As filed with the Securities and Exchange Commission on April 20, 2007

Registration No. 333-          

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

Quanta Services, Inc.

(Exact name of registrant as specified in its charter)

 

1360 Post Oak Boulevard, Suite 2100

Houston, Texas 77056

(713) 629-7600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Tana L. Pool, Esq.

Vice President and General Counsel

1360 Post Oak Boulevard, Suite 2100

Houston, Texas 77056

(713) 629-7600

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies To:

 

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions to the closing of the merger described herein.

 

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. o

 

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. o

 

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. o

 

CALCULATION OF REGISTRATION FEE

 

 

 

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 that 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 Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

SUBJECT TO COMPLETION, DATED APRIL 20, 2007

 

JOINT PROXY STATEMENT/PROSPECTUS

 

 

To the Stockholders of Quanta Services, Inc. and the Stockholders of InfraSource Services, Inc.:

 

The boards of directors of Quanta Services, Inc., referred to as Quanta, and InfraSource Services, Inc., referred to as InfraSource, have each approved an agreement and plan of merger pursuant to which InfraSource will merge with and into Quanta MS Acquisition, Inc., a wholly owned subsidiary of Quanta referred to as Merger Sub. As a result of the merger, InfraSource will become a wholly owned subsidiary of Quanta. Pursuant to the merger agreement, Quanta will issue to InfraSource’s stockholders 1.223 shares of Quanta common stock for each share of InfraSource common stock, or approximately 50.3 million shares of Quanta common stock (based on the number of outstanding shares of InfraSource common stock on April 13, 2007 and assuming the exercise of all outstanding options to purchase shares of InfraSource common stock). The Agreement and Plan of Merger, dated as of March 18, 2007, among Quanta, Merger Sub, and InfraSource, which is referred to as the merger agreement, is attached as Annex A to this joint proxy statement/prospectus and is incorporated into this joint proxy statement/prospectus by reference.

 

Quanta and InfraSource will each hold a special meeting of its stockholders in connection with the proposed merger. At the Quanta special meeting, Quanta stockholders will be asked to consider and vote on a proposal to approve the issuance of shares of Quanta common stock in the merger. At the InfraSource special meeting, InfraSource stockholders will be asked to adopt the merger agreement.

 

Shares of Quanta common stock trade on the New York Stock Exchange under the symbol “PWR.” We estimate that immediately after the effective time of the merger, former InfraSource stockholders will hold shares of Quanta common stock representing approximately 25% of the then-outstanding shares of Quanta common stock (based on the outstanding shares of InfraSource common stock on March 16, 2007).

 

The merger cannot be completed unless (i) Quanta stockholders approve the issuance of shares of Quanta common stock in the merger by the affirmative vote of the holders of at least a majority of the votes cast at a meeting at which at least a majority of the outstanding shares of Quanta common stock and Quanta limited vote common stock in the aggregate are present and voting and (ii) InfraSource’s stockholders adopt the merger agreement by the affirmative vote of the holders of at least a majority of the shares of InfraSource common stock outstanding on          , 2007, the record date for the InfraSource special meeting.

 

The Quanta board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement and unanimously recommends that Quanta stockholders vote FOR the proposal to issue shares of Quanta common stock in the merger pursuant to the merger agreement. The InfraSource board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement and unanimously recommends that InfraSource stockholders vote FOR the proposal to adopt the merger agreement.

 

In considering the recommendation of the InfraSource board of directors, stockholders of InfraSource should be aware that members of the board of directors and executive officers of InfraSource have agreements and arrangements that result in their interests in the merger being different from, or in addition to, those of other InfraSource stockholders. See “The Merger — Interests of the Infrasource Directors and Executive Officers in the Merger.”

 

The accompanying joint proxy statement/prospectus contains important information about the merger, the merger agreement and the special meetings. This document is also a prospectus for the shares of Quanta common stock that will be issued pursuant to the merger. We encourage Quanta stockholders and InfraSource stockholders to read this joint proxy statement/prospectus carefully before voting, including the section entitled “Risk Factors” beginning on page 22.

 

Your vote is very important. Whether or not you plan to attend the Quanta special meeting or the InfraSource special meeting, please take the time to submit your proxy by completing and mailing the enclosed proxy card or, if the option is available to you, by granting your proxy electronically over the Internet or by telephone. If your shares of Quanta common stock or InfraSource common stock are held in “street name,” you must instruct your broker how to vote such shares.

 

 

Neither the Securities and Exchange Commission, which is referred to as the SEC, nor any state securities regulatory authority has approved or disapproved of the merger or the securities to be issued under this joint proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosure in this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

This joint proxy statement/prospectus is dated          , 2007, and is first being mailed to Quanta stockholders and InfraSource stockholders on or about          , 2007.

 

Quanta Services, Inc.
1360 Post Oak Boulevard, Suite 2100
Houston, TX 77056
(713) 629-7600

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON          , 2007

 

To the Stockholders of Quanta Services, Inc.:

 

A special meeting of the stockholders of Quanta Services, Inc., a Delaware corporation (“Quanta”), will be held at           on          , 2007 at  :00 a.m., local time, for the following purposes:

 

 

Only Quanta stockholders of record at the close of business on          , 2007, the record date for the Quanta special meeting, are entitled to notice of, and to vote at, the Quanta special meeting and any adjournments or postponements of the Quanta special meeting.

 

The Quanta board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement and unanimously recommends that you vote FOR the proposal to approve the issuance of shares of Quanta common stock in the merger pursuant to the merger agreement, which is described in this joint proxy statement/prospectus.

 

YOUR VOTE IS IMPORTANT

 

Whether or not you plan to attend the special meeting, please submit a proxy as soon as possible. To submit a proxy, complete, sign, date and mail your proxy card in the envelope provided or, if the option is available to you, call the toll-free telephone number listed on your proxy card or use the Internet as described in the instructions on the enclosed proxy card. Submitting a proxy will assure that your vote is counted at the meeting if you do not attend in person. If your shares of Quanta common stock are held in “street name” by your broker or other nominee, only that holder can vote your shares of Quanta common stock and the vote cannot be cast unless you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares of Quanta common stock. You may revoke your proxy at any time before it is voted. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the merger and the Quanta special meeting.

 

By Order of the Board of Directors of
Quanta Services, Inc.

 

Vincent A. Mercaldi
Corporate Secretary

 

Houston, Texas
           , 2007

InfraSource Services, Inc.
100 West Sixth Street
Suite 300
Media, PA 19063

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON          , 2007

 

To the Stockholders of InfraSource Services, Inc.:

 

A special meeting of stockholders of InfraSource Services, Inc., a Delaware corporation (“InfraSource”), will be held on          , 2007, at   a.m. (local time), at 1735 Market Street, Suite 4200, Philadelphia, PA 19103, for the following purposes:

 

 

Only InfraSource stockholders of record at the close of business on          , 2007, the record date for the InfraSource special meeting, are entitled to notice of, and to vote at, the InfraSource special meeting and any adjournments or postponements of the InfraSource special meeting.

 

The InfraSource board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement and unanimously recommends that you vote FOR the proposal to adopt the merger agreement, which is described in this joint proxy statement/prospectus.

 

In considering the recommendation of the InfraSource board of directors, stockholders of InfraSource should be aware that members of the board of directors and executive officers of InfraSource have agreements and arrangements that result in their interests in the merger being different from, or in addition to, those of other InfraSource stockholders. See “The Merger — Interests of the InfraSource Directors and Executive Officers in the Merger.”

 

YOUR VOTE IS IMPORTANT

 

Whether or not you plan to attend the special meeting, please submit a proxy as soon as possible. To submit a proxy, complete, sign, date and mail your proxy card in the envelope provided or, if the option is available to you, call the toll-free telephone number listed on your proxy card or use the Internet as described in the instructions on the enclosed proxy card. Submitting a proxy will assure that your vote is counted at the meeting if you do not attend in person. If your shares of InfraSource common stock are held in “street name” by your broker or other nominee, only that holder can vote your shares of InfraSource common stock and the vote cannot be cast unless you provide instructions to your broker. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares of InfraSource common stock. You may revoke your proxy at any time before it is voted. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the merger and the InfraSource special meeting.

 

By Order of the Board of Directors of
InfraSource Services, Inc.

 

Deborah C. Lofton
Senior Vice President, General Counsel and
Secretary

Media, Pennsylvania
           , 2007

 

ADDITIONAL INFORMATION

 

This joint proxy statement/prospectus incorporates by reference important business and financial information about Quanta and InfraSource from documents that are not included or delivered with this joint proxy statement/prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

 

Documents incorporated by reference are available to Quanta stockholders and InfraSource stockholders without charge upon written or oral request, excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference as an exhibit in this joint proxy statement/prospectus. You can obtain any of these documents by requesting it in writing or by telephone from the appropriate company.

 

 

In order for you to receive timely delivery of the requested documents in advance of the applicable special meeting, Quanta or InfraSource, as applicable, should receive your request by no later than          , 2007.

 

ABOUT THIS DOCUMENT

 

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Quanta (File No. 333-          ), constitutes a prospectus of Quanta under Section 5 of the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the shares of Quanta common stock to be issued pursuant to the merger agreement. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, with respect to the special meeting of Quanta stockholders, at which Quanta stockholders will be asked to consider and vote on a proposal to approve the issuance of shares in the merger pursuant to the merger agreement and with respect to the special meeting of InfraSource stockholders, at which InfraSource stockholders will be asked to consider and vote on a proposal to adopt the merger agreement.

 

TABLE OF CONTENTS

 

 

The following are some questions that Quanta stockholders and InfraSource stockholders may have regarding the proposals being considered at the Quanta special meeting and the InfraSource special meeting and brief answers to those questions. Quanta and InfraSource urge you to read carefully this entire joint proxy statement/prospectus, including the Annexes, and the other documents to which this joint proxy statement/prospectus refers or incorporates by reference because the information in this section does not provide all the information that might be important to you. Unless stated otherwise, all references in this joint proxy statement/prospectus to Quanta are to Quanta Services, Inc., a Delaware corporation; all references to InfraSource are to InfraSource Services, Inc., a Delaware corporation; all references to Merger Sub are to Quanta MS Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Quanta; and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of March 18, 2007, by and among Quanta, Merger Sub and InfraSource, a copy of which is attached as Annex A to this joint proxy statement/prospectus and is incorporated herein by reference.

 

 

InfraSource stockholders are being asked to adopt the merger agreement.

 

The approval by the Quanta stockholders of the issuance of shares of Quanta common stock and the approval by the InfraSource stockholders of the adoption of the merger agreement are required for the consummation of the merger.

 

 

Each share of Quanta common stock is entitled to one vote, and each share of Quanta limited vote common stock is entitled to one-tenth of one vote, on the issuance of shares of Quanta common stock in the merger pursuant to the merger agreement. At the Quanta special meeting, holders of Quanta common stock and Quanta limited vote common stock will vote together as a single class.

 

Under Delaware law, which governs InfraSource, adoption of the merger agreement requires the affirmative vote of the holders of at least a majority of the outstanding shares of InfraSource common stock entitled to vote. Each share of InfraSource common stock is entitled to one vote on the adoption of the merger agreement.

 

Your vote is very important. You are encouraged to submit a proxy as soon as possible.

 

 

In connection with the Quanta special meeting, abstentions and “broker non-votes” will be considered in determining the presence of a quorum but will not constitute votes cast and, accordingly, will have no effect on the outcome of the vote with respect to the proposal to approve the issuance of Quanta common stock in the merger.

 

In connection with the InfraSource special meeting, abstentions and broker non-votes will have the same effect as votes AGAINST the adoption of the merger agreement. You should therefore provide your broker or other nominee with instructions as to how to vote your shares of InfraSource common stock.

 

An abstention occurs when a stockholder abstains from voting (either in person or by proxy) on one or more of the proposals. Broker non-votes occur when a bank, broker or other nominee returns a proxy but does not have authority to vote on a particular proposal.

 

 

Upon completion of the merger, each share of InfraSource common stock that is subject to transfer and/or forfeiture restrictions under the InfraSource stock plans immediately prior to the effective time of the merger will, upon its conversion into the merger consideration, continue to be subject to the same transfer and/or forfeiture restrictions. Upon the lapsing of those restrictions, the holders of such shares will be entitled to elect to have Quanta withhold shares in an amount equal to any applicable tax withholding.

 

InfraSource will take all actions reasonably necessary to terminate all purchases of stock under InfraSource’s 2004 Employee Stock Purchase Plan effective as of the last “trading day” of the current “offering period” (as each such term is defined in the InfraSource 2004 Employee Stock Purchase Plan) that expires in May 2007. InfraSource will terminate the InfraSource 2004 Employee Stock Purchase Plan in its entirety immediately prior to the effective time of the merger.

 

Upon completion of the merger, Quanta will assume the obligations and succeed to the rights of InfraSource under InfraSource’s stock plans. InfraSource options and InfraSource restricted shares will not vest as a result of the merger (except for options to purchase 104,397 shares and 30,210 shares of restricted stock). Prior to the

effective time of the merger, each of the InfraSource stock plans will be amended, if and to the extent necessary, to reflect the transactions contemplated by the merger agreement, including the conversion of the InfraSource options and InfraSource restricted shares, and Quanta will be substituted for InfraSource in those stock plans to the extent appropriate to effectuate the assumption of the InfraSource stock plans by Quanta.

 

 

Please review carefully the information under the caption “The Merger — Certain Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 57 for a description of the material U.S. federal income tax consequences of the merger. The tax consequences to you will depend on your own situation. Please consult your tax advisors for a full understanding of the tax consequences of the merger to you.

 

 

All InfraSource stockholders of record as of the close of business on          , 2007, the record date for the InfraSource special meeting, are entitled to receive notice of and to vote at the InfraSource special meeting.

 

 

Please refer to your proxy card or the information forwarded by your broker or other nominee to see which voting options are available to you.

 

The Internet and telephone proxy submission procedures are designed to verify your stock holdings and to allow you to confirm that your instructions have been properly recorded.

 

The method by which you submit a proxy will in no way limit your right to vote at the Quanta special meeting or the InfraSource special meeting if you later decide to attend the meeting in person. If your shares of Quanta common stock or InfraSource common stock are held in the name of a broker or other nominee, you must obtain a proxy, executed in your favor, from the holder of record, to be able to vote at the Quanta special meeting or the InfraSource special meeting.

 

 

All shares of InfraSource common stock entitled to vote and represented by properly completed proxies received prior to the InfraSource special meeting, and not revoked, will be voted at the InfraSource special meeting as instructed on the proxies. If you properly complete, sign and return a proxy card, but do not indicate how your shares of InfraSource common stock should be voted on a matter, the shares of InfraSource common stock represented by your proxy will be voted as the InfraSource board of directors recommends and therefore FOR the adoption of the merger agreement.

 

 

 

If your shares of Quanta common stock or InfraSource common stock are held in an account at a broker or other nominee and you desire to change your vote, you should contact your broker or other nominee for instructions on how to do so.

 

 

 

 

Both Quanta and InfraSource

stockholders may also contact

the proxy solicitor:

 

MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(800) 322-2885

 

SUMMARY

 

The Companies

 

The Merger

 

Recommendation of Quanta’s Board of Directors

 

Recommendation of InfraSource’s Board of Directors

 

Stockholders Entitled to Vote; Vote Required

 

Opinions of Financial Advisors

 

Treatment of Stock Options, Restricted Stock and the InfraSource Employee Stock Purchase Plan

 

Directors and Executive Officers of Quanta After the Merger

 

Ownership of Quanta After the Merger

 

Share Ownership of Directors and Executive Officers of Quanta

 

Share Ownership of Directors and Executive Officers of InfraSource

 

Interests of the InfraSource Directors and Executive Officers in the Merger

 

Listing of Shares of Quanta Common Stock; Delisting and Deregistration of Shares of InfraSource Common Stock

 

No Appraisal Rights in the Merger

 

Conditions to Completion of the Merger

	•	the approval by Quanta stockholders of the issuance of the shares of Quanta common stock in the merger;
	•	the adoption of the merger agreement by InfraSource stockholders;
	•	the expiration or termination of the waiting period (and any extension of the waiting period) applicable to the proposed transaction under the Hart-Scott-Rodino Act, referred to as the HSR Act;
	•	the effectiveness of the Form S-4 registration statement, of which this joint proxy statement/prospectus is a part, and the absence of a stop order or proceedings for such purpose pending before or threatened by the SEC;
	•	the receipt of state public utility commission consents for the transfer of InfraSource subsidiaries in the dark fiber leasing and telecommunication business;
	•	the approval for listing on the NYSE of the shares of Quanta common stock issuable to the InfraSource stockholders in the merger pursuant to the merger agreement, subject to official notice of issuance; and

	•	the accuracy of the representations and warranties of Quanta, InfraSource and Merger Sub in the merger agreement, with specified exceptions.

 

Regulatory Approvals Required for the Merger

 

No Solicitation

 

Termination of the Merger Agreement

 

Termination Fee

 

Certain Material U.S. Federal Income Tax Consequences of the Merger

 

Accounting Treatment

 

No Payment of Dividends

 

SELECTED HISTORICAL FINANCIAL DATA OF QUANTA

		Year Ended December 31,
		2002				2003				2004				2005				2006
		(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenues		$	1,750,713			$	1,642,853			$	1,626,510			$	1,858,626			$	2,131,038
Cost of services (including depreciation)			1,513,940				1,442,958				1,445,119				1,601,878				1,815,222
Gross profit			236,773				199,895				181,391				256,748				315,816
Selling, general and administrative expenses			229,454				178,219				171,537				188,203				183,002
Goodwill impairment			166,580	(a)			6,452	(d)			—				—				56,812	(f)
Income (loss) from operations			(159,261	)			15,224				9,854				68,545				76,002
Interest expense			(35,866	)			(31,822	)			(25,067	)			(23,949	)			(26,823	)
Interest income			1,709				1,065				2,551				7,416				13,924
Gain (loss) on early extinguishment of debt, net			—				(35,055	)(e)			—				—				1,598	(g)
Other income (expense), net			(426	)			(2,481	)			17				235				425
Income (loss) before income taxes and cumulative effect of change in accounting principle			(193,844	)			(53,069	)			(12,645	)			52,247				65,126
Provision (benefit) for income taxes			(19,710	)			(18,080	)			(3,451	)			22,690				47,643
Income (loss) before cumulative effect of change in accounting principle			(174,134	)			(34,989	)			(9,194	)			29,557				17,483
Cumulative effect of change in accounting principle, net of tax			445,422	(b)			—				—				—				—
Net income (loss)			(619,556	)			(34,989	)			(9,194	)			29,557				17,483
Dividends on preferred stock, net of forfeitures			(11	)			(2,109	)			—				—				—
Non-cash beneficial conversion charge			8,508	(c)			—				—				—				—
Net income (loss) attributable to common stock		$	(628,053	)		$	(32,880	)		$	(9,194	)		$	29,557			$	17,483
Basic earnings (loss) per share		$	(9.98	)		$	(0.30	)		$	(0.08	)		$	0.26			$	0.15
Diluted earnings (loss) per share		$	(9.98	)		$	(0.30	)		$	(0.08	)		$	0.25			$	0.15

(a)		During the year ended December 31, 2002, Quanta recognized an interim SFAS No. 142 non-cash goodwill impairment charge of $166.6 million. Impairment adjustments recognized after the adoption of SFAS No. 142 are required to be recognized as operating expenses.
(b)		Based on the transitional impairment test performed upon adoption of SFAS No. 142, Quanta recognized a $488.5 million non-cash charge ($445.4 million, net of tax) to reduce the carrying value of goodwill to the implied fair value of its reporting units. Basic and diluted earnings per share before cumulative effect of change in accounting principle were a loss of $2.90 per share.

(c)		The original as-converted share price negotiated with First Reserve Fund IX, L.P. (First Reserve) for Quanta Series E Preferred Stock on October 15, 2002 was $3.00 per share, which was an above market price. On December 20, 2002, the date First Reserve purchased the Series E Preferred Stock, Quanta stock closed at $3.35 per share. Accordingly, Quanta recorded a non-cash beneficial conversion charge of $8.5 million based on the $0.35 per share differential. The non-cash beneficial conversion charge was recognized as a deemed dividend to the Series E preferred stockholder and was recorded as a decrease in net income attributable to common stock and an increase in additional paid-in capital. The non-cash beneficial conversion charge had no effect on operating income, cash flows or stockholders’ equity at December 31, 2002.
(d)		As part of the 2003 annual goodwill test for impairment, goodwill of $6.5 million was written off as a non-cash operating expense associated with the closure of one of our telecommunications businesses.
(e)		In the fourth quarter of 2003, Quanta recorded a $35.1 million loss on early extinguishment of debt comprised of make-whole prepayment premiums, the write-off of certain unamortized debt issuance costs and other related costs due to the retirement of senior secured notes and termination of a then existing credit facility.
(f)		As part of the 2006 annual goodwill test for impairment, goodwill of $56.8 million was written off as a non-cash operating expense associated with a decrease in the expected future demand for the services of one of Quanta’s businesses, which has historically served the cable television industry.
(g)		In the second quarter of 2006, Quanta recorded a $1.6 million gain on early extinguishment of debt comprised of the gain from repurchasing a portion of its 4.0% notes, partially offset by costs associated with the related tender offer for such notes.

		December 31,
		2002				2003				2004				2005				2006
		(In thousands)
Balance Sheet Data:
Working capital		$	317,356			$	476,703			$	478,978			$	572,939			$	656,173
Total assets			1,364,812				1,466,435				1,459,997				1,554,785				1,639,157
Long-term debt, net of current maturities			213,167				58,051				21,863				7,591				—
Convertible subordinated notes, net of current maturities			172,500				442,500				442,500				442,500				413,750
Redeemable common stock			72,922				—				—				—				—
Total stockholders’ equity			611,671				663,132				663,247				703,738				729,083

 

SELECTED HISTORICAL FINANCIAL DATA OF INFRASOURCE

		For the Year				For the Period
		Ended				January 1 to
		December 31,				September 23,
		2002				2003
		(Predecessor				(Predecessor
		Entity —				Entity —					For the				For the				For the				For the
		InfraSource				InfraSource					Period				Year				Year				Year
		Incorporated				Incorporated					May 30 to				Ended				Ended				Ended
		and				and					December 31,				December 31,				December 31,				December 31,
		Subsidiaries)				Subsidiaries)					2003				2004				2005				2006
		(In thousands, except per share data)
Consolidated Statements of Operations Data:
Revenues		$	566,469			$	382,627				$	132,445			$	632,604			$	853,076			$	992,305
Cost of revenues			459,652				339,480					110,103				531,632				750,248				846,646
Gross profit			106,817				43,147					22,342				100,972				102,828				145,659
Selling, general and administrative expenses			62,078				41,407					13,933				63,210				73,737				94,787
Exelon transaction related costs(a)			—				16,242					—				(228	)			218				—
Provision (recoveries) for uncollectible accounts			7,964				236					178				(299	)			156				1,500
Amortization of intangible assets			—				—					2,600				12,350				4,911				1,004
Income (loss) from operations(b)(c)			36,775				(14,738	)				5,631				25,939				23,806				48,368
Interest income			1,438				1,376					60				513				388				953
Interest expense and amortization of debt discount			(388	)			(27	)				(3,966	)			(10,178	)			(8,157	)			(6,908	)
Loss on early extinguishment of debt			—				—					—				(4,444	)			—				—
Write-off of deferred financing costs			—				—					—				—				—				(4,296	)
Other income (expense)			6,976				(3,053	)				(88	)			2,366				6,663				4,144
Income (loss) before income taxes, discontinued operations, cumulative effect of a change in accounting principle and extraordinary item			44,801				(16,442	)				1,637				14,196				22,700				42,261
Income tax expense (benefit)			14,564				(5,240	)				683				5,796				9,734				16,391
Net income (loss) from continuing operations			30,237				(11,202	)				954				8,400				12,966				25,870

		For the Year				For the Period
		Ended				January 1 to
		December 31,				September 23,
		2002				2003
		(Predecessor				(Predecessor
		Entity —				Entity —					For the				For the				For the				For the
		InfraSource				InfraSource					Period				Year				Year				Year
		Incorporated				Incorporated					May 30 to				Ended				Ended				Ended
		and				and					December 31,				December 31,				December 31,				December 31,
		Subsidiaries)				Subsidiaries)					2003				2004				2005				2006
		(In thousands, except per share data)
Income (loss) from discontinued operations, net of tax			(1,574	)			(12,316	)				305				580				(1,069	)			2
Gain on disposition of discontinued operations, net of tax			—				—					—				596				1,832				273
Income (loss) before extraordinary item and cumulative effect of a change in accounting principle, net of tax			28,663				(23,518	)				1,259				9,576				13,729				26,145
Extraordinary item, net of tax			—				—					76				—				—				—
Cumulative effect of a change in accounting principle, net of tax(d)			(204,100	)			—					—				—				—				—
Net income (loss)		$	(175,437	)		$	(23,518	)			$	1,335			$	9,576			$	13,729			$	26,145
Basic income (loss) per common share:
Weighted average basic common shares outstanding			48,086				47,585					10,782				35,172				39,129				39,757
Basic income (loss) per share — continuing operations		$	0.62			$	(0.24	)			$	0.09			$	0.24			$	0.33			$	0.65
Basic income (loss) per share — discontinued operations			(0.03	)			(0.26	)				0.02				0.01				(0.03	)			—
Basic income per share — gain on disposition of discontinued operations			—				—					—				0.02				0.05				0.01
Basic income per share — extraordinary item			—				—					0.01				—				—				—
Basic loss per share — cumulative effect of a change in accounting principle, net of tax			(4.24	)			—					—				—				—				—
		$	(3.65	)		$	(0.50	)			$	0.12			$	0.27			$	0.35			$	0.66
Diluted income (loss) per common share:
Weighted average diluted common shares outstanding			48,086				47,585					11,031				36,139				39,943				40,364
Diluted income (loss) per share — continuing operations		$	0.62			$	(0.24	)			$	0.09			$	0.23			$	0.32			$	0.64
Diluted income (loss) per share — discontinued operations			(0.03	)			(0.26	)				0.02				0.01				(0.03	)			—
Diluted income per share — gain on disposition of discontinued operations			—				—					—				0.02				0.05				0.01
Diluted income per share — extraordinary item			—				—					0.01				—				—				—

		For the Year				For the Period
		Ended				January 1 to
		December 31,				September 23,
		2002				2003
		(Predecessor				(Predecessor
		Entity —				Entity —					For the				For the				For the				For the
		InfraSource				InfraSource					Period				Year				Year				Year
		Incorporated				Incorporated					May 30 to				Ended				Ended				Ended
		and				and					December 31,				December 31,				December 31,				December 31,
		Subsidiaries)				Subsidiaries)					2003				2004				2005				2006
		(In thousands, except per share data)
Diluted loss per share — cumulative effect of a change in accounting principle, net of tax			(4.24	)			—					—				—				—				—
		$	(3.65	)		$	(0.50	)			$	0.12			$	0.26			$	0.34			$	0.65

		As of December 31,
		2002
		(Predecessor
		Entity —
		InfraSource
		Incorporated and
		Subsidiaries)					2003				2004				2005				2006
		(In thousands)
Working capital		$	156,379				$	62,268			$	97,026			$	115,534			$	107,363
Total assets			509,266					370,033				524,422				569,389				581,232
Total debt			439					163,490				85,764				83,908				51,133
Total stockholders’ equity			373,721					92,849				283,983				301,856				339,185

(a)		Represents fees and expenses related to the formation of InfraSource by two investment funds managed by GFI Energy Ventures LLC and Oaktree Capital Management and the acquisition of InfraSource Incorporated from Exelon Enterprises Company, LLC by InfraSource in May 2003, including severance and retention costs and professional service fees.
(b)		For the year ended December 31, 2005, amounts include a $10.1 million loss, after giving effect to assumed claims collections, relating to one underground utility construction project.
(c)		For the year ended December 31, 2006, amounts include an $8.9 million loss, which assumes collection of a portion of current and projected claims, related to one electric transmission project.
(d)		Effective January 1, 2002, pursuant to SFAS No. 142 goodwill recorded was no longer subject to amortization. Upon adoption of SFAS No. 142, we recorded a non-cash charge of $204.1 million (net of tax) to reduce the carrying amount of goodwill and other intangibles to their implied fair value.

 

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

		Year Ended
		December 31, 2006
		(In thousands, except
		per share data)
Pro Forma Combined Statement of Operations Data:
Revenues		$	3,123,343
Cost of services			2,661,868
Gross profit			461,475
Income from operations			106,138
Income from continuing operations		$	36,972
Diluted earnings per share from continuing operations		$	0.22
Balance Sheet Data:
Total assets		$	3,104,856
Long-term debt (net of current maturities) and convertible subordinated notes			413,750
Stockholders’ equity		$	1,937,685

 

COMPARATIVE PER SHARE DATA

		Quanta				InfraSource				Pro Forma
		Historical				Historical				Combined
		For the year ended December 31, 2006
Basic earnings per share from continuing operations		$	0.15			$	0.65			$	0.22
Diluted earnings per share from continuing operations			0.15				0.64				0.22
Dividends declared			—				—				—
Book value per share(1)		$	6.20			$	8.43			$	11.62

(1)		Book value per share is calculated by dividing stockholders’ equity by the number of common shares outstanding as of December 31, 2006.

 

COMPARATIVE QUANTA AND INFRASOURCE MARKET PRICE DATA

		Quanta				InfraSource
		Common Stock				Common Stock
March 16, 2007		$	24.64			$	25.66
April 13, 2007		$	26.00			$	31.69

						Quanta								InfraSource
						Common Stock								Common Stock
Calendar Year						High				Low				High				Low
	2004			First Quarter(1)		$	9.52			$	6.50			$	—			$	—
				Second Quarter		$	7.24			$	4.83			$	13.14			$	11.50
				Third Quarter		$	7.45			$	5.30			$	12.59			$	7.66
				Fourth Quarter		$	8.29			$	5.75			$	14.98			$	10.10
	2005			First Quarter		$	8.40			$	7.25			$	13.11			$	11.00
				Second Quarter		$	9.52			$	7.60			$	13.47			$	9.53
				Third Quarter		$	12.95			$	8.85			$	15.66			$	10.25
				Fourth Quarter		$	14.54			$	11.02			$	14.86			$	10.76
	2006			First Quarter		$	16.09			$	12.24			$	19.17			$	12.52
				Second Quarter		$	18.92			$	14.47			$	20.29			$	16.23
				Third Quarter		$	18.02			$	14.40			$	19.32			$	16.40
				Fourth Quarter		$	20.05			$	16.32			$	23.73			$	17.35
	2007			First Quarter		$	26.04			$	18.66			$	31.36			$	19.88
				Second Quarter (through April 13, 2007)		$	26.28			$	25.27			$	31.89			$	30.54

(1)		InfraSource completed its initial public offering in May 2004.

 

In addition to the other information included or incorporated by reference in this joint proxy statement/prospectus, including the matters addressed under “Cautionary Statement Concerning Forward-Looking Statements,” Quanta stockholders and InfraSource stockholders should carefully consider the following risks before deciding how to vote. You should also consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

 

Because the exchange ratio is fixed and the market price of shares of Quanta common stock will fluctuate, InfraSource stockholders cannot be sure of the value of the merger consideration they will receive.

 

Upon consummation of the merger, each outstanding share of InfraSource common stock will be converted into 1.223 shares of Quanta common stock. The number of shares of Quanta common stock to be issued in the merger pursuant to the merger agreement for each share of InfraSource common stock is fixed and will not change to reflect changes in the market price of Quanta common stock. The market price of Quanta common stock at the time of the merger may vary significantly from the market prices of Quanta common stock on the date the merger agreement was executed, the date of this joint proxy statement/prospectus and the date on which Quanta or InfraSource stockholders vote on the merger.

 

In addition, the merger may not be completed until a significant period of time has passed after the special meetings. Because the exchange ratio will not be adjusted to reflect any changes in the market value of Quanta common stock or InfraSource common stock, the market value of the Quanta common stock issued in the merger and the InfraSource common stock surrendered in the merger may be higher or lower than the values of those shares on those earlier dates. Stock price changes may result from a variety of factors that are beyond the control of Quanta and InfraSource, including:

 

 

Many of these factors are beyond the control of Quanta and InfraSource.

 

Neither party is permitted to “walk away” from the merger, terminate the merger agreement or resolicit the vote of its stockholders solely because of changes in the market price of either party’s common stock.

 

Many of the anticipated benefits of combining Quanta and InfraSource may not be realized.

 

Quanta and InfraSource entered into the merger agreement with the expectation that the merger would result in various benefits including, among other things, synergies (including enhanced resource base, service offerings and geographic presence, expanded customer base and additional cross-selling opportunities), cost savings and operating efficiencies. The success of the merger will depend, in part, on our ability to realize these anticipated benefits and cost savings from combining the businesses of Quanta and InfraSource. However, to realize these anticipated benefits and cost savings, we must successfully combine the businesses of Quanta and InfraSource. If we are not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully or at all or may take longer to realize than expected.

 

Quanta and InfraSource have operated and, until the completion of the merger, will continue to operate independently. It is possible that the integration process could take longer than anticipated and could result in the loss of key employees or the disruption of each company’s ongoing businesses, which could adversely affect our ability to achieve the anticipated benefits of the merger. Quanta may have difficulty coordinating the operations and personnel of two geographically separated companies and addressing possible differences in corporate cultures and management philosophies. Integration efforts between the two companies will also divert management attention

and resources. These integration activities could have an adverse effect on the businesses of both Quanta and InfraSource during the transition period. The integration process is subject to a number of uncertainties. Although Quanta’s plans for integration are focused on minimizing those uncertainties to help achieve the anticipated benefits, no assurance can be given that these benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and could adversely affect Quanta’s future business, financial condition, operating results and prospects. In addition, we may not be able to eliminate duplicative costs or realize other efficiencies from integrating the businesses to offset part or all of the transaction and merger-related costs incurred by Quanta and InfraSource.

 

Any delay in completing the merger may substantially reduce the benefits expected to be obtained from the merger.

 

In addition to obtaining the required regulatory clearances and approvals, the merger is subject to a number of other conditions beyond the control of InfraSource and Quanta that may prevent, delay or otherwise materially adversely affect its completion. See “The Merger Agreement — Conditions to the Completion of the Merger.” Quanta and InfraSource cannot predict whether or when the conditions required to complete the merger will be satisfied. The requirements for obtaining the required clearances and approvals could delay the effective time of the merger for a significant period of time or prevent it from occurring. Any delay in completing the merger may materially adversely affect the synergies and other benefits that Quanta and InfraSource expect to achieve if the merger and the integration of their respective businesses are completed within the expected timeframe.

 

Failure to complete the merger could negatively affect the stock prices and the future business and financial results of Quanta and InfraSource.

 

If the merger is not completed, the ongoing businesses of Quanta or InfraSource may be adversely affected and Quanta and InfraSource will be subject to several risks, including the following:

 

 

Quanta’s results of operations could be adversely affected as a result of goodwill impairment.

 

When Quanta acquires a business, it records an asset called “goodwill” equal to the excess amount it pays for the business, including liabilities assumed, over the fair value of the tangible and intangible assets of the business it acquires. Quanta expects that the merger will result in the recognition of approximately $978.5 million in goodwill based on the application of purchase accounting. Statement of Financial Accounting Standards (SFAS) No. 142 requires that goodwill and other intangible assets that have indefinite useful lives not be amortized, but instead be tested at least annually for impairment, and that intangible assets that have finite useful lives continue to be amortized over their useful lives. SFAS No. 142 provides specific guidance for testing goodwill and other non-amortized intangible assets for impairment. SFAS No. 142 requires Quanta’s management to make certain estimates and assumptions when allocating goodwill to reporting units and determining the fair value of reporting unit net assets and liabilities, including, among other things, an assessment of market conditions, projected cash flows, investment rates, cost of capital and growth rates, which could significantly impact the reported value of goodwill and other intangible assets. Fair value is determined using a combination of the discounted cash flow, market multiple and market capitalization valuation approaches. Absent any impairment indicators, Quanta performs its impairment tests annually during the fourth quarter. In each of 2002, 2003 and 2006, Quanta recognized goodwill impairment charges pursuant to SFAS No. 142. Any future impairments would negatively impact Quanta’s results of operations for the period in which the impairment is recognized.

 

Quanta and InfraSource will incur substantial transaction and merger-related costs in connection with the merger.

 

Quanta and InfraSource expect to incur a number of non-recurring transaction fees and other costs associated with completing the merger, combining the operations of the two companies and achieving desired synergies. These

fees and costs will be substantial. Additional unanticipated costs may be incurred in the integration of the businesses of Quanta and InfraSource.

 

The fairness opinions obtained by Quanta and InfraSource from their respective financial advisors will not reflect changes in circumstances between signing the merger agreement and the completion of the merger.

 

Neither Quanta nor InfraSource has obtained updated opinions as of the date of this joint proxy statement/prospectus from Credit Suisse or Citigroup, respectively. Changes in the operations and prospects of Quanta or InfraSource, general market and economic conditions and other factors which may be beyond the control of Quanta or InfraSource, and on which the fairness opinions were based, may alter the value of Quanta or InfraSource or the prices of their common stock by the time the merger is completed. Each fairness opinion is based on the information in existence on the date of the opinion and will not be updated as of the time the merger will be completed. Because Quanta and InfraSource currently do not anticipate asking their respective financial advisors to update their opinions, the written opinions dated March 17, 2007 do not address the fairness of the exchange ratio, from a financial point of view, at the time the special meetings are to be held or at the time the merger is to be completed. For a description of the opinions that Quanta and InfraSource received from their respective financial advisors, please refer to “The Merger — Opinion of Quanta’s Financial Advisor” and “The Merger — Opinion of InfraSource’s Financial Advisor.

 

Directors and executive officers of InfraSource have certain interests that are different from those of InfraSource stockholders generally.

 

Executive officers of InfraSource negotiated the terms of the merger agreement and the InfraSource board of directors unanimously approved the merger agreement and unanimously recommends that InfraSource stockholders vote in favor of the proposal to adopt the merger agreement. Each executive officer of InfraSource has a management agreement with InfraSource that provides for severance payments and the acceleration of existing equity awards if the executive officer’s employment with InfraSource is terminated following a change in control transaction. The merger will constitute a change in control transaction. Following completion of the merger, David R. Helwig, J. Michal Conaway and Frederick W. Buckman, each of whom is currently a member of the InfraSource board of directors, will become members of the Quanta board of directors. In addition, certain equity awards held by directors of InfraSource will vest upon completion of the merger. These severance arrangements, directorship positions and equity awards are different from or in addition to the interests of InfraSource stockholders in the company. InfraSource stockholders should take into account such interests when they consider the InfraSource board of directors’ recommendation that the InfraSource stockholders vote for adoption of the merger agreement. For a discussion of the interests of directors and executive officers in the merger, see “The Merger — Interests of the InfraSource Directors and Executive Officers in the Merger.”

 

In certain circumstances, the merger agreement requires payment of a termination fee of $43 million by Quanta or InfraSource to the other and, under certain circumstances, InfraSource must allow Quanta five business days to match any alternative acquisition proposal prior to any change in the InfraSource board’s recommendation. These terms could affect the decisions of a third party proposing an alternative transaction to the merger, or the likelihood that such a proposal would be made at all.

 

Under the merger agreement, Quanta or InfraSource may be required to pay to the other a termination fee of $43 million if the merger agreement is terminated under certain circumstances. Should the merger agreement be terminated in circumstances under which such a termination fee is payable, the payment of this fee could have material and adverse consequences to the financial condition and operations of the company making such payment. Additionally, under the merger agreement, in the event of a potential change by the InfraSource board of directors of its recommendation with respect to the merger, InfraSource must allow Quanta five business days to make a revised proposal, prior to which the InfraSource board of directors may not change its recommendation with respect to the merger agreement. These terms could affect the structure, pricing and terms proposed by other parties seeking to acquire or merge with InfraSource, and could make it more difficult for another party to make a superior acquisition proposal for InfraSource. For a description of the termination rights of each party and the termination fee payable by InfraSource under the merger agreement, see “The Merger Agreement — Termination of the Merger Agreement.”

 

Quanta’s and InfraSource’s stockholders will be diluted by the merger.

 

The merger will dilute the ownership position of the current stockholders of Quanta. Quanta will issue approximately 50.3 million shares of Quanta common stock (based on the number of outstanding shares of InfraSource common stock on April 13, 2007 and assuming the exercise of all outstanding options to purchase shares of InfraSource common stock) to InfraSource stockholders in the merger. As a result, Quanta’s stockholders and InfraSource’s stockholders are expected to hold approximately 75% and 25%, respectively, of the combined company’s common stock outstanding on a fully diluted basis (including options and convertible notes) immediately following the completion of the merger.

 

The date that InfraSource stockholders will receive their merger consideration is uncertain.

 

The completion of the merger is subject to the stockholder and regulatory approvals described in this joint proxy statement/prospectus and the satisfaction or waiver of certain other conditions. While we currently expect to complete the merger during the third quarter of 2007, such date could be later than expected due to delays in receiving such approvals. Accordingly, we cannot provide InfraSource stockholders with a definitive date on which they will receive the merger consideration.

 

Quanta and InfraSource may be unable to obtain the regulatory approvals required to complete the merger or, in order to do so, Quanta and InfraSource may be required to comply with material restrictions or conditions.

 

The merger is subject to review by the Antitrust Division and the FTC under the HSR Act. Under the HSR Act, Quanta and InfraSource are required to make pre-merger notification filings and await the expiration or early termination of the statutory waiting period before completing the merger. Quanta and InfraSource have filed the requisite Pre-Merger Notification and Report Forms under the HSR Act with the Antitrust Division and the FTC. Governmental clearance under the HSR Act is a condition to completing the merger and we can give no assurance that we will receive the necessary HSR Act clearance.

 

Additionally, even after the statutory waiting period under the HSR Act has expired, and even after completion of the merger, governmental authorities could seek to block or challenge the merger as they deem necessary or desirable in the public interest. In addition, in some jurisdictions, a competitor, customer or other third party could initiate a private action under the antitrust laws challenging or seeking to enjoin the merger, before or after it is completed. Quanta or InfraSource may not prevail, or may incur significant costs, in defending or settling any action under the antitrust laws.

 

Certain provisions of Quanta’s corporate documents could make a future acquisition of Quanta more difficult.

 

The existence of some provisions in Quanta’s certificate of incorporation and by-laws, as currently in effect, as well as its stockholders’ rights plan described below, could discourage potential proposals to acquire Quanta, delay or prevent a change in control of Quanta or limit the price that investors may be willing to pay in the future for shares of Quanta common stock. As Quanta stockholders, former InfraSource stockholders will be subject to the provisions of Quanta’s corporate governing documents which could make it more difficult to effect a change of control of Quanta, including:

 

 

On March 8, 2000, Quanta’s board of directors adopted an amended and restated rights agreement, which, as amended and restated as of October 24, 2002, we refer to as the Rights Agreement. The Rights Agreement provides for the distribution of uncertificated stock purchase rights to Quanta stockholders at a rate of one preferred share purchase right for each share of Quanta common stock. The Rights Agreement may impede a takeover of Quanta not supported by Quanta’s board of directors, including a takeover that may be desired by a majority of Quanta’s stockholders or involving a premium over the prevailing stock price. InfraSource stockholders, who are not

currently subject to a rights plan, will become subject to the Rights Agreement after the merger. In addition, the Rights Plan could be triggered by the actions of a third party, which event would adversely affect Quanta’s and InfraSource’s ability to close the merger.

 

The existing businesses of Quanta and InfraSource are both subject to significant risks. The risks affecting Quanta’s current business are described in Item 1.A of its Form 10-K for the year ended December 31, 2006, which is incorporated herein by reference. The risks affecting InfraSource’s business are described in Item 1.A of its Form 10-K for the year ended December 31, 2006, which is incorporated herein by reference. We anticipate that these risks will continue to apply to Quanta’s and InfraSource’s businesses following the merger. In addition, the future business and operations of Quanta may be affected by the following additional risks.

 

Quanta’s and InfraSource’s dependence upon fixed price contracts could adversely affect Quanta’s business after the merger.

 

Both Quanta and InfraSource currently generate, and, after the merger, Quanta expects to continue to generate, a portion of their revenues under fixed price contracts. A fixed price contract requires an estimate of the costs of completing a particular project to bid for fixed price contracts. The actual cost of labor and materials, however, may vary from the costs originally estimated. These variations, along with other risks inherent in performing fixed price contracts, may cause actual revenue and gross profits for a project to differ from those originally estimated and could result in reduced profitability or losses on projects. Depending upon the size of a particular project, variations from the estimated contract costs could have a significant impact on Quanta’s operating results after the merger for any fiscal quarter or year.

 

Quanta’s business growth could outpace the capability of its corporate management infrastructure.

 

Quanta cannot be certain that its infrastructure will be adequate to support its operations as it expands. Future growth after the merger also could impose significant additional demands on Quanta’s infrastructure, resulting in additional responsibilities on members of Quanta’s senior management, including the need to recruit and integrate new senior level managers and executives. Quanta cannot be certain that it will be able to recruit and retain such additional managers and executives. To the extent that Quanta is unable to manage its growth effectively, or is unable to attract and retain additional qualified management, Quanta may not be able to expand its operations or execute its business plan.

 

Business issues currently faced by one company may be imputed to the operations of the other company.

 

To the extent that either Quanta or InfraSource currently has or is perceived by customers to have operational challenges, such as on-time performance, safety issues or workforce issues, those challenges may raise concerns by existing customers of the other company following the merger which may limit or impede Quanta’s future ability to obtain additional work from those customers.

 

Failure to retain key employees could adversely affect Quanta following the merger.

 

Quanta’s performance following the merger could be adversely affected if it is unable to retain certain key employees of InfraSource. The loss of the services of one or more of these key employees could adversely affect Quanta’s future operating results because of their experience and knowledge of InfraSource’s business. In addition, current and prospective employees of Quanta and InfraSource may experience uncertainty about their future roles with the company until after the merger is completed. This may adversely affect the ability of Quanta and InfraSource to attract and retain key personnel.

 

Skilled labor shortages and increased labor costs that could negatively affect Quanta’s ability to compete for new projects may also negatively affect its profitability and results of operation.

 

Both Quanta and InfraSource have from time-to-time experienced shortages of certain types of qualified personnel, including engineers, project managers, field supervisors, linemen and other skilled workers capable of working on and supervising the construction of high-voltage electric lines and substations. These shortages have negatively affected, and may continue to negatively affect, the productivity and profitability of certain projects. The inability of Quanta to bid on new and attractive projects, or maintain productivity and profitability on existing projects, due to the limited supply of skilled workers may negatively affect its profitability and results of operation.

 

Quanta may be unable to compete for or work on certain projects if it is unable to obtain the necessary surety bonds due to changes in its operating and financial risk resulting from the merger.

 

Surety market conditions currently are difficult as a result of significant losses incurred by many sureties in recent periods, both in the construction industry as well as in certain larger corporate bankruptcies. Under standard terms in the surety market, sureties issue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing or renewing any bonds. Quanta’s surety providers may on short notice decline to issue or renew, or substantially reduce the amount of, bonds for Quanta’s work and could increase Quanta’s bonding cost as a result of a change in their assessment of Quanta’s operating and financial risk after the merger. If Quanta’s surety providers were to limit or eliminate Quanta’s access to bonding, Quanta’s alternatives would include seeking bonding capacity from other sureties, finding more business that does not require bonds and posting other forms of collateral for project performance. Quanta may be unable to secure these alternatives in a timely manner, on acceptable terms or at all. Accordingly, if Quanta were to experience an interruption or reduction in the availability of bonding capacity, Quanta may be unable to compete for or work on certain projects. In addition, after the merger, Quanta will be a larger company and may, in some instances, have more difficulty in obtaining adequate surety bonds due to the expansion of its business resulting from the merger.

 

The increased employee base of Quanta following the merger may affect Quanta’s ability to maintain effective safety programs and an adequate safety record, which may cause Quanta to be ineligible to bid on certain projects, to be terminated from existing projects or to have difficulty procuring adequate insurance.

 

Quanta’s operations are subject to extensive laws and regulations relating to the maintenance of safe conditions in the workplace. While Quanta has invested, and will continue to invest, substantial resources in its occupational health and safety programs, the increase in Quanta’s employee base following the merger may negatively impact the programs’ effectiveness. The increased employee base may also cause the number of workplace injuries and fatalities to rise, resulting in substantial costs and liabilities. If Quanta’s safety record were to substantially deteriorate over time, Quanta may be ineligible to bid on certain projects and could be terminated from existing projects. Furthermore, an increase in insurance claims may result in reductions of coverage or increased collateral requirements that Quanta may not be able to meet.

 

An increase in Quanta’s unionized workforce after the merger could adversely affect its operations if a work stoppage were to occur. In addition, Quanta and InfraSource currently contribute to multiemployer plans that could result in liabilities to Quanta after the merger.

 

As of December 31, 2006, approximately 50% of Quanta’s employees and a significant percentage of InfraSource’s employees were covered by collective bargaining agreements. The increase in Quanta’s unionized workforce would magnify the adverse effects that a potential strike or work stoppage could have on Quanta. Strikes or work stoppages could adversely impact Quanta’s relationships with its customers and could cause Quanta to lose business and revenues.

 

Both Quanta and InfraSource currently contribute to several multiemployer pension plans for employees covered by collective bargaining agreements, which plans Quanta will continue to contribute to after the merger. These plans are not administered by Quanta or InfraSource, and contributions are determined in accordance with provisions of negotiated labor contracts. The Employee Retirement Income Security Act of 1974, or ERISA, imposes certain liabilities upon employers who are contributors to a multiemployer plan in the event of the employer’s withdrawal from, or upon termination of, such plan. Neither Quanta nor InfraSource has information on the net assets and actuarial present value of the multiemployer pension plans’ unfunded vested benefits allocable to it, if any, or the amounts, if any, for which Quanta may be liable if Quanta or InfraSource were to withdraw from any of these plans.

 

As a result of the merger, the profitability and financial operations of Quanta may be negatively affected by changes in, or interpretations of, existing state or federal telecommunications regulations or new regulations that could adversely affect the dark fiber business of InfraSource.

 

Many of InfraSource’s telecommunications customers benefit from the Universal Service “E-rate” program, which was established by Congress in the 1996 Telecommunications Act and is administered by the Universal Service Administrative Company (the USAC) under the oversight of the FCC. Under the E-rate program, schools, libraries and certain health-care facilities may receive subsidies for certain approved telecommunications services,

internet access and internal connections. From time to time, bills have been introduced in Congress that would eliminate or curtail the E-rate program. Passage of such actions by the FCC or USAC to further limit E-rate subsidies could decrease the demand for telecommunications infrastructure service by certain customers.

 

The telecommunications services InfraSource provides through its dark fiber business are subject to regulation by the FCC, to the extent that they are interstate telecommunications services and, by states, when wholly within a particular state. To remain eligible to provide services under the E-rate program, InfraSource must maintain telecommunications authorizations in every state where it operates. Changes in federal or state regulations could reduce the profitability of InfraSource’s telecommunications business. InfraSource could be subject to fines if the FCC or a state regulatory agency were to determine that any of its activities or positions is not in compliance. If InfraSource’s profitability in the telecommunications business were to decline, or if InfraSource were to become subject to fines, Quanta’s profitability and results of operations could also be adversely affected.

 

Pending litigation against InfraSource may adversely affect Quanta’s business, financial condition or results of operations following the merger.

 

InfraSource, certain of its officers and directors and various other parties are defendants in a lawsuit seeking unspecified damages filed in the Harris County, Texas District Court. The plaintiffs allege that the defendants violated their fiduciary duties and committed constructive fraud by failing to maximize shareholder value in connection with certain acquisitions that closed in 1999 and 2000 and the acquisition of InfraSource Incorporated and committed other acts of misconduct following the filing of the petition. If this litigation is not completed or settled by the time the merger closes, the continuing defense of this InfraSource lawsuit could result in substantial costs and a diversion of the attention and resources of management. Furthermore, if the plaintiffs are successful in their lawsuit, Quanta’s business, financial condition or results of operations may be adversely affected by the damages InfraSource may be required to pay. An unsuccessful defense or a settlement on adverse terms by InfraSource prior to the time the merger closes may also have an adverse effect on Quanta’s stock price.

 

From time to time, InfraSource is a party to various other lawsuits and claims. These lawsuits and claims may seek, among other things, compensation for alleged personal injury, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger closes may adversely affect Quanta’s business, financial condition or results of operation.

 

The market value of Quanta’s common stock could decline if large amounts of its common stock are sold following the merger.

 

Following the merger, stockholders of Quanta and former stockholders InfraSource will own interests in a combined company operating an expanded business with more assets and a different mix of liabilities. Current stockholders of Quanta and InfraSource may not wish to continue to invest in the additional operations of the combined company, or for other reasons may wish to dispose of some or all of their interests in the combined company. If, following the merger, large amounts of Quanta’s common stock are sold, the price of its common stock could decline.

 

Quanta has never paid cash dividends on its common stock or limited vote common stock.

 

Quanta has not previously paid any cash dividends on its common stock or limited vote common stock and Quanta does not anticipate paying cash dividends on its common stock or limited vote common stock following the merger. Quanta intends to reinvest all available funds for the development and growth of its business.

 

This joint proxy statement/prospectus, including information included or incorporated by reference in this joint proxy statement/prospectus, may contain certain forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions identify forward-looking statements and any statements regarding the benefits of the merger, or Quanta’s or InfraSource’s future financial condition, results of operations and business are also forward-looking statements. Without limiting the generality of the preceding sentence, certain statements contained in the sections “The Merger — Background of the Merger,” “The Merger — Recommendation of the Quanta Board of Directors and Its Reasons for the Merger” and “The Merger — Recommendation of the InfraSource Board of Directors and Its Reasons for the Merger” constitute forward-looking statements.

 

These forward-looking statements appear in a number of places and include statements with respect to, among other things:

 

 

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, most of which are difficult to predict and many of which are beyond Quanta’s and InfraSource’s control. These include, but are not limited to, quarterly variations in operating results, adverse changes in economic conditions in the markets served by Quanta or InfraSource or by their customers, the ability to effectively compete for new projects, estimates and assumptions in determining financial results, and the other risks described under the caption “Risk Factors” in Quanta’s Annual Report on Form 10-K for the year ended December 31, 2006 and in InfraSource’s Annual Report on Form 10-K for the year ended December 31, 2006.

 

Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, the following factors:

 

 

Should one or more of the risks or uncertainties described above or elsewhere in Quanta’s Annual Report on Form 10-K for the year ended December 31, 2006 or in InfraSource’s Annual Report on Form 10-K for the year ended December 31, 2006 occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements.

 

All forward-looking statements, expressed or implied, included in this joint proxy statement/prospectus are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Quanta, InfraSource or persons acting on their behalf may issue.

 

Except as otherwise required by applicable law, Quanta and InfraSource disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section. See also “Where You Can Find More Information; Incorporation by Reference.”

 

The following is a description of the material aspects of the merger. While Quanta and InfraSource believe that the following description covers the material terms of the merger, the description may not contain all of the information that is important to Quanta stockholders and InfraSource stockholders. Quanta and InfraSource encourage Quanta stockholders and InfraSource stockholders to carefully read this entire joint proxy statement/prospectus, including the merger agreement attached to this joint proxy statement/prospectus as Annex A and incorporated herein by reference, for a more complete understanding of the merger.

 

 

Each of the Quanta and InfraSource board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement. In the merger, Merger Sub will merge with and into InfraSource, and InfraSource will become a wholly owned subsidiary of Quanta. Quanta will issue to InfraSource stockholders 1.223 shares of Quanta common stock for each share of InfraSource common stock. See “The Merger Agreement — Merger Consideration.”

 

 

InfraSource was acquired from Exelon Enterprises LLC on September 24, 2003 by OCM/GFI Power Opportunities Fund, L.P. and OCM Principal Opportunities Fund II, L.P. (funds managed by Oaktree Capital Management, LLC and GFI Energy Ventures LLC, referred to as the “principal stockholders”) and management of InfraSource. On May 12, 2004, InfraSource completed its initial public offering. At that time the principal stockholders held approximately 61% of its outstanding common stock.

 

During the period from September 2003 through December 2006, InfraSource grew its business organically as well as by acquisition transactions and divested some non-core business assets.

 

In August 2005, at the request of the principal stockholders, InfraSource retained Citigroup Global Markets Inc. (Citigroup) to assist InfraSource in an evaluation of its strategic alternatives. At that time, the principal stockholders continued to hold approximately 61% of the InfraSource common stock. The InfraSource board of directors considered both additional acquisition opportunities and the potential to sell the company to strategic or financial buyers. During September through November 2005, Citigroup contacted potential U.S. and European buyers, including Quanta. The principal stockholders had expressed a preference for an all-cash transaction.

 

In September and November of 2005, John R. Colson, Chairman of the Board and Chief Executive Officer of Quanta, and James H. Haddox, Chief Financial Officer of Quanta, met with representatives of Credit Suisse Securities (USA) LLC (Credit Suisse), to discuss, among other things, strategic acquisition opportunities that would allow Quanta to broaden its customer base, expand Quanta’s geographic area of operation and grow its portfolio of services. The list of potential attractive acquisition opportunities included InfraSource.

 

On December 8, 2005, Quanta’s board of directors, in a regularly scheduled board meeting, discussed a proposal on behalf of InfraSource for the acquisition of InfraSource by Quanta. Mr. Colson described InfraSource’s business to the Quanta board, and the board discussed the potential transaction. Following the discussion, the board directed Quanta’s management to explore a possible transaction with InfraSource.

 

In December 2005, InfraSource entered into confidentiality agreements with potentially interested parties, including one with Quanta dated December 23, 2005. In January 2006, InfraSource provided potentially interested buyers that had entered into confidentiality agreements with access to an electronic data room for due diligence purposes. Due diligence reviews were conducted by potentially interested buyers, including Quanta, during January and early February 2006.

 

On December 26, 2005, Quanta’s board of directors established, by unanimous written consent, a special committee (Special Committee) of the board of directors (consisting of Messrs. Colson, Vincent D. Foster and Bruce Ranck) to review and evaluate the possible acquisition by Quanta of InfraSource. There were no perceived conflicts of interest among Quanta’s directors and InfraSource that required the formation of the Special Committee.

 

In late January 2006, Messrs. Colson and Haddox met several times with representatives of Credit Suisse to discuss Quanta’s business model, capital structure and refinancing alternatives, as well as various strategic acquisition opportunities, including a possible acquisition of InfraSource.

 

On January 31, 2006, Mr. Colson met with David R. Helwig, InfraSource’s Chief Executive Officer and President, in Houston to discuss the potential acquisition of InfraSource by Quanta.

 

On February 1, 2006, during a regularly scheduled meeting of Quanta’s board of directors, Mr. Colson informed the Quanta board of directors that InfraSource had requested a response by February 6 with respect to Quanta’s interest in the potential acquisition of InfraSource. Mr. Colson informed the Quanta board of directors that he anticipated responding that Quanta was interested in a potential transaction but such response would be non-binding and would not include pricing parameters. The board discussed the potential transaction, and determined to delegate to the Special Committee authority to determine whether Quanta should continue to pursue a transaction with InfraSource.

 

On February 3, 2006, Quanta’s Special Committee held a telephonic meeting to discuss a response to the inquiry regarding the potential acquisition of InfraSource. Also present at this meeting were Mr. Haddox and representatives of Credit Suisse. The Special Committee, Mr. Haddox and representatives of Credit Suisse discussed the possible acquisition of InfraSource, the potential synergies of a transaction and the two companies’ current stock prices. In light of, among other things, the recent increase in InfraSource’s stock price, the Special Committee determined not to pursue the potential acquisition of InfraSource at that time.

 

On February 6, 2006, Quanta informed InfraSource and its financial advisors in writing that Quanta had determined not to pursue the acquisition of InfraSource at that time. By February 6, 2006, all other preliminary indications of interest in the acquisition of InfraSource were withdrawn by potential buyers.

 

The InfraSource board of directors and management continued to assess the strategic alternatives available to the company. In February 2006, the principal stockholders exercised their rights under an existing registration rights agreement to have InfraSource register shares for sale by the principal stockholders in an underwritten secondary public offering. The secondary offering, for which Credit Suisse acted as a joint book-running manager, was commenced in March 2006 and completed in April 2006, and resulted in a reduction of the principal stockholders’ ownership to approximately 32% of the outstanding common stock.

 

On April 4, 2006, Messrs. Colson and Helwig discussed again by telephone the possible acquisition of InfraSource by Quanta. Their discussion, however, focused on the fact that while such a transaction could be attractive, the parties could not reach mutual agreement in the current stock price environment. No further discussions or meetings regarding a possible transaction between the two companies occurred until the fall of 2006.

 

After the initial secondary offering, the principal stockholders determined that they wanted to sell their remaining ownership interests in InfraSource. An additional public offering of such shares, for which Credit Suisse acted as a joint book-running manager, closed on September 1, 2006. Credit Suisse received customary fees in connection with its role as a joint book-running manager for the two secondary offerings of InfraSource common stock that were completed in April and September 2006. The principal stockholders reduced their ownership of InfraSource common stock to approximately 2% as a result of the second offering and sold all of their remaining shares of InfraSource common stock by the end of 2006.

 

In mid-September 2006, on behalf of Quanta, representatives of Credit Suisse met with InfraSource management and discussed a possible transaction with Quanta. On September 20, 2006, Mr. Helwig and Terrence R. Montgomery, InfraSource’s Senior Vice President and Chief Financial Officer, had a dinner meeting with Messrs. Colson and Haddox at an industry conference in San Francisco, California. Messrs. Helwig and Montgomery met with representatives of Credit Suisse on September 21, 2006 also in San Francisco. The purpose of both meetings was to discuss potential strategic alternatives for InfraSource, which might facilitate a transaction between InfraSource and Quanta.

 

In late September 2006, InfraSource contacted Citigroup about re-engaging in merger discussions with Quanta. On October 2, 2006, Citigroup presented its preliminary valuation and combination analysis on a proposed merger to InfraSource’s management.

 

On October 5, 2006, Deborah C. Lofton, the Senior Vice President and General Counsel of InfraSource, and Tana L. Pool, Quanta’s Vice President and General Counsel, agreed that any information exchanged in the renewed discussions between InfraSource and Quanta would be subject to the Confidentiality Agreement between the parties dated December 23, 2005 and that there would be no exchange of any customer specific information.

 

On October 5, 2006, Messrs. Haddox and Montgomery met in Houston, Texas with representatives of Credit Suisse and Citigroup to discuss general business matters with respect to both companies.

 

On October 10, 2006, Mr. Haddox wrote to Mr. Helwig expressing Quanta’s interest in pursuing further discussions with InfraSource. InfraSource then contacted representatives of Citigroup.

 

On October 12, 2006, the Quanta board of directors met in special session and discussed the status of the potential acquisition of InfraSource. Messrs. Haddox and Colson reported to the board that preliminary meetings with InfraSource management had been held on October 5, and that following the meetings, Quanta had indicated to InfraSource its interest in continuing discussions regarding a possible transaction. In addition, the board was updated on the ongoing due diligence process, and provided with preliminary financial information prepared by Credit Suisse. The board also established a special committee (Special Committee) consisting of Mr. Colson, Vincent D. Foster and Bruce Ranck to review and evaluate the possible acquisition of InfraSource and to make a recommendation to the board.

 

On October 26, 2006, at a regularly scheduled board meeting of InfraSource, Mr. Helwig advised the board that Quanta had expressed interest in pursuing discussions with InfraSource for a possible transaction.

 

On November 1, 2006, the InfraSource’s board of directors met telephonically and Mr. Helwig reiterated Quanta’s interest in pursuing a potential transaction. The board also discussed the potential transaction frameworks. The board of directors discussed an updated accretion/dilution analysis, prepared by Citigroup, and regulatory clearances related to the potential transaction.

 

On November 14, 2006, the Quanta Special Committee met with Quanta management to discuss the possible acquisition of InfraSource and a draft of a non-binding letter of interest proposed to be sent by Quanta to InfraSource.

 

On November 15, 2006, Mr. Colson sent a non-binding letter of interest to Mr. Helwig that included a proposal setting forth certain terms upon which Quanta would acquire InfraSource in a transaction involving cash and/or stock consideration, subject to negotiation of a definitive agreement, due diligence and board approval. On November 16, 2006, senior management of InfraSource met with Citigroup representatives to discuss the Quanta proposal. The alternatives discussed included continuing negotiations with Quanta, acquisition transactions by InfraSource and maintaining the status quo without a sale of the company. On November 17, 2006, the InfraSource board of directors met via telephone with management and representatives of Citigroup and Ballard Spahr Andrews & Ingersoll, LLP, InfraSource’s outside legal counsel (Ballard Spahr), to discuss Quanta’s preliminary non-binding letter of interest and strategic alternatives available to InfraSource.

 

On November 17, 2006, representatives of Credit Suisse and Citigroup discussed Quanta’s preliminary non-binding letter of interest and next steps for a possible transaction.

 

Between November 17 and 22, 2006, there were a number of telephone conversations and exchanges of correspondence between Mr. Colson and Mr. Helwig regarding Quanta’s non-binding letter of interest. As a result of these conversations, on November 21, 2006, Mr. Colson sent a revised non-binding letter of interest to Mr. Helwig.

 

On November 21 and 22, 2006, several discussions were held by and among representatives of each of Quanta, Credit Suisse, InfraSource and Citigroup regarding Quanta’s revised non-binding letter of interest.

 

On November 22, 2006, Mr. Colson sent Mr. Helwig a further revised non-binding letter of interest.

 

On November 22, 2006 and resuming again on November 27 and 28, 2006, several discussions were held by and among representatives of each of Quanta, Credit Suisse and Citigroup regarding Quanta’s revised non-binding letter of interest.

 

On November 28, 2006, Mr. Colson sent another non-binding letter of interest to Mr. Helwig, which consisted of a proposal for an all-stock merger transaction at a preliminary fixed exchange ratio (subject to re-evaluation by the parties during negotiations and diligence in the event that the preliminary ratio resulted in a premium outside certain parameters), post-merger board representation for InfraSource directors on the Quanta board and parameters for the transaction process, including mutual due diligence, negotiation of a mutually acceptable definitive agreement and board approval.

 

On December 1, 2006, during a regularly scheduled board meeting, the Quanta board of directors was updated on the status of discussions between Quanta and InfraSource regarding the proposed transaction, including the terms of the November 28 non-binding letter of interest sent to Mr. Helwig. The board of directors also discussed the financial impact of the proposed acquisition on Quanta, as well as the regulatory clearances that would be required to close the transaction. Also present at this meeting were Mr. Haddox, Mr. Kenneth W. Trawick, President-Telecommunications and Cable Television Division, Mr. Vincent A. Mercaldi, Associate General Counsel and Corporate Secretary and Ms. Pool.

 

On December 5, 2006, Quanta and InfraSource signed a mutual non-disclosure agreement providing that the companies and their representatives would maintain the confidentiality of evaluation material provided and discussed in connection with a possible transaction. On December 6, 2006, Messrs. Helwig and Montgomery, Mrs. Lofton, Messrs. Colson and Haddox, Ms. Pool, representatives of each of Akin Gump Strauss Hauer & Feld, LLP, Quanta’s outside legal counsel (Akin Gump), Ballard Spahr, Citigroup and Credit Suisse met in Chicago for an organizational meeting at which the due diligence process was discussed and a preliminary timeline developed. From December 5 until December 29, 2006, the parties exchanged due diligence lists and discussed matters with respect to due diligence and potential transaction timing.

 

On December 12, 2006, the InfraSource board of directors met in person in Phoenix, Arizona at a regularly scheduled meeting with members of InfraSource’s management to discuss, among other things, the due diligence process, key diligence items and valuation and premium analysis based on recent InfraSource and Quanta stock performance. Also present at the meeting were Mr. Montgomery, Mrs. Lofton and representatives of Citigroup (via telephone) and Ballard Spahr (via telephone). Representatives of Citigroup and Ballard Spahr discussed the non-binding letter of interest from Quanta, the financial terms of the proposed transaction and regulatory clearances related to the transaction.

 

On December 14, 2006, InfraSource opened to representatives of Quanta and its advisors an electronic data room. Due diligence by Quanta, including in-person sessions, continued through December 2006 at InfraSource’s offices in Media, Pennsylvania and Ballard Spahr’s offices in Philadelphia, Pennsylvania. The parties executed a separate non-disclosure agreement with respect to the dark fiber business of InfraSource on December 29, 2006.

 

On December 29, 2006, the InfraSource board met telephonically to discuss the status of discussions between Quanta and InfraSource. The board reviewed materials with representatives of Ballard Spahr regarding the board’s processes for considering an acquisition proposal and the duties of the directors related thereto.

 

On January 2, 2007, representatives of senior management of InfraSource, including Mr. Helwig, met with representatives of Quanta, including Mr. Colson, to provide management presentations regarding the InfraSource telecom business, including the dark fiber leasing business. Representatives of Credit Suisse were also in attendance at such management presentations. Quanta opened an electronic data room to InfraSource representatives and advisors on that date.

 

From January 3 through 10, 2007, representatives of InfraSource and its advisors performed in-person due diligence reviews at Quanta’s and Akin Gump’s offices in Houston, Texas.

 

On January 8, 2007, the InfraSource board of directors met telephonically with InfraSource’s management and representatives of Citigroup and Ballard Spahr to discuss the transaction status.

 

On January 9 and 10, 2007, senior management of InfraSource made management presentations to representatives of Quanta management with respect to the underground services and electrical infrastructure businesses of InfraSource. Representatives of Credit Suisse were also in attendance at such management presentations.

 

From January 3 through 10, 2007, Quanta discussed with its advisors and the Special Committee the contents of a draft merger agreement for the potential acquisition. On January 10, 2007, Quanta delivered a first draft of a merger agreement to InfraSource.

 

On January 15, 2007, the InfraSource board of directors met telephonically with InfraSource’s management and representatives of Citigroup and Ballard Spahr to discuss the proposed transaction with Quanta. Also present at this meeting were Mr. Montgomery and Mrs. Lofton. Mr. Helwig summarized recent relative stock performance of the companies. Mr. Helwig also discussed the potential benefits of the transaction to InfraSource and its stockholders, other strategic alternatives available to InfraSource and the potential risks of a proposed transaction with Quanta and the other strategic alternatives. Mr. Montgomery and Mrs. Lofton provided the board with an update on the status of the financial and legal due diligence. The board of directors also discussed the valuation and premium analysis prepared by Citigroup, regulatory clearances and merger agreement terms. Also on January 15, 2007, InfraSource representatives provided initial comments to the merger agreement draft to Quanta.

 

On January 15 and 16, 2007, representatives of InfraSource and Citigroup and the InfraSource financial due diligence advisors attended management presentations by Quanta’s senior management in Houston. Representatives of Credit Suisse were also in attendance. Such presentations were followed by discussions of budgets and financial information and continued due diligence review.

 

Also on January 16, 2007, the Quanta Special Committee met to discuss the status of the proposed acquisition of InfraSource. Also present at this meeting were Messrs. Haddox and Mercaldi and Ms. Pool, representatives of Credit Suisse, Akin Gump, and Abrams & Laster LLP, Quanta’s Delaware legal counsel (Abrams & Laster). Mr. Colson provided the Special Committee with an update on the status of the due diligence review and management’s recommendation to continue discussions with InfraSource. Ms. Pool provided the Special Committee with an update on the status of the draft merger agreement and legal due diligence. Following a question and answer period involving all aspects of the potential transaction, the Special Committee authorized management to continue to pursue a potential transaction, although such transaction, if any, would be subject to board review. Quanta and Credit Suisse executed an engagement letter formally engaging Credit Suisse as the exclusive financial advisor to Quanta with respect to the proposed acquisition of InfraSource.

 

On January 18, 2007, Mr. Helwig spoke with Mr. Colson to discuss an updated timeline for proceeding with a possible transaction.

 

Also on January 18, 2007, the InfraSource board of directors met telephonically with InfraSource’s management and representatives of Citigroup and Ballard Spahr. The board received a summary of the meetings with Quanta management on January 15 and 16, 2007, due diligence progress, updated timeline and the open items, including the potential financial terms of the transaction and the proposed terms in the draft of the merger agreement, including conditions to closing, termination rights and fees and human resource issues. Representatives of Citigroup discussed recent relative changes in the stock prices of the companies.

 

On January 19, 2007, Mr. Helwig again spoke with Mr. Colson to discuss specific transaction terms and open items under the draft merger agreement.

 

On January 22, 2007, Quanta provided an updated merger agreement draft to InfraSource. InfraSource entered into a revised engagement letter with Citigroup.

 

On January 23, 2007, representatives of InfraSource, Quanta and their respective legal representatives met telephonically to negotiate the draft merger agreement.

 

On January 24, 2007, Quanta and InfraSource management and their respective financial advisors participated in a conference call discussion of due diligence findings and updated financial information relating to the telecom and dark fiber leasing business.

 

On January 25, 2007, the InfraSource board of directors met telephonically with representatives of management and InfraSource’s advisors to review recent negotiations and strategies for transaction completion. On January 26, 2007, a revised draft of the merger agreement was provided by Quanta to InfraSource.

 

On January 29, 2007, the InfraSource board of directors met telephonically with InfraSource’s management and representatives of Citigroup and Ballard Spahr to discuss the open items under the merger agreement (including the financial terms, representations and warranties, covenants, and termination rights), due diligence findings and a preliminary communications plan being created for communication to employees, customers and vendors if a definitive transaction were to be announced.

 

On January 29, 2007, Quanta’s board of directors met during a regularly scheduled session. Also present at this meeting were Messrs. Colson, Haddox, Mercaldi and Ms. Pool and representatives of each of Akin Gump, Abrams & Laster, Credit Suisse and PricewaterhouseCoopers, Quanta’s independent registered public accounting firm. Abrams & Laster reviewed the fiduciary duties of the Quanta board of directors and Akin Gump reviewed the terms and conditions of the merger agreement under negotiation. Credit Suisse also presented to the board a preliminary financial analysis of the proposed transaction. Mr. Colson then discussed the various aspects of the proposed transaction, including its potential benefits and synergies, as well as the possible addition of InfraSource directors to the Quanta board. The board then discussed the process and related merger agreement provisions and reviewed potential assumed liabilities. The board of directors discussed with Quanta’s outside advisers and management the legal, strategic and financial issues related to the proposed acquisition of InfraSource and were advised that no proposal had been made on the financial terms, including the exchange ratio.

 

On January 30, 2007, representatives of Quanta and InfraSource and their respective legal advisors participated in a conference call to negotiate various provisions of the merger agreement, including the non-solicitation provisions, termination rights and fees, fiduciary duty provisions, rights of each party’s board of directors to change its recommendation to the stockholders regarding the proposed merger, continuation of director and officer insurance coverage for InfraSource’s directors and officers following the closing of the proposed merger, restrictions on interim operations between the time of execution and closing of the merger and human resource issues. Over the next two days the parties, Akin Gump, Abrams & Laster and Ballard Spahr participated in multiple conference calls to negotiate various aspects of the merger agreement.

 

On February 1, 2007, Quanta’s Special Committee met with Messrs. Colson, Haddox and Mercaldi, Mr. John R. Wilson, President-Electric Power and Gas Division for Quanta, Mr. Derrick Jensen, Vice President, Controller and Chief Accounting Officer for Quanta, and Ms. Pool, and representatives of each of Credit Suisse, Akin Gump and Abrams & Laster, to discuss various financial and legal issues related to the proposed transaction. Mr. Colson updated the Special Committee on various financial due diligence issues, and Ms. Pool updated the Committee on the status of the negotiations and open issues in the merger agreement.