS CORP.
By: /s/ Gregory S. Schlicht
--------------------------------
Name: Gregory S. Schlicht
Title: Assistant Secretary
EVEREST I ENGINEERING
& DESIGN LLC
By: /s/ Gregory S. Schlicht
--------------------------------
Name: Gregory S. Schlicht
Title: Secretary
EVEREST OKLAHOMA LLC
By: /s/ Gregory S. Schlicht
--------------------------------
Name: Gregory S. Schlicht
Title: Secretary
QUANTA SERVICES, INC.
By: /s/ Dana A. Gordon
------------------------------------
Name: Dana A. Gordon
Title: Vice President - General Counsel
SPALJ CONSTRUCTION COMPANY
By: /s/ Dana A. Gordon
--------------------------------
Name: Dana A. Gordon
Title: Vice President
PAR ELECTRICAL CONTRACTORS, INC.
By: /s/ Dana A. Gordon
--------------------------------
Name: Dana A. Gordon
Title: Vice President