-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QgmUDzHYjWPBTjYgRpwSUOxeAJfBZ4ybnvTpc+p6UFn+GgmZP+8KaFV33f7CHZwP wQp+Rqxnj+gIcl0pZLDmrw== 0000899243-00-000664.txt : 20000331 0000899243-00-000664.hdr.sgml : 20000331 ACCESSION NUMBER: 0000899243-00-000664 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENCOMPASS SERVICES CORP CENTRAL INDEX KEY: 0001039690 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION SPECIAL TRADE CONTRACTORS [1700] IRS NUMBER: 760535259 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13565 FILM NUMBER: 584941 BUSINESS ADDRESS: STREET 1: 8 E GREENWAY PLAZA STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 7138600100 MAIL ADDRESS: STREET 1: 8 E GREENWAY PLAZA STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77046 FORMER COMPANY: FORMER CONFORMED NAME: GROUP MAINTENANCE AMERICA CORP DATE OF NAME CHANGE: 19970723 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- Form 10-K [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 or [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-13565 Encompass Services Corporation (Exact name of registrant as specified in its charter) Texas 76-0535259 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3 Greenway Plaza, Suite 2000 77046 Houston, Texas (Zip Code) (Address of principal executive office) (713) 860-0100 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------- ----------------------- Common stock, par value $0.001 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] As of March 27, 2000, (i) there were 63,118,808 shares of common stock, par value $0.001 per share, of the registrant issued and outstanding and (ii) the aggregate market value of the common stock held by non-affiliates of the registrant (based on the closing price per share of the registrant's common stock reported on the New York Stock Exchange on that date) was $398,025,979. For purposes of the above statement only, all directors and executive officers of the registrant are assumed to be affiliates. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement relating to the registrant's 2000 Annual Meeting of Shareholders (to be filed within 120 days after the end of the fiscal year) are incorporated by reference into Part III of this report. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- PART I Item 1. Description of Business....................................... 1 Item 2. Properties.................................................... 9 Item 3. Legal Proceedings............................................. 10 Item 4. Submission of Matters to a Vote of Security Holders........... 10 Item 4A. Executive Officers............................................ 10 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................................... 13 Item 6. Selected Financial Data....................................... 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.... 24 Item 8. Financial Statements and Supplementary Data................... 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................... 56 PART III Item 10. Directors and Executive Officers of the Registrant............ 56 Item 11. Executive Compensation........................................ 56 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................... 56 Item 13. Certain Relationships and Related Transactions................ 56 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................................... 57
i CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, based on information currently available to management. Forward-looking statements can be identified by the use of the future tense or other forward-looking words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "should," "may," "will," "objective," "projection," "forecast," "management believes," "continue," "strategy," "position" or the negative of those terms or other variations of them or by comparable terminology. In particular, statements, express or implied, concerning future operating results or the ability to generate sales, income or cash flow are forward-looking statements. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under: . Item 1, Business . Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations . Item 7A, Quantitative and Qualitative Disclosures about Market Risk. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and shareholder value of the Company may differ materially from those expressed in these forward- looking statements. Many of the factors that will determine these results and values are beyond management's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future including, among others, . the ability to achieve synergies and revenue growth, . national, regional and local economic, competitive and regulatory conditions and developments, . technological developments, . capital market conditions, . inflation rates, . interest rates, . weather conditions, . the timing and success of business development efforts, and . other uncertainties, all of which are difficult to predict and many of which are beyond management's control. Shareholders are cautioned not to put undue reliance on any forward-looking statements. Shareholders should understand that the foregoing important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause results to differ materially from those expressed in such forward-looking statements. ii PART I Item 1. Description of Business. Encompass Services Corporation ("Encompass"), a Texas corporation incorporated in 1997, is the leading nationwide provider of facilities services to commercial, industrial and residential customers. Its operations are conducted through subsidiaries operating in approximately 250 locations throughout the United States. As used herein, the "Company" refers to Encompass and its subsidiaries. Merger With Building One Services Corporation In November 1999, Group Maintenance America Corp. ("GroupMAC"), the predecessor of Encompass, and Building One Services Corporation ("Building One") entered into an Agreement and Plan of Merger providing for the merger of Building One with and into GroupMAC (the "Merger"). The Merger was completed in February 2000 to form Encompass Services Corporation. As a result of the Merger, the combined company is approximately twice the size of each of GroupMAC and Building One and has the capability of providing mechanical, electrical and janitorial services, either alone or in combination with another service, in more locations than either constituent company could perform on its own. For additional information concerning the Merger, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 18 to the Consolidated Financial Statements of Encompass Services Corporation and Subsidiaries. Because the Merger occurred in February 2000, the financial statements included herein do not reflect the historical operations of Building One. Furthermore, because the Merger will be accounted for as a reverse acquisition of GroupMAC by Building One, financial statements for future periods will reflect the historical operations of Building One rather than GroupMAC. In connection with the Merger, Encompass issued to an affiliate of Apollo Management, L.P. approximately $256 million of 7.25% Convertible Preferred Stock in exchange for $150 million in cash and approximately $106 million aggregate principal amount of Building One convertible subordinated debentures. Based upon the current conversion price of $14.00 per share, the preferred stock is convertible into approximately 18.2 million shares of Encompass common stock, representing approximately 23% of the voting power of Encompass. Encompass used the cash proceeds from the issuance of the Convertible Preferred Stock to permit its shareholders to convert approximately 11.1 million shares of Encompass common stock into cash pursuant to the Merger. Other Developments in 1999 During 1999, the Company acquired 14 mechanical and electrical services companies with combined annual revenues of approximately $406 million. These acquisitions resulted in an increase in the portion of the Company's business derived from commercial and industrial customers as the Company focused its acquisition program on companies that could further the implementation of the Company's national accounts initiatives. The Company significantly expanded its electrical and communications business with the acquisition of five electrical service companies. With these acquisitions and the addition of the Building One operating companies, the Company comprises approximately 250 locations in 38 states and has $3.6 billion in pro forma 1999 revenues. The Company's expanded geographic coverage and service mix will allow it to pursue business opportunities that were not previously available and lessen its dependence on acquisitions to fulfill its business plan. The Company intends to selectively make additional acquisitions of businesses offering mechanical, electrical/communications and janitorial services within the commercial, industrial and residential markets. The Company's long term objective is to be able to offer each of these services in the 100 largest metropolitan areas in the United States. 1 SEGMENT FINANCIAL INFORMATION Information concerning the Company's principal business segments as of December 31, 1999 is set forth in Note 16 to the Consolidated Financial Statements. The following tables summarize (i) revenues, (ii) operating income and (iii) allocable assets of the business segments of the Company for the periods indicated (dollars in thousands):
Ten Months Year ended ended Year ended December 31, December 31, December 31, 1999 1998 1997 ------------------------------------ ------------------ Revenues Commercial/Industrial... $ 1,217,712 78.7% $472,451 62.0% $ 23,305 16.8% Residential............. 328,122 21.2 286,737 37.7 113,927 82.3 Other................... 1,957 0.1 2,353 0.3 1,247 0.9 ----------- ------ -------- ----- -------- ----- Total Revenues........ $ 1,547,791 100.0% $761,541 100.0% $138,479 100.0% =========== ====== ======== ===== ======== ===== Income From Operations Commercial/Industrial... $ 87,128 74.3% $ 33,890 55.4% $ 1,108 9.4% Residential............. 29,902 25.5 27,168 44.4 10,559 90.0 Other................... 254 0.2 98 0.2 71 0.6 ----------- ------ -------- ----- -------- ----- Segment Operating Earnings............... 117,284 100.0% 61,156 100.0% 11,738 100.0% ====== ===== ===== Merger and related charges (a)............ (3,725) -- -- Unallocated net corporate expenses (b).................... (9,575) (9,090) (11,516)(c) ----------- -------- -------- Income from Operations........... $ 103,984 $ 52,066 $ 222 =========== ======== ======== Assets Commercial/Industrial .. $ 888,744 83.7% $542,998 77.4% $ 65,566 34.0% Residential............. 124,374 11.7 123,775 17.7 96,237 50.0 Other................... 48,415 4.6 34,308 4.9 30,884 16.0 ----------- ------ -------- ----- -------- ----- Total Assets.......... $ 1,061,533 100.0% $701,081 100.0% $192,687 100.0% =========== ====== ======== ===== ======== =====
- -------- (a) Represents non-recurring, non-deductible merger and related charges associated with the Merger which was completed subsequent to year end. (See Note 18 to the Consolidated Financial Statements.) (b) Unallocated net corporate expenses primarily include (i) corporate overhead, (ii) corporate and operating company management bonuses, and (iii) savings from national purchase agreements relating to materials and property/casualty insurance. (c) Includes a $7.0 million non-recurring, non-cash compensation charge related to the reverse acquisition of Airtron, Inc. 2 COMMERCIAL/INDUSTRIAL GROUP Through its Commercial/Industrial Group, the Company provides mechanical and electrical contracting services to commercial/industrial customers. The following table shows the approximate percentages of the revenues of the Commercial/Industrial Group's revenue mix for each of the fiscal years ended December 31, 1999 and 1998:
Percentage of Revenues ------------- 1999 1998 ----- ------ Mechanical Maintenance, Repair and Replacement......................... 48.6% 51.4% New Installation............................................ 26.8 30.5 ----- ------ Total Mechanical.......................................... 75.4% 81.9% ===== ====== Electrical and Other Maintenance, Repair and Replacement......................... 17.4% 13.0% New Installation............................................ 7.2 5.1 ----- ------ Total Electrical and Other................................ 24.6% 18.1% ===== ====== Total Commercial/Industrial Group............................. 100.0% 100.00% ===== ======
Upon the consummation of the Merger with Building One, the Commercial/Industrial Group was reorganized into four groups--the Mechanical Group, the Electrical/Communications Group, the Industrial Group and the National Accounts Group. Services Provided Mechanical. The Company designs, installs, maintains, repairs and replaces the heating, ventilating and air conditioning ("HVAC"), control and monitoring and process piping systems in commercial and industrial facilities such as manufacturing and processing facilities, power generation facilities, hospitals and other critical care facilities, colleges and universities, hotels, commercial office buildings, retail stores, and restaurants, supermarkets, and convenience stores. The services provided include both maintenance, repair and replacement ("MRR") services and new installation services for products such as compressor-bearing HVAC equipment, boilers, chillers, central plants, process piping and control systems. The MRR work includes preventive maintenance (periodic checkups, cleaning and filter change-outs), emergency repairs and the replacement (in conjunction with the retrofitting or remodeling of a commercial building, or as a result of an emergency request) of HVAC systems and associated parts, plumbing fixtures, pipes, water feed and sewer lines, water heaters, softeners, filters and controls. The Commercial/Industrial Group also designs and installs mechanical, electrical and other systems on behalf of owners or general contractors in commercial buildings. Electrical/Communications. The Company installs, maintains and upgrades the electrical systems of commercial/industrial facilities, including process controls, lighting, power, lifesafety systems and energy management systems. The Company also designs, installs, upgrades, maintains and repairs low energy systems ("LES") including voice and data cabling, high speed data network infrastructure systems, fiber optics, video, security and sound. LES is the fastest growing segment of the electrical construction business. Additionally, through its information technology unit, Total Site SolutionsSM, the Company provides consulting services, turnkey design and installation work for various mission critical facilities such as telecommunications facilities, call centers, network control rooms, mainframe data centers, trading floors, laboratories and medical facilities, which must remain on line 100% of the time. Total Site SolutionsSM also provides broad-based service agreements that include provision and administration of bundled preventive maintenance and emergency response services for these facilities. 3 Customers The Company's commercial/industrial customers include general contractors, facility owners, facility managers, developers, utilities, energy service companies, property managers, engineers, consultants, and architects. The Company expects to perform an increasing amount of services for energy service companies seeking to bundle their service and commodity product offerings. The Company is seeking to expand the services it provides to building owners and operators through a national accounts marketing effort focusing on entities that are responsible for operating the mechanical and electrical systems of buildings located throughout the United States. The Company's customers include Microsoft, Lincoln Properties, Pep Boys, Blockbuster and MCI Worldcom. No customer accounts for more than 2% of the Commercial/Industrial Group's revenues. RESIDENTIAL GROUP Through its Residential Group, the Company provides mechanical and other contracting services to homebuilders and homeowners from 38 locations. Although most of the Group's locations perform MRR services, five of the operating companies emphasize new construction work and represent 69% of the Group's revenues. The following table shows the revenue mix of the Residential Group for each of the fiscal years ended December 31, 1999 and 1998:
Percentage of Revenues ------------ 1999 1998 ----- ----- Maintenance, Repair and Replacement.......................... 31.0% 33.1% New Installation............................................. 69.0% 66.9% ----- ----- Total Residential Group...................................... 100.0% 100.0% ===== =====
Services The Residential Group installs HVAC and plumbing systems in homes, apartment and condominium complexes and small commercial buildings. It also provides maintenance services for these systems, such as inspections, cleaning, repair and replacement of HVAC systems and associated parts; repair and replacement of bathroom fixtures, water filters and water heaters; and cleaning, repair and replacement of pipes, sewer lines and residential sanitary systems. In connection with its maintenance, repair and replacement services, the Company sells a wide range of HVAC, plumbing and other equipment, including complete HVAC systems and a variety of parts and components. Customers The Company markets its residential new installation contracting services to local, regional and national homebuilders, including U.S. Home Corporation, Pulte Home Corporation, Centex Corporation, and Beazer Homes Corporation. The Company targets its growth in the residential new installation market in those areas of the United States that have growth rates above the national average. Through strong existing relationships with major national homebuilders, the Company is marketing its capabilities to provide consistent, reliable installation services on a regional basis. No customer accounts for more than 3% of the Residential Group's revenues. The Company's customers for residential maintenance, repair and replacement services consist primarily of homeowners. The Company advertises its maintenance and repair services in the yellow pages, on billboards, on television and radio, and through direct mail. It also relies upon unique service offerings to attract and retain customers. 4 JANITORIAL GROUP The Janitorial Group, which was acquired by the Company in February 2000 in connection with the Building One merger, offers janitorial and maintenance management services in 50 states. The Company believes that the Janitorial Group is the largest provider of janitorial and maintenance management services to the retail sector in the United States based on revenues. Services The services provided by the Janitorial Group include: .floor and carpet cleaning and maintenance; .floor stripping and refinishing; .chemical supply and equipment management; .window, wall and structural cleaning and maintenance; .restroom and other area sanitation; .duct cleaning; .furniture polishing; and .exterior window, wall, sidewalk, and parking lot cleaning and maintenance. If requested by a customer, the Janitorial Group selects, manages and integrates services provided by its operating companies and third parties to customers and often administers the back office functions for the third party to ensure the quality of the service performed. The Janitorial Group also relieves its customers from the burden of finding and supervising the contractor or in-house labor to provide service. Customers The customers of the Janitorial Group include retail chain stores, grocery stores, office buildings, industrial plants, banks, department stores, warehouses, educational and health facilities, restaurants, and airport terminals throughout the United States. The Company often provides services to a customer under a contractual arrangement on a regional or national basis. The Janitorial Group's customers include MCI Worldcom, Walmart, Safeway, UPS, Trammell Crow and CB Richard Ellis. No single customer accounts for more than 8% of the Janitorial Group's revenues. 5 OPERATIONS In providing maintenance, repair and replacement services, the Company uses specialized systems to log service orders, schedule service calls, identify and ready the necessary parts and equipment, track the work order, provide information for communication with the service technicians and customers, and prepare accurate invoices. Service histories and specific product information are generally accessible to the dispatcher in a database that may be searched by customer name or address. Maintenance, repair and replacement calls are initiated when a customer requests emergency repair service or the Company calls the client to schedule periodic service agreement maintenance. Service technicians are scheduled for the call or routed to the customer's business or residence by the dispatcher via a scheduling board or daily work sheet (for non-emergency service) or through cellular telephone, pager or radio. Service personnel work out of the Company's service vehicles, which carry an inventory of equipment, tools, parts and supplies needed to complete the typical variety of jobs. The technician assigned to a service call travels to the business or residence, interviews the customer, diagnoses the problem, presents the solution, obtains agreement from the customer and performs the work. A portion of the Company's service work is done to satisfy manufacturers' equipment warranties. For such services, the Company is generally compensated by the manufacturer responsible for the defective equipment under warranty. The Company attempts to enter into service contracts whereby the customer pays an annual or semiannual fee for periodic diagnostic and preventive services. The customers under service contracts receive priority service and specific discounts from standard prices for repair and replacement services. Commercial new installation work begins with a design request from the owner or general contractor. Initial meetings with the parties allow the contractor to prepare preliminary and then more detailed design specifications, engineering drawings and cost estimates. Once a project is awarded, it is conducted in pre-agreed phases and progress billings are rendered to the owner for payment, less a retainage. Actual field work (ordering of equipment and materials, fabrication or assembly of certain components, delivery of materials to the job sites, scheduling of work crews with the necessary skills, and inspection and quality control) is coordinated in these same phases. The Company has established a policy to review and approve any new installation project by an operating unit that exceeds 5% of the projected annual revenue of that unit. The Company will generally perform work contracted by it using its personnel who work from one of the Commercial/Industrial Group's 68 locations. However, the Company may subcontract with other contractors to perform work in locations where the Company does not have a facility or where the Company's backlog requires additional resources. Residential service technicians may carry a Customer Assurance Pricing manual developed by the Company which specifies the labor, equipment and parts required to fulfill certain tasks and the associated flat rate prices for those tasks. This manual is custom generated for each company from a database containing over 15,000 different repair operations and is regularly updated for price changes. This "flat rate pricing" strategy allows the Company to monitor margins and labor productivity at the point of sale, while increasing the level of customer satisfaction by demonstrating greater fairness and objectivity in pricing. Payment for maintenance, repair and replacement services not covered by a warranty or service contract is generally requested in cash, check or credit card at the service location. The Janitorial Group assigns regional contract managers to each customer. The contract managers determine whether to self perform work or utilize the group's existing network of 425 cleaning companies to subcontract duties. Each of the group's three major divisions (retail, commercial and industrial) use the subcontractor network whenever possible because of the proven benefits (reliability, quality consistency and customer preference) of using the local workforce. The Janitorial Group's Quality Measurement System measures the quality of cleaning and customer support efforts. In addition, the group runs a 24/7 call center to handle any emergency cleaning requests and has a national computer network to respond quickly and appropriately to any customer requests. Sources of Supply The raw materials and components used by the Company include HVAC system components, ductwork, steel sheet metal and copper tubing and piping. These raw materials and components are generally available from 6 a variety of domestic or foreign suppliers at competitive prices. Delivery times are typically short for most raw materials and standard components, but during periods of peak demand, may extend to a month or more. Chillers for large units typically have the longest delivery time and generally have lead times of up to three to four months. The major components of HVAC systems are condensing units and chillers that are manufactured primarily by Trane Air Conditioning Company, Carrier Corporation, and York Heating and Air Conditioning Company. The major suppliers of control systems are Honeywell Inc., Johnson Controls, Inc. and Andover Control Corporation. The Company is not materially dependent on any of these outside sources. Employees The Company currently has approximately 30,000 full and part-time employees. In the course of performing installation work, the Company may utilize the services of subcontractors. Approximately 3,800 employees (in 20 of the Company's subsidiaries) are members of unions and work under collective bargaining agreements. The collective bargaining agreements have expiration dates between April 2000 and June, 2007. The Company believes that its relationship with its employees is generally satisfactory. Seasonality The Company's mechanical and electrical services business tends to be affected adversely by moderate weather patterns. Comparatively warm winters and cool summers reduce the demand for its maintenance, repair and replacement services. Additionally, its new installation business is affected adversely by extremely cold weather and large amounts of rain. As a result, the Company expects that its revenues and operating results will be lower in the first and, to a lesser degree, fourth calendar quarters. Prolonged weather conditions or seasonal variations may cause unpredictable fluctuations in operating results. Backlog At December 31, 1999 and 1998, the Company's backlog of work was approximately $589.7 million and $420.7 million, respectively. Of the December 31, 1999 backlog, approximately $543.6 million related to the Company's commercial/industrial operations and the remaining $46.1 million related to the Company's residential operations. The Company expects that during 2000 it will complete a substantial portion of the backlog as of December 31, 1999. Competition The facility services industry is highly competitive. The Company believes that the principal competitive factors in the facility services industry are (i) timeliness, reliability and quality of services provided, (ii) range of services offered, (iii) market share and visibility and (iv) price. The Company believes its strategy of creating a leading national provider of comprehensive services directly addresses these factors. The ability of the Company to employ, train and retain highly motivated service technicians to provide quality services should be enhanced by its ability to utilize professionally managed recruiting and training programs. In addition, the Company expects to offer compensation, health and savings benefits that are more comprehensive than most offered in the industry. Competitive pricing is possible through purchasing economies and other cost saving opportunities that exist across each of the service lines offered and from productivity improvements. Most of the Company's competitors are small, owner-operated companies that typically operate in a single market. Certain of these smaller competitors may have lower overhead cost structures and may be able to provide their services at lower rates. Moreover, many homeowners have traditionally relied on individual persons or small repair service firms with whom they have long- established relationships for a variety of home repairs. There are currently a limited number of public companies focused on providing services in some of the same service lines provided by the Company. In addition, there are a number of national retail chains that sell a variety of plumbing fixtures and equipment and HVAC equipment for residential use and offer, either directly or through various subcontractors, installation, warranty and repair services. Other companies or trade groups engage in franchising their names and marketing programs in some service lines. In addition, HVAC equipment manufacturers, the unregulated business segments of regulated gas and electric utilities and deregulated utilities are entering into various 7 commercial/industrial or residential service areas. Certain of the Company's competitors and potential competitors have greater financial resources than the Company to finance acquisition and development opportunities, to pay higher prices for the same opportunities or to develop and support their own commercial/industrial or residential service operations if they decide to enter the field. Governmental Regulation Many aspects of the Company's operations are subject to various federal, state and local laws and regulations, including, among others, (1) permitting and licensing requirements applicable to contractors in their respective trades, (2) building, mechanical and electrical codes and zoning ordinances, (3) laws and regulations relating to consumer protection, including laws and regulations governing service contracts for residential services, and (4) laws and regulations relating to worker safety and protection of human health. In Florida, warranties provided for in the Company's service agreements subject the Company and such agreements to some aspects of that state's insurance laws and regulations. Specifically, the Company is required to maintain funds on deposit with the Florida Office of Insurance Commissioner and Treasurer, the amount of which is not material to the Company's business. The Company is in compliance with these deposit requirements. The Company believes it has all required permits and licenses to conduct its operations and is in substantial compliance with applicable regulatory requirements relating to its operations. Failure of the Company to comply with the applicable regulations could result in substantial fines or revocation of the Company's operating permits. A large number of state and local regulations governing the residential services trades require various permits and licenses to be held by individuals. In some cases, a required permit or license held by a single individual may be sufficient to authorize specified activities for all the Company's service technicians who work in the geographic area covered by the permit or licenses. Environmental Regulation The Company's operations are subject to numerous federal, state and local environmental laws and regulations, including those governing the remediation of contaminated soil and groundwater, vehicle emissions and the use and handling of refrigerants. These laws and regulations are administered by the United States Environmental Protection Agency, the Coast Guard, the Department of Transportation and various state and local governmental agencies. The technical requirements of these laws and regulations are becoming increasingly complex and stringent, and meeting these requirements can be expensive. The nature of the Company's operations and its ownership or operation of property expose it to the risk of claims with respect to such matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. Federal and state environmental laws include statutes intended to allocate the cost of remedying contamination among specifically identified parties. For example, the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund") can impose strict, joint and several liability on past and present owners or operators of facilities at, from or to which a release of hazardous substances has occurred, on parties who generated hazardous substances that were released at such facilities and on parties who arranged for the transportation of hazardous substances to such facilities. A majority of states have adopted "Superfund" statutes comparable to, and in some cases more stringent than, CERCLA. If the Company were to be found to be a responsible party under CERCLA or a similar state statute, the Company could be held liable for all investigative and remedial costs associated with addressing such contamination, even though the releases were caused by a prior owner or operator or third party. In addition, claims alleging personal injury or property damage may be brought against the Company as a result of alleged exposure to hazardous substances resulting from the Company's operations. Prior to entering into the agreements relating to the acquisition of businesses, the Company evaluated the properties owned or leased by those businesses and in some cases engaged an independent environmental consulting firm to conduct or review assessments of environmental conditions at certain of those properties. No material environmental problems were discovered in these reviews, and the Company is not otherwise aware of 8 any actual or potential environmental liabilities that would be material to the Company. There can be no assurance that all such liabilities have been identified, that such liabilities will not occur in the future, that a party could not assert a material claim against the Company with respect to such liabilities, or that the Company would be required or able to answer for such claim. The Company's operations are subject to the Clean Air Act, Title VI of which governs air emissions and imposes specific requirements on the use and handling of substances known or suspected to cause or contribute significantly to harmful effects on the stratospherical ozone layer, such as chlorofluorocarbons and certain other refrigerants ("CFCs"). Clean Air Act regulations require the certification of service technicians involved in the service or repair of systems, equipment and appliances containing these refrigerants and also regulate the containment and recycling of these refrigerants. These requirements have increased the Company's training expenses and expenditures for containment and recycling equipment. The Clean Air Act is intended ultimately to eliminate the use of CFCs in the United States and require alternative refrigerants to be used in replacement HVAC systems. The implementation of the Clean Air Act restrictions has also increased the cost of CFCs in recent years and is expected to continue to increase such costs in the future. As a result, the number of conversions of existing HVAC systems that use CFCs to systems using alternative refrigerants is expected to increase. The Company's operations in certain geographic regions are subject to laws that will, over the next few years, require specified percentages of vehicles in large vehicle fleets to use "alternative" fuels, such as compressed natural gas or propane, and meet reduced emissions standards. The Company does not anticipate that the cost of fleet conversion that may be required under current laws will be material. Future costs of compliance with these laws will be dependent upon the number of vehicles purchased in the future for use in the covered geographic regions, as well as the number and size of future business acquisitions by the Company in these regions. The Company cannot determine to what extent its future operations and earnings may be affected by new regulations or changes in existing regulations relating to vehicle emissions. Capital expenditures related to environmental matters during the fiscal year ended December 31, 1999, were not material. The Company does not currently anticipate any material adverse effect on its business or consolidated financial position as a result of future compliance with existing environmental laws and regulations controlling the discharge of materials into the environment. Future events, however, such as changes in existing laws and regulations or their interpretation, more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws and regulations may require additional expenditures by the Company which may be material. Item 2. Properties. The Company's executive offices are located in leased office space at 3 Greenway Plaza, Suite 2000, Houston, Texas 77046. The Company's vehicle fleet is estimated to be approximately 9,500 owned or leased service trucks, vans and support vehicles. It believes these vehicles generally are well-maintained, ordinary wear and tear excepted, and adequate for the Company's current operations. The Company conducts its business from approximately 250 facilities, substantially all of which are leased under agreements with remaining terms up to 11 years from the date hereof on terms the Company believes to be commercially reasonable. A majority of the Company's facilities are leased from certain former shareholders (or entities controlled by certain former shareholders) of its subsidiaries. The provisions of the leases are on terms the Company believes to be at least as favorable to the Company as could have been negotiated by the Company with unaffiliated third parties. The Company believes the owned and leased facilities are adequate to serve its current level of operations. 9 The Company believes that it has generally satisfactory title to the property owned by it, subject to the liens for current taxes, liens incident to minor encumbrances and easements and restrictions that do not materially detract from the value of such property or the interests therein or the use of such property in its business. Additionally, the inventory and accounts receivable of the Company and the capital stock of its subsidiaries are subject to a lien under its credit facility. Item 3. Legal Proceedings. The Company is a party to various legal proceedings. It is not possible to predict the outcome of these matters. However, in the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's financial condition or results of operations. Item 4. Submission of Matters to a Vote of Security Holders. The Company did not submit any matter to a vote of its security holders during the fourth quarter of 1999. Item 4A. Executive Officers. The following table sets forth certain information concerning the executive officers of the Company as of March 1, 2000:
Name Age Position ---- --- -------- J. Patrick Millinor, Jr..................... 54 Chairman of the Board; Director Joseph M. Ivey.......... 41 President and Chief Executive Officer; Director Donald L. Luke.......... 63 Executive Vice President and Chief Operating Officer; Director Chester J. Jachimiec.... 45 Senior Vice President, Corporate Development and Planning Darren B. Miller........ 40 Senior Vice President and Chief Financial Officer Randolph W. Bryant...... 49 Vice President, General Counsel and Secretary Jeanne Buchanan......... 47 Vice President, Corporate Communications Daniel W. Kipp.......... 40 Vice President, Treasurer and Chief Information Officer Keith Kirk.............. 40 Vice President, Purchasing Steven C. Ronilo........ 50 Vice President, Human Resources William P. Love, Jr..... 40 President, Electrical/Communications Group Patrick L. McMahon...... 51 President, Industrial Group Alfred R. Roach, Jr..... 55 President, Mechanical Group Thomas P. Rosato........ 48 President, National Accounts Michael Sullivan........ 52 President, Janitorial Group Robert Tyler............ 50 President, Residential Group
J. Patrick Millinor, Jr. became Chairman of the Board of the Company in February 2000. He previously served as Chief Executive Officer of the Company from April 1997 and also served as President of the Company and its predecessor from October 1996 to August 1997. He has also been a director of the Company and its predecessor since October 1996. From September 1994 to October 1996, Mr. Millinor worked directly for Gordon Cain, a major stockholder in the Company, assisting in the formation and management of Agennix Incorporated and Lexicon Genetics, two biotechnology companies. He currently serves as a director of Agennix Incorporated, General Roofing Services, Inc. and Haelan Health(R) Corporation. Joseph M. Ivey became President and Chief Executive Officer and a director of the Company in February 2000. He previously served as the president and chief executive officer of Building One from February 1999 to February 2000. He also served as a director of Building One from October 1998 to February 2000. From September 1998 to February 1999, Mr. Ivey served as the president of the Building One mechanical group. Prior to joining Building One, Mr. Ivey served as the chairman and chief executive officer of Ivey Mechanical Company, Inc., a mechanical services company that Building One acquired in September 1998. Mr. Ivey 10 also serves as a director of 1st M&F Corp. Mr. Ivey is a graduate of, and serves as a trustee of Freed-Hardeman University. Donald L. Luke became Executive Vice President and Chief Operating Officer of the Company in February 2000. He previously served as President and Chief Operating Officer of the Company since August 1997. He has also served as a director of the Company since that date. From November 1996 to July 1997, he served as Chairman of Arriva Air International, Inc. a start-up commercial air cargo business, and a partner in McFarland Grossman Capital Ventures, L.C., a consolidator of fastener distribution companies. From September 1996 to August 1997, he served as the Chief Executive Officer of CTW, Inc. a privately held acquisitions and management company, and a consultant to Batteries Batteries, Inc., a consolidator of specialty battery distribution companies which completed its initial public offering in April 1996. From 1995 to September 1996, he served as President, Chief Executive Officer and Director of Batteries Batteries, Inc. Previously, Mr. Luke served as Chief Operating Officer and a director of ChemLawn Services Corporation. Chester J. Jachimiec became Senior Vice President--Corporate Development and Planning of the Company in February 2000. From October 1996 through February 2000, he served as Executive Vice President--Acquisitions of the Company and its predecessor. From February 1994 to October 1996, Mr. Jachimiec served as the Director of Acquisitions & Investments for Tenneco Energy. From 1990 to 1994, he was an investor in or consultant to various private ventures engaged in natural gas gathering, processing and exploration as well as computer software development. Prior to 1990, Mr. Jachimiec practiced securities law and public accounting with several professional firms. Darren B. Miller became Senior Vice President of the Company in February 2000. From July 1998 to February 2000, he served as Executive Vice President of the Company. He has also served as Chief Financial Officer of the Company and its predecessor since October 1996. He was also a Senior Vice President from October 1996 until July 1998. From 1989 to 1996, Mr. Miller served in several capacities at Allwaste, Inc., an industrial service company, including Vice President--Treasurer and Controller from 1995 to 1996. Prior to 1989, he was employed in the audit practice of Arthur Andersen LLP. Randolph W. Bryant became Vice President, General Counsel and Secretary of the Company in February 2000. From April 1997 until February 2000 he served as the Company's Senior Vice President, General Counsel and Secretary. From December 1996 to April 1997, Mr. Bryant served as Associate General Counsel of El Paso Natural Gas Company. From 1984 to 1996, he was an attorney with Tenneco Inc. and Tenneco Energy Inc., last serving as Associate General Counsel. Jeanne Buchanan became Vice President, Corporate Communications, of the Company in January 2000. Prior to joining the Company, she was Vice President, Corporate Communications, of PennzEnergy Company from January 1999 until October 1999. She previously served as Vice President, Investor Relations, of United Meridian Corporation from 1993 until January 1999. Daniel W. Kipp became Vice President, Treasurer and Chief Information Officer in February 2000. He previously served as Senior Vice President of the Company since July 1998 and its Corporate Controller since February 1997. He also served as a Vice President of the Company from February 1997 through July 1998. From February 1994 until February 1997, Mr. Kipp was a sales executive with American Sterling, a provider of hazard insurance outsourcing services to the mortgage banking industry, and from July 1990 until February 1994 he was Vice President and Controller of Allwaste Recycling, Inc., a glass recycler and powdered glass processor. Prior to July 1990, he was employed in the audit practice of Arthur Andersen LLP. Keith Kirk became Vice President, Purchasing, in February 2000. He previously served as the Company's Vice President, Supplier Relations, from October 1998 to February 2000 and as Director, Supplier Relations, from October 1997 to October 1998. Prior to joining the Company, Mr. Kirk was Director, Supply Management, with Bristol Compressors, an equipment manufacturer, from 1995 to October 1997. From 1989 until 1995, he held several positions with Lennox Industries, Inc., an HVAC equipment manufacturer, involving the purchase of materials and supplies. 11 Steven C. Ronilo became Vice President, Human Resources, of the Company in February 2000. He previously served the Company as its Senior Vice President, Human Resources, from April 1999 until February 2000. Mr. Ronilo was employed by Amerra Health Services, Inc., a national health care provider with 384 facilities in 22 states, as Vice President of Human Resources from October 1997 until joining the Company in April 1999. From March 1990 until October 1997, he served as Senior Vice President of Human Resources and Education for Regency Health Services, Inc., a California based company with 168 facilities in six states. Prior to March 1990, Mr. Ronilo was director of labor relations and employee relations for several large manufacturing firms and the nation's largest long-term care company with 116,000 employees. William P. Love, Jr. became President, Electrical/Communications Group, of the Company in February 2000. Before joining the Company in February 2000, he served as the president of Building One's mechanical and electrical group from March 1998. From September 1980 to March 1998, Mr. Love served as the president and chief executive officer of SKC Electric, Inc., an electrical installation and maintenance services company that Mr. Love founded and that became a wholly-owned subsidiary of Building One in March 1998. He previously served as a director of Building One from March 1998 until February 2000. Patrick McMahon became President, Industrial Group, of the Company in February 2000. He was previously Executive Vice President and Chief Operating Officer of the Industrial Business Unit of Building One's Mechanical and Electrical Group since July 1999. Previously, Mr. McMahon was a management consultant with respect to outsourcing maintenance operations from October 1998 to July 1999 and served as President and Chief Operating Officer of Professional Services Group, a subsidiary of Air & Water Technologies, between May 1995 and October 1998. From July 1994 to March 1995, he served as Vice President of National Sales of International Technology, Inc., and from May 1971 to June 1994 Mr. McMahon served in various capacities at Brown & Root including Vice President of Business Development and Vice President of Operations and Engineering. Thomas P. Rosato became President, National Accounts, of the Company in February 2000. Prior to assuming that position, he was President of Total Site Solutions, a division of the Company performing mission critical services, and was also responsible for developing the national accounts business of the Company. He had previously served as president of Commercial Air, Power & Cable, Inc., a subsidiary of the Company, for more than five years. Mr. Rosato was a founder of Commercial Air and sold it to the Company in 1998. Michael Sullivan became President, Janitorial Group, of the Company in February 2000. He was previously Chairman of the Building One Service Solutions Group since November 1998. From 1980 to 1998, Mr. Sullivan served as President and Chief Executive Officer of Sullivan Service Company, a contract management firm that Mr. Sullivan founded and that has been a wholly-owned subsidiary of Building One since Building One acquired it on April 27, 1998 from United Service Solutions. In 1980, Mr. Sullivan founded SPC Contract Management, which specializes in outsourcing cleaning services for the specialty retailer, and was acquired by Building One on April 27, 1998 from United Service Solutions. From 1975 to 1980 he served as the President of Coastal Building Maintenance, a contract cleaning company. Alfred R. Roach, Jr. became President, Mechanical Group of the Company in February 2000. He previously served as Executive Vice President of the Company's Commercial/Industrial Group since January 1998 and Executive Vice President--Marketing, Sales and Product Support from August 1997 until January 1998. From 1989 to July 1997, Mr. Roach was a partner in Callahan Roach & Associates, which provided management training and consulting services to HVAC contractors. From 1986 to 1989, he served as President and General Counsel of Service America Corporation, an HVAC franchise company. From 1970 to 1986, Mr. Roach engaged in the private practice of law. Robert Tyler has become President, Residential Group of the Company in February 2000. He previously served as Senior Vice President of the Company's Residential Group since June 1998. From February 1994 until June 1998, he was Vice President, Sales, for Amana Heating and Air Conditioning, a manufacturer of HVAC equipment. He previously served as National Sales Manager for Friedrich Air Conditioning, a manufacturer of HVAC equipment, from January 1990 until February 1994. 12 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Common Stock of the Company is listed for trading on the New York Stock Exchange (the "NYSE") under the symbol "ESR." As of March 27, 2000, there were 63,118,808 shares of Common Stock outstanding, held by approximately 2,240 shareholders of record. The number of record holders does not necessarily bear any relationship to the number of beneficial owners of the Common Stock. Sales Prices of Common Stock The following table sets forth the range of high and low sales prices for the Common Stock on the NYSE (as reported by National Quotation Bureau, LLC) for the periods indicated:
High Low -------- -------- Year ended December 31, 1998 1st quarter................................................... $17.125 $14 2nd quarter................................................... 19.625 15.50 3rd quarter................................................... 20.625 11.25 4th quarter................................................... 14.1875 10.3125 Year ended December 31, 1999 1st quarter................................................... $15.4375 $ 9.875 2nd quarter................................................... 14.4375 10.75 3rd quarter................................................... 14.4375 9.75 4th quarter................................................... 12.25 7
Dividends Under applicable corporate law, the Company may pay dividends out of surplus (as defined under the Texas Business Corporation Act). At December 31, 1999, the Company had surplus of approximately $426.0 million for the payment of dividends. The Company has not paid a dividend on the Common Stock since its incorporation and does not anticipate paying any dividends on the Common Stock in the foreseeable future because it intends to retain any earnings to finance the expansion of its business, to repay indebtedness and for general corporate purposes. Under the terms of the Company's 7.25% Convertible Preferred Stock, the holders of the Convertible Preferred Stock are entitled to receive in the aggregate dividends of approximately $18.6 million per year, payable quarterly. However, the Company has the option, until March 2003, of deferring the payment of dividends on the Convertible Preferred Stock without any adverse consequences other than a compounding of the dividends payable in the future. The Company has elected to defer the payment of the dividend that would otherwise be payable on March 31, 2000. Any payment of future dividends will be at the discretion of the Board of Directors and will depend upon, among other things, the Company's earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends and other relevant factors. Additionally, the Company's revolving credit facility prohibits the payment of dividends without the consent of the lenders, the Company's indenture relating to the 10 1/2% Senior Subordinated Notes due 2009 assumed in connection with the Merger (the "10 1/2% Notes") places restrictions on the ability of the Company to pay dividends other than dividends on its Convertible Preferred Stock, and the holders of the Convertible Preferred Stock must approve payment of dividends on the Common Stock in excess of five percent of the value of the Common Stock during any twelve month period. For additional information concerning the Company's revolving credit facility and the 10 1/2% Notes, see Note 7 and Note 18, respectively, to the Consolidated Financial Statements included under Item 8 of this Annual Report. 13 Item 6. Selected Financial Data. Our first acquisition was that of Airtron. For accounting purposes, this transaction was accounted for as a reverse acquisition, as if Airtron acquired Encompass, because the former shareholders of Airtron owned a majority of our common stock upon consummation of the acquisition. As such, the Selected Income Statement and Balance Sheet data set forth below as of and for the two- year period ended February 28, 1997 have been derived from the audited financial statements of Airtron. The financial statements of Encompass and its subsidiaries, other than Airtron, are included in the financial statements from their respective dates of acquisition. The selected financial data presented below should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Item 8, "Financial Statements and Supplementary Data," included elsewhere herein (in thousands, except per share data):
Ten Months Fiscal Year Ended Year Ended Year Ended Ended February 28 or December 31, December 31, December 31, 29,(b) ------------ ------------ ------------ ------------------- 1999(a) 1998(a) 1997(a) 1997 1996 ------------ ------------ ------------ --------- --------- INCOME STATEMENT DATA: Revenues................ $1,547,791 $761,541 $138,479 $ 81,880 $ 73,765 Gross Profit............ 318,728 176,145 36,717 23,374 21,091 Selling, General and Administrative Expenses............... 198,417 118,119 35,862(c) 19,811 17,615 Merger and Related Charges(d)............. 3,725 -- -- -- -- Goodwill Amortization(e)........ 12,602 5,960 633 -- -- ---------- -------- -------- --------- --------- Income from Operations.. 103,984 52,066 222 3,563 3,476 Interest Income (Expense), Net......... (28,727) (6,188) (1,144) 89 68 Other Income, Net....... 782 377 112 256 246 ---------- -------- -------- --------- --------- Income (Loss) Before Income Tax Provision... 76,039 46,255 (810) 3,908 3,790 Income Tax Provision.... 34,483 20,326 2,832 1,572 1,651 ---------- -------- -------- --------- --------- Net Income (Loss)....... $ 41,556 $ 25,929 $ (3,642) $ 2,336 $ 2,139 ========== ======== ======== ========= ========= Net Income (Loss) Per Share: Basic................. $ 1.12 $ 0.94 $ (0.34) ========== ======== ======== Diluted............... $ 1.11 $ 0.93 $ (0.34) ========== ======== ======== Weighted Average Shares Outstanding: Basic................. 37,176 27,544 10,800 ========== ======== ======== Diluted............... 37,496 27,948 10,800 ========== ======== ======== December 31, February 28 or 29, -------------------------------------- ------------------- 1999 1998 1997 1997 1996 ------------ ------------ ------------ --------- --------- BALANCE SHEET DATA: Cash and Cash Equivalents............ $ 3,452 $ 2,371 $ 25,681 $ 4,339 $ 1,774 Working Capital......... 201,353 86,441 40,478 6,337 3,285 Total Assets............ 1,061,533 701,081 192,687 27,153 28,282 Total Debt.............. 384,648 223,959 2,938 1,290 -- Shareholders' Equity.... 425,970 315,929 136,653 5,991 6,373
- -------- (a) The operations of the acquired businesses (other than Airtron) are included in the financial data from the effective date of their respective acquisition. (b) Concurrent with the initial public offering of Encompass' common stock (the "IPO") the Company changed its fiscal year end from February 28 to December 31. (c) Includes $7.0 million of non-recurring, non-cash compensation expenses related to the reverse acquisition of Encompass during the ten months ended December 31, 1997. (d) Represents non-recurring, non-deductible merger and related costs associated with the merger with Building One Services Corp. that was completed subsequent to year end. See Note 18 to the Consolidated Financial Statements for further discussion. (e) Consists of amortization recorded, as a result of the acquisition of acquired businesses, over a 40-year period and computed on the basis described in the notes to consolidated financial statements. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Encompass Services Corporation ("Encompass"), formerly Group Maintenance America Corp. ("GroupMAC"or the "Company") was incorporated to build a national company providing mechanical and electrical services in the commercial, industrial and residential markets. The following review of the Company's financial condition and results of operations should be read in connection with the consolidated financial statements and related notes presented in Item 8. Merger With Building One Services Corporation On February 22, 2000, the shareholders of both GroupMAC and Building One Services Corporation ("Building One") approved a merger of the two companies (the "Merger"). Under the terms of the Merger, each outstanding share of Building One common stock was converted into 1.25 shares of GroupMAC common stock. In addition, approximately 11,052,000 shares of GroupMAC common stock were converted into cash at a rate of $13.50 per share pursuant to a cash election right available to GroupMAC shareholders. In connection with the closing of the Merger, GroupMAC amended its articles of incorporation to change the Company's name to Encompass Services Corporation. Concurrent with the closing of the Merger, an affiliate of Apollo Management, L.P. exchanged $106 million of Building One convertible junior subordinated debentures and $150 million of cash for approximately $256 million of GroupMAC convertible preferred stock. The preferred stock will mature in 2012, will bear a dividend yield coupon rate of 7.25% and will be convertible into shares of GroupMAC common stock at a conversion price of $14 per common share. The proceeds from the issuance of the convertible preferred stock were used to fund the cash election feature of the Merger. On February 22, 2000, GroupMAC entered into a new credit agreement to provide a total of $800 million in financing. The proceeds of this new credit agreement were used to refinance the existing revolving credit facilities of GroupMAC and Building One, as well as GroupMAC's senior subordinated notes. In addition, GroupMAC assumed the 10 1/2% Senior Subordinated Notes due 2009 of Building One. GroupMAC was the surviving legal entity in the Merger. However, for accounting purposes, Building One is deemed to be the acquiror and, accordingly, the Merger will be accounted for as a "reverse acquisition." Under this method of accounting, Encompass' historical results for periods prior to the Merger will be the same as Building One's historical results. General The Company has historically derived revenues from providing maintenance, repair and replacement and new installation services for mechanical, electrical and other systems to commercial/industrial and residential customers. Revenues for 1999 consisted of the following (dollars in thousands):
Revenues Percentages ---------- ----------- Maintenance, repair and replacement...................... $ 906,901 58.6% New installation......................................... 640,890 41.4 ---------- ----- Total.................................................. $1,547,791 100.0% ========== =====
The Company recognizes maintenance, repair and replacement revenues as the services are performed, except for service contract revenue, which is recognized ratably over the life of the contract. The Company generally accounts for revenues from fixed price installation and retrofit contracts on a percentage-of-completion basis, using the cost-to-cost method. Cost of services consists primarily of components, parts and supplies related to new installation and maintenance, repair and replacement services, salaries and benefits of service and installation technicians, subcontracted services, depreciation, fuel and other vehicle expenses and equipment rentals. Selling, general and 15 administrative expenses consist primarily of compensation and related benefits for management, administrative salaries and benefits, advertising, office rent and utilities, communications and professional fees. The Company's balanced business mix is reflected to varying degrees in its gross margins. The gross margin for the businesses providing services to commercial/industrial markets was 18.7% for the twelve months ended December 31, 1999. The Company's businesses performing primarily maintenance, repair and replacement services in the residential markets tend to have higher gross margins, averaging 32.3% for the twelve months ended December 31, 1999. On average, the Company's residential new installation businesses have lower gross margins. Such companies' gross margin was 23.0% for the twelve months ended December 31, 1999. Future consolidated gross margins may vary depending on, among other things, shifts in the business mix as well as the impact of future acquisitions on the business mix. The Company has realized savings from (1) greater volume discounts from suppliers of components, parts and supplies; (2) consolidation of insurance and bonding programs; (3) other general and administrative expenses such as training and advertising; and (4) its ability to borrow at lower interest rates than most, if not all, of its subsidiaries. These savings are offset by costs related to corporate management structure, costs associated with being a public company and integration costs. Effective April 30, 1997, the Company entered into an Agreement and Plan of Exchange with Airtron (the "Airtron Agreement"), pursuant to which the Company issued $20.4 million in cash, 14.9 million shares of preferred stock and 4.7 million shares of common stock to shareholders of Airtron in exchange for all of the then outstanding shares of Airtron. Although for legal purposes Airtron was acquired by the Company, for accounting purposes the transaction was accounted for as a reverse acquisition, as if Airtron acquired the Company, due to the fact that the former shareholders of Airtron then owned a majority of the outstanding common stock. In connection with the reverse acquisition, the Company recorded the consideration paid to the shareholders of the Company as non-recurring compensation expense of $7.0 million in the accompanying consolidated statements of operations for the ten months ended December 31, 1997. The consolidated financial statements included elsewhere herein for the periods prior to the effective date of the acquisition only include the accounts of Airtron. The consolidated statements of shareholders' equity have been converted from Airtron's capital structure to the Company's capital structure to reflect the exchange of shares pursuant to the Airtron Agreement. Concurrent with the initial public offering of the Company's common stock in November 1997 (the "IPO"), the Company changed its fiscal year end from February 28 to December 31. As of December 31, 1999, the Company was comprised of 73 operating companies performing services in 64 cities across 28 states. Through its acquisitions since the IPO, the Company has increased the portion of its business derived from commercial/industrial customers and focused its acquisition program on companies that could further the implementation of the Company's national accounts initiatives. The Company has also significantly expanded its electrical and data cabling business through these acquisitions. 16 Results of Operations The following table sets forth certain financial data for the periods indicated (dollars in thousands):
Fiscal Year Fiscal Year Ten Months Ended Ended Ended December 31, December 31, December 31, 1999 1998 1997 ----------------- --------------- --------------- Revenues................ $1,547,791 100.0% $761,541 100.0% $138,479 100.0% Cost of Services........ 1,229,063 79.4 585,396 76.9 101,762 73.5 ---------- ----- -------- ----- -------- ----- Gross Profit............ 318,728 20.6 176,145 23.1 36,717 26.5 Selling, General and Administrative Expenses............... 211,019 13.6 124,079 16.2 36,495 26.3 Merger and Related Charges................ 3,725 0.2 -- -- -- -- ---------- ----- -------- ----- -------- ----- Income from Operations.. 103,984 6.7 52,066 6.9 222 0.2 Interest, net........... (28,727) (1.9) (6,188) (0.8) (1,144) (0.8) Other................... 782 0.1 377 -- 112 -- ---------- ----- -------- ----- -------- ----- Income (Loss) Before Income Tax Provision... 76,039 4.9 46,255 6.1 (810) (0.6) Income Tax Provision.... 34,483 2.2 20,326 2.7 2,832 2.0 ---------- ----- -------- ----- -------- ----- Net Income (Loss)....... $ 41,556 2.7% $ 25,929 3.4% $ (3,642) (2.6)% ========== ===== ======== ===== ======== =====
Twelve Months Ended December 31, 1999 Compared To Twelve Months Ended December 31, 1998 Revenues. Revenues increased $786.3 million, or 103.2%, to $1,547.8 million for the twelve months ended December 31, 1999 from $761.5 million for the twelve months ended December 31, 1998. The increase in revenues is attributable to the following: . $624.7 million relates to the incremental revenue contributed in the twelve months ended December 31, 1999 by commercial/industrial companies acquired during or subsequent to the twelve months ended December 31, 1998; . $13.1 million relates to the incremental revenue contributed in the twelve months ended December 31, 1999 by residential companies acquired during or subsequent to the twelve months ended December 31, 1998; . $117.0 million relates to the same store growth in the commercial/industrial group. Of this increase, $47.2 million results from growth in work in mission-critical environments and voice/data cabling in the Mid-Atlantic region and $25.0 million relates to volume increases in the Seattle/Portland market, with the balance of the increase generated primarily from the Dallas, Little Rock, Toledo, Minneapolis, Bakersfield, California and Vail, Colorado markets; and . $31.5 million relates to the same store growth in the residential group. Of this increase, $22.9 million relates to companies that primarily provide new installation services due to an increase in new home starts in the markets they serve and $8.6 million relates to companies that primarily provide maintenance, repair and replacement services. Gross Profit. Gross profit increased $142.6 million, or 80.9%, to $318.7 million for the twelve months ended December 31, 1999 from $176.1 million for the twelve months ended December 31, 1998. The increase in gross profit is attributable to the following: . $117.1 million relates to the incremental gross profit contributed in the twelve months ended December 31, 1999 by commercial/industrial companies acquired during or subsequent to the twelve months ended December 31, 1998; 17 . $2.4 million relates to the incremental gross profit contributed in the twelve months ended December 31, 1999 by residential companies acquired during or subsequent to the twelve months ended December 31, 1998; . $13.8 million relates to the same store growth in the commercial/industrial group. Of this increase, $5.1 million results from growth in work in mission-critical environments and voice/data cabling in the Mid-Atlantic region and $4.3 million relates to volume increases in the Seattle/Portland market, with the balance of the increase generated primarily from the Little Rock, Toledo, Minneapolis and Vail, Colorado markets. Partially offsetting these increases were continued economic softening in the Richmond, Virginia market and general labor inefficiencies caused by the shortage of experienced field personnel in the industry and additional overtime hours incurred to handle the substantial volume of work, which had the most impact on the Dallas market; . $7.7 million relates to the same store growth in the residential group. Of this increase, $5.2 million relates to companies that primarily provide new installation services due to an increase in new home starts in the markets they serve and $2.5 million relates to companies that primarily provide maintenance, repair and replacement services; and . $1.6 million relates to additional materials purchases savings in the current period. Gross profit margin decreased 2.5% for the twelve months ended December 31, 1999 compared to the twelve months ended December 31, 1998 because of the Company's acquisition emphasis during 1998 and 1999 on commercial/industrial businesses, which support the Company's national accounts initiatives. These businesses typically have lower gross margins than residential businesses. Also impacting the decrease were gross profit declines in the Dallas and Richmond, Virginia markets, as well as the general labor inefficiencies referred to above. Selling, General and Administrative Expenses. Selling, general and administrative expenses, including goodwill amortization and merger and related charges, increased $90.6 million, or 73.1%, to $214.7 million for the twelve months ended December 31, 1999 from $124.1 million for the twelve months ended December 31, 1998. The increase in these expenses is attributable to the following: . $59.6 million relates to the incremental selling, general and administrative expenses incurred in the twelve months ended December 31, 1999 by commercial/industrial companies acquired during or subsequent to the twelve months ended December 31, 1998; . $1.5 million relates to the incremental selling, general and administrative expenses incurred in the twelve months ended December 31, 1999 by residential companies acquired during or subsequent to the twelve months ended December 31, 1998; . $12.3 million relates to the same store growth in the commercial/industrial group, with $1.7 million of the increase coming from the Mid-Atlantic market and $3.8 million from the Company's Seattle/Portland operations; . $5.4 million relates to the same store growth in the residential group; . $7.1 million relates to incremental corporate expenses representing expansion of the corporate management team, expenses of employee benefit programs and infrastructure necessary to execute the Company's operating and acquisition strategies; . $3.7 million relates to non-recurring, non-deductible charges related to costs incurred in connection with the Merger (see above discussion and Note 18 to the Consolidated Financial Statements); . $6.6 million relates to an increase in goodwill amortization associated with the above described acquisitions. Partially offsetting the above increases is approximately $5.3 million of increased savings related to the Company's property and casualty insurance programs and a $0.3 million decrease in field bonuses. 18 As a percentage of revenues, selling, general and administrative expenses, excluding corporate expenses, non-recurring charges related to the Merger and goodwill amortization, decreased to 11.8% for the twelve months ended December 31, 1999 from 14.0% for the twelve months ended December 31, 1998, due primarily to achieving lower selling, general and administrative expense margins on a same store basis and acquiring a higher mix of commercial companies which tend to have lower selling, general and administrative expense structures relative to revenues earned. When including corporate expenses and goodwill amortization but excluding non-recurring charges related to the Merger, selling, general and administrative expenses as a percentage of revenues decreased to 13.6% for the twelve months ended December 31, 1999 from 16.2% for the twelve months ended December 31, 1998. Net Interest. Net interest increased $22.5 million during the twelve months ended December 31, 1999 compared to the same period of the prior year. Such increase was attributable to a higher level of borrowings under the Company's credit facility and the issuance in January 1999 of $130 million in Senior Subordinated Notes, which carried a higher rate of interest than loans under the credit facility. The higher level of borrowings was needed to finance the Company's aggressive acquisition program during 1998 and 1999. See "Liquidity and Capital Resources." Income Tax Provision. The income tax provision increased $14.2 million to $34.5 million for the twelve months ended December 31, 1999 from $20.3 million for the twelve months ended December 31, 1998. This increase corresponds with the pre-tax income increase of $29.8 million between periods. The effective tax rate for the twelve months ended December 31, 1999 was 45.3% compared to 43.9% for the twelve months ended December 31, 1998. The effective tax rate exceeds the Company's statutory federal and state tax rate and has increased between years due primarily to non-deductible goodwill amortization of $9.3 million and non-deductible merger and related charges of $3.7 million in 1999 compared to $6.0 million of non-deductible goodwill amortization in 1998. When excluding the non-deductible merger and related charges in 1999, the overall effective tax rate decreased to 43.2% in 1999 from 43.9% in 1998. This overall decrease in the effective tax rate results from certain income tax strategies, including structuring seven of the Company's acquisitions as taxable asset acquisitions, resulting in the deductibility of goodwill for these entities. Twelve Months Ended December 31, 1998 Compared To Ten Months Ended December 31, 1997 Revenues. Revenues increased $623.0 million, or 450.0%, to $761.5 million for the twelve months ended December 31, 1998 from $138.5 million for the ten months ended December 31, 1997. The increase in revenues is attributable to the following: . $328.7 million relates to 28 commercial/industrial companies acquired during 1998, . $54.1 million relates to 11 residential companies acquired during 1998, . $186.7 million relates to 13 companies acquired simultaneous with the IPO, resulting in twelve months of revenues during 1998 compared to two months of revenues during 1997, . $29.3 million relates to the other 10 companies acquired in June and July of 1997, resulting in twelve months of revenue during 1998 compared to six or seven months of revenues during 1997, and . $24.2 million relates to Airtron, resulting in twelve months of revenues in 1998 compared to ten months of revenues in 1997. Gross Profit. Gross profit increased $139.4 million, or 379.8%, to $176.1 million for the twelve months ended December 31, 1998 from $36.7 million for the ten months ended December 31, 1997. The increase in gross profit is attributable to the following: . $66.0 million relates to 28 commercial/industrial companies acquired during 1998, . $15.2 million relates to 11 residential companies acquired during 1998, 19 . $37.2 million relates to 13 companies acquired simultaneous with the IPO, resulting in twelve months of activity during 1998 compared to two months of activity during 1997, . $8.9 million relates to the other 10 companies acquired in June and July of 1997, resulting in twelve months of activity during 1998 compared to six or seven months of activity during 1997, . $10.1 million relates to Airtron, resulting in twelve months of activity in 1998 compared to ten months of activity in 1997, and . $2.0 million relates to materials purchases savings. Gross profit margin decreased 3.4% for the twelve months ended December 31, 1998 compared to the ten months ended December 31, 1997 because of the Company's 1998 acquisition emphasis on com-mercial/industrial businesses, which support the Company's national accounts initiatives although they typically have lower gross margins than residential businesses. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $87.6 million, or 240.0%, to $124.1 million for the twelve months ended December 31, 1998 from $36.5 million for the ten months ended December 31, 1997. The increase in selling, general and administrative expenses is attributable to the following: . $37.5 million relates to 28 commercial/industrial companies acquired during 1998, . $10.6 million relates to 11 residential companies acquired during 1998, . $23.5 million relates to 13 companies acquired simultaneous with the IPO, resulting in twelve months of activity during 1998 compared to two months of activity during 1997, . $6.5 million relates to the other 10 companies acquired in June and July of 1997, resulting in twelve months of activity during 1998 compared to six or seven months of activity during 1997, . $4.3 million relates to Airtron, resulting in twelve months of activity in 1998 compared to ten months of activity in 1997, . $7.8 million relates to corporate expenses representing the formation of the corporate management team and infrastructure necessary to execute the Company's operating and acquisition strategies, . $5.3 million relates to goodwill amortization associated with the above described acquisitions, and . $2.6 million relates to field bonuses. Offsetting the above increases were the following reductions: . $7.0 million reduction in compensation expense recognized in the prior year from the reverse acquisition of Airtron, and . $3.5 million of savings related to the Company's property and casualty insurance programs. As a percentage of revenues, selling, general and administrative expenses, excluding corporate expenses, goodwill amortization and the 1997 non-recurring compensation expense, decreased to 14.0% for the twelve months ended December 31, 1998 from 18.3% for the ten months ended December 31, 1997. This decrease was due primarily to achieving lower selling and administrative expense margins within the 23 companies acquired during 1997 and acquiring a higher mix of commercial/industrial companies which tend to have lower selling and administrative expense structures relative to revenues earned. When including corporate expenses and goodwill amortization, but excluding the non-recurring, non-cash compensation expense of $7.0 million, selling, general and administrative expenses as a percentage of revenue decreased to 16.2% for the twelve months ended December 31, 1998 from 21.1% for the ten months ended December 31, 1997. 20 Net Interest. Net interest increased $5.0 million during the twelve months ended December 31, 1998 compared to the ten months ended December 31, 1997 due to borrowings under our credit facility to fund our aggressive acquisition program during 1998. See "Liquidity and Capital Resources." Income Tax Provision. The income tax provision increased $17.5 million, or 625.0%, to $20.3 million for the twelve months ended December 31, 1998 from $2.8 million for the ten months ended December 31, 1997. This increase corresponds with the pre-tax income increase of $40.1 million between periods after adding back the $7.0 million of non-recurring, non-cash compensation expense related to the reverse acquisition of Airtron. The effective tax rate for the twelve months ended December 31, 1998 was 43.9% compared to 45.8% for the ten months ended December 31, 1997 after adding back the $7.0 million of non-recurring, non-cash compensation expense related to the reverse acquisition of Airtron. The decrease results primarily from income tax planning strategies implemented during 1998. Year 2000 The Year 2000 issue refers to the inability of certain date sensitive computer chips, software and systems to recognize a two-digit date field as belonging to the 21st century. Many computer software programs, as well as certain hardware and equipment containing date sensitive data, were structured to utilize a two-digit date field. Accordingly, these programs may not be able to properly recognize dates in the year 2000 and later, which could result in significant system and equipment failures. The Company has completed its Year 2000 plan to address the issues resulting from the Year 2000. To date the Company has encountered no major automation or business disruptions due to Year 2000 issues. The Company continues to operate normally through all of its operating companies and will continue to monitor operations throughout 2000. The Company is monitoring the effect of the Year 2000 on its most significant customers and suppliers, and thus indirectly on the Company. To date, none of these significant customers and suppliers has encountered business interruptions due to the Year 2000 that have impacted the Company's operations. There are no individual customers who will have a material impact on our revenues should they fail to complete their Year 2000 efforts. Additionally, the Company has alternative vendors that can be relied on should a current vendor fail in its Year 2000 preparations. Independent of its Year 2000 activities discussed in the previous paragraphs, the Company has been developing a common information system throughout the organization for its overall information needs that would be free of any Year 2000 limitations. The Company's board of directors previously approved the prototype and pilot phase of an enterprise resource planning ("ERP") system. This phase commenced in July 1999 and was expected to take approximately ten months to complete, with conclusion originally expected by the end of the second quarter of the Year 2000. The Merger required that management focus all resources towards the integration of the Building One companies. Accordingly, implementation of the ERP system has been suspended until such time as the information needs of the Building One companies can be assessed and factored into the overall systems strategy of the combined organization. To date, the Company has expended approximately $6.1 million related to the implementation of the ERP system. Seasonality and Cyclicality The HVAC industry is subject to seasonal variations. Specifically, the demand for new installations is generally lower during the winter months due to reduced construction activities during inclement weather and less use of air conditioning during the colder months. Demand for HVAC services is generally higher in the second and third quarters. Accordingly, the Company expects its revenues and operating results generally will be lower in the first and, to a lesser degree, fourth quarters. Historically, the construction industry has been highly cyclical. As a result, the Company's volume of business may be adversely affected by declines in new installation projects in various geographic regions of the United States. 21 A substantial portion of the Company's business involves installation of mechanical and electrical systems in newly constructed residences and commercial/industrial facilities. Our revenues from new installation services in the residential market is dependent upon the level of housing starts in the areas in which we operate. The housing industry is cyclical, and the Company's revenues from residential new installation will be affected by the factors that affect the housing industry. These factors include changes in employment and income levels, the availability and cost of financing for new home buyers and general economic conditions. The level of new commercial/industrial installation services is also affected by changes in economic conditions and interest rates. General downturns in housing starts or new commercial/industrial construction in the areas in which the Company operates could have a material adverse effect on its business, including its financial condition and results of operations. Inflation Inflation did not have a significant effect on the results of operations for the years ended December 31, 1999 and 1998, or the ten months ended December 31, 1997. Liquidity and Capital Resources Historically, the Company has financed its operations and growth with internally generated working capital and borrowings from commercial banks or other lenders. These borrowings (other than subordinated debt) are secured by the Company's accounts receivable and inventory. At December 31, 1999, the Company had outstanding $249.4 million of borrowings under its then existing $425 million revolving credit facility (the "Credit Agreement"). In connection with the Merger with Building One, the Company entered into a new $800 million revolving credit facility and borrowed funds under the new facility to repay (i) the borrowings under the old facility, (ii) $130 million of senior subordinated notes (the "Senior Subordinated Notes") issued in January 1999, and (iii) borrowings of Building One under its revolving credit facility. As of March 27, 2000, $743.5 million of borrowings were outstanding under the new facility. The availability of borrowings under the new facility is subject to the Company's ability at the time to meet certain specified conditions, which the Company believes it currently meets. These conditions include compliance with the financial covenants and ratios required by the new credit facility, absence of default under the facility and continued accuracy of the representations and warranties contained in the facility (including the absence of any material adverse changes since the specified dates). Also in connection with the Merger, the Company assumed the 10 1/2% Senior Subordinated Notes due 2009 of Building One. Concurrent with the closing of the Merger, an affiliate of Apollo Management, L.P. exchanged $106 million of Building One convertible junior subordinated debentures and $150 million of cash for approximately $256 million of Encompass convertible preferred stock. The preferred stock will mature in 2012, will bear a dividend yield coupon rate of 7.25% and will be convertible into shares of Encompass common stock at a conversion price of $14 per common share. The proceeds from the issuance of the convertible preferred stock were used to fund the cash election feature of the Merger. The Company's largest need for capital in the past has been to fund acquisitions. Historically, the Company has generally paid for its acquisitions with cash and common stock in approximately equal amounts. The Company intends to continue to use its common stock as a significant component of the consideration that it pays for businesses to be acquired. When the Company's common stock price declines, the Company generally reduces the price it is willing to pay for acquisitions and in some cases may increase the cash component of the purchase price. If the price of the Company's common stock declines, then the Company believes that the number of companies willing to be acquired at an accretive price may be reduced, which could adversely impact the growth of the Company. Furthermore, if the Company pays a greater proportion of the consideration of future acquisitions in cash, then it will exhaust its available credit faster than would otherwise be the case and would increase its ratio of debt to total capitalization. The Company's primary requirements for capital (other than those related to acquisitions) consist of purchasing vehicles, inventory and supplies used in the operation of the business. During the years ended 22 December 31, 1999 and 1998 and the ten months ended December 31, 1997, capital expenditures aggregated $20.1 million, $9.3 million and $2.0 million, respectively. The Company anticipates that its cash flow from operations and existing credit facilities will provide cash in excess of its normal working capital needs, debt service requirements and planned capital expenditures for property and equipment. For the years ended December 31, 1999 and 1998 and the ten months ended December 31, 1997, the Company generated $29.6 million, $0.9 million and $4.4 million of cash from operating activities, respectively. For the year ended December 31, 1999, net income, depreciation, amortization, deferred taxes and other items generated $72.6 million and changes in asset and liability accounts utilized a net $43.0 million. The use of cash due to changes in asset and liability accounts is due primarily to increased levels of receivables, the majority of which results from internal revenue growth during the twelve months ended December 31, 1999. For the year ended December 31, 1998, net income, depreciation, amortization, deferred taxes and non-cash compensation generated $43.5 million and changes in asset and liability accounts utilized a net $42.6 million. For the ten months ended December 31, 1997, net loss, depreciation, amortization, deferred taxes and non-cash compensation generated $7.5 million and changes in asset and liability accounts utilized a net $3.1 million. For the year ended December 31, 1999, the Company used $137.1 million of cash in investing activities. These activities principally consisted of $116.0 million for acquisitions and $20.1 million for capital expenditures. For the year ended December 31, 1998, the Company used $189.2 million in investing activities. These activities principally consisted of $178.5 million for acquisitions and $9.3 million for capital expenditures. For the ten months ended December 31, 1997, the Company used $37.9 million in investing activities. These activities principally consisted of $35.8 million for acquisitions and $2.0 million for capital expenditures. For the year ended December 31, 1999, the Company generated $108.6 million of cash from financing activities. These activities principally consisted of proceeds from long-term debt, net of offering costs, of $357.1 million and $248.8 million in payments of long-term debt. For the year ended December 31, 1998, the Company generated $165.0 million in cash from its financing activities. These activities principally consisted of proceeds from long-term debt of $884.5 million and payments of long-term debt of $719.5 million. For the ten months ended December 31, 1997, the Company generated $54.9 million in cash from its financing activities. These activities principally consisted of issuance of common stock for $109.7 million and proceeds from long-term debt of $32.5 million less distributions to shareholders of $20.4 million, payments of long-term debt of $47.7 million and retirement of preferred stock of $19.3 million. The Company intends to selectively pursue strategic acquisition opportunities. Management believes that funds provided by operations, together with funds available under the Company's new credit facility entered into with Bank of America, N.A. and Chase Bank of Texas, N.A. (as Co-Lead Arrangers and Co-Book Managers) in connection with the Merger and other financing sources will be adequate to meet its anticipated requirements for acquisitions. Estimates as to working capital needs and other expenditures may be materially affected if the foregoing sources are not available or do not otherwise provide sufficient funds to meet the Company's obligations. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes new accounting and reporting standards requiring that all derivative instruments (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This statement, as amended, is effective for all fiscal years beginning after June 15, 2000. Under present operations, this statement will have no impact on the Company's financial position or results of operations. 23 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. The table below provides information about the Company's market sensitive financial instruments as of December 31, 1999 and 1998. In connection with the Merger, the Company has refinanced the borrowings under the Credit Agreement and the Senior Subordinated Notes with proceeds from a new $800 million revolving credit facility discussed in Item 7 and has assumed $200 million of Building One's 10.5% Senior Subordinated Notes. The Company's major market risk exposure is changing interest rates. All items described are non-trading and are stated in U.S. dollars (in thousands). The information constitutes a "forward looking statement."
Fair Value at December 31, December 31, 1999: 2000 2001 2002 2003 2004 Thereafter Total 1999 - ------------------ ------- -------- -------- ------ ------- ---------- -------- ------------ Fixed Rate Debt......... $ 1,098 $ -- $ -- $ -- $ -- $ -- $ 1,098 $ 1,098 Average rate.......... 7.4% -- -- -- -- -- Credit Agreement........ $ -- $249,400 $ -- $ -- $ -- $ -- $249,400 $249,400 Average rate.......... -- (a) -- -- -- -- Senior Subordinated Notes.................. $ -- $ -- $ -- $ -- $ -- $130,000 $130,000 $128,700 Average rate.......... -- -- -- -- -- 10.6%(b) Junior Subordinated Notes.................. $ -- $ -- $ -- $1,650 $ 2,500 $ -- $ 4,150 $ 4,150 Average rate.......... -- -- -- 6.0% 7.5% -- Fair Value at December 31, December 31, 1998: 1999 2000 2001 2002 2003 Thereafter Total 1998 - ------------------ ------- -------- -------- ------ ------- ---------- -------- ------------ Fixed Rate Debt......... $12,959 $ -- $ -- $ -- $ -- $ -- $ 12,959 $ 12,959 Average rate.......... 7.12% -- -- -- -- -- Credit Agreement........ $ -- $ -- $195,000 $ -- $ -- $ -- $195,000 $195,000 Average rate.......... -- -- (a) -- -- -- Junior Subordinated Notes.................. $ -- $ -- $ -- $ -- $16,000 $ -- $ 16,000 $ 16,000 Average rate.......... -- -- -- -- 6.00% --
- -------- (a) The Credit Agreement borrowings bore interest at a rate per annum, at the Company's option, of either (1) the Alternate Base Rate or (2) the Eurodollar Rate. The Alternate Base Rate is equal to the greater of the Federal Funds Effective Rate plus 0.5% or the Prime Rate plus a Margin depending on the ratio of indebtedness for borrowed money to EBITDA (with all capitalized terms as defined in the Credit Agreement). The Eurodollar Rate is the rate defined in the Credit Agreement plus a Margin depending on the ratio of indebtedness for borrowed money to EBITDA. At December 31, 1999 and 1998, the weighted average interest rates in effect for the Credit Agreement borrowings were 8.34% and 7.08%, respectively. (b) The Senior Subordinated Notes were unsecured, matured in January 2009 and bore interest at 9.75% payable semi-annually. In addition, there were approximately $11.0 million in related debt issuance costs which were being amortized to interest expense over the ten year life of these notes, increasing the effective interest rate to 10.6%. 24 Item 8. Financial Statements and Supplementary Data. ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES Independent Auditors' Report.............................................. 26 Consolidated Balance Sheets............................................... 27 Consolidated Statements of Operations..................................... 28 Consolidated Statements of Shareholders' Equity........................... 29 Consolidated Statements of Cash Flows..................................... 30 Notes to Consolidated Financial Statements................................ 31 SEPARATE FINANCIAL STATEMENTS OF GROUP MAINTENANCE AMERICA CORP. FROM INCEPTION THROUGH DATE OF REVERSE ACQUISITION Independent Auditors' Report.............................................. 47 Balance Sheets............................................................ 48 Statements of Operations.................................................. 49 Statements of Shareholders' Equity (Deficit).............................. 50 Statements of Cash Flows.................................................. 51 Notes to Financial Statements............................................. 52
25 INDEPENDENT AUDITORS' REPORT The Board of Directors Encompass Services Corporation: We have audited the accompanying consolidated balance sheets of Encompass Services Corporation (formerly Group Maintenance America Corp.) and Subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended December 31, 1999 and 1998, and the ten months ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Encompass Services Corporation (formerly Group Maintenance America Corp.) and Subsidiaries as of December 31, 1999 and 1998 and the results of their operations and their cash flows for the years ended December 31, 1999 and 1998 and the ten months ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG LLP Houston, Texas February 16, 2000 26 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PAR VALUE)
December 31, ------------------- ASSETS 1999 1998 ------ ---------- -------- Current Assets: Cash and cash equivalents................................ $ 3,452 $ 2,371 Accounts receivable, net of allowance for doubtful accounts of $9,591 and $5,355, respectively............. 338,137 187,251 Inventories.............................................. 22,551 17,843 Costs and estimated earnings in excess of billings on uncompleted contracts................................... 59,334 26,533 Prepaid expenses and other current assets................ 11,733 6,134 Deferred tax assets...................................... 10,537 7,579 Refundable income taxes.................................. -- 3,341 ---------- -------- Total current assets................................... 445,744 251,052 Property and Equipment, net................................ 59,051 40,795 Goodwill, net of accumulated amortization of $19,096 and $6,593, respectively...................................... 541,776 398,714 Deferred Debt Issue Costs.................................. 12,917 9,260 Other Long-Term Assets..................................... 2,045 1,260 ---------- -------- Total assets........................................... $1,061,533 $701,081 ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Short-term borrowings and current maturities of long-term debt.................................................... $ 1,098 $ 12,959 Accounts payable......................................... 102,115 59,068 Accrued compensation..................................... 44,016 29,736 Accrued liabilities...................................... 20,161 10,401 Due to related parties................................... 10,642 14,961 Billings in excess of costs and estimated earnings on uncompleted contracts................................... 55,144 27,830 Income taxes payable..................................... 2,740 2,028 Other current liabilities................................ 8,475 7,628 ---------- -------- Total current liabilities.............................. 244,391 164,611 Revolving Credit Facility.................................. 249,400 195,000 Senior Subordinated Notes.................................. 130,000 -- Junior Subordinated Notes.................................. 4,150 16,000 Deferred Tax Liabilities................................... 6,138 733 Other Long-Term Liabilities................................ 1,484 8,808 Commitments and Contingencies
Shareholders' Equity: Preferred stock, $0.001 par value; 50,000 shares authorized; none issued and outstanding................ -- -- Common stock, $0.001 par value; 100,000 shares authorized; 38,621 and 33,154 shares issued and outstanding, respectively.............................. 39 33 Additional paid-in capital.............................. 390,957 322,478 Retained earnings (deficit)............................. 34,974 (6,582) ---------- -------- Total shareholders' equity............................ 425,970 315,929 ---------- -------- Total liabilities and shareholders' equity............ $1,061,533 $701,081 ========== ========
The accompanying notes are an integral part of these consolidated financial statements. 27 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended Ten Months December 31, Ended -------------------- December 31, 1999 1998 1997 ---------- -------- ------------ Revenues.................................... $1,547,791 $761,541 $138,479 Cost of Services............................ 1,229,063 585,396 101,762 ---------- -------- -------- Gross Profit.............................. 318,728 176,145 36,717 Selling, General and Administrative Expenses................................... 198,233 117,951 28,643 Merger and Related Charges.................. 3,725 -- -- Amortization of Goodwill.................... 12,602 5,960 633 Compensation Expense From Reverse Acquisition and Issuance of Management Shares and Stock Options................... 184 168 7,219 ---------- -------- -------- Income from operations.................... 103,984 52,066 222 Other Income (Expense): Interest expense.......................... (29,133) (6,595) (1,542) Interest income........................... 406 407 398 Other..................................... 782 377 112 ---------- -------- -------- Income (loss) before income tax provision.............................. 76,039 46,255 (810) Income Tax Provision........................ 34,483 20,326 2,832 ---------- -------- -------- Net Income (Loss)........................... $ 41,556 $ 25,929 $ (3,642) ========== ======== ======== Basic Earnings (Loss) Per Share: Earnings (Loss) Per Share................. $ 1.12 $ 0.94 $ (0.34) ========== ======== ======== Weighted Average Shares Outstanding....... 37,176 27,544 10,800 ========== ======== ======== Diluted Earnings (Loss) Per Share: Earnings (Loss) Per Share................. $ 1.11 $ 0.93 $ (0.34) ========== ======== ======== Weighted Average Shares Outstanding....... 37,496 27,948 10,800 ========== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 28 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS)
Common Stock Additional Retained Total ------------- Paid-In Earnings Subscriptions Shareholders' Shares Amount Capital (Deficit) Receivable Equity ------ ------ ---------- --------- ------------- ------------- BALANCE, February 28, 1997................... 4,652 $ 5 $ 2,646 $ 3,340 $ -- $ 5,991 Purchases of acquired companies............ 5,612 6 58,781 -- (6,153) 52,634 Public offering, net of offering costs.... 8,340 8 103,543 -- -- 103,551 Compensation expense from issuance of management shares and stock options........ 5 -- 241 -- -- 241 Preferred stock issued to Airtron shareholders in reverse acquisition.. -- -- -- (14,873) -- (14,873) Distribution to Airtron shareholders in reverse acquisition.......... -- -- -- (17,336) -- (17,336) Shares issued under subscription agreement............ 2,000 2 -- -- 6,153 6,155 Exercise of stock options.............. 20 -- 61 -- -- 61 Common stock to be issued in acquisitions......... -- -- 3,871 -- -- 3,871 Net loss.............. -- -- -- (3,642) -- (3,642) ------ --- -------- ------- ------- -------- BALANCE, December 31, 1997................... 20,629 21 169,143 (32,511) -- 136,653 Purchases of acquired companies............ 12,455 12 148,762 -- -- 148,774 Debenture conversion.. 68 -- 820 -- -- 820 Compensation expense from issuance of stock options........ -- -- 168 -- -- 168 Exercise of stock options.............. 2 -- 10 -- -- 10 Common stock to be issued in acquisitions......... -- -- 3,575 -- -- 3,575 Net income............ -- -- -- 25,929 -- 25,929 ------ --- -------- ------- ------- -------- BALANCE, December 31, 1998................... 33,154 33 322,478 (6,582) -- 315,929 Purchases of acquired companies............ 5,413 6 61,172 -- -- 61,178 Compensation expense from issuance of stock options........ -- -- 184 -- -- 184 Exercise of stock options.............. 54 -- 258 -- -- 258 Common stock to be issued in acquisitions......... -- -- 1,102 -- -- 1,102 Tax benefit from deferred compensation arrangement.......... -- -- 5,763 -- -- 5,763 Net income............ -- -- -- 41,556 -- 41,556 ------ --- -------- ------- ------- -------- BALANCE, December 31, 1999................... 38,621 $39 $390,957 $34,974 $ -- $425,970 ====== === ======== ======= ======= ========
The accompanying notes are an integral part of these consolidated financial statements. 29 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Year ended Ten months December 31, ended -------------------- December 31, 1999 1998 1997 --------- --------- ------------ Net income (loss)......................... $ 41,556 $ 25,929 $ (3,642) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization........... 27,175 13,863 1,413 Gain from sale of property and equipment.............................. (252) (26) (32) Deferred income taxes................... 2,376 3,499 2,482 Non-cash merger and related charges..... 1,500 -- -- Non-cash compensation expense........... 184 168 7,219 Changes in operating assets and liabilities, net of effect of acquisitions accounted for as purchases: (Increase) decrease in-- Accounts receivable.................. (67,937) (27,316) (2,849) Inventories.......................... (1,769) (1,718) (656) Costs and estimated earnings in excess of billings on uncompleted contracts........................... (9,174) (6,950) 503 Prepaid expenses and other current assets.............................. (4,634) (3,404) 46 Refundable income taxes.............. 3,341 1,319 1,665 Other long-term assets............... 3,268 (780) (299) Increase (decrease) in-- Accounts payable..................... 9,566 3,614 (918) Accrued liabilities.................. 6,256 (2,918) (4,598) Due to related parties............... (181) (5,469) (732) Billings in excess of costs and estimated earnings on uncompleted contracts........................... 12,904 3,885 1,572 Income taxes payable................. 6,749 519 1,586 Other current liabilities............ 75 (2,282) 1,442 Other long-term liabilities.......... (1,391) (1,082) 206 --------- --------- -------- Net cash provided by operating activities....................... 29,612 851 4,408 --------- --------- -------- Cash Flows From Investing Activities: Cash paid for acquisitions, net of cash acquired of $7,430, $13,176 and $5,263, respectively............................. (116,012) (178,542) (35,767) Deferred acquisition costs................ (2,117) (1,573) (246) Purchases of property and equipment....... (20,054) (9,292) (2,017) Proceeds from sale of property and equipment................................ 1,076 199 83 --------- --------- -------- Net cash used in investing activities....................... (137,107) (189,208) (37,947) --------- --------- -------- Cash Flows From Financing Activities: Retirement of preferred stock............. -- -- (19,277) Proceeds from senior subordinated debt offering, net of offering costs.......... 118,984 -- -- Proceeds from long-term debt.............. 239,990 884,515 32,500 Payments of long-term debt................ (248,788) (719,478) (47,742) Deferred financing costs on other long- term debt................................ (1,868) -- -- Issuance of common stock.................. -- -- 109,706 Exercise of stock options................. 258 10 61 Distributions to shareholders prior to initial public offering.................. -- -- (20,367) --------- --------- -------- Net cash provided by financing activities.. 108,576 165,047 54,881 --------- --------- -------- Net Increase (Decrease) In Cash and Cash Equivalents............................... 1,081 (23,310) 21,342 Cash and Cash Equivalents, beginning of period.................................... 2,371 25,681 4,339 --------- --------- -------- Cash and Cash Equivalents, end of period... $ 3,452 $ 2,371 $ 25,681 ========= ========= ======== Supplemental Disclosures of Cash Flow Information: Interest Paid............................. $ 21,222 $ 5,163 $ 1,470 Income Taxes Paid......................... $ 25,764 $ 16,869 $ --
The accompanying notes are an integral part of these consolidated financial statements. 30 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION Encompass Services Corporation ("Encompass"), formerly Group Maintenance America Corp. ("GroupMAC" or "the Company" ) was incorporated as a Texas corporation to build a national company providing mechanical and electrical services in the commercial, industrial and residential markets. Effective April 30, 1997, the Company entered into an Agreement and Plan of Exchange (the "Airtron Agreement") with Airtron, Inc. ("Airtron") and certain of its shareholders, pursuant to which $20.4 million in cash, 14.9 million shares of the Company preferred stock and 4.7 million shares of the Company common stock were issued to shareholders of Airtron in exchange for all of the then outstanding shares of Airtron. Although for legal purposes Airtron was acquired by the Company, for accounting purposes the transaction was accounted for as a reverse acquisition, as if Airtron acquired the Company, due to the fact that the former shareholders of Airtron then owned a majority of the Company common stock. In connection with the purchase of the Company, the consideration paid to the shareholders of the Company was recorded as non- recurring compensation expense of $7.0 million in the accompanying consolidated statements of operations for the ten months ended December 31, 1997. The consolidated financial statements presented herein for the periods prior to the effective date of the acquisition only include the accounts of Airtron. The consolidated statements of shareholders' equity have been converted from Airtron's capital structure to the Company's capital structure to reflect the exchange of shares pursuant to the Airtron Agreement. The cash and redeemable preferred stock paid to the Airtron shareholders, net of existing liabilities to former shareholders, have been treated as a distribution to the Airtron shareholders. All significant intercompany balances have been eliminated. Concurrent with the initial public offering of the Company's common stock in November 1997 (the "IPO"), the Company changed its fiscal year end from February 28 to December 31. As of December 31, 1999, the Company was comprised of 73 operating companies performing services in 64 cities across 28 states. Through its acquisitions, the Company has increased the portion of its business derived from commercial/industrial customers and focused its acquisition program on companies that could further the implementation of the Company's national accounts initiatives. The Company has also significantly expanded its electrical and data cabling business through these acquisitions. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition Revenues from work orders are recognized as services are performed. Revenues from service and maintenance contracts are recognized over the life of contracts. Revenues from construction contracts are recognized on a percentage of completion basis using the cost-to-cost method. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined. 31 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Inventories Inventories consist primarily of purchased materials and supplies. The inventory is valued at the lower of cost or market, with cost determined on a first-in, first-out ("FIFO") basis. Property and Equipment Property and equipment is stated at cost. Depreciation is computed principally using the straight-line method over the useful lives of the assets. Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life of the asset. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property or equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the consolidated statements of operations. Goodwill Goodwill represents the excess of the aggregate purchase price over the fair value of net assets acquired and is amortized on a straight-line basis over a period of 40 years. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the goodwill balance over its remaining life can be recovered through undiscounted future operating cash flows of the acquired operation. The amount of goodwill impairment, if any, is measured based on projected discounted future operating cash flows compared to the carrying value of goodwill. The Company will reassess the recoverability of goodwill if estimated future operating cash flows are not achieved. Deferred Debt Issue Costs Deferred debt issue costs related to the Company's revolving credit agreement and senior subordinated notes are included in other noncurrent assets and amortized to interest expense over the scheduled maturity of the debt. Stock-Based Compensation Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, encourages but does not require companies to record compensation expense for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Accordingly, compensation expense for stock options is measured as the excess, if any, of the quoted market price of the Company's common stock at the date of the grant over the amount an employee must pay to acquire the common stock. 32 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued Warranty Costs The Company generally warrants all of its work for a period of one year from the date of installation. A provision for estimated warranty costs is made at the time a product is sold or service is rendered. Income Taxes The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Earnings Per Share Weighted average shares outstanding for each of the periods presented were as follows (in thousands):
Year Ended Ten Months December 31, Ended ------------- December 31, 1999 1998 1997 ------ ------ ------------ Shares issued through December 31, 1997 excluding acquisitions...................................... 16,629 16,629 9,541 Shares issued for 1997 acquisitions................ 4,682 4,733 1,259 Shares issued for 1998 acquisitions................ 12,228 6,182 -- Shares issued for 1999 acquisitions................ 3,600 -- -- Exercise of stock options.......................... 37 -- -- ------ ------ ------ Weighted average shares outstanding -- Basic..... 37,176 27,544 10,800 ------ ------ ------ Incremental effect of options and warrants outstanding....................................... 320 404 -- ------ ------ ------ Weighted average shares outstanding -- Diluted... 37,496 27,948 10,800 ====== ====== ======
Basic earnings per share have been calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the weighted average number of common shares outstanding plus potentially dilutive common shares. Because the Company reported a net loss for the ten months ended December 31, 1997, the potentially dilutive common shares (including warrants and stock options discussed in Note 9) had an anti-dilutive effect on earnings per share. As of December 31, 1999 and 1998, options to purchase 3.4 million and 0.4 million shares of common stock and warrants to purchase 0.6 million and 1.3 million shares of common stock, respectively, were not included in the calculation of diluted earnings per share because the options' or warrants' exercise price was greater than the average market price of the common shares. Reclassifications Certain amounts recorded in the year ended December 31, 1998 and the ten months ended December 31, 1997 have been reclassified to conform with the current year presentation. 33 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued 3. BUSINESS COMBINATIONS During 1997, the Company acquired 23 companies for approximately $44.2 million in cash, 4.5 million shares of common stock, 4.4 million shares of redeemable preferred stock (which were retired in connection with the IPO), options to acquire 0.1 million shares of common stock and warrants to purchase 0.5 million shares of common stock. Of the total recorded consideration, approximately $3.2 million of cash and 0.5 million shares of common stock were due to former owners at December 31, 1997. During 1998, a reduction of approximately $1.0 million in cash and 0.1 million shares of common stock was recorded to reflect final settlements on certain 1997 acquisitions. Also during 1998, payments of approximately $1.9 million in cash and 0.4 million shares of common stock were made to former shareholders on certain 1997 acquisitions. During 1998, the Company completed the acquisition of 39 platform and five tuck-in companies for approximately $194.8 million in cash, $4.0 million of notes payable, $16.0 million of junior subordinated debt, 12.1 million shares of common stock, options to purchase 0.3 million shares of common stock and warrants to purchase 0.8 million shares of common stock. Of the total consideration, approximately $7.2 million of cash was due to former owners at December 31, 1998. During 1999, the Company paid approximately $6.1 million of cash related to previously recorded amounts due to former shareholders of companies acquired prior to December 31, 1998. In addition, the Company reduced amounts due to former shareholders by approximately $1.1 million related to final purchase price settlements. During 1999, the Company completed the acquisition of 14 additional companies, including 13 platform companies and one satellite location. These companies were acquired for approximately $181.4 million, which includes cash payments of $115.2 million, $4.1 million in junior subordinated notes, 5.1 million shares of common stock and warrants to purchase approximately 80,000 shares of common stock. Of the total consideration, approximately $6.6 million of cash was due to former owners at December 31, 1999. In conjunction with the above mentioned acquisitions, the Company assumed $35.4 million, $26.2 million and $16.1 million of debt for acquisitions completed in 1999, 1998 and 1997, respectively. For the above mentioned acquisitions, the common stock, options and warrants were valued at estimated fair value at the time of the respective acquisition and the preferred stock was valued at its redemption value of $1 per share. For certain 1999 acquisitions, allocation of purchase price to the assets acquired and liabilities assumed has been initially assigned and recorded based on preliminary estimates of fair value and may be revised as additional information becomes available. Such additional information includes appraisals on property, contingent liabilities of the acquired business, and working capital settlements related to the acquisition consideration and the net assets acquired. However, the Company does not expect any significant adjustments to the purchase price allocations or amount of goodwill at December 31, 1999. Several former owners of businesses acquired by the Company have the ability to receive additional amounts of purchase price, payable in cash and/or common stock contingent upon the occurrence of future events. The Company records such contingent consideration as additional purchase price when earned. During 1997, approximately $0.3 million in cash and 22,500 shares of common stock were earned and due to former owners related to these contingent payments. These amounts were paid in 1998. During 1998, approximately $5.2 million of cash and 0.3 million shares of common stock were earned related to these contingent payments, of which approximately $3.3 million of cash and 0.3 million shares of common stock were due to former owners as of December 31, 1998 and were subsequently paid in 1999. During 1999, approximately $5.0 million of cash and 0.1 million shares were earned related to these contingent payments, of which approximately $4.0 million of cash and 0.1 million shares of common stock remained due to former owners as of December 31, 1999. Additional cash and common stock may become payable in 2000 through 2002 contingent upon future events. 34 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued The unaudited pro forma data presented below consists of the combined income statement data for the Company and its subsidiaries as if the acquisitions in 1998 and 1999 were effective on January 1, 1998 (in thousands, except for per share amounts).
Pro Forma Data (Unaudited) --------------------- Year Ended December 31, --------------------- 1999 1998 ---------- ---------- Revenues.................................................. $1,671,143 $1,466,963 Net income................................................ $ 46,979 $ 45,383 Net income per share: Basic................................................... $ 1.21 $ 1.17 Diluted................................................. $ 1.20 $ 1.15
Pro forma adjustments reflected in the amounts above include compensation differentials, adjustment for goodwill amortization over a period of 40 years, elimination of historical interest income and historical interest expense on long-term debt which was repaid or otherwise retired, additional interest expense on funds borrowed for certain 1999 and 1998 acquisitions, and adjustment to the federal and state income tax provisions based on pro forma operating results. Net income per share assumes all shares issued for the acquisitions were outstanding for the periods presented. 4. ALLOWANCE FOR DOUBTFUL ACCOUNTS The following summarizes the activity in the allowance for doubtful accounts (in thousands):
1999 1998 ------ ------ Balance, beginning of period.................................... $5,355 $1,825 Provision for bad debts......................................... 1,668 1,698 Allowance activity from acquired companies...................... 3,951 2,951 Write-off of bad debts.......................................... (1,383) (1,119) ------ ------ Balance, end of period.......................................... $9,591 $5,355 ====== ======
5. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS The summary of the status of uncompleted contracts is as follows (in thousands):
December 31, -------------------- 1999 1998 ---------- -------- Costs incurred.......................................... $1,049,661 $618,547 Estimated earnings recognized........................... 227,966 129,912 ---------- -------- 1,277,627 748,459 Less billings on contracts.............................. (1,273,437) (749,756) ---------- -------- $ 4,190 $ (1,297) ========== ======== These costs and estimated earnings on uncompleted contracts are included in the accompanying consolidated balance sheets under the following captions (in thousands): December 31, -------------------- 1999 1998 ---------- -------- Costs and estimated earnings in excess of billings on uncompleted contracts.................................. $ 59,334 $ 26,533 Billings in excess of costs and estimated earnings on uncompleted contracts.................................. (55,144) (27,830) ---------- -------- $ 4,190 $ (1,297) ========== ========
35 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued 6. PROPERTY AND EQUIPMENT The principal categories and estimated useful lives of property and equipment were as follows (in thousands):
Estimated December 31, Useful ------------------ Lives 1999 1998 ----------- -------- -------- Land............................................ $ 1,144 $ 1,144 Buildings and improvements...................... 20-30 years 6,773 6,128 Service and other vehicles...................... 4-7 years 24,232 17,643 Machinery and equipment......................... 5-10 years 17,658 9,491 Office equipment, furniture and fixtures........ 5-10 years 26,735 12,445 Leasehold improvements.......................... 6,790 4,334 -------- -------- 83,332 51,185 Less accumulated depreciation................... (24,281) (10,390) -------- -------- $ 59,051 $ 40,795 ======== ========
7. SHORT- AND LONG-TERM DEBT Short- and long-term debt consists of the following (in thousands):
December 31, ------------------ 1999 1998 -------- -------- Bank revolving credit agreement (8.3% at December 31, 1999)..................................................... $249,400 $195,000 Senior subordinated notes at 9.75%, due January 2009....... 130,000 -- Junior subordinated notes payable to former shareholders of acquired businesses at 6% to 7.5%, due from November 2003 to July 2004.............................................. 4,150 16,000 Equipment installment loans and other notes payable to banks and other lenders, interest varying from 2.9% to 12%, secured by certain equipment, due in monthly and quarterly installments.................................... 1,098 560 Notes payable to former shareholders of acquired businesses at 6%..................................................... -- 4,399 Note payable to a bank at 8%............................... -- 8,000 -------- -------- Total short-and long-term debt............................. 384,648 223,959 Less short-term borrowings and current maturities.......... (1,098) (12,959) -------- -------- $383,550 $211,000 ======== ========
On December 11, 1997, the Company entered into a three-year revolving credit agreement (the "Credit Agreement"), which was subsequently amended and restated to increase the borrowing capacity. As of December 31, 1999 the Credit Agreement provided for a borrowing capacity of $425 million. Borrowings under the Credit Agreement are guaranteed by the Company's domestic subsidiaries, including future domestic subsidiaries. The obligations of the Company under the Credit Agreement and the obligations under the guarantees are secured by a first priority lien on the accounts receivable and inventory of the domestic subsidiaries, and by a pledge of stock of its domestic subsidiaries. Borrowings under the Credit Agreement bear interest at a rate per annum, at the Company's option, of either (1) the Alternate Base Rate or (2) the Eurodollar Rate. The Alternate Base Rate is equal to the greater of the 36 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued Federal Funds Effective Rate plus 0.5% or the Prime Rate plus a Margin depending on the ratio of indebtedness for borrowed money to EBITDA (with all capitalized terms as defined in the Credit Agreement). The Eurodollar Rate is the rate defined in the Credit Agreement plus a Margin depending on the ratio of indebtedness for borrowed money to EBITDA. The Company is subject to commitment fees payable quarterly in arrears and administration fees payable annually to the Agent until such time as the Credit Agreement is terminated. The commitment fees range from 0.25% to 0.375% per annum with respect to the unused commitments under the Credit Agreement depending on the ratio of indebtedness for borrowed money to EBITDA. In addition, the Company paid various underwriting and arrangement fees and closing costs associated with the origination and syndication of the Credit Agreement. The unamortized portion of these expenses is included as deferred debt issue costs in the accompanying consolidated balance sheets and amounted to approximately $2.9 million and $2.4 million at December 31, 1999 and 1998, respectively. Under the Credit Agreement, the Company is required to maintain certain financial covenants and tests, including: (1) a minimum Fixed Charge Coverage Ratio; (2) a maximum ratio of total indebtedness for borrowed money to capitalization (as defined in the Credit Agreement); (3) a maximum ratio of senior debt to pro forma earnings before interest, taxes, depreciation and amortization; (4) a maximum ratio of total indebtedness to EBITDA; (5) a minimum amount of Consolidated Net Worth (as defined in the Credit Agreement) and (6) a maximum amount of Capital Expenditures in relation to Consolidated Net Worth. The Credit Agreement places limitations upon the amount of letters of credit which may be drawn, investments which may be permitted, and liens which may be granted to secure other debt. The Company may not pay any dividends or redeem, retire or guarantee the value of shares of any class of stock in the Company without prior approval from the lending banks, other than the purchase of outstanding shares of the Company's stock within defined limits. At December 31, 1999, the Company was in compliance with these covenants. The Credit Agreement matures on October 13, 2001. Subsequent to year-end 1999, the Company refinanced the Credit Agreement with borrowings under a new credit facility (see Note 18). In connection with the acquisition of Trinity Contractors, Inc. ("Trinity"), the Company paid cash and issued $16.0 million of subordinated notes (the "Trinity Notes"), common stock and warrants to purchase common stock (the "Trinity Warrants"). Unless prepaid in whole or part at any time by the Company, the balance of the Trinity Notes was due in November 2003. Holders of the Trinity Notes had a one-time option to require the Company to repurchase the Trinity Notes (the "Put Option") in the event the Company issued $50,000,000 or more in principal amount of debt that met certain criteria. In connection with the private placement offering in January 1999 discussed below, the Put Option was exercised by substantially all the holders of the Trinity Notes, such notes were repaid by the Company and the related Trinity Warrants were surrendered. In January 1999, the Company completed a private placement offering (the "Offering") of $130 million of unsecured senior subordinated notes bearing interest at 9.75% and maturing in January 2009. The net proceeds of the offering were used to repay indebtedness incurred under the Credit Agreement. These notes were subsequently exchanged for identical notes registered under the Securities Act of 1933, as amended (the "Notes"). The Notes are guaranteed by all of the Company's current and future U.S. subsidiaries other than "Unrestricted Subsidiaries" (as defined in the indenture governing the Notes). As of December 31, 1999, there were no "Unrestricted Subsidiaries." These guarantees are full, unconditional and joint and several. Accordingly, no separate financial statements of the guarantor subsidiaries are presented because management believes this information is not material to users of its financial statements. The Notes pay interest semi-annually commencing July 15, 1999 and are redeemable at the option of the Company at any time on or after January 15, 2004. Additionally, the Notes' indenture has restrictive covenants 37 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued or limitations on the payment of dividends, the distribution or redemption of capital stock, the incurrence of debt and the sale of assets. The Company entered into an agreement to lock in the ten year U.S. Treasury rate used to price the offering of the Notes. The Company locked in $100 million at 5.5212%, which management believes is an attractive long-term base rate. This agreement expired on January 31, 1999, and was settled on that date based upon the ten year Treasury yield of 4.648%, resulting in an additional pre-tax financing cost of approximately $6.9 million. In accordance with SFAS No. 80, Accounting for Futures Contracts, this agreement qualified as a hedge and was recognized as deferred debt issue costs. The Company has also paid various underwriting and closing costs associated with the Offering. The unamortized portion of all costs related to the Offering is included as deferred debt issue costs in the accompanying consolidated balance sheets and amounted to approximately $10.0 million and $6.9 million at December 31, 1999 and 1998, respectively. Subsequent to December 31, 1999, the Company refinanced the Notes with borrowings under a new credit facility (see Note 18). The aggregate maturities of debt as of December 31, 1999 are as follows (in thousands): 2000............................................................. $ 1,098 2001............................................................. 249,400 2002............................................................. -- 2003............................................................. 1,650 2004............................................................. 2,500 Thereafter....................................................... 130,000 -------- $384,648 ========
8. DUE TO RELATED PARTIES Under the Airtron Agreement, part of the cash purchase price payable to former shareholders of Airtron related to the tax benefits which have been received by the Company related to the exercise of previously outstanding warrants and distributions under deferred compensation arrangements. The Company recognized liabilities of $9.7 million at the date of acquisition as an estimate of these amounts. This amount was paid to the former shareholders of Airtron as the tax benefit was realized by the Company either through receipt of net operating loss carryback claims or utilization of current deductions and net operating loss carryforwards to reduce estimated tax payments. During 1998, the Company was able to realize certain tax benefits under the Airtron Agreement and correspondingly paid $5.3 million of the original liability to the former shareholders. As of December 31, 1998, the $4.4 million remaining liability and the related refundable income taxes and deferred tax assets were reflected as current assets and liabilities in the December 31, 1998 consolidated balance sheet as all remaining tax benefits were realized during 1999. 9. STOCK-BASED PLANS The Company has implemented the following stock-based programs for its employees and others: Stock Awards Plan--In August 1997, the Company adopted the Group Maintenance America Corp. 1997 Stock Awards Plan which provides the Company the latitude to grant a variety of awards, such as stock options, stock appreciation rights ("SARs"), restricted stock, performance awards and phantom stock awards, to officers, directors, key employees and other persons working for the Company and its subsidiaries. The plan requires that options and SARs be granted at not less than the fair market value of a share of common stock on the grant date. The plan also requires that no stock option granted shall vest in less than six months after the grant date. The 38 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued Company may issue not more than 9% of the number of total shares outstanding (determined on a quarterly basis) under the plan, which will terminate on June 30, 2007. At December 31, 1999, options to purchase 3.4 million shares at an average exercise price of $12.84 were outstanding under this plan. Stock Option Plan--In August 1997, the Company adopted the Group Maintenance America Corp. 1997 Stock Option Plan under which the Company may grant options to employees who are not eligible for awards under the Stock Awards Plan. The plan requires that options be granted at not less than fair market value of a share of common stock on the grant date. The plan also requires that no stock option granted shall vest in less than six months after the grant date. The Company may issue not more than 3% of the number of shares outstanding (determined on a quarterly basis) under this plan, which will terminate on June 30, 2007. At December 31, 1999, options to purchase 0.7 million shares at an average exercise price of $13.97 were outstanding under this plan. Founder Options--Between October 1996 and August 1997, the Company granted to directors, senior management and other employees options to purchase an aggregate of 388,800 shares of common stock at an exercise price of $3.08. These options vest and expire over various periods. At December 31, 1999, options to purchase 352,000 shares of common stock were outstanding under this plan. During 1999 and 1998, the Company issued options to purchase approximately 0.8 million and 1.6 million shares of common stock at a weighted average exercise price of $13.17 and $14.32, respectively. These options vest at a rate of 25% per year and expire at various dates during 2003 and 2004. Additionally, the Company issued options to purchase 0.3 million and 0.1 million shares of common stock in connection with acquisitions at a weighted average exercise price of $4.09 and $11.89 in 1998 and 1997, respectively. These options were valued at $3.4 million and $1.2 million in 1998 and 1997, respectively, and are included in the purchase price of the acquired company. Substantially all of these options are immediately exercisable. As consideration for a company acquired in January 1999, the Company issued 80,000 warrants to purchase shares of common stock at $19.50 per share. These warrants were valued at $0.4 million and are included in the purchase price of the acquired company. As consideration for a company acquired in November 1998, the Company issued 829,000 warrants to purchase shares of common stock at $19.30 per share. As indicated in Note 7, substantially all of the warrants issued in November 1998 were surrendered in January 1999 and accordingly no value was included for these warrants in the purchase price of the acquired company. In connection with the purchase of one company in July 1997, the Company issued warrants to purchase 514,000 shares of common stock at $17.50 per share. These warrants were valued at $1.0 million and are included in the purchase price of the acquired company. There were no options issued in connection with acquisitions during 1999. 39 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued The following is a summary of stock option and warrant activity (in thousands, except for exercise price):
Weighted Average Number of Exercise Options and Price Warrants -------- ----------- Balance at April 30, 1997, date of Airtron Agreement...... 3.08 361 Granted................................................... 14.33 2,611 Exercised................................................. 3.08 (20) Surrendered............................................... 3.08 (25) ------ Balance at December 31, 1997.............................. 13.07 2,927 Granted................................................... 14.56 2,701 Exercised................................................. 5.77 (2) Surrendered............................................... 14.54 (165) ------ Balance at December 31, 1998.............................. 13.77 5,461 Granted................................................... 13.83 846 Exercised................................................. 5.45 (54) Surrendered............................................... 17.69 (1,186) ------ Balance at December 31, 1999.............................. 12.94 5,067 ======
A summary of outstanding and exercisable options and warrants as of December 31, 1999 follows:
Weighted Weighted Average Weighted Number of Average Exercise Number of Average Outstanding Remaining Price of Exercisable Range of Option and Options and Contractual Exercisable Options and Option and Warrant Warrants Life Options and Warrants Warrant Prices Prices (Thousands) (Years) Warrants (Thousands) -------------- ---------- ----------- ----------- ----------- ----------- $ 3.08 to $ 5.00.... $ 3.52 651 5.0 $ 3.27 387 $ 5.01 to $10.00.... $ 8.26 37 3.4 $ 7.46 10 $10.01 to $15.00.... $13.48 3,278 3.5 $13.72 1,091 $15.01 to $19.30.... $16.74 1,101 6.0 $17.76 690 ----- ----- 5,067 2,178 ===== =====
The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its stock options (other than options issued in connection with acquisitions). Accordingly, compensation cost has been recognized only for the options that have an exercise price less than the fair market value of the underlying stock at the date of grant. A compensation charge of approximately $0.2 million is reflected in the consolidated statements of operations and shareholders' equity for each of the years ended December 31, 1999 and 1998 and the ten months ended December 31, 1997 related to the issuance of management shares and stock options at prices below the fair market value at the date of issue or grant. 40 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued The following pro forma data is calculated as if compensation expense for the Company's stock option plans were determined based on the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No. 123, Accounting for Stock-Based Compensation (in thousands, except per share data):
Year Ended Year Ended Ten Months Ended December 31, 1999 December 31, 1998 December 31, 1997 ------------------ ----------------- ------------------- As Pro As Pro As Pro Reported Forma Reported Forma Reported Forma ------------------ -------- -------- ---------- -------- Net income (loss)....... $ 41,556 $ 37,320 $ 25,929 $ 23,173 $ (3,642) $ (3,983) Net income (loss) per share: Basic................. $ 1.12 $ 1.00 $ 0.94 $ 0.84 $ (0.34) $ (0.37) Diluted............... $ 1.11 $ 1.00 $ 0.93 $ 0.83 $ (0.34) $ (0.37)
The pro forma compensation cost may not be representative of that to be expected in future years because options vest over several years and additional awards may be made each year. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
Ten Months Ended December 31, 1997 Year Ended ------------------------- December 31, Subsequent to Prior to -------------------- the Airtron the Airtron 1999 1998 Agreement Agreement ---------- --------- ------------- ----------- Dividend yield................ -- -- -- -- Expected volatility........... 50.0% 48.0% 33.0% 0% Risk-free interest rate....... 6.60% 4.70% 5.83% 6.26% Expected lives................ 5.0 years 5.0 years 6.6 years 10.0 years Fair value of options at grant date......................... $6.832 $7.445 $5.425 $1.425
10. SHAREHOLDERS' EQUITY On October 24, 1996, the Company entered into a stock subscription agreement with an individual providing for the sale of up to 2.6 million shares of common stock at a purchase price of $3.08 per share. At December 31, 1997, the Company had sold all of the 2.6 million shares. During November and December 1997, the Company completed the IPO involving the sale of 8.3 million shares of common stock at a price to the public of $14.00 per share. The net proceeds from the IPO (after deducting underwriting discounts and commissions and offering expenses) were approximately $103.6 million. Of this amount, $29.8 million was used to pay the cash portion of the closing consideration relating to certain acquired businesses, $42.6 million to repay corporate indebtedness and debt assumed in connection with the acquisition of businesses, $19.3 million to retire all of the then outstanding preferred stock and $11.9 million for general corporate purposes including working capital, final consideration settlements related to acquired businesses and future acquisitions. In March 1998, the Company issued $0.8 million of subordinated convertible debentures to fund a portion of the consideration of one acquisition. These debentures were converted to 68,000 shares of common stock during 1998. As discussed in Note 8, under the Airtron Agreement, the Company received certain tax benefits related to the exercise of previously outstanding warrants and distributions under deferred compensation arrangements. The Company repaid a portion of these benefits to the former shareholders of Airtron as the benefits were realized. In addition to the tax benefits paid to the former shareholders, the Company realized additional tax benefits during 41 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued 1999 totaling $5.8 million. As these tax benefits were generated through equity transactions, the resulting benefit has been recorded directly to additional paid-in capital in the accompanying consolidated statements of shareholders' equity. 11. INCOME TAXES Income tax expense consists of the following (in thousands):
Year Ended Ten Months December 31, Ended ----------------- December 31, 1999 1998 1997 -------- -------- ------------ Current: Federal........................................ $ 27,716 $ 13,553 $ -- State.......................................... 4,391 3,274 489 -------- -------- ------- 32,107 16,827 489 Deferred: Federal and state.............................. 2,376 3,499 2,343 -------- -------- ------- $ 34,483 $ 20,326 $ 2,832 ======== ======== =======
Total income tax expense differs from the amounts computed by applying the U.S. federal statutory income tax rate to income (loss) before income tax provision as a result of the following (in thousands):
Year Ended Ten Months December 31, Ended ------------------ December 31, 1999 1998 1997 -------- -------- ------------ Income (loss) before income tax provision..... $ 76,039 $ 46,255 $ (810) Applicable U.S federal statutory rate......... 35.0% 35.0% 34.0% -------- -------- ------- Tax provision (benefit) at statutory rate..... 26,614 16,189 (275) Increase (decrease) resulting from: State income taxes, net of federal benefit.. 2,854 2,128 323 Compensation expense from reverse acquisition and issuance of management shares and stock options................... 64 59 2,455 Non-deductible goodwill amortization........ 3,208 1,975 199 Non-deductible merger and related costs..... 1,304 -- -- Other....................................... 439 (25) 130 -------- -------- ------- $ 34,483 $ 20,326 $ 2,832 ======== ======== =======
42 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued The components of the deferred income tax assets and liabilities are as follows (in thousands):
December 31, --------------- 1999 1998 ------- ------ Deferred income tax assets: Allowance for doubtful accounts.............................. $ 3,740 $2,088 Inventories.................................................. 460 300 Accrued expenses............................................. 6,732 5,101 Deferred revenue............................................. 1,620 1,510 Compensation and benefits.................................... -- 280 Net operating loss carryforward.............................. 339 497 Other........................................................ 624 259 ------- ------ Total deferred income tax assets........................... 13,515 10,035 ------- ------ Deferred income tax liabilities: Depreciation................................................. (2,091) (951) Completed contract accounting for tax purposes............... (2,707) (1,899) Amortization of goodwill..................................... (3,026) (46) Other........................................................ (1,292) (293) ------- ------ Total deferred income tax liabilities...................... (9,116) (3,189) ------- ------ Net deferred income tax assets............................. $ 4,399 $6,846 ======= ======
These deferred income tax assets and liabilities are included in the accompanying consolidated balance sheets under the following captions (in thousands):
December 31, --------------- 1999 1998 ------- ------ Deferred tax assets -- current................................. $10,537 $7,579 Deferred tax liabilities -- long-term.......................... (6,138) (733) ------- ------ $ 4,399 $6,846 ======= ======
Management believes it is more likely than not that the Company will realize the benefits of the net deferred tax assets. Accordingly, no valuation allowance has been recorded as of December 31, 1999 or December 31, 1998. 12. LEASES Operating leases for certain facilities and transportation equipment expire at various dates through 2012. Certain leases contain renewal options. Approximate minimum future rental payments as of December 31, 1999 are as follows (in thousands): 2000................................................................... $ 21,172 2001................................................................... 19,018 2002................................................................... 17,194 2003................................................................... 14,907 2004................................................................... 10,119 Thereafter............................................................. 51,089 -------- $133,499 ========
43 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued Total rental expense for the years ended December 31, 1999 and 1998 and the ten months ended December 31, 1997 was approximately $22.0 million, $13.5 million and $2.3 million, respectively (including $5.6 million, $4.3 million and $1.2 million, respectively, to related parties). 13. EMPLOYEE BENEFIT PLANS Effective January 1, 1999, the Company adopted a defined contribution savings plan (the "Savings Plan") to consolidate and replace the existing defined contribution employee retirement plans at acquired companies. In addition, certain of the Company's subsidiaries maintain defined contribution employee retirement plans that have not yet been merged into the Savings Plan. These plans are open to certain employees after various lengths of service. Employee contributions and employer matching contributions occur at different rates and the matched portions of the funds vest over a period of years. Company contributions to these plans totaled approximately $7.1 million, $4.8 million and $0.4 million for the years ended December 31, 1999 and 1998 and the ten months ended December 31, 1997, respectively. Certain of the Company's subsidiaries make contributions to union- administered benefit funds that cover the majority of these companies' union employees. For the years ended December 31, 1999 and 1998 and the ten months ended December 31, 1997, the participant costs charged to operations were approximately $24.3 million, $8.8 million and $0.6 million, respectively. Governmental regulations require that, in the event of plan termination or employer withdrawal, an employer may be liable for a portion of the plan's unfunded vested benefits, if any. The Company is not aware of any liabilities resulting from unfunded vested benefits related to union administered benefit plans. The Company does not anticipate withdrawal from the plans, nor is the Company aware of any expected plan terminations. 14. COMMITMENTS AND CONTINGENCIES The Company is involved in various legal actions. It is not possible to predict the outcome of these matters; however, in the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's consolidated financial position or results of operations. 15. FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash and cash equivalents and short- and long-term debt. The Company believes that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair value. 16. OPERATING SEGMENTS The Company's reportable segments are strategic business units that offer products and services to two distinct customer groups. They are managed separately because each business requires different operating and marketing strategies. The Company has two reportable segments: commercial/industrial and residential markets. The commercial/industrial segment provides maintenance, repair and replacement services and new installation services in manufacturing and processing facilities, power generation facilities, hospitals and other critical care facilities, colleges and universities, hotels, commercial office buildings and complexes, retail stores and restaurants, supermarkets and convenience stores. The residential segment provides maintenance, repair and replacement services and new installation services in single family and low- rise multifamily housing units. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on income from operations of the respective business units prior to unallocated corporate expenses. 44 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued Other activities include financial data of two operating subsidiaries that provide products and services outside of those performed by the Company's two primary operating segments. Unallocated corporate expenses primarily include (1) corporate overhead, (2) corporate and operating company management bonuses, and (3) savings from national purchase agreements relating to materials and property/casualty insurance. Assets, capital expenditures and depreciation expense for the corporate function are included in the "Other" column in the presentation below. Segment information for the years ended December 31, 1999 and 1998 and the ten months ended December 31, 1997 was as follows (in thousands):
Commercial/ Industrial Residential Other Total ----------- ----------- -------- ----------- YEAR ENDED DECEMBER 31, 1999: Revenues........................ $ 1,217,712 $ 328,122 $ 1,957 $ 1,547,791 Operating costs................. 1,120,034 296,348 1,523 1,417,905 ----------- --------- -------- ----------- Subtotal........................ 97,678 31,774 434 129,886 Goodwill amortization........... 10,550 1,872 180 12,602 ----------- --------- -------- ----------- Segment operating earnings...... $ 87,128 $ 29,902 $ 254 117,284 =========== ========= ======== Merger and related charges...... (3,725) Unallocated corporate expenses.. (9,575) ----------- Income from operations.......... $ 103,984 =========== Assets.......................... $ 888,744 $ 124,374 $ 48,415 $ 1,061,533 Capital expenditures............ 11,008 2,461 6,585 20,054 Depreciation expense............ 11,001 3,060 512 14,573 YEAR ENDED DECEMBER 31, 1998: Revenues........................ $ 472,451 $ 286,737 $ 2,353 $ 761,541 Operating costs................. 434,431 257,917 2,077 694,425 ----------- --------- -------- ----------- Subtotal........................ 38,020 28,820 276 67,116 Goodwill amortization........... 4,130 1,652 178 5,960 ----------- --------- -------- ----------- Segment operating earnings...... $ 33,890 $ 27,168 $ 98 61,156 =========== ========= ======== Unallocated corporate expenses.. (9,090) ----------- Income from operations.......... $ 52,066 =========== Assets.......................... $ 542,998 $ 123,775 $ 34,308 $ 701,081 Capital expenditures............ 6,157 2,376 759 9,292 Depreciation expense............ 4,847 2,745 311 7,903 TEN MONTHS ENDED DECEMBER 31, 1997: Revenues........................ $ 23,305 $ 113,927 $ 1,247 $ 138,479 Operating costs................. 22,023 103,017 1,068 126,108 ----------- --------- -------- ----------- Subtotal........................ 1,282 10,910 179 12,371 Goodwill amortization........... 174 351 108 633 ----------- --------- -------- ----------- Segment operating earnings...... $ 1,108 $ 10,559 $ 71 11,738 =========== ========= ======== Unallocated corporate expenses.. (11,516) ----------- Income from operations.......... $ 222 =========== Assets.......................... $ 65,566 $ 96,237 $ 30,884 $ 192,687 Capital expenditures............ 355 1,376 286 2,017 Depreciation expense............ 147 575 58 780
45 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES (FORMERLY GROUP MAINTENANCE AMERICA CORP. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued Maintenance, repair and replacement services represented 59%, 53% and 35% and new installation services represented 41%, 47%, and 65% of total revenues for the years ended December 31, 1999 and 1998 and the ten months ended December 31, 1997, respectively. 17. QUARTERLY FINANCIAL SUMMARY (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Fourth Third Second First --------- --------- --------- --------- 1999 Revenues................................ $ 426,320 $ 436,852 $ 381,854 $ 302,765 Income from operations.................. 24,863 33,645 29,242 16,234 Net income.............................. 8,136 14,820 12,921 5,679 Earnings per share: Basic................................. $ 0.21 $ 0.39 $ 0.35 $ 0.16 Diluted............................... $ 0.21 $ 0.39 $ 0.35 $ 0.16 Fourth Third Second First --------- --------- --------- --------- 1998 Revenues................................ $ 283,597 $ 211,667 $ 159,185 $ 107,092 Income from operations.................. 19,746 16,297 11,452 4,571 Net income.............................. 9,193 8,369 6,095 2,272 Earnings per share: Basic................................. $ 0.28 $ 0.30 $ 0.24 $ 0.10 Diluted............................... $ 0.28 $ 0.30 $ 0.24 $ 0.10
The fourth quarter of 1999 results of operations includes non-recurring, non-deductible merger and related charges of $3.7 million associated with the Merger that was completed subsequent to year end (see Note 18). 18. EVENTS SUBSEQUENT TO INDEPENDENT AUDITORS' REPORT On February 22, 2000, the shareholders of both GroupMAC and Building One Services Corporation (Building One) approved a merger of the two companies. Under the terms of the merger, each outstanding share of Building One common stock was converted into 1.25 shares of GroupMAC common stock. In addition, approximately 11,052,000 shares of GroupMAC common stock were converted into cash at a rate of $13.50 per share pursuant to a cash election right available to GroupMAC shareholders. In connection with the closing of the merger, GroupMAC amended its articles of incorporation to change its name to Encompass Services Corporation. Concurrent with the closing of the merger, an affiliate of Apollo Management, L.P. exchanged $106 million of Building One convertible junior subordinated debentures and $150 million of cash for approximately $256 million of Encompass convertible preferred stock. The preferred stock will mature in 2012, will bear a dividend yield coupon rate of 7.25% and will be convertible into shares of Encompass common stock at an initial conversion price of $14 per common share. The proceeds from the issuance of the convertible preferred stock were used to fund the cash election feature of the merger. On February 22, 2000, Encompass entered into a new credit agreement to provide a total of $800 million in financing. The proceeds of this new credit agreement were used to refinance the existing revolving credit facilities of GroupMAC and Building One, as well as GroupMAC's senior subordinated notes. In addition, Encompass assumed the 10 1/2% Senior Subordinated Notes due 2009 of Building One. GroupMAC was the surviving legal entity in the merger. However, for accounting purposes, Building One is deemed to be the acquiror and, accordingly, the merger will be accounted for as a "reverse acquisition." Under this method of accounting, Encompass' historical results for periods prior to the merger will be the same as Building One's historical results. 46 INDEPENDENT AUDITORS' REPORT The Board of Directors Group Maintenance America Corp. We have audited the accompanying balance sheets of Group Maintenance America Corp. (the Company) as of December 31, 1996 and April 30, 1997, and the related statements of operations, shareholders' equity (deficit), and cash flows for the periods from October 21, 1996 (inception) to December 31, 1996 and the four months ended April 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Group Maintenance America Corp. as of December 31, 1996 and April 30, 1997 and the results of its operations and its cash flows for the periods from October 21, 1996 (inception) to December 31, 1996 and the four months ended April 30, 1997, in conformity with generally accepted accounting principles. KPMG LLP Houston, Texas July 11, 1997 47 GROUP MAINTENANCE AMERICA CORP. BALANCE SHEETS
December 31, April 30, ASSETS 1996 1997 ------ ------------ ---------- Current assets: Cash and cash equivalents................................ $ 228,036 $ 516,838 Due from employee........................................ 1,200 6,759 Prepaid expenses......................................... 2,341 -- ---------- ---------- Total current assets................................. 231,577 523,597 Property and equipment, net................................ 100,996 120,694 Other noncurrent assets.................................... 19,473 1,094,708 ---------- ---------- Total assets......................................... $ 352,046 $1,738,999 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) ---------------------------------------------- Current liabilities: Accounts payable......................................... $ 137,377 $ 527,869 Accrued expenses......................................... 6,118 1,478,898 ---------- ---------- Total current liabilities............................ 143,495 2,006,767 Long-term debt............................................. 75,000 75,000 Other long-term liabilities................................ -- 73,424 Commitments and contingencies Shareholders' equity (deficit): Preferred stock, $.001 par value; 50,000,000 shares authorized; none issued or outstanding.............................. -- -- Common stock, $.001 par value; 100,000,000 shares authorized; 1,211,345 and 1,611,345 shares issued, respectively..... 1,211 1,611 Additional paid-in capital............................... 8,238,857 8,238,457 Retained earnings........................................ (722,517) (2,503,260) Subscriptions receivable................................. (7,384,000) (6,153,000) ---------- ---------- Total shareholders' equity (deficit)................. 133,551 (416,192) ---------- ---------- Total liabilities and shareholders' equity........... $ 352,046 $1,738,999 ========== ==========
The accompanying notes are an integral part of these financial statements. 48 GROUP MAINTENANCE AMERICA CORP. STATEMENTS OF OPERATIONS
Inception (October 21, 1996) Four months through ended December 31, April 30, 1996 1997 ------------ ----------- Revenues.............................................. $ -- $ -- Cost of services...................................... -- -- --------- ----------- Gross profit...................................... -- -- Selling, general and administrative expenses.......... 724,006 1,783,409 --------- ----------- Loss from operations.............................. (724,006) (1,783,409) --------- ----------- Other income (expense): Interest expense..................................... (1,118) (2,000) Interest income...................................... 2,607 4,666 --------- ----------- Loss before income tax provision.................. (722,517) (1,780,743) Income tax provision.................................. -- -- --------- ----------- Net loss.............................................. $(722,517) $(1,780,743) ========= ===========
The accompanying notes are an integral part of these financial statements. 49 GROUP MAINTENANCE AMERICA CORP. STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock ---------------- Additional Shareholders' Number of Paid-In Retained Subscriptions Equity Shares Amount Capital Earnings Receivable (Deficit) --------- ------ ---------- ----------- ------------- ------------- Balance, October 21, 1996................... -- $ -- $ -- $ -- $ -- $ -- Net loss............... -- -- -- (722,517) -- (722,517) Issuance of subscription agreement............. -- -- 8,000,000 -- (8,000,000) -- Issuance of common stock................. 791,345 791 32,807 -- -- 33,598 Shares issued under subscription agreement............. 200,000 200 (200) -- 616,000 616,000 Compensation expense related to issuance of management shares..... 220,000 220 206,250 -- -- 206,470 --------- ------ ---------- ----------- ----------- ---------- Balance, December 31, 1996................... 1,211,345 1,211 8,238,857 (722,517) (7,384,000) 133,551 Net loss............... -- -- -- (1,780,743) -- (1,780,743) Shares issued under subscription agreement............. 400,000 400 (400) -- 1,231,000 1,231,000 --------- ------ ---------- ----------- ----------- ---------- Balance, April 30, 1997................... 1,611,345 $1,611 $8,238,457 $(2,503,260) $(6,153,000) $ (416,192) ========= ====== ========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements. 50 GROUP MAINTENANCE AMERICA CORP. STATEMENTS OF CASH FLOWS
Inception (October 21, 1996) Four Months through ended December 31, April 30, 1996 1997 ------------ ----------- Cash flows from operating activities: Net loss............................................ $(722,517) $(1,780,743) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization...................... 3,343 12,877 Noncash compensation charge........................ 206,250 -- Changes in operating assets and liabilities: (Increase) decrease in -- Prepaid expenses and other assets................ (3,541) (3,218) Other noncurrent assets.......................... -- (1,567) Increase (decrease) in -- Accounts payable................................. 137,377 390,492 Accrued expenses................................. 6,118 979,562 --------- ----------- Net cash used in operating activities........... (372,970) (402,597) --------- ----------- Cash flows from investing activities: Purchases of property and equipment................. (104,339) (32,575) --------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock.............. 649,818 1,231,000 Proceeds from borrowings............................ 75,000 -- Deferred offering costs............................. (19,473) (439,205) Deferred financing costs............................ -- (67,821) --------- ----------- Net cash provided by financing activities....... 705,345 723,974 --------- ----------- Increase in cash and cash equivalents................ 228,036 288,802 Cash and cash equivalents, beginning of period....... -- 228,036 --------- ----------- Cash and cash equivalents, end of period............. $ 228,036 $ 516,838 ========= ===========
The accompanying notes are an integral part of these financial statements. 51 GROUP MAINTENANCE AMERICA CORP. NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION Group Maintenance America Corp. (the Company or GroupMAC Parent) was incorporated in October 1996 and, therefore, the financial statements reflect the period since the Company's inception through December 31, 1996 and the four months ended April 30, 1997. The Company's primary business is to build a national company providing heating, ventilation and air conditioning (HVAC), plumbing and electrical services. Effective April 30, 1997, GroupMAC Parent entered into an Agreement and Plan of Exchange (the Agreement) with Airtron, Inc. (Airtron), in which $20,366,951 in cash, 14,873,133 shares of GroupMAC Parent preferred stock and 4,652,140 shares of GroupMAC Parent common stock were issued to shareholders of Airtron in exchange for 100 percent of the then outstanding shares of Airtron. In connection with this merger the combined company is referred to as GroupMAC and Subsidiaries. The Agreement closed on May 2, 1997 with the cash portion funded by the Company's available credit facility and a capital contribution from a shareholder pursuant to a stock subscription agreement (see note 6). For accounting purposes, the transaction was accounted for as a reverse acquisition, as if Airtron acquired GroupMAC Parent, as the former shareholders of Airtron then owned a majority of GroupMAC Parent's common stock. Concurrent with this transaction, the resulting combined entity will be named Group Maintenance America Corp. and Subsidiaries. The Company is included in the consolidated financial statements of GroupMAC and Subsidiaries, presented elsewhere herein, for periods subsequent to the effective date of the acquisition. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. There were no cash payments for interest or income taxes in 1996 or in the four months ended April 30, 1997. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures of major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property or equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statements of operations. Income Taxes The Company follows the liability method of accounting for income taxes in accordance with Statement of Financial Accounting Standards No. 109. Under this method deferred income taxes are recorded based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the underlying assets or liabilities are received or settled. 52 GROUP MAINTENANCE AMERICA CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) The Company has recorded a full valuation allowance against all deferred tax assets due to the uncertainty of ultimate realizability. Accordingly, no income tax benefit has been recorded for the losses incurred. 3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS Other noncurrent assets consists of the following:
December 31, April 30, 1996 1997 ------------ ---------- Deferred offering costs.......................... $13,648 $ 452,853 Deferred financing costs......................... -- 634,463 Other noncurrent assets.......................... 5,825 7,392 ------- ---------- $19,473 $1,094,708 ======= ==========
Accrued expenses consists of the following:
December 31, April 30, 1996 1997 ------------ ---------- Accrued compensation............................. $ -- $ 767,476 Accrued financing costs.......................... -- 566,642 Other accrued expenses........................... 6,118 144,780 ------ ---------- $6,118 $1,478,898 ====== ==========
4. PROPERTY AND EQUIPMENT The principal categories and estimated useful lives of property and equipment are as follows:
Estimated December 31, April 30, Useful Lives 1996 1997 ------------ ------------ --------- Office equipment, furniture and fixtures.......................... 3-7 years $104,339 $136,358 Less accumulated depreciation...... (3,343) (15,664) -------- -------- $100,996 $120,694 ======== ========
5. LONG-TERM DEBT Credit Agreement In May 1997, the Company entered into a credit agreement (the Credit Agreement) with a group of banks providing for secured facilities consisting of an 18-month revolving credit line of $3 million, a six-year term loan of $20 million used in connection with the acquisition of Airtron (see note 1) and a term loan facility, available until October 31, 1998, providing for up to $12 million in term loans having a final maturity six years after the date of the Credit Agreement, to be used in connection with future acquisitions. Loans under the revolving credit facility are limited to a borrowing base consisting of 70% of eligible accounts receivable. Interest on outstanding borrowings is payable in quarterly installments beginning August 31, 1997. A commitment fee of .25% is payable on the unused portion of the revolving credit line. The Credit Agreement contains covenants which, among other matters, restrict or limit the ability of the Company to pay dividends, incur indebtedness, make capital expenditures and repurchase capital stock. The Company must also maintain a minimum fixed charge coverage ratio (as defined) and certain other ratios, among other restrictions. 53 GROUP MAINTENANCE AMERICA CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) As of June 30, 1997, available borrowing capacity under the Credit Agreement was $5.4 million. Long-Term Debt On October 24, 1996, the Company executed a $75,000 subordinated note with a Texas limited liability company. The note bears interest at eight percent (8%) and is payable upon the earlier of (i) the closing of the Company's first public offering of its common stock or (ii) two years from the date of the note. The note is subordinate to all indebtedness of the Company to the banks and is guaranteed by certain officers of the Company. 6. SHAREHOLDERS' EQUITY (DEFICIT) Common Stock The Company is authorized to issue 100 million shares of common stock, $.001 par value. There were 1,211,345 and 1,611,345 shares of common stock issued and outstanding at December 31, 1996 and April 30, 1997, respectively. In connection with the sale of certain shares of common stock to management, a nonrecurring, noncash compensation charge of $206,250 was recorded in 1996 to reflect the difference between the amount paid for the shares and the estimated fair value of the shares on the date of sale. On October 24, 1996, the Company entered into a stock subscription agreement with an individual allowing for the purchase of up to 2.6 million shares of common stock at a purchase price of $3.08 per share. Under this agreement, 0.2 million shares were purchased in October 1996, 0.2 million in January 1997 and 0.2 million in April 1997 and additional shares are required to be purchased upon written notice from the Company, but in no event later than October 24, 1998. Subsequent to April 30, 1997, an additional 1.658 million shares have been purchased under the Subscription Agreement. Preferred Stock The Company is authorized to issue up to 50 million shares of preferred stock, par value $.001 per share, in one or more series. As of December 31, 1996 and April 30, 1997, none were outstanding. Options Under an option agreement dated October 24, 1996, the Company is authorized to grant stock options with respect to 388,800 shares of the Company's common stock to directors and senior management. The following is a summary of stock option activity and number of shares reserved for outstanding options.
Option Price Number Per Share of Shares ------------ --------- Granted............................................ $3.08 291,600 ------- Balance at December 31, 1996....................... 291,600 Granted............................................ $3.08 69,200 ------- Balance at April 30, 1997.......................... 360,800 =======
At April 30, 1997, options representing 28,000 shares were available to be granted under the option agreement. 54 GROUP MAINTENANCE AMERICA CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) The Company has adopted the disclosure-only provisions of the Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-based Compensation. Accordingly, no compensation cost has been recognized for the option agreement as all options have an exercise price equal to or greater than the fair value of the underlying stock at date of grant. Had compensation cost for the Company's stock option plan been determined consistent with the provisions of SFAS No. 123, net loss would have been increased by the following pro forma amounts:
Inception (October 21, Four months 1996) through ended December 31, April 30, 1996 1997 ------------- ----------- Net loss: As reported.................................. $(722,517) $(1,780,743) Pro forma.................................... $(745,602) $(1,837,870)
The pro forma compensation cost may not be representative of that to be expected in future years because options vest over several years and additional awards may be made each year. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used by the plan for fiscal 1996 and for the four months ending April 30, 1997: no dividend yield; expected volatility of 0%; risk-free interest rate of 6.26%; and expected lives of ten years. The weighted average fair value per share of the options granted during fiscal 1996 and in the four months ending April 30, 1997 is estimated to be $1.425. 7. INCOME TAXES There is no Federal income tax provision as losses were incurred and a valuation allowance has been established against future benefits deriving from the carryforward of these losses. 8. COMMITMENTS AND CONTINGENCIES The Company has entered into various operating lease agreements, primarily for office space, furniture and service equipment. Minimum annual rental payments under non-cancelable operating leases as of June 30, 1997, were approximately as follows:
For the year ending April 30, ----------------------------- 1997.............................................................. $46,000 1998.............................................................. 600 1999.............................................................. 300
Rental expense under operating leases was $9,032 for the period ended December 31, 1996 and $49,194 for the four months ending April 30, 1997. 9. EVENT SUBSEQUENT TO INDEPENDENT AUDITORS' REPORT--STOCK SPLIT On August 16, 1997, the Company's Board of Directors declared a 1-for-2.5 reverse stock split of the Company's common stock. All share data included in the consolidated financial statements have been restated to reflect the stock split. 55 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None PART III Item 10. Directors and Executive Officers of the Registrant. The information appearing under the caption "Election of Directors" in the Company's proxy statement for the 2000 Annual Meeting of Shareholders is incorporated herein by reference. Information regarding executive officers of the Company is presented in Item 4A of this Form 10-K under the caption "Executive Officers of the Registrant." Item 11. Executive Compensation. Information appearing under the caption "Executive Compensation" in the Company's proxy statement for the 2000 Annual Meeting of Shareholders is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. Information appearing under the caption "Stock Ownership" in the Company's proxy statement for the 2000 Annual Meeting of Shareholders is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. Information appearing under the caption "Transactions with Management and Others" in the Company's proxy statement for the 2000 Annual Meeting of Shareholders is incorporated herein by reference. 56 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) The following documents are filed as part of this report: 1. Financial statements See "Index to Financial Statements" set forth in Item 8, "Financial Statements and Supplementary Data." 2. Financial statement schedules None 3. Exhibits
Number Description of Exhibit ------ ---------------------- 2.1* --Agreement and Plan of Merger dated as of November 2, 1999 by and between Group Maintenance America Corp. and Building One Services Corporation (Exhibit 2.1 to Registration Statement No. 333-93649). 3.1 --Certificate of Merger dated February 22, 2000 merging Building One Services Corporation into Group Maintenance America Corp., together with Exhibit A thereto (the Amended and Restated Articles of Incorporation of Encompass). 3.2 --Statement of Designation dated February 15, 2000 relating to the 7.25% Convertible Preferred Stock of Encompass. 3.3* --By-laws of Encompass, as amended (Exhibit 3.2 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 4.1 --Indenture dated as of April 30, 1999, among Building One Services Corporation, the guarantors named therein and IBJ Whitehall Bank & Trust Company, as Trustee. 4.2 --First Supplemental Indenture dated as of November 12, 1999, among Building One Services Corporation, the guarantors named therein and IBJ Whitehall Bank & Trust Company, as Trustee. 4.3 --Second Supplemental Indenture dated as of January 31, 2000, among Building One Services Corporation, the guarantors named therein and IBJ Whitehall Bank & Trust Company, as Trustee. 4.4 --Third Supplemental Indenture dated as of February 22, 2000 among Building One Services Corporation, Group Maintenance America Corp., the guarantors named therein and The Bank of New York, as successor to IBJ Whitehall Bank & Trust Company, as Trustee. 9 --None. 10.1*+ --Group Maintenance America Corp. 1997 Stock Awards Plan (Exhibit 10.1 to Registration Statement No. 333-34067). 10.2*+ --Group Maintenance America Corp. 1997 Stock Option Plan (Exhibit 10.2 to Registration Statement No. 333-34067). 10.3*+ --2000 Stock Performance Incentive Plan of Encompass Services Corporation (Annex G to Joint Proxy Statement of Encompass dated January 18, 2000). 10.4*+ --2000 Stock Awards Plan of Encompass Services Corporation (Annex H to Joint Proxy Statement of Encompass dated January 18, 2000). 10.5*+ --Employment Agreement between Encompass and J. Patrick Millinor, Jr. (Exhibit 10.4 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 10.6*+ --Employment Agreement between Encompass and Donald L. Luke (Exhibit 10.5 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 10.7+ --Employment Agreement dated March 1, 1998 between Encompass and Alfred R. Roach, Jr. 10.8+ --Employment Agreement dated March 1, 1998 between Encompass and Chester J. Jachimiec. 10.9+ --Employment Agreement dated March 1, 1998 between Encompass and Darren B. Miller. 10.10*+ --Modification to employment contract with J. Patrick Millinor, Jr. (Exhibit 10.12 to Registration Statement No. 333-93649). 10.11*+ --Modification to employment contract with Donald L. Luke (Exhibit 10.13 to Registration Statement No. 333-93649).
57
Number Description of Exhibit ------ ---------------------- 10.12*+ --Modification to employment contract with Chester J. Jachimiec (Exhibit 10.14 to Registration Statement No. 333-93649). 10.13*+ --Modification to employment contract with Darren B. Miller (Exhibit 10.15 to Registration Statement No. 333-93649). 10.14*+ --Modification to employment contract with Alfred R. Roach, Jr. (Exhibit 10.16 to Registration Statement No. 333-93649). 10.15 --Credit Agreement dated as of February 22, 2000 among Encompass, the subsidiaries of Encompass named therein, Bank of America, N.A., as administrative agent, Chase Bank of Texas, National Association, as syndication agent, First Union National Bank, as documentation agent, and the banks named therein. 10.16* --Subscription and Exchange Agreement dated November 2, 1999 between Group Maintenance America Corp., and BOSS II, LLC (Exhibit 10.11 to Registration Statement No. 333-93649). 10.17 --Investors' Rights Agreement dated as of February 22, 2000 between Group Maintenance America Corp. and BOSS II, LLC. 10.18 --Warrant Agreement dated as of November 25, 1997 between Consolidation Capital Corporation and Friedman, Billings, Ramsey & Co., Inc. 10.19 --Warrant Agreement dated as of November 25, 1997 between Consolidation Capital Corporation and Jonathan J. Ledecky. 11 --None. 12 --None. 13 --None. 16 --None. 18 --None. 21 --Subsidiaries of Encompass as of March 1, 2000. 22 --None. 23 --Consent of KPMG LLP. 24 --Powers of Attorney. 27 --Financial Data Schedule. 99 --None.
- -------- * Incorporated by reference from a prior filing as indicated. + Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K. On November 5, 1999, Encompass filed a Current Report on Form 8-K which disclosed, under Item 5 thereof, the issuance by the Company of a press release announcing that it had entered into an Agreement and Plan of Merger, dated November 2, 1999 (the "Merger Agreement"), with Building One Services Corporation ("Building One") under which Building One would be merged with and into the Company. On November 24, 1999, Encompass filed a Current Report on Form 8-K which reported, under Item 5 thereof, that the Company had announced that it had entered into the Merger Agreement with Building One. The report included audited financial statements of the businesses to be acquired and pro forma financial information of the Company reflecting the merger with Building One. (c) Encompass has not filed with this report copies of certain instruments defining the rights of holders of long-term debt of Encompass and its subsidiaries. Encompass agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request. 58 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of March, 2000. ENCOMPASS SERVICES CORPORATION /s/ J. Patrick Millinor, Jr. By: _________________________________ J. Patrick Millinor, Jr. Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ J. Patrick Millinor, Jr. Director and Chairman of the March 29, 2000 ______________________________________ Board J. Patrick Millinor, Jr. /s/ Joseph M. Ivey Director and Chief Executive March 29, 2000 ______________________________________ Officer (principal Joseph M. Ivey executive officer) /s/ Darren B. Miller Senior Vice President and March 29, 2000 ______________________________________ Chief Financial Officer Darren B. Miller (principal financial officer) /s/ Daniel W. Kipp Vice President, Treasurer March 29, 2000 ______________________________________ and Chief Information Daniel W. Kipp Officer (principal accounting officer) /s/ Donald L. Luke* Director, Executive Vice March 29, 2000 ______________________________________ President and Chief Donald L. Luke Operating Officer /s/ William P. Love* Director and Vice President, March 29, 2000 ______________________________________ Electrical Group William P. Love /s/ Andrew Africk* Director March 29, 2000 ______________________________________ Andrew Africk /s/ Vincent W. Eades* Director March 29, 2000 ______________________________________ Vincent W. Eades /s/ Michael Gross* Director March 29, 2000 ______________________________________ Michael Gross
59
Signature Title Date --------- ----- ---- /s/ Lucian L. Morrison* Director March 29, 2000 ______________________________________ Lucian L. Morrison /s/ Brooks Newmark* Director March 29, 2000 ______________________________________ Brooks Newmark /s/ M. Jude Reyes* Director March 29, 2000 ______________________________________ M. Jude Reyes* /s/ John M. Sullivan* Director March 29, 2000 ______________________________________ John M. Sullivan /s/ Darren B. Miller *By: _________________________________ Darren B. Miller (Attorney-in-fact for persons indicated)
60 EXHIBIT INDEX
Number Description of Exhibit ------ ---------------------- 2.1* --Agreement and Plan of Merger dated as of November 2, 1999 by and between Group Maintenance America Corp. and Building One Services Corporation (Exhibit 2.1 to Registration Statement No. 333-93649). 3.1 --Certificate of Merger dated February 22, 2000 merging Building One Services Corporation into Group Maintenance America Corp., together with Exhibit A thereto (the Amended and Restated Articles of Incorporation of Encompass). 3.2 --Statement of Designation dated February 15, 2000 relating to the 7.25% Convertible Preferred Stock of Encompass. 3.3* --By-laws of Encompass, as amended (Exhibit 3.2 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 4.1 --Indenture dated as of April 30, 1999, among Building One Services Corporation, the guarantors named therein and IBJ Whitehall Bank & Trust Company, as Trustee. 4.2 --First Supplemental Indenture dated as of November 12, 1999, among Building One Services Corporation, the guarantors named therein and IBJ Whitehall Bank & Trust Company, as Trustee. 4.3 --Second Supplemental Indenture dated as of January 31, 2000, among Building One Services Corporation, the guarantors named therein and IBJ Whitehall Bank & Trust Company, as Trustee. 4.4 --Third Supplemental Indenture dated as of February 22, 2000 among Building One Services Corporation, Group Maintenance America Corp., the guarantors named therein and The Bank of New York, as successor to IBJ Whitehall Bank & Trust Company, as Trustee. 9 --None. 10.1*+ --Group Maintenance America Corp. 1997 Stock Awards Plan (Exhibit 10.1 to Registration Statement No. 333-34067). 10.2*+ --Group Maintenance America Corp. 1997 Stock Option Plan (Exhibit 10.2 to Registration Statement No. 333-34067). 10.3*+ --2000 Stock Performance Incentive Plan of Encompass Services Corporation (Annex G to Joint Proxy Statement of Encompass dated January 18, 2000). 10.4*+ --2000 Stock Awards Plan of Encompass Services Corporation (Annex H to Joint Proxy Statement of Encompass dated January 18, 2000). 10.5*+ --Employment Agreement between Encompass and J. Patrick Millinor, Jr. (Exhibit 10.4 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 10.6*+ --Employment Agreement between Encompass and Donald L. Luke (Exhibit 10.5 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 10.7+ --Employment Agreement dated March 1, 1998 between Encompass and Alfred R. Roach, Jr. 10.8+ --Employment Agreement dated March 1, 1998 between Encompass and Chester J. Jachimiec. 10.9+ --Employment Agreement dated March 1, 1998 between Encompass and Darren B. Miller. 10.10*+ --Modification to employment contract with J. Patrick Millinor, Jr. (Exhibit 10.12 to Registration Statement No. 333-93649). 10.11*+ --Modification to employment contract with Donald L. Luke (Exhibit 10.13 to Registration Statement No. 333-93649). 10.12*+ --Modification to employment contract with Chester J. Jachimiec (Exhibit 10.14 to Registration Statement No. 333-93649). 10.13*+ --Modification to employment contract with Darren B. Miller (Exhibit 10.15 to Registration Statement No. 333-93649). 10.14*+ --Modification to employment contract with Alfred R. Roach, Jr. (Exhibit 10.16 to Registration Statement No. 333-93649). 10.15 --Credit Agreement dated as of February 22, 2000 among Encompass, the subsidiaries of Encompass named therein, Bank of America, N.A., as administrative agent, Chase Bank of Texas, National Association, as syndication agent, First Union National Bank, as documentation agent, and the banks named therein. 10.16* --Subscription and Exchange Agreement dated November 2, 1999 between Group Maintenance America Corp., and BOSS II, LLC (Exhibit 10.11 to Registration Statement No. 333-93649). 10.17 --Investors' Rights Agreement dated as of February 22, 2000 between Group Maintenance America Corp. and BOSS II, LLC.
Number Description of Exhibit ------ ---------------------- 10.18 --Warrant Agreement dated as of November 25, 1997 between Consolidation Capital Corporation and Friedman, Billings, Ramsey & Co., Inc. 10.19 --Warrant Agreement dated as of November 25, 1997 between Consolidation Capital Corporation and Jonathan J. Ledecky. 11 --None. 12 --None. 13 --None. 16 --None. 18 --None. 21 --Subsidiaries of Encompass as of March 1, 2000. 22 --None. 23 --Consent of KPMG LLP. 24 --Powers of Attorney. 27 --Financial Data Schedule. 99 --None.
- -------- * Incorporated by reference from a prior filing as indicated. + Management contract or compensatory plan or arrangement. EX-3.1 2 CERTIFICATE OF MERGER EXHIBIT 3.1 CERTIFICATE OF MERGER MERGING BUILDING ONE SERVICES CORPORATION INTO GROUP MAINTENANCE AMERICA CORP. GROUP MAINTENANCE AMERICA CORP., a corporation organized and existing under the laws of Texas, DOES HEREBY CERTIFY: FIRST: That the names and states of incorporation of each of the constituent corporations of the merger are as follows: Group Maintenance America Corp. Texas Building One Services Corporation Delaware Group Maintenance America Corp. was incorporated on April 16, 1997, pursuant to the Business Corporation Act of the State of Texas, the provisions of which permit the merger of a corporation of another state and a corporation organized and existing under the laws of said state. SECOND: That the Agreement and Plan of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 252 of the General Corporation Law of Delaware. THIRD: That the name of the surviving corporation of the merger is Group Maintenance America Corp., which shall herewith be changed to Encompass Services Corporation, a Texas corporation. FOURTH: That the Amended and Restated Articles of Incorporation of Group Maintenance America Corp. as are to be effected by the merger are set forth in their entirety and attached hereto as Exhibit A, and all the terms and provisions thereof are hereby incorporated in this Certificate of Merger and made a part hereof with the same force and effect as if herein set forth in full; and, from and after the effective date of the merger until further amended as provided by law, said Exhibit A, separate and apart from this Certificate of Merger shall be, and may be separately certified as, the Amended and Restated Articles of Incorporation of Group Maintenance America Corp., the surviving corporation. FIFTH: That the executed Agreement and Plan of Merger is on file at an office of the surviving corporation, the address of which is 8 Greenway Plaza, Suite 1500, Houston, Texas 77046. SIXTH: That a copy of the Agreement and Plan of Merger will be furnished, on request and without cost, to any stockholder of any constituent corporation. SEVENTH: That Group Maintenance America Corp. survives the merger and may be served with process in the State of Delaware in any proceeding for enforcement of any obligation of any constituent Delaware corporation as well as for enforcement of any obligation of the surviving corporation arising from the merger, including any suit or other proceeding to enforce the right of any stockholder as determined in appraisal proceedings pursuant to the provisions of Section 262 of the General Corporation Law of Delaware, and it does hereby irrevocably appoint the Secretary of State of Delaware as its agent to accept service of process in any such suit or other proceeding. The address to which a copy of such process shall be mailed by the Secretary of State of Delaware is 8 Greenway Plaza, Suite 1500, Houston, Texas 77046, until the surviving corporation shall have hereafter designated in writing to the said Secretary of State a different address for such purpose. EIGHTH: That this Certificate of Merger shall be effective upon filing. 2 Dated February 22, 2000 GROUP MAINTENANCE AMERICA CORP. By: /s/ J. Patrick Millinor, Jr. --------------------------------- Name: J. Patrick Millinor, Jr. Title: Chief Executive Officer 3 EXHIBIT A AMENDED AND RESTATED ARTICLES OF INCORPORATION OF GROUP MAINTENANCE AMERICA CORP. ARTICLE I Group Maintenance America Corp., pursuant to the provisions of Article 4.07 of the Texas Business Corporation Act ("TBCA"), hereby adopts restated articles of incorporation which accurately copy the articles of incorporation and all amendments thereto that are in effect to date and as further amended by such restated articles of incorporation as hereinafter set forth and which contain no other change in any provision thereof. ARTICLE II The articles of incorporation of the corporation are amended by the restated articles of incorporation as follows: (1) Article I is amended in its entirety to be as follows: "ARTICLE I NAME The name of the Corporation is Encompass Services Corporation." (2) The first paragraph of Article IV is amended in its entirety to be as follows: "The total number of shares of all classes of stock which the Corporation shall have authority to issue is 250,000,000 which shall be divided into (a) 200,000,000 shares of common stock having a par value of $.001 per share ("Common Stock") and (b) 50,000,000 shares of preferred stock having a par value of $.001 per share ("Preferred Stock")." (3) Article VI is amended in its entirety to be as follows: ARTICLE VI REGISTERED OFFICE AND AGENT The street address of the registered office of the Corporation is 8 Greenway Plaza, Suite 1500, Houston, Texas 77046. The name of the registered agent of the Corporation at such address is J. Patrick Millinor, Jr." (4) Article VII is amended in its entirety to be as follows: "ARTICLE VII BOARD OF DIRECTORS (1) The property, affairs and business of the Corporation shall be managed by or under the direction of the Corporation's board of directors. Subject to the rights of the holders of any series of Preferred Stock, the number of directors constituting the board of directors of the Corporation shall not be less than nine (9) nor more than eighteen (18). Subject to the rights of the holders of any series of Preferred Stock, the number of directors shall be determined from time to time hereafter exclusively pursuant to a resolution adopted by the affirmative vote of a majority of the entire board of directors. For purposes of these Restated Articles of Incorporation, the "entire board of directors" shall mean the number of directors that would be in office if there were no vacancies nor any unfilled newly created directorships. Directors need not be residents of the State of Texas or shareholders of the Corporation. Until the third annual meeting of shareholders following effectiveness of these Restated Articles of Incorporation under the TBCA, the directors shall be divided into three classes, which shall consist, as nearly as possible, of one- third of the total number of directors constituting the entire Board of Directors, and designated Class I, Class II and Class III, respectively. Each director elected or appointed prior to the effectiveness of these Restated Articles of Incorporation under the TBCA shall serve for their full term, such that the term of each Class I director shall end at the second succeeding annual meeting of shareholders following effectiveness of these Restated Articles of Incorporation, the term of each Class II director shall end at the third succeeding annual meeting of shareholders following effectiveness of these Restated Articles of Incorporation, and the term of each Class III director shall end at the first succeeding annual meeting of shareholders following effectiveness of these Restated Articles of Incorporation. The term of each director elected after the effectiveness of these Restated Articles of Incorporation whether at an annual meeting or to fill a vacancy in the board of directors arising for any reason, including any increase in the size of the board of directors, shall end at the first annual meeting following his or her election. Commencing with the third annual meeting of shareholders following the effectiveness of these Restated Articles of Incorporation, the foregoing classification of the board of directors shall cease, and all directors shall be of one class and serve for a term ending at the annual meeting following the annual meeting at which the director was elected. In no case shall a decrease in the number of directors shorten the term of any incumbent director. Each director shall hold office after the annual meeting at which his or her term is scheduled to end until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, disqualification or removal from office in accordance with the TBCA. Any newly created directorship resulting from an increase in the number of directors may be filled by a majority of the board of directors then in office, provided that a quorum is present, and any other vacancy on the board of directors may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. (2) Notwithstanding anything else contained in these Restated Articles of Incorporation, whenever holders of any one or more series of Preferred Stock shall have the right, voting separately by class or series, to elect directors at any annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the provisions applicable to such class or series established pursuant to Paragraph 1 of Article IV hereof. Directors shall be elected by such holders annually unless expressly provided otherwise by the terms of such class or series of Preferred Stock. 2 (3) No director of the Corporation shall be removed from office as a director by vote or other action of the shareholders or otherwise except for cause." (5) Article XII is hereby deleted in its entirety. (6) Article XIII is amended in its entirety to be as follows: "ARTICLE XII PROVISIONS APPLICABLE TO BUSINESS COMBINATIONS 1. Vote Required for Certain Business Combinations. In addition to any affirmative vote required by law or these Articles of Incorporation or the Bylaws of the Corporation, and except as otherwise expressly provided in Section 2 of this Article XII, a Business Combination (as hereinafter defined) with, or proposed by or on behalf of, any Interested Shareholder (as hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of any Interested Shareholder or any person who thereafter would be an Affiliate or Associate of such Interested Shareholder, shall require the affirmative vote of not less than eighty percent (80%) of the votes entitled to be cast by the holders of all of the then outstanding shares of Voting Stock (as hereinafter defined), voting together as a single class, and the affirmative vote of not less than a majority of the votes entitled to be cast by the Voting Stock beneficially owned by persons other than such Interested Shareholder. Each share of Voting Stock shall have the number of votes granted to it in, or duly fixed by the board of directors pursuant to, Article IV of these Articles of Incorporation. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law, or in any agreement of the Corporation with any national securities exchange or otherwise. 2. Exceptions to Higher Vote Requirement. The provisions of Section 3 of this Article XII shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of these Articles of Incorporation or the Bylaws of the Corporation, or any agreement with any national securities exchange, if all of the conditions specified in any of the following Paragraphs (a), (b) or (c) are met or, in the case of a Business Combination not involving the payment of consideration to the holders of the Corporation's outstanding Capital Stock (as hereinafter defined), if the condition specified in the following Paragraph (a) is met: (a) The Business Combination shall have been approved either specifically, or as a transaction which is within a series of related transactions described with reasonable specificity, by at least an eighty percent (80%) vote of the Continuing Directors (as hereinafter defined), who shall at the time constitute at least a majority of the Whole Board (as hereinafter defined) (whether or not such approval occurs prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Interested Shareholder to become an Interested Shareholder). (b) All of the following conditions shall have been met: (i) The aggregate amount of cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of Common Stock of the Corporation in such Business Combination shall be at least equal to the higher amount determined under clauses (A) and (B) below: (A) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) ("Highest 3 Purchase Price") paid by or on behalf of the Interested Shareholder for any share of Common Stock in connection with the acquisition by the Interested Shareholder of beneficial ownership of shares of Common Stock, (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date"), or (y) in the transaction in which it became an Interested Shareholder, whichever is higher, in either case, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock; provided that if the Business Combination is effected more than 180 days after the last date upon which such Interested Shareholder paid the Highest Purchase Price, then the consideration to be received by the shareholders shall be increased by Interest (as hereinafter defined) with respect to the period from the date the Interested Shareholder paid the applicable Highest Purchase Price to the effective date of the Business Combination ("Adjustment Period"). (B) The Fair Market Value per share of Common Stock on the Announcement Date or on the date (the "Determination Date") on which the Interested Shareholder became an Interested Shareholder, whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock. (ii) The aggregate amount of cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock, other than Common Stock, shall be at least equal to the highest amount determined under clauses (A), (B) and (C) below: (A) (If applicable) the Highest Purchase Price paid by or on behalf of the Interested Shareholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Shareholder of beneficial ownership of shares of such class or series of Capital Stock, (x) within the two-year period immediately prior to the Announcement Date, or (y) in the transaction in which it became an Interested Shareholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; provided that if the Business Combination is effected more than 180 days after the last date upon which such Interested Shareholder paid the Highest Purchase Price, then the consideration to be received by the shareholders shall be increased by Interest with respect to the Adjustment Period. (B) The Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher, as adjusted for any subsequent stock split, stock 4 dividend, subdivision or reclassification with respect to such class or series of Capital Stock; and (C) (If applicable) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock would be entitled, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation regardless of whether the Business Combination to be consummated constitutes such an event. (iii) The consideration to be received by holders of a particular class or series of outstanding Capital Stock shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Shareholder in connection with its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varies as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Shareholder. (iv) After the Determination Date and prior to the consummation of such Business Combination: (A) Except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (B) There shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock of the Corporation), except as approved by a majority of the Continuing Directors; (C) There shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of common stock of the Corporation, unless the failure to increase such annual rate is approved by a majority of the Continuing Directors; and (D) Neither such Interested Shareholder nor any of its Affiliates shall have become the beneficial owner of any additional shares of Capital Stock or securities convertible into Capital Stock except as part of the transaction that results in such Interested Shareholder becoming an Interested Shareholder and except in a transaction that, after giving effect thereto, would not result in any increase in the percentage beneficial ownership of the Interested Shareholder or any of its Affiliates of any class or series of Capital Stock. (v) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act") (or any subsequent provisions replacing such Exchange Act, rules or regulations) 5 shall be mailed to all shareholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to the Exchange Act or subsequent provisions). (vi) Such Interested Shareholder shall not have made any major change in the Corporation's business or equity capital structure without the approval of a majority of the Continuing Directors. (vii) The Interested Shareholder and any of its Affiliates shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advantages, guarantees, pledges or other financial assistance or any tax credits or other tax advances provided by the Corporation or any Subsidiary, whether in anticipation of or in connection with such Business Combination or otherwise. (c) The Business Combination shall be allowed, permitted or required under the terms of any Statement of Designation governing any Preferred Stock of the Corporation or pursuant to the Investor's Rights Agreement by and between the Corporation and Boss II, LLC, or necessary or required as part of or in connection with the Merger. 3. Certain Definitions. The following definitions shall apply with respect to this Article XII: (a) The term "Business Combination" shall mean: (i) Any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (A) any Interested Shareholder or (B) any other company (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder which, in any case, involves the issuance, redemption, cancellation, exchange or conversion of shares, obligations, evidences of ownership, rights to purchase securities or other securities (in one transaction or a series of transactions) having an aggregate Fair Market Value (as hereinafter defined) of more than twenty percent (20%) of the Total Assets of the Corporation (as hereinafter defined); or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), including without limitation any other security device, to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder of any assets, securities or commitments of the Corporation or any Subsidiary (as hereinafter defined) having an aggregate Fair Market Value of more than twenty percent (20%) of the Total Assets of the Corporation; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of more than twenty percent (20%) of the Total Assets of the Corporation; or (iv) the adoption of any plan or proposal for the liquidation, spinoff, splitoff, splitup or dissolution of the Corporation proposed by or on behalf of any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or 6 (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of equity or convertible securities of the Corporation or any Subsidiary which is beneficially owned (as hereinafter defined) by an Interested Shareholder or any Affiliate of any Interested Shareholder by more than one percent, except for transactions described in subparagraphs (i), (ii) or (iii) of this Paragraph 3(a) which involve assets, cash, securities or other property of the Corporation with an aggregate Fair Market Value not in excess of twenty percent (20%) of the Total Assets of the Corporation; or (vi) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. (b) The term "Capital Stock" shall mean all capital stock of the Corporation now or hereafter authorized to be issued from time to time by the Corporation, and the term "Voting Stock" shall mean shares of Capital Stock which are entitled to vote generally in the election of directors. (c) The term "Total Assets of the Corporation" means the total assets of the Corporation, as reflected on the most recent consolidated balance sheet of the Corporation at the time the shareholders of the Corporation would be required to approve or adopt the transaction in question. (d) The term "person" shall mean any individual, firm, company, corporation, partnership, limited liability company, or other entity and shall include any "group" comprised of any person (as the term "group" is defined in Section 13(d)(3) of the Exchange Act). (e) "Interested Shareholder" means any person (other than the Corporation or any Subsidiary) who or which is the beneficial owner (as hereinafter defined), directly or indirectly, of ten percent or more of the voting power of the outstanding Voting Stock; provided, however, the term "Interested Shareholder" shall not include any employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary, or any trustee of, or fiduciary with respect to, any such plan when acting in such capacity. (f) A person shall be a "beneficial owner" of, or shall "beneficially own" any Capital Stock (i) which such person or any of its Affiliates or Associates owns, directly or indirectly; (ii) which such person or any of its Affiliates or Associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or only after the passage of any period of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is an Interested Shareholder pursuant to Paragraph (e) of this Section 3, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph (f) of Section 3, but shall not include any other shares of Capital Stock that may be issuable pursuant to any arrangement or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise. (g) The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in effect on April 1, 1997. 7 (h) The term "Subsidiary" means any company of which a majority of any class of Equity Security is beneficially owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in Paragraph (e) of this Section 3, the term "Subsidiary" shall mean only a company of which a majority of each class of Equity Security is beneficially owned by the Corporation. (i) The term "Continuing Directors" means (i) any member of the board of directors of the Corporation, while such person is a member of the board of directors, who is not the Interested Shareholder, an Affiliate or Associate of the Interested Shareholder or a representative of any such person and who was a member of the board of directors prior to the Determination Date, and (ii) any successor of any of the Continuing Directors, while such successor is a member of the board of directors, who is not the Interested Shareholder, an Affiliate or Associate of the Interested Shareholder or a representative of any such person and who is recommended or elected to succeed any of the Continuing Directors by a majority of Continuing Directors. (j) The term "Fair Market Value" means (i) in the case of stock, the highest closing sales price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (ii) in the case of property other than stock, the fair market value of such property on the date in question as determined by a majority of the Continuing Directors in good faith. (k) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs (b)(i) and (b)(ii) of Section 2 of this Article XII shall include the shares of Common Stock of the Corporation and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. (l) The term "Interest" means interest with respect to the applicable Highest Purchase Price accrued daily at an annual rate equal to 110% of the arithmetic average of the weekly per annum market discount rates for 3- month U.S. Treasury bills during the Adjustment Period, as published by the Board of Governors of the Federal Reserve System; provided, however, that in respect of any portion of the Adjustment Period during which the Corporation cannot determine Interest in the foregoing manner, Interest shall be deemed to be ten percent (10%); and provided further that any such amount shall be reduced, but not below zero, by the aggregate of the regular quarterly cash dividends paid per share of Common Stock during the Adjustment Period. (m) The term "Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Exchange Act, as in effect on April 1, 1997. (n) "Whole Board" means the total number of directors which this Corporation would have if there were no vacancies. (o) The term "Merger" means the merger contemplated by the Agreement and Plan of Merger dated November 2, 1999, by and between Group Maintenance America Corp. and Building One Services Corporation as amended. 8 4. A majority of the Whole Board, but only if a majority of the Whole Board shall then consist of Continuing Directors or, if a majority of the Whole Board shall not then consist of Continuing Directors, a majority of the then Continuing Directors, shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article XII, including, without limitation, (i) whether a person is an Interested Shareholder, (ii) the number of shares of Voting Stock beneficially owned by any person, (iii) whether a person is an Affiliate or Associate of another; (iv) whether the applicable conditions set forth in Paragraph (b) of Section 2 have been met with respect to any Business Combination, (v) the Fair Market Value of Stock or other property in accordance with Paragraph (j) of Section 3 of this Article XII, and (vi) whether the securities which are the subject of any Business Combination referred to in Paragraph (a)(i) of Section 3, or the assets, securities or commitments which are the subject of any Business Combination referred to in Paragraph (a)(ii) of Section 3, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination referred to in Paragraph (a)(iii) of Section 3 have, in any such case, an aggregate Fair Market Value of more than twenty percent (20%) of the Total Assets of the Corporation. 5. A majority of the Whole Board shall have the right to demand, but only if a majority of the Whole Board shall then consist of Continuing Directors, or, if a majority of the Whole Board shall not then consist of Continuing Directors, a majority of the then Continuing Directors shall have the right to demand, that any person who it is reasonably believed is an Interested Shareholder (or holds of record shares of Voting Stock beneficially owned by any Interested Shareholder) supply the Corporation with complete information as to (i) the record owner(s) of all shares beneficially owned by such person who it is reasonably believed is an Interested Shareholder, (ii) the number of, and class or series of, shares beneficially owned by such person who it is reasonably believed is an Interested Shareholder and held of record by each such record owner and the number(s) of the stock certificate(s) evidencing such shares, and (iii) any other factual matter relating to the applicability or effect of this Article XII, as may be reasonably requested of such person, and such person shall furnish such information within ten (10) days after receipt of such demand. 6. Nothing contained in this Article XII shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. 7. Notwithstanding any other provisions of these Articles of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the board of directors and the holders of any particular class or series of the Voting Stock required by law or these Articles of Incorporation, to alter, amend or repeal this Article XII, as an additional requirement for such action, either (i) the Continuing Directors, who at the time shall constitute at least a majority of the Whole Board, shall expressly approve such action by at least an eighty percent (80%) vote of such Continuing Directors; or (ii) such action shall be adopted or approved by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class." 9 (7) Article XIV is amended in its entirety to be as follows: "ARTICLE XIII. CERTAIN ACQUISITIONS OF VOTING STOCK BY THE CORPORATION 1. The Corporation shall not acquire, directly or indirectly, any Voting Stock, by the purchase, exchange or otherwise from any Related Person (as hereinafter defined) or any of its Affiliates or Associates. 2. This article shall not be applicable to any acquisition of Voting Stock (i) pursuant to a Tender Offer made to all holders of any class of Voting Stock on the same price, terms and conditions and, if for less than all of the Voting Stock, subject to pro rata acceptance (except as to holders of fewer than 100 shares), (ii) in compliance with Rule 10b-18 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect at the date of adoption of this article, (iii) for a total consideration per share, including payment for legal fees, investment banking fees, brokerage fees and related costs and expenses of the holder in acquiring such Voting Stock, not in excess of the Fair Market Value per share, determined as of the Acquisition Date, (iv) pursuant to the terms of the Statement of Designation for any series of Preferred Stock or pursuant to the Investor's Rights Agreement by and between the Corporation and Boss II, LLC, or (v) as part of or in connection with the Merger. 3. The term "Acquisition Date" means the date on which the Related Person became a Related Person. 4. The term "Related Person" means any person (other than the Corporation or any Subsidiary) who or which is the beneficial owner, directly or indirectly, of five percent or more of the voting power of the then outstanding Voting Stock. 5. The term "Tender Offer" means any tender offer for, or request or invitation for tenders of, Voting Stock, within the meaning of Section 14(d)(1) of the Securities Exchange Act of 1934, as amended, as in effect at the date of adoption of this article, and any purchase or series of purchases of Voting Stock at or above then prevailing market prices for such Voting Stock pursuant to which more than five percent of the outstanding Voting Stock is acquired in any two-year period. 6. The term "Merger" means the merger contemplated by the Agreement and Plan of Merger dated November 2, 1999, by and between Group Maintenance America Corp. and Building One Services Corporation as amended. 7. Notwithstanding any other provisions of these Articles of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the board of directors and the holders of any particular class or series of the Voting Stock required by law or these Articles of Incorporation, to alter, amend or repeal this Article XIII, as an additional requirement for such action, either (i) the Continuing Directors, who at the time shall constitute at least a majority of the Whole Board, shall expressly approve such action by at least an eighty percent (80%) vote of such Continuing Directors; or (ii) such action shall be adopted or approved by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class." ARTICLE III Each such amendment made by the restated articles of incorporation has been effected in conformity with the provisions of the Texas Business Corporation Act and such restated articles of incorporation and each such amendment made by the restated articles of incorporation were duly 10 adopted at a meeting of the shareholders of the Corporation, duly called, and held on __________________. ARTICLE IV The number of shares outstanding was ________________ and the number of shares entitled to vote on the amendments and restated articles of incorporation was ___________; the number of shares voted for such restated articles as so amended was _____________; and the number of shares that abstained or did not vote at the meeting of the shareholders regarding such restated articles as so amended was ____________. ARTICLE V The articles of incorporation and all amendments and supplements thereto are hereby superseded by the following restated articles of incorporation which accurately copy the entire text thereof and as amended as above set forth: RESTATED ARTICLES OF INCORPORATION OF GROUP MAINTENANCE AMERICA CORP ARTICLE I NAME The name of the Corporation is Encompass Services Corporation. 11 ARTICLE II DURATION The period of the duration of the Corporation is perpetual. ARTICLE III PURPOSE The purpose for which the Corporation is organized is to transact any and all lawful business for which corporations may be incorporated under the Texas Business Corporation Act (the "TBCA"). ARTICLE IV CAPITAL STOCK The total number of shares of all classes of stock which the Corporation shall have authority to issue is 250,000,000 which shall be divided into (a) 200,000,000 shares of common stock having a par value of $.001 per share ("Common Stock") and (b) 50,000,000 shares of preferred stock having a par value of $.001 per share ("Preferred Stock"). A description of the different classes of stock of the Corporation and a statement of the designations, preferences, limitations and relative rights, including voting rights of the various classes of stock are as follows: 1. Preferred Stock. The shares of Preferred Stock may be divided into and issued in series. The board of directors shall have the authority to establish series of unissued shares of Preferred Stock by fixing and determining the relative rights and preferences of the shares of any series so established, and to increase or decrease the number of shares within each such series; provided, however, that the board of directors may not decrease the number of shares within a series of Preferred Stock to less than the number of shares within such series that are then issued. The Preferred Stock of each such series shall have such designations, preferences, limitations or relative rights, including voting rights, as shall be set forth in the resolution or resolutions establishing such series adopted by the board of directors, including, but without limiting the generality of the foregoing, the following: (a) the distinctive designation of, and the number of shares of Preferred Stock that shall constitute, such series, which number (except where otherwise provided by the board of directors in the resolution establishing such series) may be increased or decreased (but not below the number of shares of such series then outstanding) from time to time by like action of the board of directors; (b) The rights in respect of dividends, if any, of such series of Preferred Stock, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes or any other series of the same or other class or classes of capital stock of the Corporation and whether such dividends shall be cumulative or noncumulative; (c) The right, if any, of the holders of such series of Preferred Stock to convert the same into, or exchange the same for, shares of any other class or classes or of any other series of the same or any other class or classes of capital stock, obligations, indebtedness, rights to purchase securities or other securities of the Corporation or other entities, domestic or foreign, or for other property or for any combination of the foregoing, and the terms and conditions of such conversion or exchange; 12 (d) Whether or not shares of such series of Preferred Stock shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, shares of such series of Preferred Stock may be redeemed; (e) The rights, if any, of the holders of such series of Preferred Stock upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation or in the event of any merger or consolidation of or sale of assets by the Corporation; (f) The terms of any sinking fund or redemption or repurchase or purchase account, if any, to be provided for shares of such series of Preferred Stock; (g) The voting powers, if any, of the holders of any series of Preferred Stock generally or with respect to any particular matter, which may be less than, equal to or greater than one vote per share, and which may, without limiting the generality of the foregoing, include the right, voting as a series of Preferred Stock as a class, to elect one or more directors of the Corporation generally or under such specific circumstances and on such conditions, as shall be provided in the resolution or resolutions of the board of directors adopted pursuant hereto, including, without limitation, in the event there shall have been a default in the payment of dividends on or redemption of any one or more series of Preferred Stock; and (h) Such other powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, as the board of directors shall determine. 2. Common Stock. (i) Subject to the prior and superior rights of the Preferred Stock, and on the conditions set forth in Section 1 of this Article or in any resolution of the board of directors providing for the issuance of any series of Preferred Stock, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the board of directors may be declared and paid on the Common Stock from time to time out of any funds legally available therefor. (j) Each holder of Common Stock shall be entitled to one vote for each share held. 3. Cumulative Voting Denied. Shares of the voting stock of the Corporation shall not be voted cumulatively. 4. Preemptive Rights. Except as may be established by the board of directors with respect to any series of Preferred Stock, shares of stock of the Corporation do not carry preemptive rights. 5. Stock Certificates. There shall be set forth on the face or back of each certificate for shares of stock of the Corporation a statement that each of the following is set forth in the articles of incorporation of the Corporation on file in the Office of the Secretary of State of the State of Texas, and that the Corporation will furnish a copy of each such statement to the record holder of the certificate without charge on written request to the Corporation at its principal place of business or registered office: (i) a statement of the designations, preferences, and relative rights, including voting rights, of each class or series of the Corporation's capital stock to the extent that they have been fixed and determined; (ii) a statement of the authority of the board of directors to fix and determine the designations, preferences, limitations and relative rights, including voting rights, of any series; and (iii) a statement of the extent to which the Corporation has by its articles of incorporation limited or denied the preemptive right of shareholders to acquire unissued or treasury shares of the Corporation. 13 6. Reverse Stock Split. At 5:00 p.m. Houston Time on September 26, 1997 (the "Effective Date"), each share of the Company's Common Stock, par value $.001 per share, issued and outstanding (the "Old Common Stock") shall automatically and without any action on the part of the holder thereof be reclassified and changed into two-fifths of a share of the Company's Common Stock, par value $.001 per share (the "New Common Stock"), subject to the treatment of fractional share interests as described below. Each holder of a certificate or certificates, which immediately prior to the Effective Date represented outstanding shares of Old Common Stock (the "Old Certificates," whether one or more), shall be entitled to receive, upon surrender of such Old Certificates to the Company's exchange agent appointed by the Company (the "Exchange Agent") for cancellation, a certificate or certificates (the "New Certificates," whether one or more) representing the number of whole shares of the New Common Stock into which and for which the shares of the Old Common Stock formerly represented by such Old Certificates so surrendered are reclassified under the terms hereof. From and after the Effective Date, Old Certificates shall represent only the right to receive New Certificates (and, where applicable, cash in lieu of fractional shares, as provided below) pursuant to the provisions hereof. No certificates or scrip representing fractional share interests in New Common Stock will be issued, and no such fractional share interest will entitle the holder thereof to vote, or to any rights of a shareholder of the Company. A holder of Old Certificates shall receive, in lieu of any fraction of a share of New Common Stock to which the holder would otherwise be entitled, a cash payment equal to the product of such fraction multiplied by $16.00. If more than one Old Certificate shall be surrendered at one time for the account of the same shareholder, the number of full shares of New Common Stock for which New Certificates shall be issued shall be computed on the basis of the aggregate number of shares represented by the Old Certificates so surrendered. In the event that the Company's Exchange Agent determines that a holder of Old Certificates has not tendered to all his certificates for exchange the Exchange Agent shall carry forward any fractional share until all certificates of that holder have been presented for exchange such that payment for fractional shares to any one person shall not exceed $16.00. If any New Certificate is to be issued in a name other than that in which the Old Certificates surrendered for exchange are issued, the Old Certificates so surrendered shall be properly endorsed and otherwise in proper form for transfer, and the person or persons requesting such exchange shall affix any requisite stock transfer tax stamps to the Old Certificates so surrendered, or provide funds for their purchase, or establish to the satisfaction of the Exchange Agent that such taxes are not payable. From and after the Effective Date the amount of capital represented by the shares of the New Common Stock into which and for which the shares of Old Common Stock are reclassified under the terms hereof shall be the same as the amount of capital represented by the shares of Old Common Stock so reclassified, until thereafter reduced or increased in accordance with applicable law. The Exchange Agent shall be the Secretary of the Company or such other agent as the Company may appoint for such purpose. ARTICLE V INITIAL CONSIDERATION FOR ISSUANCE OF SHARES The Corporation will not commence business until it has received for the issuance of its shares consideration of a value of at least One Thousand and No/100 Dollars ($1,000.00), consisting of money, labor done or property actually received. ARTICLE VI REGISTERED OFFICE AND AGENT The street address of the registered office of the Corporation is 8 Greenway Plaza, Suite 1500, Houston, Texas 77046. The name of the registered agent of the Corporation at such address is J. Patrick Millinor, Jr. ARTICLE VII 14 BOARD OF DIRECTORS (1) The property, affairs and business of the Corporation shall be managed by or under the direction of the Corporation's board of directors. Subject to the rights of the holders of any series of Preferred Stock, the number of directors constituting the board of directors of the Corporation shall not be less than nine (9) nor more than eighteen (18). Subject to the rights of the holders of any series of Preferred Stock, the number of directors shall be determined from time to time hereafter exclusively pursuant to a resolution adopted by the affirmative vote of a majority of the entire board of directors. For purposes of these Restated Articles of Incorporation, the "entire board of directors" shall mean the number of directors that would be in office if there were no vacancies nor any unfilled newly created directorships. Directors need not be residents of the State of Texas or shareholders of the Corporation. Until the third annual meeting of shareholders following effectiveness of these Restated Articles of Incorporation under the TBCA, the directors shall be divided into three classes, which shall consist, as nearly as possible, of one- third of the total number of directors constituting the entire Board of Directors, and designated Class I, Class II and Class III, respectively. Each director elected or appointed prior to the effectiveness of these Restated Articles of Incorporation under the TBCA shall serve for their full term, such that the term of each Class I director shall end at the second succeeding annual meeting of shareholders following effectiveness of these Restated Articles of Incorporation, the term of each Class II director shall end at the third succeeding annual meeting of shareholders following effectiveness of these Restated Articles of Incorporation, and the term of each Class III director shall end at the first succeeding annual meeting of shareholders following effectiveness of these Restated Articles of Incorporation. The term of each director elected after the effectiveness of these Restated Articles of Incorporation whether at an annual meeting or to fill a vacancy in the board of directors arising for any reason, including any increase in the size of the board of directors, shall end at the first annual meeting following his or her election. Commencing with the third annual meeting of shareholders following the effectiveness of these Restated Articles of Incorporation, the foregoing classification of the board of directors shall cease, and all directors shall be of one class and serve for a term ending at the annual meeting following the annual meeting at which the director was elected. In no case shall a decrease in the number of directors shorten the term of any incumbent director. Each director shall hold office after the annual meeting at which his or her term is scheduled to end until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, disqualification or removal from office in accordance with the TBCA. Any newly created directorship resulting from an increase in the number of directors may be filled by a majority of the board of directors then in office, provided that a quorum is present, and any other vacancy on the board of directors may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. (2) Notwithstanding anything else contained in these Restated Articles of Incorporation, whenever holders of any one or more series of Preferred Stock shall have the right, voting separately by class or series, to elect directors at any annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the provisions applicable to such class or series established pursuant to Paragraph 1 of Article IV hereof. Directors shall be elected by such holders annually unless expressly provided otherwise by the terms of such class or series of Preferred Stock. (3) No director of the Corporation shall be removed from office as a director by vote or other action of the shareholders or otherwise except for cause. 15 ARTICLE VIII LIMITATION OF DIRECTOR LIABILITY To the greatest extent permitted by applicable law in effect from time to time, a director of the Corporation shall not be liable to the Corporation or its shareholders for monetary damages for an act or omission in the director's capacity as a director except for liability for: (i) a breach of a director's duty of loyalty to the Corporation or its shareholders; (ii) an act or omission not in good faith that constitutes a breach of duty of the director to the Corporation or that involved intentional misconduct or a knowing violation of the law; (iii) a transaction from which a director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office; (iv) an act or omission for which the liability of a director is expressly provided for by statute; or (v) an act related to any unlawful stock repurchase or unlawful payment of a dividend. ARTICLE IX INDEMNIFICATION 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative, arbitrative or investigative, any appeal in such action, suit or proceeding, and any inquiry or investigation that would lead to such action, suit or proceeding (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to any employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the TBCA, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all judgments, fines, penalties (including excise tax and similar taxes), settlements, and reasonable expenses actually incurred by such indemnitee in connection therewith. The right to indemnification conferred in this Article shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that if the TBCA requires, an advancement of expenses incurred by an indemnitee shall be made only upon delivery to the Corporation of any undertaking, by or on behalf of such indemnitee, to repay all amount so advanced if it shall ultimately be determined by that such indemnitee is not entitled to be indemnified for such expenses under this Article or otherwise. 2. Insurance. The Corporation may purchase and maintain insurance, at its expense, on behalf of any indemnitee against any liability asserted against him and incurred by him in such a capacity or arising out of his status as a representative of the Corporation, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the TBCA. 3. Indemnity of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the board of directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this article or as otherwise permitted under the TBCA with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. 16 ARTICLE X CALL OF SPECIAL MEETINGS OF THE SHAREHOLDERS Special meetings of the Corporation's shareholders may be called (i) by the president, the board of directors, or such other person or persons as may be authorized in the Bylaws or (ii) by the holders of at least fifty percent (50%) of all the shares entitled to vote at the proposed special meeting. ARTICLE XI AMENDMENT OF BYLAWS In furtherance and not in limitation of the powers conferred by the laws of the State of Texas, the board of directors is expressly authorized to alter, amend or repeal the bylaws of the Corporation or to adopt new bylaws. ARTICLE XII PROVISIONS APPLICABLE TO BUSINESS COMBINATIONS 1. Vote Required for Certain Business Combinations. In addition to any affirmative vote required by law or these Articles of Incorporation or the Bylaws of the Corporation, and except as otherwise expressly provided in Section 2 of this Article XII, a Business Combination (as hereinafter defined) with, or proposed by or on behalf of, any Interested Shareholder (as hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of any Interested Shareholder or any person who thereafter would be an Affiliate or Associate of such Interested Shareholder, shall require the affirmative vote of not less than eighty percent (80%) of the votes entitled to be cast by the holders of all of the then outstanding shares of Voting Stock (as hereinafter defined), voting together as a single class, and the affirmative vote of not less than a majority of the votes entitled to be cast by the Voting Stock beneficially owned by persons other than such Interested Shareholder. Each share of Voting Stock shall have the number of votes granted to it in, or duly fixed by the board of directors pursuant to, Article IV of these Articles of Incorporation. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law, or in any agreement of the Corporation with any national securities exchange or otherwise. 2. Exceptions to Higher Vote Requirement. The provisions of Section 3 of this Article XII shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of these Articles of Incorporation or the Bylaws of the Corporation, or any agreement with any national securities exchange, if all of the conditions specified in any of the following Paragraphs (a), (b) or (c) are met or, in the case of a Business Combination not involving the payment of consideration to the holders of the Corporation's outstanding Capital Stock (as hereinafter defined), if the condition specified in the following Paragraph (a) is met: (a) The Business Combination shall have been approved either specifically, or as a transaction which is within a series of related transactions described with reasonable specificity, by at least an eighty percent (80%) vote of the Continuing Directors (as hereinafter defined), who shall at the time constitute at least a majority of the Whole Board (as hereinafter defined) (whether or not such approval occurs prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Interested Shareholder to become an Interested Shareholder). (b) All of the following conditions shall have been met: 17 (i) The aggregate amount of cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of Common Stock of the Corporation in such Business Combination shall be at least equal to the higher amount determined under clauses (A) and (B) below: (A) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) ("Highest Purchase Price") paid by or on behalf of the Interested Shareholder for any share of Common Stock in connection with the acquisition by the Interested Shareholder of beneficial ownership of shares of Common Stock, (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date"), or (y) in the transaction in which it became an Interested Shareholder, whichever is higher, in either case, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock; provided that if the Business Combination is effected more than 180 days after the last date upon which such Interested Shareholder paid the Highest Purchase Price, then the consideration to be received by the shareholders shall be increased by Interest (as hereinafter defined) with respect to the period from the date the Interested Shareholder paid the applicable Highest Purchase Price to the effective date of the Business Combination ("Adjustment Period"). (B) The Fair Market Value per share of Common Stock on the Announcement Date or on the date (the "Determination Date") on which the Interested Shareholder became an Interested Shareholder, whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock. (ii) The aggregate amount of cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock, other than Common Stock, shall be at least equal to the highest amount determined under clauses (A), (B) and (C) below: (A) (If applicable) the Highest Purchase Price paid by or on behalf of the Interested Shareholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Shareholder of beneficial ownership of shares of such class or series of Capital Stock, (x) within the two-year period immediately prior to the Announcement Date, or (y) in the transaction in which it became an Interested Shareholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; provided that if the Business Combination is effected more than 180 days after the last date upon which such Interested Shareholder paid the Highest Purchase Price, then the consideration to be received by the 18 shareholders shall be increased by Interest with respect to the Adjustment Period. (B) The Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; and (C) (If applicable) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock would be entitled, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation regardless of whether the Business Combination to be consummated constitutes such an event. (iii) The consideration to be received by holders of a particular class or series of outstanding Capital Stock shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Shareholder in connection with its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varies as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Shareholder. (iv) After the Determination Date and prior to the consummation of such Business Combination: (A) Except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (B) There shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock of the Corporation), except as approved by a majority of the Continuing Directors; (C) There shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of common stock of the Corporation, unless the failure to increase such annual rate is approved by a majority of the Continuing Directors; and (D) Neither such Interested Shareholder nor any of its Affiliates shall have become the beneficial owner of any additional shares of Capital Stock or securities convertible into Capital Stock except as part of the transaction that results in such Interested Shareholder becoming an Interested Shareholder and except in a transaction that, after giving effect thereto, would not result in any increase in the percentage beneficial ownership of the Interested Shareholder or any of its Affiliates of any class or series of Capital Stock. 19 (v) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act") (or any subsequent provisions replacing such Exchange Act, rules or regulations) shall be mailed to all shareholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to the Exchange Act or subsequent provisions). (vi) Such Interested Shareholder shall not have made any major change in the Corporation's business or equity capital structure without the approval of a majority of the Continuing Directors. (vii) The Interested Shareholder and any of its Affiliates shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advantages, guarantees, pledges or other financial assistance or any tax credits or other tax advances provided by the Corporation or any Subsidiary, whether in anticipation of or in connection with such Business Combination or otherwise. (c) The Business Combination shall be allowed, permitted or required under the terms of any Statement of Designation governing any Preferred Stock of the Corporation or pursuant to the Investor's Rights Agreement by and between the Corporation and Boss II, LLC, or necessary or required as part of or in connection with the Merger. 3. Certain Definitions. The following definitions shall apply with respect to this Article XII: (a) The term "Business Combination" shall mean: (i) Any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (A) any Interested Shareholder or (B) any other company (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder which, in any case, involves the issuance, redemption, cancellation, exchange or conversion of shares, obligations, evidences of ownership, rights to purchase securities or other securities (in one transaction or a series of transactions) having an aggregate Fair Market Value (as hereinafter defined) of more than twenty percent (20%) of the Total Assets of the Corporation (as hereinafter defined); or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), including without limitation any other security device, to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder of any assets, securities or commitments of the Corporation or any Subsidiary (as hereinafter defined) having an aggregate Fair Market Value of more than twenty percent (20%) of the Total Assets of the Corporation; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of more than twenty percent (20%) of the Total Assets of the Corporation; or 20 (iv) the adoption of any plan or proposal for the liquidation, spinoff, splitoff, splitup or dissolution of the Corporation proposed by or on behalf of any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of equity or convertible securities of the Corporation or any Subsidiary which is beneficially owned (as hereinafter defined) by an Interested Shareholder or any Affiliate of any Interested Shareholder by more than one percent, except for transactions described in subparagraphs (i), (ii) or (iii) of this Paragraph 3(a) which involve assets, cash, securities or other property of the Corporation with an aggregate Fair Market Value not in excess of twenty percent (20%) of the Total Assets of the Corporation; or (vi) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. (b) The term "Capital Stock" shall mean all capital stock of the Corporation now or hereafter authorized to be issued from time to time by the Corporation, and the term "Voting Stock" shall mean shares of Capital Stock which are entitled to vote generally in the election of directors. (c) The term "Total Assets of the Corporation" means the total assets of the Corporation, as reflected on the most recent consolidated balance sheet of the Corporation at the time the shareholders of the Corporation would be required to approve or adopt the transaction in question. (d) The term "person" shall mean any individual, firm, company, corporation, partnership, limited liability company, or other entity and shall include any "group" comprised of any person (as the term "group" is defined in Section 13(d)(3) of the Exchange Act). (e) "Interested Shareholder" means any person (other than the Corporation or any Subsidiary) who or which is the beneficial owner (as hereinafter defined), directly or indirectly, of ten percent or more of the voting power of the outstanding Voting Stock; provided, however, the term "Interested Shareholder" shall not include any employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary, or any trustee of, or fiduciary with respect to, any such plan when acting in such capacity. (f) A person shall be a "beneficial owner" of, or shall "beneficially own" any Capital Stock (i) which such person or any of its Affiliates or Associates owns, directly or indirectly; (ii) which such person or any of its Affiliates or Associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or only after the passage of any period of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is an Interested Shareholder pursuant to Paragraph (e) of this Section 3, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through 21 application of this Paragraph (f) of Section 3, but shall not include any other shares of Capital Stock that may be issuable pursuant to any arrangement or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise. (g) The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in effect on April 1, 1997. (h) The term "Subsidiary" means any company of which a majority of any class of Equity Security is beneficially owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in Paragraph (e) of this Section 3, the term "Subsidiary" shall mean only a company of which a majority of each class of Equity Security is beneficially owned by the Corporation. (i) The term "Continuing Directors" means (i) any member of the board of directors of the Corporation, while such person is a member of the board of directors, who is not the Interested Shareholder, an Affiliate or Associate of the Interested Shareholder or a representative of any such person and who was a member of the board of directors prior to the Determination Date, and (ii) any successor of a Continuing Directors, while such successor is a member of the board of directors, who is not the Interested Shareholder, an Affiliate or Associate of the Interested Shareholder or a representative of any such person and who is recommended or elected to succeed the Continuing Directors by a majority of Continuing Directors. (j) The term "Fair Market Value" means (i) in the case of stock, the highest closing sales price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (ii) in the case of property other than stock, the fair market value of such property on the date in question as determined by a majority of the Continuing Directors in good faith. (k) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs (b)(i) and (b)(ii) of Section 2 of this Article XII shall include the shares of Common Stock of the Corporation and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. (l) The term "Interest" means interest with respect to the applicable Highest Purchase Price accrued daily at an annual rate equal to 110% of the arithmetic average of the weekly per annum market discount rates for 3- month U.S. Treasury bills during the Adjustment Period, as published by the Board of Governors of the Federal Reserve System; provided, however, that in respect of any portion of the Adjustment Period during which the Corporation cannot determine Interest in the foregoing manner, Interest shall be deemed to be ten percent (10%); and provided further that any such amount shall be reduced, but not below zero, by the aggregate of the regular quarterly cash dividends paid per share of Common Stock during the Adjustment Period. (m) The term "Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Exchange Act, as in effect on April 1, 1997. (n) "Whole Board" means the total number of directors which this Corporation would have if there were no vacancies. 22 (o) The term "Merger" means the merger contemplated by the Agreement and Plan of Merger dated November 2, 1999, by and between Group Maintenance America Corp. and Building One Services Corporation as amended. 4. A majority of the Whole Board, but only if a majority of the Whole Board shall then consist of Continuing Directors or, if a majority of the Whole Board shall not then consist of Continuing Directors, a majority of the then Continuing Directors, shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article XII, including, without limitation, (i) whether a person is an Interested Shareholder, (ii) the number of shares of Voting Stock beneficially owned by any person, (iii) whether a person is an Affiliate or Associate of another; (iv) whether the applicable conditions set forth in Paragraph (b) of Section 2 have been met with respect to any Business Combination, (v) the Fair Market Value of Stock or other property in accordance with Paragraph (j) of Section 3 of this Article XII, and (vi) whether the securities which are the subject of any Business Combination referred to in Paragraph (a)(i) of Section 3, or the assets, securities or commitments which are the subject of any Business Combination referred to in Paragraph (a)(ii) of Section 3, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination referred to in Paragraph (a)(iii) of Section 3 have, in any such case, an aggregate Fair Market Value of more than twenty percent (20%) of the Total Assets of the Corporation. 5. A majority of the Whole Board shall have the right to demand, but only if a majority of the Whole Board shall then consist of Continuing Directors, or, if a majority of the Whole Board shall not then consist of Continuing Directors, a majority of the then Continuing Directors shall have the right to demand, that any person who it is reasonably believed is an Interested Shareholder (or holds of record shares of Voting Stock beneficially owned by any Interested Shareholder) supply the Corporation with complete information as to (i) the record owner(s) of all shares beneficially owned by such person who it is reasonably believed is an Interested Shareholder, (ii) the number of, and class or series of, shares beneficially owned by such person who it is reasonably believed is an Interested Shareholder and held of record by each such record owner and the number(s) of the stock certificate(s) evidencing such shares, and (iii) any other factual matter relating to the applicability or effect of this Article XII, as may be reasonably requested of such person, and such person shall furnish such information within ten (10) days after receipt of such demand. 6. Nothing contained in this Article XII shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. 7. Notwithstanding any other provisions of these Articles of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the board of directors and the holders of any particular class or series of the Voting Stock required by law or these Articles of Incorporation, to alter, amend or repeal this Article XII, as an additional requirement for such action, either (i) the Continuing Directors, who at the time shall constitute at least a majority of the Whole Board, shall expressly approve such action by at least an eighty percent (80%) vote of such Continuing Directors; or (ii) such action shall be adopted or approved by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class. ARTICLE XIII. CERTAIN ACQUISITIONS OF VOTING STOCK BY THE CORPORATION 1. The Corporation shall not acquire, directly or indirectly, any Voting Stock, by the purchase, exchange or otherwise from any Related Person (as hereinafter defined) or any of its Affiliates or Associates. 23 2. This article shall not be applicable to any acquisition of Voting Stock (i) pursuant to a Tender Offer made to all holders of any class of Voting Stock on the same price, terms and conditions and, if for less than all of the Voting Stock, subject to pro rata acceptance (except as to holders of fewer than 100 shares), (ii) in compliance with Rule 10b-18 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect at the date of adoption of this article, (iii) for a total consideration per share, including payment for legal fees, investment banking fees, brokerage fees and related costs and expenses of the holder in acquiring such Voting Stock, not in excess of the Fair Market Value per share, determined as of the Acquisition Date, (iv) pursuant to the terms of any Statement of Designation governing any Preferred Stock of the Corporation or pursuant to the Investor's Rights Agreement by and between the Corporation and Boss II, LLC, or (v) as part of or in connection with the Merger. 3. The term "Acquisition Date" means the date on which the Related Person became a Related Person. 4. The term "Related Person" means any person (other than the Corporation or any Subsidiary) who or which is the beneficial owner, directly or indirectly, of five percent or more of the voting power of the then outstanding Voting Stock. 5. The term "Tender Offer" means any tender offer for, or request or invitation for tenders of, Voting Stock, within the meaning of Section 14(d)(1) of the Securities Exchange Act of 1934, as amended, as in effect at the date of adoption of this article, and any purchase or series of purchases of Voting Stock at or above then prevailing market prices for such Voting Stock pursuant to which more than five percent of the outstanding Voting Stock is acquired in any two-year period. 6. The term "Merger" means the merger contemplated by the Agreement and Plan of Merger dated November 2, 1999, by and between Group Maintenance America Corp. and Building One Services Corporation as amended. 7. Notwithstanding any other provisions of these Articles of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the board of directors and the holders of any particular class or series of the Voting Stock required by law or these Articles of Incorporation, to alter, amend or repeal this Article XIII, as an additional requirement for such action, either (i) the Continuing Directors, who at the time shall constitute at least a majority of the Whole Board, shall expressly approve such action by at least an eighty percent (80%) vote of such Continuing Directors; or (ii) such action shall be adopted or approved by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class. 24 EX-3.2 3 STATEMENT OF DESIGNATION EXHIBIT 3.2 GROUP MAINTENANCE AMERICA CORP. STATEMENT OF DESIGNATION 7.25% CONVERTIBLE PREFERRED STOCK PURSUANT TO ARTICLE 2.13 OF TEXAS BUSINESS CORPORATION ACT A. The name of the corporation is Group Maintenance America Corp. B. The following preamble and resolution were duly adopted by the Board of Directors (the "Board of Directors") of Group Maintenance America Corp., a Texas corporation (the "Corporation"), on January 12, 2000, pursuant to the provisions of Article 2.13 of the Texas Business Corporation Act: WHEREAS, the Articles of Incorporation of the Corporation (the "Articles of Incorporation") authorize the issuance of a class of preferred stock, par value $.001 per share (the "Preferred Stock"), by the Corporation; RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors by the provisions of the Articles of Incorporation, the Board of Directors hereby authorizes the issuance of a series of Preferred Stock, and the Board of Directors hereby fixes and determines the designation, preferences, limitations and relative rights, including voting rights, thereof or so much thereof as shall not be fixed and determined by the Articles of Incorporation, as follows: 1. ESTABLISHMENT AND DESIGNATION OF SERIES. There is hereby established out of the authorized but unissued shares of Preferred Stock a series of Preferred Stock to be designated 7.25% Convertible Preferred Stock (the "Convertible Preferred Stock"), to consist of an aggregate of 275,000 shares and to have the designations, preferences, limitations and relative rights, including voting rights, thereof, as set forth herein. 2. Dividends. (a) The holders of the outstanding shares of Convertible Preferred Stock shall be entitled to receive dividends at the Applicable Dividend Rate on the Accumulated Amount, if, as and when declared by the Board of Directors out of funds legally available therefor. Such dividends shall be payable in arrears on each of March 31, June 30, September 30 and December 31 (each, a "Preferred Dividend Payment Date"), the first such Preferred Dividend Payment Date being March 31, 2000, except that if any Preferred Dividend Payment Date is not a Business Day, then the Preferred Dividend Payment Date shall be on the first immediately succeeding Business Day. Such dividends shall accrue on a daily basis (computed on the basis of a 360-day year of twelve 30-day months) commencing on the date of issuance, and shall compound, if not paid in cash when due, on the next Preferred Dividend Payment Date, regardless of whether the Board has declared a dividend payment or whether there are any profits, surplus or other funds of the Corporation legally available for dividends. (b) During the Initial Dividend Period, dividends accruing during any quarterly dividend period shall be payable in cash out of funds legally available therefor at the option of the Company. (c) During the Second Dividend Period, dividends accruing during any quarterly dividend period shall be paid in cash, out of funds legally available therefor. (d) In the event a Change of Control occurs prior to the fifth anniversary of the Original Issuance Date, the holders of the outstanding shares of Convertible Preferred Stock, as of the close of business on the Business Day immediately preceding the date of consummation of the Change of Control, shall be entitled to receive, out of funds legally available therefor, all accrued or accumulated and unpaid dividends as of the date of the consummation of such Change of Control and the lesser of (i) all dividends that would accrue from the date of the consummation of such Change of Control through the fifth anniversary of the Original Issuance Date and (ii) all dividends that would accrue from the date of the consummation of such Change of Control through the date that is two and one-half (2 1/2) years from the date of the consummation of the Change of Control, such dividends to be paid in cash, provided that, any holder of Convertible Preferred Stock who converts such shares into shares of Common Stock pursuant to Section 4 hereof after receipt of a notice from the Corporation pursuant to Section 6 hereof and prior to the date of consummation of the Change of Control to which such notice relates, may elect to receive the sum payable pursuant to this paragraph in the form of cash, shares of Common Stock or any combination thereof, all as specified in such holder's notice of election to convert. Shares of Common Stock issued pursuant to the foregoing election shall be valued at the Fair Market Value as of the date of consummation of the Change of Control. Any holder of Convertible Preferred Stock who elects to require the Company to redeem the Convertible Preferred Stock upon a Change of Control in accordance with Section 6 hereof, shall be entitled to receive an amount equal to the amount of such dividends, in cash, as part of the amount paid for such redemption under Section 6(a). Payment of the amount specified in clauses (i) and (ii) in accordance with this Section shall satisfy in full the obligation of the Corporation to otherwise make such dividend payments on the scheduled Preferred Dividend Payment Dates. (e) The dividends payable with respect to the Convertible Preferred Stock on each Preferred Dividend Payment Date pursuant to Sections 2(a) through (c) shall be paid to the holders of shares of the Convertible Preferred Stock as they appear on the stock records of the Corporation on such date (the "Preferred Record Date") as shall be fixed by the Board, which Preferred Record Date shall not be more than 40 days prior to the 2 applicable Preferred Dividend Payment Date and shall not precede the date upon which the resolution fixing such Preferred Record Date is adopted. (f) Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends then accrued or accumulated with respect to the Convertible Preferred Stock, such payment shall be distributed ratably among the holders of the shares of Convertible Preferred Stock based upon the number of shares of Convertible Preferred Stock then held by each holder. (g) In addition to all dividends payable pursuant to Sections 2(a) through (d), whenever the Corporation shall declare any dividend on its Common Stock (other than a distribution described in Section 4(e)(5) or a dividend described in Section 4(e)(11) (a "Common Dividend")), the holders of the outstanding shares of Convertible Preferred Stock shall have the option, exercisable by the Requisite Convertible Preferred Shareholders to (i) participate in such dividends on a ratable basis with such Common Stock, pro rata in accordance with the number of shares of Common Stock into which such shares of Convertible Preferred Stock are then convertible (the "Cash Election"), or (ii) reduce the Conversion Price then in effect by the amount of dividends payable with respect to one share of Common Stock or, if not payable in cash, by an amount equal to the Fair Market Value of such dividends. The Corporation shall notify each holder of Convertible Preferred Stock within two Business Days following the date on which the Board declares a Common Dividend, which notice shall specify the amount of such dividend per share of such Common Stock. If the Corporation shall have received, prior to the 10th day following the date of such notice from the Corporation (the "Determination Date"), notices from the Requisite Preferred Shareholders electing the Cash Election, then the holders of record of Convertible Preferred Stock as of the Determination Date shall be entitled to receive, out of funds legally available therefor, the Common Dividend in accordance with clause (i). Any such dividend shall be payable no later than 10 Business Days after the Determination Date. Unless a Cash Election has been made prior to the Determination Date, the adjustment to the Conversion Price specified in clause (ii) shall become effective as of the close of the business on the Determination Date. 3. LIQUIDATION. Upon a Liquidation, after payment or provision for payment of the debts and other liabilities of the Corporation and the liquidation preference of any class or series of capital stock of the Corporation ranking senior to the Convertible Preferred Stock, the holders of Convertible Preferred Stock shall be entitled to receive, out of the remaining assets of the Corporation available for distribution to its shareholders, with respect to each share of Convertible Preferred Stock, an amount equal to the greater of (i) the Liquidation Amount of such share and (ii) the amount the holder of such share would have received if such holder had converted such share of Convertible Preferred Stock into shares of Common Stock immediately prior to such Liquidation, before any distribution shall be made to the holders of the Common Stock or any other class or series of capital stock of the Corporation ranking junior to the Convertible Preferred Stock. If upon any Liquidation the assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of Convertible Preferred Stock the full 3 amount to which they shall be entitled, the holders of Convertible Preferred Stock shall share in any distribution of assets pro rata in accordance with the total amount that each such holder would have received had there been such sufficient assets. 4. CONVERSION. (a) Upon the terms set forth in this Section 4, each holder of shares of Convertible Preferred Stock shall have the right, at such holder's option, at any time and from time to time, to convert all or any portion of such shares into the number of fully paid and nonassessable shares of Common Stock equal to the quotient obtained by dividing (A) the aggregate Liquidation Amount of the shares of Convertible Preferred Stock to be converted by (B) the Conversion Price (as defined below), as last adjusted and then in effect, by surrender of the certificate or certificates representing such shares in accordance with this Section 4. The initial conversion price per share at which shares of Common Stock shall be issuable upon conversion of shares of Convertible Preferred Stock (the "Conversion Price") shall be $14.00, subject to adjustment as set forth herein. (b) Any holder of shares of Convertible Preferred Stock electing to convert all or any portion of the shares in accordance with Section 4(a) above shall give written notice to the Corporation as specified herein (which notice may be given by facsimile transmission) that such holder elects to convert the same and shall state therein the number of shares of Convertible Preferred Stock to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. Promptly thereafter, the holder shall surrender the certificate or certificates representing the shares of Convertible Preferred Stock to be converted, duly endorsed, at the office of the Corporation or any transfer agent for such shares, or at such other place designated by the Corporation, provided that the Corporation shall at all times maintain an office or agency for such purposes. The Corporation shall, promptly upon receipt of such notice, issue and deliver to or upon the order of such holder, against delivery of the certificates representing the shares of Convertible Preferred Stock that have been converted, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled (in the number(s) and denomination(s) designated by such holder), and the Corporation shall deliver to such holder a certificate or certificates for the number of shares of Convertible Preferred Stock that such holder has not elected to convert. To the extent the holder requests that the shares of Common Stock to be issued upon conversion shall be issued in the name of any Person other than the holder of the Convertible Preferred Stock surrendered for conversion, such holder shall deliver to the Corporation (and its transfer agent, if applicable) such documents and certificates, including, if requested, an opinion of counsel to the effect that the transfer thereof will not constitute a violation of the Securities Act of 1933, as amended, or state securities laws. The Corporation shall pay any documentary, stamp or similar issue or transfer tax due on the issuance of Common Stock upon the conversion of Convertible Preferred Stock or due on the issuance of a new certificate or certificates for any Convertible Preferred Stock not converted, other than any tax in respect of any transfer involved in any issuance of shares of Common Stock in a name other than the name in which the shares of Convertible Preferred Stock so converted were registered. The conversion right 4 with respect to any shares of Convertible Preferred Stock shall be deemed to have been exercised at the earliest date upon which both the notice of conversion referred to in the first sentence of this paragraph and the certificates therefor shall have been so delivered (the "Conversion Date") and the Person or persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock upon that date. (c) No fractional shares of Common Stock or scrip shall be issued upon conversion of shares of Convertible Preferred Stock. The number of full shares of Common Stock issuable upon conversion of Convertible Preferred Stock shall be computed on the basis of the aggregate number of shares of such Convertible Preferred Stock to be converted. Instead of any fractional shares of Common Stock that would otherwise be issuable upon conversion of any such shares, the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to the product of (i) the Fair Market Value of one share of Common Stock and (ii) such fractional interest. The holders of fractional interests shall not be entitled to any rights as shareholders of the Corporation in respect of such fractional interests. (d) The Corporation shall reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of all of the then-outstanding shares of Convertible Preferred Stock. For the purposes of this Section 4(d), the full number of shares of Common Stock then issuable upon the conversion of all then-outstanding shares of Convertible Preferred Stock shall be computed as if at the time of computation all outstanding shares of Convertible Preferred Stock were held by a single holder. The Corporation shall from time to time, in accordance with the laws of the State of Texas and its articles of incorporation, increase the authorized amount of its Common Stock if at any time the authorized amount of its Common Stock remaining unissued shall not be sufficient to permit the conversion of all shares of Convertible Preferred Stock at the time outstanding. All shares of Common Stock issued upon conversion of the shares of Convertible Preferred Stock shall be validly issued, fully paid and nonassessable. (e) The Conversion Price shall be subject to adjustment from time to time as follows: (1) If the Corporation shall, (A) at any time or from time to time after the Original Issuance Date through the date that is two and one-half (2 1/2) years after the Original Issuance Date, issue any shares of Common Stock, options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities, other than Excluded Stock, without consideration or for a consideration per share less than the greater of (x) the Conversion Price or (y) the Fair Market Value of the Common Stock, in effect immediately prior to the issuance of such Common Stock or securities, or (B) at any time or from time to time after the date that is two and one-half (2 1/2) years after the Original Issuance Date, issue any shares of Common Stock, options to purchase or rights to subscribe for Common Stock, 5 securities by their terms convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities, other than Excluded Stock, without consideration or for a consideration per share less than the Fair Market Value of the Common Stock, in effect immediately prior to the issuance of such Common Stock or securities, then such Conversion Price, as in effect immediately prior to each such issuance, shall forthwith be lowered to a price equal to the price obtained by multiplying: (A) the Conversion Price at which shares of Convertible Preferred Stock were theretofore convertible by (B) a fraction of which (x) the denominator shall be the number of shares of Common Stock outstanding on a fully-diluted basis immediately after such issuance and (y) the numerator shall be the sum of (1) the number of shares of Common Stock outstanding on a fully- diluted basis immediately prior to the date of such issuance and (2) the number of additional shares of Common Stock which the aggregate offering price of the number of shares of Common Stock so offered would purchase at the greater of the Conversion Price or the Fair Market Value per share of Common Stock. (2) If the Corporation shall, at any time or from time to time after the Original Issuance Date, directly or indirectly, redeem, purchase or otherwise acquire any shares of Common Stock, options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities, for a consideration per share greater than the Fair Market Value (plus, in the case of such options, rights, or securities, the additional consideration required to be paid to the Corporation upon exercise, conversion or exchange) for shares of Common Stock in effect immediately prior to such event, then such Conversion Price, as in effect immediately prior to each such event, shall forthwith be lowered to a price equal to the price obtained by multiplying: (A) the Conversion Price at which shares of Convertible Preferred Stock were theretofore convertible by (B) a fraction of which (x) the denominator shall be the Fair Market Value per share of Common Stock immediately prior to such event and (y) the numerator shall be the result of dividing: i) (1) the product of the number of shares of Common Stock outstanding on a fully-diluted basis and the Fair Market Value per share of Common Stock, in each case immediately prior to such event, minus (2) the aggregate consideration paid by the Corporation in such event (plus, in the case of such options, rights, or convertible or exchangeable securities, the aggregate 6 additional consideration to be paid by the Corporation upon exercise, conversion or exchange), by ii) the number of shares of Common Stock outstanding on a fully-diluted basis immediately after such redemption. (3) For the purposes of any adjustment of the Conversion Price pursuant to Sections 4(e)(1) or (2) above, the following provisions shall be applicable: (A) In the case of the issuance of Common Stock for cash in a public offering or private placement, the consideration shall be deemed to be the amount of cash paid therefor by the investors without deducting any discounts, commissions or placement fees payable by the Corporation to any underwriter or placement agent in connection with the issuance and sale thereof that are usual and customary for such a transaction. Notwithstanding anything provided above to the contrary, for purposes of issuances described in this clause, Fair Market Value for such issuance shall be deemed to be the lesser of (i) the Closing Price on the date of the execution of the underwriting, placement, subscription or purchase agreement executed in connection with such offering or placement and (ii) the Fair Market Value (as defined herein) determined as of the date of the execution of the underwriting, placement, subscription or purchase agreement executed in connection with such offering or placement. (B) In the case of the issuance of Common Stock for consideration consisting in whole or in part other than cash, the value of such non-cash consideration shall be deemed to be the fair market value thereof as determined in good faith by the Board or a duly authorized committee thereof, irrespective of any accounting treatment. Notwithstanding anything provided above to the contrary, for purposes of issuances described in this clause, Fair Market Value for such issuance shall be deemed to be the fair market value as determined in good faith by the Board or a duly authorized committee thereof, irrespective of any accounting treatment, as of the date of the approval of such transaction by the Board or appropriate committee of the Board. (C) In the case of the issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities, except for options to acquire Excluded Stock: i) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Sections 4(e)(3)(A) and (B) above), if any, received by the Corporation upon the issuance of such options or 7 rights were issued and for a consideration equal to the consideration (determined in the manner provided in Sections 4(e)(3)(A) and (B) above), if any, received by the Corporation upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Common Stock covered thereby; ii) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities, options, or rights were issued and for a consideration equal to the consideration received by the Corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration, if any, to be received by the Corporation upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Sections 4(e)(3)(A) and (B) above); and iii) on any change in the number of shares or exercise price of Common Stock deliverable upon exercise of any such options or rights or conversions of or exchanges for such securities, other than a change resulting from the antidilution provisions thereof, the applicable Conversion Price shall forthwith be readjusted to such Conversion Price as would have been obtained had the adjustment made upon the issuance of such options, rights or securities not converted prior to such change or options or rights related to such securities not converted prior to such change been made upon the basis of such change; iv) Upon the expiration of the right to convert, exchange or acquire Common Stock in accordance with the terms of any securities, the issuance of which securities had effected an adjustment to the Conversion Price pursuant to the terms of this Section 4(e), if any such securities shall not have been converted, exercised or exchanged prior to such expiration, the number of shares of Common Stock deemed to have been issued and outstanding by reason of the fact that they were issuable upon conversion, exchange or exercise of any such security pursuant to Section 4(e)(l) 8 above, shall no longer be computed as set forth above and the Conversion Price shall forthwith be readjusted and thereafter be the price at which it would have been had the adjustment to the Conversion Price made upon the issuance or sale of any such security been made on the basis of the issuance only of the number of additional shares of Common Stock actually issued upon exercise, conversion or exchange thereof and thereupon only the number of additional shares of Common Stock actually so issued shall be deemed to have been issued and the only consideration actually received by the Corporation (computed as set forth above) shall be deemed to have been received by the Corporation; and v) No further adjustment of the Conversion Price adjusted upon the issuance of any such options, rights, convertible securities or exchangeable securities shall be made as a result of the actual issuance of Common Stock on the exercise of any such rights or options or any conversion or exchange of any such securities. (4) All calculations under this Section will be made to the nearest one-hundredth of a cent or to the nearest whole share, as the case may be. No adjustment to the Conversion Price will be required unless such adjustment would result in an increase or decrease of at least one percent (1%) of the Conversion Price; provided, however, that any adjustments which by reason of this clause (4) are not required to be made will be carried forward and taken into account in a subsequent adjustment, if any. (5) If, at any time after the Original Issuance Date, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then the provisions of Section 4(e)(1) shall not apply and, following the record date for the determination of holders of Common Stock entitled to receive such stock dividend, subdivision or split-up, the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Convertible Preferred Stock shall be increased in proportion to such increase in outstanding shares. (6) If, at any time after the Original Issuance Date, the number of shares of Common Stock outstanding is decreased by a combination of the outstanding shares of Common Stock, then, following the record date for such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Convertible Preferred Stock shall be decreased in proportion to such decrease in outstanding shares. 9 (7) In the event of any capital reorganization of the Corporation, any reclassification of the stock of the Corporation (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), or any consolidation or merger of the Corporation (other than the Merger), each share of Convertible Preferred Stock shall after such reorganization, reclassification, consolidation, or merger be convertible into the kind and number of shares of stock or other securities or property of the Corporation or of the corporation resulting from such consolidation or surviving such merger to which the holder of the number of shares of Common Stock deliverable (immediately prior to the time of such reorganization, reclassification, consolidation or merger) upon conversion of such share of Convertible Preferred Stock would have been entitled upon such reorganization, reclassification, consolidation or merger. The provisions of this clause shall similarly apply to successive reorganizations, reclassifications, consolidations, or mergers. (8) In any case in which the provisions of this Section 4(e) shall require that an adjustment shall become effective immediately after a record date of an event, the Corporation may defer until the occurrence of such event (1) issuing to the holder of any share of Convertible Preferred Stock converted after such record date and before the occurrence of such event the shares of capital stock issuable upon such conversion by reason of the adjustment required by such event in addition to the shares of capital stock issuable upon such conversion before giving effect to such adjustments, and (2) paying to such holder any amount in cash in lieu of a fractional share of capital stock pursuant to Section 4(c) above; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder's right to receive such additional shares and such cash. (9) Whenever a Conversion Price shall be adjusted as provided in this Section 4(e), the Corporation shall make available for inspection during regular business hours, at its principal executive offices or at such other place as may be designated by the Corporation, a statement, signed by its chief financial officer, showing in detail the facts requiring such adjustment and the Conversion Price that shall be in effect after such adjustment. The Corporation shall also cause a copy of such statement to be sent by first class certified mail, return receipt requested and postage prepaid, to each holder of Convertible Preferred Stock affected by the adjustment at such holder's address appearing on the Corporation's records. Where appropriate, such copy may be given in advance and may be included, as part of any notice required to be mailed under the provisions of this Section 4(e) below. (10) If the Corporation shall propose to take any action of the types described in clauses (5), (6) or (7) of this Section 4(e), the Corporation shall give notice to each holder of shares of Convertible Preferred Stock, in the manner set forth in clause (9) above, which notice shall specify the record date, if any, with respect to any such action and the date on which such action is to take place. 10 Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable or purchasable upon the occurrence of such action or deliverable upon conversion of shares of Convertible Preferred Stock. In the case of any action which would require the fixing of a record date, such notice shall be given at least 20 days prior to the date so fixed, and in case of all other action, such notice shall be given at least 30 days prior to the taking of such proposed action. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action. (11) Without duplication of any other adjustment provided for in this Section 4, at any time the Corporation makes or fixes a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, provision shall be made so that each holder of Convertible Preferred Stock shall have the option to (i) receive as part of such dividend or distribution the number of securities of the Corporation which such holder would have received had its shares of Convertible Preferred Stock been converted into shares of Common Stock immediately prior to the date of such event or (ii) receive upon conversion thereof, in addition to the shares of Common Stock receivable thereupon, the number of securities of the Corporation which such holder would have received had its shares of Convertible Preferred Stock been converted into shares of Common Stock on the date of such event and had such holder thereafter, during the period from the date of such event to and including the date of conversion, retained such securities receivable by it pursuant to this paragraph during such period, subject to the sum of all other adjustments called for during such period under this Section 4 with respect to the rights of such holder of Convertible Preferred Stock. (12) If the Corporation issues any securities after the Original Issuance Date containing provisions protecting the holder or holders thereof against dilution in any manner more favorable to such holder or holders thereof than those set forth in this Section 4, such provisions (or any more favorable portion thereof) shall be deemed to be incorporated herein as if fully set forth in this Statement and, to the extent inconsistent with any provision of this Statement, shall be deemed to be substituted therefor. 5. REDEMPTION AT OPTION OF THE CORPORATION. (a) The Corporation shall have the right to redeem, at any time after the fifth anniversary of the Original Issuance Date, out of funds legally available for such purpose, all, but not less than all, of the shares of Convertible Preferred Stock then outstanding, for an amount per share (the "Corporation Redemption Price"), which shall be payable in cash, as set forth below: 11 (i) 103% of the Liquidation Amount, if such redemption occurs on or after the fifth anniversary of the Original Issuance Date and before the sixth anniversary date of the Original Issuance Date; (ii) 102% of the Liquidation Amount, if such redemption occurs on or after the sixth anniversary of the Original Issuance Date and before the eighth anniversary date of the Original Issuance Date; and (iii) 101% of the Liquidation Amount, if such redemption occurs on or after the eighth anniversary of the Original Issuance Date but prior to the Maturity Date. (b) Not less than 20 nor more than 60 days (such date as fixed by the Board of Directors of the Corporation is referred to herein as the "Redemption Record Date") prior to the date fixed for any redemption of shares of the Convertible Preferred Stock pursuant to this Section 5, a notice specifying the time and place of the redemption, the redemption price and the number of shares to be redeemed shall be given by first class mail, postage prepaid, to the holders of record on the Redemption Record Date of the shares of the Convertible Preferred Stock to be redeemed at their respective addresses as the same shall appear on the books of the Corporation, calling upon each holder of record to surrender to the Corporation on the redemption date at the place designated in the notice such holder's certificate or certificates representing the number of shares specified in the notice of redemption. Neither failure to mail such notice, nor any defect therein or in the mailing hereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice. On or after the redemption date, each holder of shares of Convertible Preferred Stock to be redeemed shall present and surrender such holder's certificate or certificates for such shares to the Corporation at the place designated in the redemption notice and thereupon the Corporation Redemption Price shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled. (c) If a notice of redemption has been given pursuant to this Section 5 and if, on or before the redemption date, the funds necessary for such redemption (including all dividends on the shares of Convertible Preferred Stock to be redeemed that will accrue to the redemption date) shall have been set aside by the Corporation, separate and apart from its other funds in trust for the pro rata benefit of the holders of the shares of Convertible Preferred Stock so called for redemption, then, notwithstanding that any certificates for such shares of Convertible Preferred Stock have not been surrendered for cancellation, on the redemption date dividends shall cease to accrue on the shares of the Convertible Preferred Stock to be redeemed, and the holders of such shares shall cease to be shareholders with respect to those shares and shall have no voting or other rights with respect thereto, except the right to receive the moneys payable upon such redemption, without interest thereon, upon surrender (and endorsement, if required by the Corporation) of their certificates, and the shares of Convertible Preferred Stock evidenced 12 thereby shall no longer be outstanding, provided, however, nothing in this Section 5 will limit the right of the holders of shares of Convertible Preferred Stock to convert such shares after the notice of redemption has been given and prior to the redemption date in accordance with Section 4. If the holder of any shares of Convertible Preferred Stock shall not, within one year after the redemption date, claim the amount deposited for the redemption thereof, such funds shall be released to the Corporation and held thereby until such holder shall make a claim therefor. (d) If a notice of redemption has been given pursuant to this Section 5 and any holder of shares of Convertible Preferred Stock shall, prior to the close of business on the Business Day immediately preceding the redemption date, give written notice to the Corporation pursuant to Section 4 above of the conversion of any or all of the shares to be redeemed held by the holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Corporation, as required by Section 4 above), then such redemption shall not become effective as to such shares to be converted and such conversion shall become effective as provided in Section 4 above, whereupon any funds deposited by the Corporation for the redemption of such shares shall immediately upon such conversion be returned to the Corporation or, if then held in trust by the Corporation, shall automatically and without further corporate action or notice be discharged from the trust. 6. REDEMPTION AT THE OPTION OF THE HOLDERS. (a) Each holder of Convertible Preferred Stock shall have the right to require the Corporation to redeem, out of funds legally available therefor, any or all of such holder's shares of Convertible Preferred Stock at the Redemption Price, plus the amount described in the first sentence of Section 2(d), in connection with the occurrence of a Change of Control as set forth herein. (b) The Corporation shall notify the holders of the Convertible Preferred Stock in writing promptly upon the occurrence of a Change of Control; provided, however, that any failure by the Corporation to provide such notice shall not affect the right of the holders of shares of Convertible Preferred Stock to require a redemption of such shares in connection with such Change of Control. Such notice shall state the terms and conditions of such Change of Control. (c) In the event the Requisite Convertible Preferred Shareholders expect that a Change of Control will occur, the Requisite Convertible Preferred Shareholders may so notify the Corporation, which notice shall specify the circumstances constituting the expected Change of Control. Within three Business Days following the receipt by the Corporation of such notice, the Corporation shall notify each holder of Convertible Preferred Stock of the receipt of such notice from the Requisite Convertible Preferred Shareholders. For a period of 15 days following such notice by the Corporation, each holder of Convertible Preferred Stock may elect to have any or all of such holder's shares of Convertible Preferred Stock redeemed under this Section 6(c) by providing an irrevocable written notice (a "Section 6(c) Redemption Notice") to the Corporation of such election; provided, however, no redemption shall be effected prior to the 13 consummation of the Change of Control. The Corporation shall effect such redemption on the later to occur of (i) 15 days following receipt by the Corporation of such Section 6(c) Redemption Notice and (ii) the date of the consummation of such Change of Control (such date on which redemption is required, the "Redemption Date") and the holders of record of shares of Convertible Preferred Stock being redeemed in accordance with this Section 6(c) shall promptly deliver certificates representing the shares being redeemed to the Corporation or its agents. If a holder has delivered a Section 6(c) Redemption Notice and no Change of Control shall have been consummated within 180 days from the date of such Section 6(c) Redemption Notice, then such Section 6(c) Redemption Notice shall be null and void and the holders shall again be entitled to deliver a new Section 6(c) Redemption Notice in accordance with the terms of this Section 6(c). (d) If the Corporation has delivered to the holders of the Convertible Preferred Stock a notice pursuant to Section 6(b) above that a Change of Control has occurred, each holder of Convertible Preferred Stock may elect to have any or all of such holder's shares of Convertible Preferred Stock redeemed under this Section 6(d) by providing an irrevocable written notice (a "Section 6(d) Redemption Notice") to the Corporation of such election at any time prior to the 90th day following the date of the Corporation's notice given pursuant to Section 6(b) (the "Expiration Date"). The Corporation shall effect the redemption of all shares pursuant to this Section 6(d) on the date which is 15 days after the Expiration Date. (e) If, on or before any redemption date specified in paragraph (c) or (d) above, the funds necessary for such redemption (including all dividends on the shares of Convertible Preferred Stock to be redeemed that will accrue to the redemption date) shall have been set aside by the Corporation, separate and apart from its other funds in trust for the pro rata benefit of the holders of the shares of Convertible Preferred Stock so called for redemption, then, notwithstanding that any certificates for such shares of Convertible Preferred Stock have not been surrendered for cancellation, on the redemption date, dividends shall cease to accrue on the shares of the Convertible Preferred Stock to be redeemed, and the holders of such shares shall cease to be shareholders with respect to those shares and shall have no voting or other rights with respect thereto, except the right to receive the monies payable upon such redemption, without interest thereon, upon surrender (and endorsement, if required by the Corporation) of their certificates, and the shares of Convertible Preferred Stock evidenced thereby shall no longer be outstanding. Upon delivery to the Corporation of an irrevocable notice from a holder of Convertible Preferred Stock pursuant to paragraph (c) or (d) above, the right of such holder to convert the shares of Convertible Preferred Stock to be redeemed into shares of Common Stock pursuant to Section 4 shall cease and terminate. If the holder of any shares of Convertible Preferred Stock shall not, within one year after the redemption date, claim the amount deposited for the redemption thereof, such funds shall be released to the Corporation and held thereby until such holder shall make a claim therefor. On and after the redemption date pursuant to either Section 6(c) or (d) above (unless default shall be made by the Corporation in the payment of the applicable Redemption Price, in which event such rights shall be exercisable until such default is cured), all rights in respect of the shares of Convertible Preferred Stock to be redeemed, except the right to receive the Redemption Price, shall cease and terminate, and such shares shall no longer be deemed 14 to be outstanding, whether or not the certificates representing such shares have been received by the Corporation. (f) If the assets of the Corporation available for redemption of the Convertible Preferred Stock shall be insufficient to permit the payment of the entire Redemption Price required to be paid pursuant to this Section 6, then the holders of Convertible Preferred Stock shall share ratably in any such redemption based on the respective number of shares of Convertible Preferred Stock that each holder thereof holds. (g) Any communication or notice relating to redemption given pursuant to this Section 6 shall be sent by first-class certified mail, postage prepaid, to the holders of record of shares of Convertible Preferred Stock, at their respective addresses as the same shall appear on the books of the Corporation, or to the Corporation at the address of its principal, or registered office, as the case may be. (h) The Corporation shall not engage in any Sale of the Corporation transaction unless (i) if the Corporation shall be the surviving or continuing entity of such transaction, the Corporation shall, after consummation thereof, have sufficient funds to perform its obligations under this Section 6, and (ii) if the Corporation shall not be the surviving or continuing entity of such transaction, proper and adequate provision shall be made, in the definitive documentation providing for such transaction or otherwise, to ensure that the surviving or continuing corporation of such transaction shall expressly assume the Corporation's obligations under this Section 6 and shall have sufficient funds to perform its obligations under this Section 6. 7. MANDATORY REDEMPTION. On the Maturity Date, the Corporation shall redeem each outstanding share of Convertible Preferred Stock for the Liquidation Amount of such share at such time. If the assets of the Corporation available for redemption of the Convertible Preferred Stock shall be insufficient to permit the payment of the entire Liquidation Amount to which they shall be entitled, the holders of Convertible Preferred Stock shall share ratably in any such redemption based on the respective number of shares of Convertible Preferred Stock that each holder thereof holds. 8. VOTING RIGHTS. (a) Except as otherwise expressly provided herein or required by law and so long as any shares of the Convertible Preferred Stock are outstanding, each share of Convertible Preferred Stock shall entitle the holder thereof to notice of and to vote, in person or by proxy, at any special or annual meeting of shareholders, on all matters entitled to be voted on by holders of Common Stock (and any other series or class of Voting Stock also entitled to vote with the holders of Common Stock), voting together as a single class with all other shares entitled to vote thereon. With respect to any such vote, each share of Convertible Preferred Stock shall entitle the holder thereof to cast that number of votes as is equal to the number of votes that such holder would be entitled to cast had such holder converted such share of Convertible Preferred Stock into shares of 15 Common Stock as of the record date for determining the shareholders of the Corporation entitled to vote on any such matters. (b) At any time after the Original Issuance Date, the Corporation shall not, and shall not permit any Subsidiary to, without first obtaining the affirmative written consent or approval of the Requisite Convertible Preferred Shareholders: (i) in any manner authorize, create, designate, issue, sell or reclassify any class or series of capital stock of the Corporation (including any shares of treasury stock) or rights, options, warrants or other securities convertible into or exercisable or exchangeable for capital stock or any debt security which by its terms is convertible into or exchangeable for any equity security or has any other equity feature or any security that is a combination of debt and equity, which, in each case, as to the payment of dividends, distribution of assets or Redemptions, including, without limitation, distributions to be made upon a Liquidation, is pari passu with, is senior to the Convertible Preferred Stock or is mandatorily redeemable prior to the Convertible Preferred Stock or which in any manner materially adversely affects the rights, preferences or remedies of the holders of the Convertible Preferred Stock; (ii) in any manner alter or change the terms, designations, powers, preferences or relative, participating, optional or other special rights, or the qualifications, limitations or restrictions thereof, of the Convertible Preferred Stock; (iii) in any manner authorize, create, issue or sell any additional shares of Convertible Preferred Stock; (iv) amend, alter or repeal any of the provisions of (A) the Articles of Incorporation of the Corporation (as amended or restated) or (B) the By-laws of the Corporation, if such amendment, alteration or repeal would alter or change the rights, preferences or privileges of the holders of such Convertible Preferred Stock so as to adversely affect them. (v) declare or pay any dividend with respect to, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement or other acquisition of, any shares of any class of capital stock of the Corporation ranking junior to the Convertible Preferred Stock, or any warrants or options to purchase any such capital stock, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Corporation or any Subsidiary (other than a declaration or payment of a stock dividend payable in shares of Common Stock to the holders of Common Stock); provided, however, that the Corporation may declare or pay any dividend on (or repurchase) the Common Stock if such amount, when combined with the sum of all other dividends declared or paid on (plus all amounts paid in the repurchase of), the Common Stock in the preceding twelve-month period, does not exceed 5% of the aggregate Fair Market Value of 16 the Common Stock at the time of the declaration or payment of such dividend or commitment to repurchase, as the case may be; (vi) agree to, or permit any Subsidiary to agree to, any provision in any agreement that would by its terms impose any restriction on the ability of the Corporation to honor the exercise of any rights of the holders of the Convertible Preferred Stock; (vii) enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than any transaction between the Corporation and any wholly-owned Subsidiary or between or among wholly-owned Subsidiaries) unless such transaction is (a) in the ordinary course of business of the Corporation and its Subsidiaries, and (b) upon fair and reasonable terms no less favorable to the Corporation and its Subsidiaries than they would obtain in a comparable arm's length transaction with a Person which is not an Affiliate 9. BOARD OF DIRECTORS. (a) The holders of the Convertible Preferred Stock, voting as a separate class, shall be entitled to elect directors (the "Convertible Preferred Directors") to the Board as follows: (i) for so long as Apollo and its Affiliates hold in the aggregate Common Stock Equivalents representing at least 50% of the number of Conversion Shares issuable upon conversion of the Convertible Preferred Stock issued on the Original Issuance Date, Apollo shall be entitled to elect the greater of 3 directors or the number of directors that represents 30% of the Board, rounded up to the nearest whole director; (ii) for so long as Apollo and its Affiliates hold in the aggregate Common Stock Equivalents representing at least 25% of the number of Conversion Shares issuable upon conversion of the Convertible Preferred Stock issued on the Original Issuance Date, Apollo shall be entitled to elect the number of directors that represents 22% of the Board, rounded up to the nearest whole director; (iii) for so long as Apollo and its Affiliates hold in the aggregate Common Stock Equivalents representing at least 12 1/2% of the number of Conversion Shares issuable upon the conversion of the Convertible Preferred Stock issued on the Original Issuance Date, Apollo shall be entitled to elect the number of directors that represents 15% of the Board, rounded up to the nearest whole director. (b) In the event the number of directors the holders of Convertible Preferred Stock are entitled to elect decreases in accordance with paragraph (a) above, then the 17 number of directors the holders of Convertible Preferred Stock are entitled to elect pursuant to paragraph (a) shall not thereafter be increased, irrespective of any subsequent acquisition of Common Stock Equivalents by Apollo and its Affiliates. In determining the number of directors the holders of the Convertible Preferred Stock shall be entitled to elect pursuant to paragraph (a) above, Apollo and its Affiliates shall be deemed to hold each Common Stock Equivalent that is held of record by Apollo or any of its Affiliates, or as to which Apollo or any of its Affiliates retains the entire economic interest. (c) Each committee of the Board shall include directors elected by the holders of shares of the Convertible Preferred Stock in the same proportion, rounded up to the nearest whole director, as such directors comprise the Board and the Corporation shall provide each Convertible Preferred Director with notice at least 48 hours prior to any meeting of the Board or any committee. (d) If an Event of Non-Compliance occurs (each, a "Trigger Event"), the Requisite Convertible Preferred Shareholders (voting as a separate class) shall have the special right to elect that number of individuals to the Board that will constitute a majority of the Board. Upon receipt by the Corporation of written notice of the occurrence of a Trigger Event signed by the Requisite Convertible Preferred Shareholders, the number of directors constituting the entire Board shall be increased by a number which, together with the number of directors which the holders of the Convertible Preferred Stock have elected pursuant to Section 9(a), shall constitute a majority of the number of directors constituting the entire Board. In case any vacancy shall occur among the directors elected by the holders of the Convertible Preferred Stock pursuant to Section 9(a) or 9(d), a successor shall be elected by the Convertible Preferred Directors (or by the holders of the Convertible Preferred Stock, in the event no such director remains in office). Upon receipt by the Corporation of written consents signed by or on behalf of the Requisite Convertible Preferred Shareholder designating the persons to fill the vacancy, created by increase or otherwise, the Board shall immediately fill such vacancies with the designees named in such notice. In lieu of delivery of notice to the Corporation described in the preceding sentence, at their discretion, the holders of the Convertible Preferred Stock, voting separately as a single class, may elect such directors at any annual meeting of the shareholders or any special meeting of the holders of the Convertible Preferred Stock called as hereinafter provided. At any time during which the power to elect any directors has been vested in the holders of Convertible Preferred Stock, the Secretary of the Corporation, upon written request of any holder of Convertible Preferred Stock, shall call a meeting of the holders of the Convertible Preferred Stock for the election of directors as provided herein. The rights of the holders of the Convertible Preferred Stock to increase the number of directors and designate such additional directors, as provided in this Section 9(d) shall continue until such time as there is no longer a Trigger Event in existence, at which time such special right shall terminate, subject to revesting upon the occurrence and continuation of any subsequent Trigger Event which gives rise hereunder. After the expiration of such Trigger Event, the term of office of the directors elected pursuant to the increase under this Section 9(d) shall automatically expire and the number of directors shall be reduced accordingly. 18 (e) Any transferee of shares of Convertible Preferred Stock shall be required, as a condition to such transfer, to enter into a written agreement with the transferor and the Corporation, which agreement shall confer on Apollo (or such other Person as the Corporation shall approve), for so long as such shares remain outstanding, sole power and authority to vote such shares of Convertible Preferred Stock (at any meeting of shareholders or by execution of a written consent of shareholders), with respect to (i) any election of directors of the Corporation, including any election of directors pursuant to Section 9 of this Statement, or (ii) any matter described in Section 8(b)(vi). A counterpart of any such contract shall be deposited with the Corporation at its principal place of business or registered office and shall be subject to examination by shareholders, in accordance with Article 2.30 of the Texas Business Corporation Act. Upon any transfer in which the transferee does not agree to such contractual agreement described above, such shares of Convertible Preferred Stock shall automatically convert into a like number of Series B Convertible Preferred Stock, which shall be identical in all respects to the Convertible Preferred Stock, except such Series B Convertible Preferred Stock shall not be entitled to vote (at any meeting of shareholders or by execution of a written consent of shareholders) with respect to (i) any election of directors of the Corporation, including any election of directors pursuant to Section 9, or (ii) any matter described in Section 8(b)(vi). 10. DEFINITIONS. As used herein, the following terms shall have the following meanings: "Accumulated Amount" means an amount per share of Convertible Preferred Stock equal to the Original Cost plus the sum of all dividends accrued but unpaid as of the most recent Preferred Dividend Payment Date. "Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person; provided that Affiliates of Apollo shall exclude any operating companies that would otherwise be deemed an Affiliate of Apollo, but shall include all investment partnerships and special purpose entities that are not operating companies, whether existing as of the date hereof or created hereafter, if the Persons controlling Apollo have a dominant management role in such entities. For the purpose of the above definition, the term "control" (including, with correlative meaning, the terms "controlling", "controlled by", and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Applicable Dividend Rate" means 7.25% per annum; provided however that the Applicable Dividend Rate shall be 9.25% upon the occurrence of and during the continuation of any Event of Non-Compliance until cured, except for any Event of Non-Compliance related solely to: 19 (i) a breach by the Company of any provisions of the Purchase Agreement; or (ii) any breach of Sections 15(a), (iii), (v), (vi), (vii), or (ix) through (xiii) (in the case of (xiii), only insofar as it relates to the foreoging clauses) of the Investor Rights Agreement that does not have a material adverse effect on the Corporation and its Subsidiaries, taken as a whole. "Apollo" means Apollo Management IV, L.P. "Appraisal Procedure" shall mean the following procedure to determine the fair market value, as to any security, for purposes of the definition of "Fair Market Value" or the fair market value, as to any other property (in either case, the "valuation amount"). The valuation amount shall be determined in good faith jointly by the disinterested members of the Board and the Requisite Convertible Preferred Shareholders; provided, however, that if such parties are not able to agree on the valuation amount within a reasonable period of time (not to exceed twenty (20) days) the valuation amount shall be determined by an investment banking firm of national recognition, which firm shall be reasonably acceptable to the disinterested members of the Board and the Requisite Convertible Preferred Shareholders. If the disinterested members of the Board and the Requisite Convertible Preferred Shareholders are unable to agree upon an acceptable investment banking firm within ten (10) days after the date either party proposed that one be selected, the investment banking firm will be selected by an arbitrator located in New York City, New York, selected by the American Arbitration Association (or if such organization ceases to exist, the arbitrator shall be chosen by a court of competent jurisdiction). The arbitrator shall select the investment banking firm (within ten (10) days of his appointment) from a list, jointly prepared by the disinterested members of the Board and the Requisite Convertible Preferred Shareholders, of not more than six investment banking firms of national standing in the United States, of which no more than three may be named by the disinterested members of the Board and no more than three may be named by the Requisite Convertible Preferred Shareholders. The arbitrator may consider, within the ten-day period allotted, arguments from the parties regarding which investment banking firm to choose, but the selection by the arbitrator shall be made in its sole discretion from the list of six. The disinterested members of the Board and the Requisite Convertible Preferred Shareholders shall submit to the investment banking firm their respective determinations of the valuation amount, and any supporting arguments and other data as they may desire, within ten (10) days of the appointment of the investment banking firm, and the investment banking firm shall as soon as practicable thereafter make its own determination of the valuation amount. The final valuation amount for purposes hereof shall be the average of the two valuation amounts closest together, as determined by the investment banking firm, from among the valuation amounts submitted by the Corporation and the Requisite Convertible Preferred Shareholders and the valuation amount calculated by the investment banking firm. The determination of the final valuation amount by such investment-banking firm shall be final and binding upon the parties. The party that submits the valuation amount that is not used by the investment banking firm to calculate the final valuation amount shall pay the fees and expenses of the investment banking firm and arbitrator (if any) used to determine the valuation amount. If required by any such investment banking firm or arbitrator, the Corporation shall execute a retainer and engagement letter containing reasonable terms and conditions, including, without limitation, customary provisions concerning the rights of indemnification and contribution by the 20 Corporaion in favor of such investment banking firm or arbitrator and its officers, directors, partners, employees, agents and Affiliates. "Board" means the Board of Directors of the Corporation. "BOSC" means Building One Services Corporation, a Delaware Corporation. "Business Day" means any day except a Saturday, Sunday or a day on which banking institutions are legally authorized to close in the City of New York "Change of Control" means the occurrence, after the date of the consummation of the Merger, of any of the following events (each a "Change of Control"): (i) the Sale of the Corporation, (ii) the adoption of a plan relating to a Liquidation, (iii) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than Apollo and its Affiliates, is or becomes the "beneficial owner" (as defined in Rules 13-d-3 and 13d-5 under the Exchange Act), directly or indirectly, of Voting Stock entitled to cast a majority of the votes entitled to be cast by the holders of the outstanding Voting Stock of the Corporation , (iv) (A) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than Apollo and its Affiliates, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of Voting Stock entitled to cast more than 30% of the votes entitled to be cast by the holders of the outstanding Voting Stock of the Corporation and (B) Apollo and its Affiliates beneficially owns, directly or indirectly, Voting Stock entitled to cast in the aggregate a lesser percentage of the votes entitled to be cast by the outstanding Voting Stock of the Corporation than such other person or group, or (v) the first day on which a majority of the Common Stock Directors are not Continuing Directors. "Closing Price" means with respect to the shares of Common Stock on any day, (i) the last reported sales price, or in the case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case on the NYSE, or (ii) if the shares of Common Stock are not listed or admitted to trading on the NYSE, the last reported sales price, or in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading, or (iii) if the shares of Common Stock are not listed on any national securities exchange, the average of the closing bid and asked prices in the over-the- counter market as furnished by any NYSE member firm selected from time to time by 21 the Corporation for that purpose, or (iv) if such prices in the over-the- counter market are not available, the Fair Market Value. "Common Stock" means the Common Stock, par value $0.001, of the Corporation. "Common Stock Directors" means those directors who have not been elected by the holders of the shares of the Convertible Preferred Stock pursuant to Section 9. "Common Stock Equivalent" means one share of Common Stock or the right to acquire, whether or not immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant, convertible security or other instrument or agreement, in each case, as adjusted to account for any stock splits, reverse stock splits, stock dividends or other similar events. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (a) after-tax gains or losses from asset sales or abandonments or reserves relating thereto, (b) after-tax items classified as extraordinary or nonrecurring gains or losses, (c) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Subsidiary of the referent Person, (d) the net income (but not loss) of any Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is by a contract, operation of law or otherwise prohibited, (e) the net income of any Person, other than a Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a wholly owned Subsidiary of the referent Person by such Person, and (f) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets. "Continuing Directors" means Common Stock Directors who were directors on the Original Issuance Date or whose election to the Board, or whose nomination for election by the shareholders of the Corporation, was approved by a majority of the Common Stock Directors then still in office who were either directors on the Original Issuance Date or whose election or nomination for election was previously so approved. "Conversion Date" shall have the meaning set forth in Section 4(b). "Conversion Price" shall have the meaning set forth in Section 4(a). "Conversion Shares" means the shares of Common Stock issuable upon conversion of the Convertible Preferred Stock, as adjusted to account for any stock splits, reverse splits, stock dividends or other similar events. "Corporation Redemption Price" shall have the meaning set forth in Section 5(a). "Event of Non-Compliance" means the occurrence of any of the following: 22 (i) the Corporation fails to pay the dividends or distributions required pursuant to Section 2 hereof and such failure to pay continues 10 days after notice of such failure has been delivered by any holder of shares of Convertible Preferred Stock; (ii) the Corporation fails to pay the full redemption price when due under Sections 5, 6 or 7 hereof; (iii) any breach by the Corporation of Section 8(b) hereof, any other material breach by the Corporation of any of the terms and conditions hereof, or any material and intentional breach by the Corporation of any of the terms and conditions of the Investor Rights Agreement or the Purchase Agreement; (iv) there is a payment default, or any other default giving rise to a right of acceleration, under any Indebtedness of the Corporation that has an aggregate principal amount outstanding, as of the date of such default or acceleration, in excess of $10,000,000 (after giving effect to any notice or cure period relating to such Indebtedness); (v) the Corporation or any of its material Subsidiaries shall (A) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law, (B) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (C) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for any such Person or for any substantial part of its property or assets, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors, (F) fail generally to pay its debts as they become due or (G) take any corporate or shareholder action in furtherance of any of the foregoing; or (vi) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (A) relief in respect of the Corporation or any of its material Subsidiaries, or of any substantial part of their respective property or assets, under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law, (B) the appointment of a receiver, trustee, custodian, sequestrator or similar official for any such Person or for any substantial part of its property or (C) the winding-up or liquidation of any such Person, and such proceeding, petition or order shall continue unstayed and in effect for a period of 60 consecutive days. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Stock" means (i) shares of Common Stock issuable upon exercise of any warrants or options of the Corporation outstanding on the Original Issuance Date, (ii) shares of Common Stock issuable upon exercise of any warrant or option of BOSC assumed by the 23 Corporation in connection with the Merger, (iii) shares of Common Stock issued pursuant to the conversion of the Convertible Preferred Stock, (iv) shares of Common Stock issued as consideration pursuant to any acquisition by the Company or any Subsidiary of any Person or assets (an "Acquisition") if (x) the total consideration paid in such Acquisition is (based on total cash consideration, total Indebtedness assumed by the Company and its Subsidiaries and the Fair Market Value of the shares of Common Stock issued and other property paid) is less than 2.0% of the total assets of the Company and its Subsidiaries as of the end of its most recently completed fiscal quarter and (y) the Consolidated Net Income per outstanding share of Common Stock for the immediately preceding full twelve month period giving pro forma effect to such Acquisition, and related financing, as if such Acquisition were consummated at the beginning of such period is greater than the actual Consolidated Net Income per outstanding share of Common Stock for such period, (v) shares of Convertible Preferred Stock issued as dividends to the holders of Convertible Preferred Stock, (vi) shares of Common Stock or options issued pursuant to any Company or BOSC employee incentive or benefit arrangement existing on the date hereof pursuant to the terms thereof on the date hereof, (vii) shares of Common Stock or options issued pursuant to Corporation employee incentive or benefit arrangements adopted after the Original Issuance Date of substantially the same size and on terms that are no less favorable to the Company than such plans existing on the date hereof to become effective upon the termination of such existing plans to replace such existing plans and all outstanding options thereunder, (viii) shares of Common Stock issued pursuant to obligations to pay earnouts with respect to the Acquisitions described on Schedule I hereto in accordance with the agreements relating thereto, (ix) up to 2,500,000 shares of Common Stock under a new employee option plan to be instituted by the Corporation at the closing of the Merger, (x) up to 1,200,000 shares of Common Stock issued pursuant to a stock performance incentive plan no less favorable to the Corporation than the BOSC 1999 Stock Performance Incentive Plan (whether as an addition to such plan, or as a part of an expanded plan which incorporates the BOSC plan plus the additional 1,200,000 shares) and (xi) Common Stock issued to the shareholders of BOSC pursuant to the Merger Agreement. "Fair Market Value" means, as to any security, the average of the Closing Prices of such security (i) averaged over a period of 21 days consisting of the day immediately preceding the day as of which "Fair Market Value" is being determined and the 20 consecutive Business Days prior to such immediately preceding day and (ii) excluding any trades that are not bona fide, arm's length transactions). If at any time such security is not listed on any domestic securities exchange or quoted in the NASDAQ System or the domestic over-the- counter market, the "Fair Market Value" of such security shall be the fair market value thereof as determined in accordance with the Appraisal Procedure, using an appropriate valuation method, assuming an arms-length sale to an independent party. In determining the fair market value of any class or series of Common Stock, a sale of all of the issued and outstanding Common Stock of the Corporation will be assumed, without giving regard to the lack of liquidity of such stock due to any restrictions (contractual or otherwise) applicable thereto or any discount for minority interests and assuming the conversion or exchange of all securities then outstanding that are convertible into or exchangeable for Common Stock and the exercise of all rights and warrants then outstanding and exercisable to purchase shares of such stock or securities convertible into or exchangeable for shares of such stock; provided, however that such assumption will not include those securities, rights and warrants convertible into Common Stock where the conversion, exchange or exercise price per share is greater than the fair market value; provided, further, 24 however, that fair market value shall be determined with regard to the relative priority of each class or series of Common Stock (if more than one class or series exists.) "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by (or which customarily would be evidenced by) bonds, debentures, notes or similar instruments, (c) all reimbursement obligations of such Person with respect to letters of credit and similar instruments, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of such Person incurred, issued or assumed as the deferred purchase price of property or services other than accounts payable incurred and paid on terms customary in the business of such Person, provided that Indebtedness shall include contingent purchase price obligations and other earnout obligations of the Corporation and its Subsidiaries incurred in connection with the acquisition of any business, to the extent that it is more likely than not that such obligations will be paid (it being understood that the "deferred purchase price" in connection with any purchase of property or assets shall include only that portion of the purchase price which shall be deferred beyond the date on which the purchase is actually consummated), (f) all obligations secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person under forward sales, futures, options and other similar hedging arrangements (including interest rate hedging or protection agreements), (h) all guaranties by such Person of obligations of others and (i) all capitalized lease obligations of such Person. "Initial Dividend Period" means the period from and including the Original Issuance Date through and including the third anniversary of the Original Issuance Date. "Investor's Rights Agreement" means the Investor Rights Agreement dated as of the Original Issuance Date among the Corporation and the Investor. "Investor" means BOSS II, LLC. "Lien" means any security interest, lien, pledge, claim, charge, escrow, encumbrance, option, right of first offer, right of first refusal, preemptive right, mortgage, indenture, security agreement or other similar agreement, arrangement, contract, commitment, understanding or obligation, whether written or oral and whether or not relating in any way to credit or the borrowing of money. "Liquidation" means any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Corporation, other than any dissolution, liquidation or winding up in connection with any reincorporation of the Corporation in another jurisdiction. "Liquidation Amount" means, as to each share of Convertible Preferred Stock, the Original Cost plus all accrued and unpaid dividends and all accumulated and unpaid dividends, whether or not declared and whether or not there are profits, surplus or other funds legally available for dividends, payable with respect to such share of Convertible Preferred Stock. "Maturity Date" means the 12th anniversary of the Original Issuance Date. 25 "Merger" means the merger contemplated by the Agreement and Plan of Merger dated November 2, 1999, by and between Group Maintenance America Corp. and Building One Services Corporation. "NASDAQ System" means the National Association of Securities Dealers Automated Quotation System. "Original Cost" means $1,000 per share. "Original Issuance Date" for the Convertible Preferred Stock means the date of original issuance of the first share of such Convertible Preferred Stock. "Person" shall be construed broadly and shall include, without limitation, an individual, a partnership, an investment fund, a limited liability corporation, a corporation, an association, a joint stock corporation, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Preferred Dividend Payment Date" shall have the meaning set forth in Section 2(a). "Preferred Record Date" shall have the meaning set forth in Section 2(b). "Purchase Agreement" means the Securities Purchase Agreement dated as of November 2, 1999 among the Corporation and the Investor. "Redemption Date" shall have the meaning set forth in Section 6(c). "Redemption Price" shall mean 101% of the Liquidation Amount. "Redemption Record Date" has the meaning set forth in Section 5(b). "Requisite Convertible Preferred Shareholders" means, as of any date of determination, the holders of a majority of the outstanding shares of Convertible Preferred Stock as of such date. "Sale of the Corporation" shall mean (i) the sale or other disposition, directly or indirectly, of all or substantially all of the Corporation's assets in one transaction or a series of transactions or (ii) the merger or consolidation of the Corporation with or into another Person, in the case of clause (ii) only, under circumstances in which the holders of Voting Stock entitled to cast a majority of the votes entitled to be cast by the holders of the Voting Stock of the Corporation, immediately prior to the merger or consolidation, own Voting Stock entitled to cast less than a majority of the votes entitled to be cast by the holders of the Voting Stock of the Corporation or the surviving or resulting corporation or acquirer, as the case may be, immediately following such merger or consolidation. A sale (or sales) of one or more Subsidiaries of the Corporation (whether by way of merger, consolidation, reorganization or sale of all or substantially all assets or securities) which constitutes all or substantially all of the consolidated assets of the Corporation shall be deemed a Sale of the Corporation. 26 "Second Dividend Period" means the period from, but not including, the third anniversary of the Original Issuance Date through and including the Maturity Date. "Statement" means this Statement of designations, rights, preferences, powers, privileges and restrictions, qualifications, and limitations. "Subsidiary" means any entity of which a majority of the outstanding Voting Stock, is owned by the Corporation either directly or indirectly through Subsidiaries. "Trigger Event" shall have the meaning set forth in Section 9(d). "Voting Stock" of a Person means any class or all classes of capital stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. 27 IN WITNESS WHEREOF, Group Maintenance America Corp. has caused this Statement of Designation to be duly executed this 15th day of February, 2000. GROUP MAINTENANCE AMERICA CORP. By: /s/ RANDOLPH W. BRYANT ------------------------ Name: Randolph W. Bryant Title: Senior Vice President EX-4.1 4 INDENTURE EXHIBIT 4.1 ================================================================================ BUILDING ONE SERVICES CORPORATION, as Issuer, the GUARANTORS named herein, as Guarantors, and IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee ____________________ INDENTURE Dated as of April 30, 1999 ____________________ up to $400,000,000 ____________________ 10 1/2% Senior Subordinated Notes due 2009 ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions.......................................... 1 SECTION 1.02. Incorporation by Reference of TIA.................... 33 SECTION 1.03. Rules of Construction................................ 34 ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating...................................... 34 SECTION 2.02. Execution and Authentication......................... 35 SECTION 2.03. Registrar and Paying Agent........................... 36 SECTION 2.04. Paying Agent To Hold Assets in Trust................. 37 SECTION 2.05. Holder Lists......................................... 37 SECTION 2.06. Transfer and Exchange................................ 37 SECTION 2.07. Replacement Securities............................... 38 SECTION 2.08. Outstanding Securities............................... 39 SECTION 2.09. Treasury Securities.................................. 39 SECTION 2.10. Temporary Securities................................. 40 SECTION 2.11. Cancellation......................................... 40 SECTION 2.12. Defaulted Interest................................... 40 SECTION 2.13. CUSIP Number......................................... 41 SECTION 2.14. Deposit of Moneys.................................... 41 SECTION 2.15. Book-Entry Provisions for Global Securities.......... 41 SECTION 2.16. Special Transfer Provisions.......................... 43 ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee................................... 46 SECTION 3.02. Selection of Securities To Be Redeemed............... 46 SECTION 3.03. Notice of Redemption................................. 47 SECTION 3.04. Effect of Notice of Redemption....................... 48 SECTION 3.05. Deposit of Redemption Price.......................... 48 SECTION 3.06. Securities Redeemed in Part.......................... 48
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Page ---- ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities.................................. 49 SECTION 4.02. Maintenance of Office or Agency........................ 49 SECTION 4.03. Limitation on Restricted Payments...................... 50 SECTION 4.04. Limitation on Incurrence of Additional Indebtedness.... 52 SECTION 4.05. Corporate Existence.................................... 53 SECTION 4.06. Payment of Taxes and Other Claims...................... 53 SECTION 4.07. Maintenance of Properties and Insurance................ 53 SECTION 4.08. Compliance Certificate; Notice of Default.............. 54 SECTION 4.09. Compliance with Laws................................... 55 SECTION 4.10. Reports to Holders..................................... 55 SECTION 4.11. Waiver of Stay, Extension or Usury Laws................ 56 SECTION 4.12. Limitations on Transactions with Affiliates............ 57 SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.................... 59 SECTION 4.14. Limitation on Liens.................................... 60 SECTION 4.15. Change of Control...................................... 61 SECTION 4.16. Limitation on Asset Sales.............................. 63 SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt.. 67 SECTION 4.18. Additional Subsidiary Guarantees....................... 67 SECTION 4.19. Conduct of Business.................................... 68 ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets............... 68 SECTION 5.02. Successor Corporation Substituted...................... 70 ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default...................................... 70 SECTION 6.02. Acceleration........................................... 72 SECTION 6.03. Other Remedies......................................... 73 SECTION 6.04. Waiver of Past Defaults................................ 74 SECTION 6.05. Control by Majority.................................... 74
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Page ---- SECTION 6.06. Limitation on Suits..................................... 74 SECTION 6.07. Rights of Holders To Receive Payment.................... 75 SECTION 6.08. Collection Suit by Trustee.............................. 75 SECTION 6.09. Trustee May File Proofs of Claim........................ 75 SECTION 6.10. Priorities.............................................. 76 SECTION 6.11. Undertaking for Costs................................... 77 ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee....................................... 77 SECTION 7.02. Rights of Trustee....................................... 78 SECTION 7.03. Individual Rights of Trustee............................ 80 SECTION 7.04. Trustee's Disclaimer.................................... 80 SECTION 7.05. Notice of Default....................................... 80 SECTION 7.06. Reports by Trustee to Holders........................... 81 SECTION 7.07. Compensation and Indemnity.............................. 81 SECTION 7.08. Replacement of Trustee.................................. 82 SECTION 7.09. Successor Trustee by Merger, Etc........................ 83 SECTION 7.10. Eligibility; Disqualification........................... 84 SECTION 7.11. Preferential Collection of Claims Against Company....... 84 ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of the Company's Obligations................ 84 SECTION 8.02. Legal Defeasance and Covenant Defeasance................ 86 SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance... 88 SECTION 8.04. Application of Trust Money.............................. 90 SECTION 8.05. Repayment to the Company................................ 90 SECTION 8.06. Reinstatement........................................... 91 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders.............................. 91 SECTION 9.02. With Consent of Holders................................. 92 SECTION 9.03. Effect on Senior Debt................................... 94 SECTION 9.04. Compliance with TIA..................................... 94 SECTION 9.05. Revocation and Effect of Consents....................... 94 SECTION 9.06. Notation on or Exchange of Securities................... 95
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Page ---- SECTION 9.07. Trustee To Sign Amendments, Etc........................ 95 ARTICLE TEN SUBORDINATION OF SECURITIES SECTION 10.01. Securities Subordinated to Senior Debt................. 96 SECTION 10.02. Suspension of Payment When Senior Debt Is in Default... 96 SECTION 10.03. Securities Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company........................................... 98 SECTION 10.04. Payments May Be Paid Prior to Dissolution.............. 100 SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt................................................. 100 SECTION 10.06. Obligations of the Company Unconditional............... 101 SECTION 10.07. Notice to Trustee...................................... 101 SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent.................................... 102 SECTION 10.09. Trustee's Relation to Senior Debt...................... 102 SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt............. 103 SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination of Securities.......................... 103 SECTION 10.12. This Article Ten Not To Prevent Events of Default...... 104 SECTION 10.13. Trustee's Compensation Not Prejudiced.................. 104 ARTICLE ELEVEN GUARANTEE OF SECURITIES SECTION 11.01. Unconditional Guarantee................................ 105 SECTION 11.02. Limitations on Guarantees.............................. 106 SECTION 11.03. Execution and Delivery of Guarantee.................... 107 SECTION 11.04. Release of a Guarantor................................. 107 SECTION 11.05. Waiver of Subrogation.................................. 108 SECTION 11.06. Immediate Payment...................................... 109 SECTION 11.07. No Set-Off............................................. 109 SECTION 11.08. Obligations Absolute................................... 109 SECTION 11.09. Obligations Continuing................................. 110 SECTION 11.10. Obligations Not Reduced................................ 110
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Page ---- SECTION 11.11. Obligations Reinstated.................................... 110 SECTION 11.12. Obligations Not Affected.................................. 111 SECTION 11.13. Waiver.................................................... 112 SECTION 11.14. No Obligation To Take Action Against the Company.......... 112 SECTION 11.15. Dealing with the Company and Others....................... 113 SECTION 11.16. Default and Enforcement................................... 113 SECTION 11.17. Amendment, Etc............................................ 114 SECTION 11.18. Acknowledgment............................................ 114 SECTION 11.19. Costs and Expenses........................................ 114 SECTION 11.20. No Merger or Waiver; Cumulative Remedies.................. 114 SECTION 11.21. Survival of Obligations................................... 114 SECTION 11.22. Guarantee in Addition to Other Obligations................ 115 SECTION 11.23. Severability.............................................. 115 SECTION 11.24. Successors and Assigns.................................... 115 ARTICLE TWELVE SUBORDINATION OF GUARANTEE SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt.................................................... 115 SECTION 12.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default...................................... 116 SECTION 12.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor..................... 117 SECTION 12.04. Payments May Be Paid Prior to Dissolution................. 118 SECTION 12.05. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of Guarantor Senior Debt..................... 119 SECTION 12.06. Obligations of the Guarantors Unconditional............... 119 SECTION 12.07. Notice to Trustee......................................... 120 SECTION 12.08. Reliance on Judicial Order or Certificate of Liquidating Agent .................................................. 121 SECTION 12.09. Trustee's Relation to Guarantor Senior Debt............... 121 SECTION 12.10. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Debt...... 122
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Page ---- SECTION 12.11. Holders Authorized Trustee To Effectuate Subordination of Guarantee Obligations.............................. 122 SECTION 12.12. This Article Twelve Not To Prevent Events of Default..... 123 SECTION 12.13. Trustee's Compensation Not Prejudiced.................... 123 ARTICLE THIRTEEN MISCELLANEOUS SECTION 13.01. TIA Controls............................................. 123 SECTION 13.02. Notices.................................................. 124 SECTION 13.03. Communications by Holders with Other Holders............. 125 SECTION 13.04. Certificate and Opinion as to Conditions Precedent....... 125 SECTION 13.05. Statements Required in Certificate or Opinion............ 125 SECTION 13.06. Rules by Trustee, Paying Agent, Registrar................ 126 SECTION 13.07. Legal Holidays........................................... 126 SECTION 13.08. Governing Law............................................ 126 SECTION 13.09. No Adverse Interpretation of Other Agreements............ 127 SECTION 13.10. No Recourse Against Others............................... 127 SECTION 13.11. Successors............................................... 127 SECTION 13.12. Duplicate Originals...................................... 127 SECTION 13.13. Severability............................................. 127 Signatures................................................................ S-1
Exhibit A - Form of Note Exhibit B - Form of Legends Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers to Non QIB Accredited Investors Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit E - Form of Guarantee Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture -vi- CROSS - REFERENCE TABLE
TIA Identure Section Section - ------- ------- 310(a) (1).................................................... 7.10 (a) (2).................................................... 7.10 (a) (3).................................................... N.A. (a) (4).................................................... N.A. (a) (5).................................................... 7.08; 7.10 (b)........................................................ 7.08; 7.10; 13.02 (c)........................................................ N.A. 311(a)........................................................ 7.11 (b)........................................................ 7.11 (c)........................................................ N.A. 312(a)........................................................ 2.05 (b)........................................................ 13.03 (c)........................................................ 13.03 313(a)........................................................ 7.06 (b) (1).................................................... 7.06 (b) (2).................................................... 7.06 (c)........................................................ 7.06; 13.02 (d)........................................................ 7.06 314(a)........................................................ 4.08; 4.10; 13.02 (b)........................................................ N.A. (c) (1).................................................... 7.02; 13.04; 13.05 (c) (2).................................................... 7.02; 13.04; 13.05 (c) (3).................................................... N.A. (d)........................................................ N.A. (e)........................................................ 13.05 (f)........................................................ N.A. 315(a)........................................................ 7.01(b) (b)........................................................ 7.05 (c)........................................................ 7.01 (d)........................................................ 6.05; 7.01(c) (e)........................................................ 6.11 316(a) (last sentence)........................................ 2.09 (a) (1) (A)................................................ 6.05 (a) (1) (B)................................................ 6.04 (a) (2).................................................... 9.05 (b)........................................................ 6.07 (c)........................................................ 9.05 317(a) (1).................................................... 6.08 (a) (2).................................................... 6.09 (b)........................................................ 2.04 318(a)........................................................ 13.01 (c)........................................................ 13.01
___________________ N.A. means Not Applicable Note: This Cross - Reference Table shall not, for any purpose, be deemed to be a part of the Indenture INDENTURE dated as of April 30, 1999 among BUILDING ONE SERVICES CORPORATION, a Delaware corporation (the "Company"), as Issuer, each of the ------- Guarantors named herein, as Guarantors, and IBJ WHITEHALL BANK & TRUST COMPANY, a New York banking corporation, as Trustee (the "Trustee"). ------- The Company has duly authorized the creation of an issue of 10 1/2% Senior Subordinated Notes due 2009 and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when duly issued and executed by the Company and authenticated and delivered hereunder, the valid and binding obligations of the Company and to make this Indenture a valid and binding agreement of the Company have been done. Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Securities: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. ----------- "Acquired Indebtedness" means Indebtedness of a Person or any of its --------------------- Restricted Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with or into the Company or any of its Subsidiaries or is assumed in connection with the acquisition of assets from such Person and in each case whether or not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation. "Affiliate" means, with respect to any specified Person, any other --------- Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing. "Affiliate Transaction" has the meaning set forth in Section 4.12. --------------------- "Agent" means any Registrar, Paying Agent or co-Registrar. ----- "Asset Acquisition" means (a) an Investment by the Company or any ----------------- Restricted Subsidiary of the Company in any other person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprises any operating unit, division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. "Asset Sale" means any direct or indirect sale, issuance, conveyance, ---------- transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Wholly Owned Restricted Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or (b) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, -------- ------- that Asset Sales shall not include: (i) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $1.5 million; (ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Section 5.01; (iii) any Restricted Payment permitted by Section 4.03 or that constitutes a Permitted Investment; (iv) sales of damaged, worn-out or obsolete equipment or assets that, in the Company's reasonable judgment, are no longer either used or useful in the business of the Company or its Restricted Subsidiaries; and (v) the sale of accounts receivable pursuant to a Qualified Receivables Transaction. "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, -------------- state or foreign law for the relief of debtors. -2- "Board of Directors" means, as to any Person, the board of directors ------------------ of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a ---------------- resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday, Sunday or any ------------ other day on which banking institutions in the City of New York are required or authorized by law or other governmental action to be closed. "Capital Stock" means (i) with respect to any Person that is a ------------- corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person (but shall not include, prior to any conversion thereof, the Convertible Subordinated Notes), and (ii) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such person. "Capitalized Lease Obligation" means, as to any Person, the ---------------------------- obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Cash Equivalents" means (i) marketable direct obligations issued by, ---------------- or unconditionally guaranteed by, the United States Government or issued by any agency thereof, and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof, (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's --- Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more ------- than one year from the date of creation thereof and, at the time of acquisition, having a rat- -3- ing of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250.0 million; (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; and (vi) investments in money market funds which invest substantially all their assets in securities of the type described in clauses (i) through (v) above. "Change of Control" means the occurrence of one or more of the ----------------- following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates ----- thereof (whether or not otherwise in compliance with the provisions of this Indenture), other than to the Permitted Holders, (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this Indenture); (iii) any Person or Group (other than the Permitted Holders) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company; or (iv) the replacement of a majority of the Board of Directors of the Company over a two-year period from the directors who constituted the Board of Directors of the Company at the beginning or such period, and such replacement shall not have been approved by the Permitted Holders or a vote of at least a majority of the Board of Directors of the Company then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved. "Change of Control Date" has the meaning set forth in Section 4.15. ---------------------- "Change of Control Offer" has the meaning set forth in Section 4.15. ----------------------- -4- "Change of Control Payment Date" has the meaning set forth in Section ------------------------------ 4.15. "Commission" means the Securities and Exchange Commission. ---------- "Common Stock" of any Person means any and all shares, interests or ------------ other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Company" means the party named as such in this Indenture until a ------- successor replaces it pursuant to this Indenture and thereafter shall mean such successor corporation. "Consolidated EBITDA" means, with respect to any Person, for any ------------------- period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains), (B) Consolidated Interest Expense and (C) Consolidated Non-cash Charges less any non-cash items increasing ---- Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any ---------------------------------------- Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending prior to the date of the ------------------- transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which financial statements are available (the "Transaction ----------- Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. - ---- In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such --- ----- calculation to (i) the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business -5- for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or other dispositions or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma --- ----- expense and cost reductions, adjustments and other operating improvements or synergies both achieved by such Person during such period and to be achieved by such Person and with respect to the acquired assets, all as determined in good faith by a responsible financial or accounting officer of the Company and as reported on or otherwise confirmed, consistent with applicable standards of the American Institute of Certified Public Accountants, to the Company by an independent public accounting firm) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale or other disposition during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or other disposition or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the -6- rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any -------------------------- period, the sum, without duplication, of (i) Consolidated Interest Expense (excluding (x) amortization or write-off of deferred financing costs, (y) interest paid on Convertible Subordinated Notes in the form of Convertible Subordinated Notes or Qualified Capital Stock and (z) one-time accelerated interest payments due upon the conversion of the Convertible Subordinated Notes prior to May 1, 2004) plus (ii) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person (other than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Interest Expense" means, with respect to any Person for ----------------------------- any period, the sum of, without duplication: (i) the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount and amortization or write-off of deferred financing costs (including the amortization of costs relating to interest rate caps or other similar agreements), (b) the net costs under Interest Swap Obligations, (c) all capitalized interest and (d) the interest portion of any deferred payment Obligation; and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP, minus interest income for such period. "Consolidated Net Income" means, with respect to any Person, for any ----------------------- period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (a) after-tax gains -------- or losses from Asset Sales (without regard to the $1.5 million limitation set forth in the definition thereof) or abandonments or reserves relating thereto, (b) items classified as extraordinary, nonrecurring or unusual gains or losses on an after-tax basis (including, but not limited to, fees and expenses related to the Transactions and non-cash charges related to the acceleration of the vesting of options), (c) the net in- -7- come of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Restricted Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Restricted Subsidiary of the referent Person, (d) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends and the making of loans or advances or similar distributions, loans or advances by that Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise, (e) the net income of any Person, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Wholly Owned Restricted Subsidiary of the referent Person by such Person, (f) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets and (g) the effect of changes in accounting principles after the Issue Date. For purposes of Section 4.03 only, "Consolidated Net Income" shall be calculated without taking into account cash interest payments (and the related tax effects) on the Convertible Subordinated Notes. "Consolidated Non-cash Charges" means, with respect to any Person, for any ----------------------------- period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Convertible Subordinated Notes" means the $100 million aggregate principal ------------------------------ amount of the Company's 7 1/2% Convertible Junior Subordinated Notes due 2012 and any additional Convertible Subordinated Notes issued in lieu of cash interest thereon in accordance with the terms of the Convertible Subordinated Notes as in effect on the Issue Date. "Covenant Defeasance" has the meaning set forth in Section 8.02. ------------------- "Credit Agreement" means the Credit Agreement dated as of the Issue Date, ---------------- between the Company, the lenders party thereto in their capacities as lenders thereunder, Goldman, Sachs Credit Partners L.P., as documentation agent, Salomon Smith Barney Inc., as syndication agent, and Bankers Trust Company, as administrative agent, together with the related docu- -8- ments thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Credit Facilities" means one or more debt facilities (including, ----------------- without limitation, the Credit Agreement) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) and/or letters of credit or banker's acceptances. "Currency Agreement" means any foreign exchange contract, currency ------------------ swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, liquidator, --------- sequestrator or similar official under any Bankruptcy Law. "Default" means an event or condition the occurrence of which is, or ------- with the lapse of time or the giving of notice or both would be, an Event of Default. "Depository" shall mean The Depository Trust Company, New York, New ---------- York, or a successor thereto registered under the Exchange Act or other applicable statue or regulation. "Designated Senior Debt" means (i) Indebtedness under or in respect of ---------------------- the Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. -9- "Disqualified Capital Stock" means that portion of any Capital Stock -------------------------- which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event (other than an event which would constitute a Change of Control or Asset Sale), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control or Asset Sale), on or prior to the Maturity Date of the Securities. "Domestic Restricted Subsidiary" means a Restricted Subsidiary ------------------------------ incorporated or otherwise organized or existing under the laws of the United States, any state thereof or any territory or possession of the United States. "Equity Offering" means a public or private offering of Qualified --------------- Capital Stock (other than public offerings with respect to the Company's Common Stock on Form S-8 or any replacement form for such Form S-8) of the Company for aggregate net cash proceeds to the Company of at least $20 million. "Event of Default" has the meaning set forth in Section 6.01. ---------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ or any successor statute or statutes thereto. "Exchange Securities" means securities issued in exchange for the ------------------- Securities pursuant to the terms of the Registration Rights Agreement, or, in the case of Securities issued after the Issue Date, any other registration rights agreement. "fair market value" means, with respect to any asset or property, the ----------------- price which could be negotiated in an arm's length, free market transaction between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. "GAAP" means generally accepted accounting principles set forth in the ---- opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date. -10- "Global Security" shall mean one or more IAI Global Securities, --------------- Regulation S Global Securities and 144A Global Securities. "Guarantee Obligations" has the meaning set forth in Section 12.01. --------------------- "Guarantees" means the guarantees of the Securities by the Guarantors. ---------- "Guarantor" means (i) each of the Company's Restricted Subsidiaries as --------- of the Issue Date and (ii) each of the Company's Restricted Subsidiaries that in the future executes a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor; provided that -------- any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when it is respective Guarantee is released in accordance with the terms of this Indenture. "Guarantor Senior Debt" means with respect to any Guarantor, the --------------------- principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of such Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee of such Guarantor. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (x) all monetary obligations of every nature of such Guarantor under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (including guarantees thereof), (y) all Interest Swap Obligations (and guarantees thereof) and (z) all obligations (and guarantees thereof) under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include (i) any Indebt- -11- edness of such Guarantor to a Subsidiary of such Guarantor, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of such Guarantor or any Subsidiary of such Guarantor (including, without limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender) under the Credit Facilities (including the Credit Agreement), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) Indebtedness represented by Disqualified Capital Stock, (v) any liability for federal, state, local or other taxes owed or owing by such Guarantor, (vi) that portion of any Indebtedness incurred in violation of the provisions of Section 4.04 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (vi) if the holder(s) of such obligation or their representative shall have received an officers' certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture), (vii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company and (viii) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor. "incur" has the meaning set forth in Section 4.04. ----- "Indebtedness" means with respect to any Person, without duplication, ------------ (i) all Obligations of such Person for borrowed money (including, without limitation, Senior Debt), (ii) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 90 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted), (v) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (i) through (v) above and clause (viii) below, (vii) all Obligations of any other Person -12- of the type referred to in clauses (i) through (vi) which are secured by any lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured, (viii) all Obligations under currency agreements and interest swap agreements of such Person and (ix) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. Notwithstanding anything to the contrary in this definition, Indebtedness shall not include any contingent purchase price obligations or other earnout obligations of the Company and its Restricted Subsidiaries in connection with acquisitions, which obligations are not required to be included as indebtedness on the face of the Company's consolidated balance sheet in accordance with GAAP. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock. "Indenture" means this Indenture, as amended or supplemented from time --------- to time in accordance with the terms hereof. "Independent Financial Advisor" means a firm (i) which does not, and ----------------------------- whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Initial Purchasers" means BT Alex. Brown Incorporated, Bear, Stearns ------------------ & Co. Inc., Goldman, Sachs & Co., Salomon Smith Barney Inc., Friedman Billings Ramsey & Co. Inc., Jefferies & Company, Inc. and Fleet Securities, Inc. "Institutional Accredited Investor" or "IAI" means an institution that --------------------------------- --- is an "accredited investor" as that term is -13- defined in Rule 501(a) (1), (2), (3) or (7) under the Securities Act. "Interest Payment Date" means the stated maturity of an installment of --------------------- interest on the Securities. "Interest Swap Obligations" means the obligations of any Person ------------------------- pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" means, with respect to any Person, any direct or indirect ---------- loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be. For purposes of Section 4.03: (1) "Investment" shall include and be valued at the fair market value of the net assets of any Restricted Subsidiary of the Company at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary of the Company and shall exclude the fair market value of the net assets of any Unrestricted Subsidiary of the Company at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company; and (2) the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or distributions or -------- receipt of any such other amounts shall reduce the amount of any Investment if such payment of -14- dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, 100% of the outstanding Common Stock of such Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "Investors' Rights Agreement" means the Investors' Rights Agreement, --------------------------- dated March 22, 1999, among the Company and certain of its investors. "Issue Date" means April 30, 1999, the date of original issuance of ---------- any Securities under this Indenture. "Legal Defeasance" has the meaning set forth in Section 8.02. ---------------- "Lien" means any lien, mortgage, deed of trust, pledge, security ---- interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Maturity Date" means May 1, 2009. ------------- "Net Cash Proceeds" means, with respect to any Asset Sale, the ----------------- proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Restricted Subsidiaries from such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), (b) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements, (c) repayment of Indebtedness that is required to be repaid in connection with such Asset Sale, (d) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in -15- accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, and (e) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries or joint ventures as a result of such Asset Sale. "Net Proceeds Offer" has the meaning set forth in Section 4.16. ------------------ "Net Proceeds Offer Amount" has the meaning set forth in Section 4.16. ------------------------- "Net Proceeds Offer Payment Date" has the meaning set forth in Section ------------------------------- 4.16. "Net Proceeds Offer Trigger Date" has the meaning set forth in Section ------------------------------- 4.16. "Non-payment Default" has the meaning set forth in Section 10.02. ------------------- "Non-U.S. Person" has the meaning assigned to such term in Regulation --------------- S. "Obligations" means all obligations for principal, premium, interest, ----------- penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the ------- Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Controller, or the Secretary of such Person. "Officers' Certificate" means a certificate signed by two Officers of --------------------- the Company. "144A Global Security" means a permanent global security in registered -------------------- form representing the aggregate principal amount of Securities sold in reliance on Rule 144A under the Securities Act. -16- "Opinion of Counsel" means a written opinion from legal counsel which ------------------ opinion and counsel are reasonably acceptable to the Trustee. "Participants" has the meaning set forth in Section 2.15. ------------ "Paying Agent" has the meaning set forth in Section 2.03. ------------ "Payment Blockage Notice" has the meaning set forth in Section 10.02. ----------------------- "Payment Blockage Period" has the meaning set forth in Section 10.02. ----------------------- "Payment Default" has the meaning set forth in Section 10.02. --------------- "Permitted Holders" means Apollo Management, L.P. and its Affiliates ----------------- and management of the Company. "Permitted Indebtedness" means, without duplication, each of the ---------------------- following: (i) Indebtedness under the Securities and the Guarantees issued on the Issue Date in an aggregate principal amount not to exceed $200 million; (ii) Indebtedness incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $375.0 million less the amount of all repayments and permanent commitment reductions under the Credit Agreement with the Net Cash Proceeds of an Asset Sale applied thereto as required by Section 4.16; provided that the -------- amount of Indebtedness permitted to be incurred pursuant to the Credit Agreement in accordance with this clause (ii) shall be in addition to any Indebtedness permitted to be incurred pursuant to the Credit Agreement in reliance on and in accordance with clause (xvi) below; provided, further, -------- ------- that the aggregate principal amount of Indebtedness permitted to be incurred under this clause (ii) shall be reduced dollar for dollar by any Indebtedness outstanding under clause (xv) below; (iii) Indebtedness under the Convertible Subordinated Notes reduced by any principal payments or conversions thereof; -17- (iv) Other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon; (v) Interest Swap Obligations of the Company or any Restricted Subsidiary of the Company covering Indebtedness of the Company or any of its Restricted Subsidiaries; provided, however, that such Interest Swap Obligations -------- ------- are entered into to protect the Company and its Restricted Subsidiaries from fluctuations in interest rates on their outstanding Indebtedness to the extent the notional principal amount of such Interest Swap Obligations does not, at the time of the incurrence thereof, exceed the principal amount of the Indebtedness to which such Interest Swap Obligations relate; (vi) Indebtedness under Currency Agreement; provided that in the case of -------- Currency Agreement which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (vii) Indebtedness of a Restricted Subsidiary of the Company to the Company or to a Wholly Owned Restricted Subsidiary of the Company for so long as such Indebtedness is held by the Company, a Wholly Owned Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement, in each case subject to no Lien held by a Person other than the Company, a wholly Owned Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement; provided that if as of any date any person other -------- than the Company, a Wholly Owned Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness; (viii) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement for so long as such Indebtedness is held by a Wholly Owned Restricted Subsidiary of the Company or the lenders or collateral -18- agent under the Credit Agreement in each case subject to no other Lien; provided -------- that (a) any Indebtedness of the Company to any Wholly Owned Restricted Subsidiary of the Company is unsecured and subordinated, pursuant to a written agreement, to the Company's obligations under this Indenture and the Securities and (b) if as of any date any Person other than a Wholly Owned Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement owns or holds any such Indebtedness or any Person holds a Lien (other than a Lien in favor of the lenders or collateral agent under the Credit Agreement) in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the Company; (ix) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished -------- ------ within two business days of incurrence; (x) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self- insurance or similar requirements in the ordinary course of business; (xi) Indebtedness represented by Capitalized Lease Obligations and Purchase Money Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business not to exceed $20.0 million at any one time outstanding; provided that all or a portion of the $20 million -------- permitted to be incurred pursuant to this clause (xi) may, at the option of the Company, be incurred under the Credit Agreement instead of pursuant to Capitalized Lease Obligations or Purchase Money Indebtedness; (xii) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such busi- -19- ness, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that (a) such Indebtedness is not reflected on the -------- ------- balance sheet of the Company or any Restricted Subsidiary of the Company (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (a)) and (b) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the fair market value of such non-cash proceeds being measured at the time it is received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (xiii) Indebtedness of the Company or any of its Restricted Subsidiaries in respect of performance bonds, bankers' acceptances, workers' compensation claims, surety or appeal bonds, payment obligations in connection with self-insurance or similar obligations, and bank overdrafts (and letters of credit in respect thereof); (xiv) Refinancing Indebtedness; (xv) the incurrence by a Receivables Subsidiary of Indebtedness in a Qualified Receivables Transaction that is without recourse to the Company or to any Restricted Subsidiary of the Company or their assets (other than such Receivables Subsidiary and its assets), and is not guaranteed by any such Person; provided that any outstanding Indebtedness incurred under this -------- clause (xv) shall reduce the aggregate amount permitted to be incurred under clause (ii) above to the extent set forth therein; and (xvi) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $20.0 million at any one time outstanding (which amount may, but need not, be incurred in whole or in part under the Credit Agreement). For purposes of determining compliance with Section 4.04, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (i) through (xvi) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of Section 4.04, the Company shall, in its sole discretion, classify (or later reclassify) such -20- item of Indebtedness in any manner that complies with Section 4.04. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock in the form of additional shares of the same class of Disqualified Capital Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Capital Stock for purposes of Section 4.04. "Permitted Investments" means: --------------------- (i) Investments by the Company or any Restricted Subsidiary of the Company in any Person that is or will become immediately after such Investment a Wholly Owned Restricted Subsidiary of the Company or that will merge or consolidate into the Company or a Wholly Owned Restricted Subsidiary of the Company; (ii) Investments in the Company by any Restricted Subsidiary of the Company; provided that any Indebtedness evidencing such Investment is unsecured -------- and subordinated, pursuant to a written agreement, to the Company's obligations under the securities and this Indenture; (iii) Investments in cash and Cash Equivalents; (iv) loans and advances to employees and officers of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $5.0 million at any one time outstanding; (v) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with this Indenture; (vi) additional Investments (including joint ventures) not to exceed $10.0 million at any one time outstanding; (vii) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (viii) Investments made by the Company or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section -21- 4.16 or any Investment made by the Company or any Restricted Subsidiary in connection with a transaction that would be an Asset Sale if it involved aggregate consideration of $1.5 million or more; (ix) Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time such Person merges or consolidates with the Company or any of its Restricted Subsidiaries, in either case in compliance with this Indenture; provided that such Investments were not made by by such Person in connection - -------- with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such merger or consolidation; (x) repurchases of Capital Stock of the Company deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof; (xi) Investments made by the Company or any Restricted Subsidiary in connection with purchase price adjustments, contingent purchase price payments or other earnout payments required in connection with Investments otherwise permitted under this Indenture; (xii) Investments in securities received in settlement of trade obligations in the ordinary course of business; and (xiii) Investments in the Securities. "Permitted Liens" means the following types of Liens: --------------- (i) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; -22- (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (v) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company of any of its Restricted Subsidiaries; (vi) any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or asset -------- which is not leased property subject to such Capitalized Lease Obligation; (vii) Liens securing Capitalized Lease Obligations and Purchase Money Indebtedness permitted pursuant to clause (xi) of the definition of "Permitted Indebtedness" above; provided, however, that in the case of -------- ------- Purchase Money Indebtedness (a) the Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired and (b) the Lien securing such Indebtedness shall be created within 180 days of such acquisition or construction or, in the case of a refinancing of any Purchase Money Indebtedness, within 180 days of such refinancing; (viii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the -23- purchase, shipment or storage of such inventory or other goods; (ix) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (x) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (xi) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (xii) Liens in the ordinary course of business not exceeding $5 million at any one time outstanding that (a) are not incurred in connection with borrowing of money and (b) do not materially detract from the value of the property or materially impair its use; (xiii) Liens by reason of judgment or decree not otherwise resulting in an Event of Default; (xiv) Liens securing Indebtedness under Currency Agreements permitted under this Indenture; (xv) Liens securing Acquired Indebtedness incurred in accordance with Section 4.04; provided that; (a) such Liens secured such Acquired -------- Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company; and (b) such Liens do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company; and -24- (xvi) Liens securing Indebtedness permitted to be incurred pursuant to clause (xvi) of the definition of "Permitted Indebtedness." "Person" means an individual, partnership, corporation, limited ------ liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Physical Securities" shall have the meaning provided in Section ------------------- 2.01. "Preferred Stock" of any Person means any Capital Stock of such --------------- Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "principal" of any Indebtedness (including the Securities) means --------- the principal amount of such Indebtedness plus the premium, if any, on such Indebtedness. "Private Placement Legend" means the legends initially set forth ------------------------ on the Securities in the form set forth in Exhibit B. --------- "Purchase Money Indebtedness" means Indebtedness of the Company --------------------------- and its Restricted Subsidiaries incurred in the normal course of business for the purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment and any Refinancings thereof. "Qualified Capital Stock" means any Capital Stock that is not ----------------------- Disqualified Capital Stock. "Qualified Institutional Buyer" or "QIB" shall have the meaning ----------------------------- --- specified in Rule 144A under the Securities Act. "Qualified Receivables Transaction" means any transaction or --------------------------------- series of transactions that may be entered into by the Company or any of its Restricted Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by the Company or any of its Restricted Subsidiaries) and (ii) any other Person (in the case of transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Re- -25- stricted Subsidiaries, and any assets related thereto, including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving receivable. "Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary of ---------------------- the Company that engages in no activities other than in connection with the financing of accounts receivable and that is designated by the Board of Directors of the Company (as provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any Restricted Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction), (ii) is recourse to or obligates the Company or any Restricted Subsidiary of the Company in any way other than pursuant to representatives, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction, or (iii) subjects any property or asset of the Company or any Restricted Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction, (b) with which neither the Company nor any Restricted Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing accounts receivable, and (c) with which neither the Company nor any Restricted Subsidiary of the Company has any obligation to maintain or preserve such Restricted Subsidiary's financial condition or cause such Restricted Subsidiary to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions. -26- "Record Date" means the applicable Record Date specified in the ----------- Securities; provided that if any such date is not a Business Day, the Record -------- Date shall be the first day immediately preceding such specified day that is a Business Day. "Redemption Date," when used with respect to any Security to be --------------- redeemed, means the date fixed for such redemption pursuant to this Indenture and the Securities. "Redemption Price," when used with respect to any Security to be ---------------- redeemed, means the price fixed for such redemption, payable in immediately available funds, pursuant to this Indenture and the Securities. "Reference Date" has the meaning set forth in Section 4.03. -------------- "Refinance" means, in respect of any security or Indebtedness, to --------- refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by the Company or any ------------------------ Restricted Subsidiary of the Company of Indebtedness incurred or existing in accordance with Section 4.04 (other than pursuant to clause (ii), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xv) or (xvi) of the definition of "Permitted Indebtedness"), in each case that does not (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred by the Company in connection with such Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such -------- Indebtedness being Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced is subordinate or junior to the Securities, then such Refinancing Indebtedness shall be subordinate to the Securities at least to the same extent and in the same manner as the Indebtedness being Refinanced. -27- "Registrar" has the meaning set forth in Section 2.03. --------- "Registration Rights Agreement" means the Registration Rights ----------------------------- Agreement dated as of the Issue Date among the Company, the Guarantors and the Initial Purchasers. "Regulation S" means Regulation S under the Securities Act. ------------ "Regulation S Global Security" means a permanent global security in ---------------------------- registered form representing the aggregate principal amount of Securities sold in reliance on Regulation S under the Securities Act. "Replacement Assets" has the meaning set forth in Section 4.16. ------------------ "Representative" means the indenture trustee or other trustee, agent -------------- or representative in respect of any Designated Senior Debt; provided that if, -------- and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "Responsible Officer" means, when used with respect to the Trustee, ------------------- any officer in the Corporate Trust Office of the Trustee including any vice president, assistant vice president, assistant secretary, treasurer, assistant treasurer, or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Restricted Payment" has the meaning set forth in Section 4.03. ------------------ "Restricted Security" means a Security that constitutes a "Restricted ------------------- Security" within the meaning of Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and - -------- ------- conclusively rely on an Opinion of Counsel with respect to whether any Security constitutes a Restricted Security. -28- "Restricted Subsidiary" of any Person means any Subsidiary of such --------------------- Person which at the time of determination is not an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. --------- "Sale and Leaseback Transaction" means any direct or indirect ------------------------------ arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such property. "Securities" means, collectively, the Company's 10 1/2% Senior ---------- Subordinated Notes due 2009 issued in accordance with Section 2.02 (whether on the Issue Date or thereafter) treated as a single class of securities under this Indenture, as amended or supplemented from time to time in accordance with the terms of this Indenture. "Securities Act" means the Securities Act of 1933, as amended, or any -------------- successor statute or statutes thereto. "Securities Purchase Agreement" means the Securities Purchase ----------------------------- Agreement, dated as of March 22, 1999, between Boss Investment, LLC and the Company. "Securityholder" or "Holder" means the Person in whose name a Security -------------- ------ is registered on the Registrar's books. "Senior Debt" means the principal of, premium, if any, and interest ----------- (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Securities. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with -29- respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing by the Company in respect of, (i) all monetary obligations of every nature of the Company under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, (ii) all Interest Swap Obligations (including guarantees thereof) and (iii) all obligations under Currency Agreements (including guarantees thereof), in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not include (i) any Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation) other than a shareholder who is a lender (or an Affiliate of a lender) under the Credit Facilities (including the Credit Agreement), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) Indebtedness represented by Disqualified Capital Stock, (v) any liability for federal, state, local or other taxes owed or owing by the Company, (vi) that portion of any Indebtedness incurred in violation of Section 4.04 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (vi) if the holder(s) of such obligation or their representative shall have received an Officers' Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture), (vii) Indebtedness represented by the Convertible Subordinated Notes, (viii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company and (ix) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company. "Significant Subsidiary," with respect to any Person, means any ---------------------- Restricted Subsidiary of such Person that satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Exchange Act based upon the most recent pro forma annual financial information --- ----- filed by the Company with the Commission. -30- "Subsidiary," with respect to any Person, means (i) any corporation of ---------- which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Surviving Entity" has the meaning set forth in Section 5.01. ---------------- "Tender Offer" means (i) the purchase of the Company's common stock, ------------ including shares underlying certain options, pursuant to the Company's offer to purchase dated February 19, 1999, as amended through the Issue Date or (ii) to the extent that the Company has not purchased an aggregate of 25.5 million shares of its common stock, including shares underlying options, pursuant to the offer to purchase described in clause (i), any other purchase of the Company's common stock or shares underlying options to purchase the Company's common stock within 180 days of the Issue Date, provided that the aggregate amount expended -------- pursuant to clauses (i) and (ii) shall not exceed $573.75 million. "TIA" means the Trust Indenture act of 1939 (15 U.S.C. (S)(S) --- 77aaa-77bbbb), as amended, as in effect on the date of the execution of this Indenture until such time as this Indenture is qualified under the TIA, and thereafter as in effect on the date on which this Indenture is qualified under the TIA, except as otherwise provided in Section 9.03. "Trust Officer" means any officer or assistant officer of the Trustee ------------- assigned by the Trustee to administer its corporate trust matters or, in the case of a successor trustee, an officer assigned to the department, division or group performing the corporate trust work of such successor. "Trustee" means the party named as such in this Indenture until a ------- successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Unrestricted Securities" means one or more Securities that do not and ----------------------- are not required to bear the Private Placement Legend in the form set forth in Exhibit B, including, without limitation, the Exchange Securities. - --------- -31- "Unrestricted Subsidiary" of any Person means (i) any Subsidiary of ----------------------- such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that (x) the -------- Company certifies to the Trustee that such designation complies with Section 4.03 and (y) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.04 and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations of, and --------------------------- obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "U.S. Legal Tender" means such coin or currency of the United States ----------------- of America as at the time of payment shall be legal tender for the payment of public and private debts. "Weighted Average Life to Maturity" means, when applied to any --------------------------------- Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or -32- other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Restricted Subsidiary" of any Person means any Wholly ---------------------------------- Owned Subsidiary of such Person which at the time of determination is a Restricted Subsidiary of such Person. "Wholly Owned Subsidiary" of any Person means any Subsidiary of such ----------------------- Person of which all the outstanding voting securities (other than in the case of a foreign Subsidiary, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Subsidiary of such Person. SECTION 1.02. Incorporation by Reference of TIA. --------------------------------- Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities. -------------------- "indenture security holder" means a Holder or a Securityholder. ------------------------- "indenture to be qualified" means this Indenture. ------------------------- "indenture trustee" or "institutional trustee" means the Trustee. ----------------- --------------------- "obligor" on the indenture securities means the Company, any Guarantor ------- or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. --------------------- Unless the context otherwise requires: (i) a term has the meanings assigned to it; -33- (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. --------------- The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Securities may have --------- notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its issuance and show the date of its authentication. Each Security shall have an executed Guarantee from each of the Guarantors endorsed thereon substantially in the form of Exhibit E. --------- The terms and provisions contained in the Securities and the Guarantees shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Securities offered and sold in reliance on Rule 144 and Securities offered and sold in reliance on Regulation S shall be issued initially in the form of one or more Global Securities, substantially in the form set forth in Exhibit A, deposited with the Trustee, as custodian for the Depository, duly - --------- executed by the Company (and having an executed Guarantee from each of the Guarantors endorsed thereon) and authenticated by -34- the Trustee as hereinafter provided and shall bear the legends set forth in Exhibit B. The aggregate principal amount of the Global Securities may from time - --------- to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Securities issued in exchange for interests in a Global Security pursuant to Section 2.16 may be issued in the form of permanent certificated Securities in registered form in substantially the form set forth in Exhibit A --------- (the "Physical Securities"). ------------------- SECTION 2.02. Execution and Authentication. ---------------------------- Two Officers, or an Officer and an Assistant Secretary, shall sign, or one Officer shall sign and one Officer or an Assistant Secretary (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security or Guarantee, as the case may be, was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Security, the Security shall nevertheless be valid. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue on the Issue Date in the aggregate principal amount of $200,000,000 upon a written order of the Company in the form of an Officers' Certificate. In addition, the Trustee shall authenticate Securities for original issue after the Issue Date in the aggregate principal amount of up to $200,000,000 upon a written order of the Company in the form of an Officers' Certificate. Each such Officers' Certificate shall specify the amount of Securities to be authenticated and the date on which the Securities are to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $400,000,000, except as provided in Section 2.07. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate Securities. -35- Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company and Affiliates of the Company. The Securities shall be issuable only in registered form without coupons in denominations of $1,000 and integral multiples thereof. SECTION 2.03. Registrar and Paying Agent. -------------------------- The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, where (a) Securities may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (b) --------- Securities may be presented or surrendered for payment ("Paying Agent") and (c) ------------ notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or reacission shall in -------- ------- any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company may act as its own Registrar, Paying Agent or Calculation Agent except that for the purposes of Articles Three and Eight and Sections 4.15 and 4.16, neither the Company nor any Affiliate of the Company shall act as Paying Agent. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company, upon notice to the Trustee, may have one or more co-Registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional paying agent. The Company initially appoints the Trustee as Registrar and Paying Agent until such time as the Trustee has resigned or a successor has been appointed. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee, in advance of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. -36- SECTION 2.04. Paying Agent To Hold Assets in Trust. ------------------------------------ The Company shall require each Paying Agent other than the Trustee to agree in writing that, subject to Article Four and Article Twelve, each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Securities (whether such assets have been distributed to it by the Company or any other obligor on the Securities), and shall notify the Trustee of any Default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate such assets and hold them as a separate trust fund. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. SECTION 2.05. Holder Lists. ------------ The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.06. Transfer and Exchange. --------------------- Subject to Sections 2.15 and 2.16, when Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the -------- ------- Securities surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar -37- or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part, and (iii) during a Change of Control Offer or an Net Proceeds Offer if such Security is tendered pursuant to such Change of Control Offer or Net Proceeds Offer and not withdrawn. Any Holder of a beneficial interest in a Global Security shall, by acceptance of such beneficial interest, agree that transfers of beneficial interests in such Global Securities may be effected only through a book entry system maintained by the Holder of such Global Security (or its agent), and that ownership of a beneficial interest in the Security shall be required to be reflected in a book entry system. SECTION 2.07. Replacement Securities. ---------------------- If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Company and the Trustee, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such Holder for its reasonable out-of-pocket expenses in replacing a Security pursuant to this Section 2.07, including reasonable fees and expenses of counsel. Every replacement Security is an additional obligation of the Company and every replacement Guarantee shall constitute an additional obligation of the Guarantors. -38- SECTION 2.08. Outstanding Securities. ---------------------- Securities outstanding at any time are all the Securities that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company, the Guarantors or any of their respective Affiliates holds the Security (subject to the provisions of Section 2.09). If a Security is replaced pursuant to Section 2.07 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a protected purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.07. If the principal amount of any Security is considered paid under Section 4.01, it ceases to be outstanding and interest ceases to accrue. If on a Redemption Date or the Maturity Date the Paying Agent (other than the Company or a Subsidiary) holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Securities. ------------------- In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company, any of its Subsidiaries or any of their respective Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that the Trustee knows or has reason to know are so owned shall be disregarded. SECTION 2.10. Temporary Securities. -------------------- Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. Until such exchange, tempo- -39- rary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities. Notwithstanding the foregoing, so long as the Securities are represented by a Global Security, such Global Security may be in typewritten form. SECTION 2.11. Cancellation. ------------ The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Company or a Subsidiary), and no one else, shall cancel and, at the written direction of the Company, shall dispose of all Securities surrendered for transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. If the Company or any Guarantor shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. ------------------ If the Company defaults in a payment of interest on the Securities, it shall, unless the Trustee fixes another record date pursuant to Section 6.10, pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, in any lawful manner. The Company may pay the defaulted interest to the persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before any such subsequent special record date, the Company shall mail to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13. CUSIP Number. ------------ The Company in issuing the Securities may use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to -40- Holders; provided, however, that any such notice may state that no -------- ------- representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. SECTION 2.14. Deposit of Moneys. ----------------- Prior to 11:00 a.m. New York City time on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the case may be. SECTION 2.15. Book-Entry Provisions for Global Securities. ------------------------------------------- (a) The Global Securities initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit B. --------- Members of, or participants in, the Depository ("Participants") shall ------------ have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Securities may be transferred or ex- -41- changed for Physical Securities in accordance with the rules and procedures of the Depository and the provisions of Section 2.16. In addition, Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Securities if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for any Global Security and a successor Depository is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Securities. (c) In connection with any transfer or exchange of a portion of the beneficial interest in a Global Security to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Securities are to be issued) reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Securities of authorized denominations in an aggregate principal amount equal to the principal amount of the beneficial interest in the Global Security so transferred. (d) In connection with the transfer of a Global Security as an entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15, such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, the Guarantors shall execute Guarantees on and the Trustee shall upon written instructions from the Company authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Physical Securities of authorized denominations. (e) Any Physical Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to paragraph (b) or (c) of this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the Private Placement Legend. (f) The Holder of any Global Security may grant proxies and otherwise authorize any Person, including Participants and Persons that may hold interests through Participants, to take any action which a Holder is entitled to take under this Indenture or the Securities. -42- SECTION 2.16. Special Transfer Provisions. --------------------------- (a) Transfers to Non-QIB Institutional Accredited Investors and ----------------------------------------------------------- Non-U.S. Persons. The following additional provisions shall apply with respect - ---------------- to the registration of any proposed transfer of a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person; (i) the Registrar shall register the transfer of any Restricted Security, whether or not such Security bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date; provided, however, that neither the Company nor any Affiliate of the -------- ------- Company has held any beneficial interest in such Security, or portion thereof, at any time on or prior to the second anniversary of the Issue Date or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto and any legal opinions and certifications --------- required thereby and (2) in the case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto; --------- (ii) if the proposed transferee is a Participant and the Securities to be transferred consist of Physical Securities which after transfer are to be evidenced by an interest in the IAI Global Security or Regulation S Global Security, as the case may be, upon receipt by the Registrar of (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, the Registrar shall register the transfer and reflect on its books and records the date and an increase in the principal amount of the IAI Global Security or Regulation S Global Security, as the case may be, in an amount equal to the principal amount of Physical Securities to be transferred, and the Registrar shall cancel the Physical Securities so transferred; and (iii) if the proposed transferor is a Participant seeking to transfer an interest in a Global Security, upon receipt by the Registrar of (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, the Regis- -43- trar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the Global Security from which such interests are to be transferred in an amount equal to the principal amount of the Securities to be transferred and (B) an increase in the principal amount of the IAI Global Security or the Regulation S Global Security, as the case may be, in an amount equal to the principal amount of the Securities to be transferred. (b) Transfers to QIBs. The following provisions shall apply with ----------------- respect to the registration of any proposed transfer of a Restricted Security to a QIB: (i) the Registrar shall register the transfer of any Restricted Security, whether or not such Security bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date; provided, however, that neither the Company nor any Affiliate of the -------- ------- Company has held any beneficial interest in such Security, or portion thereof, at any time on or prior to the second anniversary of the Issue Date or (y) such transfer is being made by a proposed transferor who has checked the box provided for on the form of Security stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Security stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) if the proposed transferee is a Participant and the Securities to be transferred consist of Physical Securities which after transfer are to be evidenced by an interest in the 144A Global Security, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its book -44- and records the date and an increase in the principal amount of the 144A Global Security in an amount equal to the principal amount of Physical Securities to be transferred, and the Registrar shall cancel the Physical Securities so transferred; and (iii) if the proposed transferor is a Participant seeking to transfer an interest in the IAI Global Security or the Regulation S Global Security, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the IAI Global Security or the Regulation S Global Security, as the case may be, in an amount equal to the principal amount of the Securities to be transferred and (B) an increase in the principal amount of the 144A Global Security in an amount equal to the principal amount of the Securities to be transferred. (c) Restrictions on Transfer and Exchange of Global Securities. ---------------------------------------------------------- Notwithstanding any other provisions of this Indenture, a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (d) Private Placement Legend. Upon the transfer, exchange or ------------------------ replacement of Securities not bearing the Private Placement Legend, the Registrar or co-Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar or co-Registrar shall deliver only Securities that bear the Private Placement Legend unless (i) there is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (ii) such Security has been sold pursuant to an effective registration statement under the Securities Act. (e) General. By its acceptance of any Security bearing the ------- Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement -45- Legend and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or this Section 2.16. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustees. ------------------- If the Company elects to redeem Securities pursuant to Paragraph 6 or Paragraph 7 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Redemption Price and the principal amount of Securities to be redeemed. The Company shall give notice of redemption to the Paying Agent and Trustee at least 45 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee in writing), together with an Officers' Certificate stating that such redemption will comply with the conditions contained herein. SECTION 3.02 Selection of Securities To Be Redeemed -------------------------------------- In the event that less than all of the Securities are to be redeemed at any time, selection of such Securities for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Securities are listed or, if such Securities are not then listed on a national securities exchange, on a pro rata --- ---- basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Securities of a principal amount of $1,000 or less - -------- ------- shall be redeemed in part; and provided, further, that if a partial redemption -------- ------- is made with the net cash proceeds of an Equity Offering, selection of the Securities or portions thereof for redemption shall be made by the Trustees only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject --- ---- --- ---- to the procedures of the Depository) unless such method is otherwise prohibited. -46- SECTION 3.03. Notice of Redemption. -------------------- At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first class mail, postage prepaid, to each Holder whose Securities are to be redeemed at its registered address. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Each notice for redemption shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (5) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Securities is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Securities redeemed; (6) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, and upon surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued; (7) if fewer than all the Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption; and (8) the Paragraph of the Securities pursuant to which the Securities are to be redeemed. -47- The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. SECTION 3.04. Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed in accordance with Section 3.03, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Trustee or Paying Agent, such Securities called for redemption shall be paid at the Redemption Price (which shall include accrued interest thereon to the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates. SECTION 3.05. Deposit of Redemption Price. --------------------------- On or before 11.00 a.m. New York time on the Redemption Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest, if any, of all Securities to be redeemed on that date. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Securities to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Securities are presented for payment. SECTION 3.06. Securities Redeemed in Part. --------------------------- Upon surrender of a Security that is to be redeemed in part only, the Trustee shall upon written instruction from the Company authenticate for the Holder a new Security or Securities in a principal amount equal to the unredeemed portion of the Security surrendered. -48- ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. --------------------- The Company shall pay the principal of and interest on the Securities in the manner provided in the Securities. An installment of principal of or interest on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. Interest on the Securities will be computed on the basis of a 360-day year comprised of twelve 30-day months. SECTION 4.02. Maintenance of Office or Agency. ------------------------------- The Company shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.03. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 13.02. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the Corporate Trust Office of the Trustee located in the Borough of Manhattan, The City of New York, as such office of the Company in accordance with Section 2.03. SECTION 4.03. Limitation on Restricted Payments. --------------------------------- The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on or in respect of shares of the Com- -49- pany's Capital Stock to holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock, (c) make (i) any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company that is subordinate or junior in right of payment to the Securities, including, without limitation, the Convertible Subordinated Notes (except a conversion thereof into Qualified Capital Stock) and (ii) any cash interest payments on the Convertible Subordinated Notes or (d) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted Payment"), if immediately after giving effect to the Restricted ------------------ Payment, (i) a Default or an Event of Default shall have occurred and be continuing or (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.04 or (iii) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by senior management or, in the case of any such property in excess of $5 million, by the Board of Directors of the Company) shall exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned subsequent to the Issue Date and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such -------------- period as a single accounting period); plus (x) 100% of (1) the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company and (2) the fair market value (as determined in good faith by senior management or, in the case of a fair market value in excess of $5 million, by the Board of Directors of the Company) of shares of Qualified Capital Stock of the Company issued subsequent to the Issue Date and on or prior to the Reference Date in connection with Asset Acquisitions and other acquisitions of property after the Issue Date; plus (y) without duplication of any amounts included in clause (iii) (x) above, 100% of (1) the aggregate net cash proceeds and (2) the fair market value of property other than cash (as determined in good faith by senior management or, in the case of a fair market value in excess of $5 million, by -50- the Board of Directors of the Company), in each case of any equity contribution received by the Company from a holder of the Company's Capital Stock subsequent to the Issue Date and on or prior to the Reference Date; plus (z) without duplication, the sum of (1) the aggregate amount returned in cash on or with respect to Investments (other that Permitted Investments) made subsequent to the Issue Date whether through interest payments, principal payments, dividends or other distributions or payments, (2) the net cash proceeds received by the Company or any of its Restricted Subsidiaries from the disposition of all or any portion of such Investments (other than to a Subsidiary of the Company) and (3) upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary; provided, however, that the sum of clauses -------- ------- (1), (2) and (3) above shall not exceed the aggregate amount of all such Investments made subsequent to the Issue Date. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration; (2) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange for shares of Qualified Capital Stock of the Company or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (3) if no Default of Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of the Company that is subordinate or junior in right of payment to the Securities either (i) solely in exchange for shares of Qualified Capital Stock of the Company, or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (A) shares of Qualified Capital Stock of the Company or (B) Refinancing Indebtedness; (4) so long as no Default or Event of Default shall have occurred and be continuing, repurchases by the Company of Common Stock of the Company from employees of the Company or any of its Subsidiaries or their authorized representatives upon the death, disability or termination of employment of such employees, in an aggregate amount not to exceed $5 million in any calendar year; (5) the consummation of the Tender Offer; (6) so long as no Default or Event of Default shall have occurred or be continuing, the declaration and payment of dividends to holders of any class or series of Preferred Stock of the Company (other than Disqualified Capital Stock) issued after the Issue Date, provided that after giving -51- effect to such issuance on a pro forma basis, the Company would be permitted to --- ----- incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.04; (7) cash payments in lieu of payment of (i) fractional Convertible Subordinated Notes in lieu of cash interest thereon or (ii) fractional shares of Common Stock of the Company upon conversion of Convertible Subordinated Notes; and (8) other Restricted Payments in an aggregate amount not to exceed $2.0 million. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (4) (iii) of the immediately preceding paragraph, amounts expended pursuant to clauses (1), (2) (ii), (4) and (6) above shall be included in such calculation. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment complies with this Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon the Company's latest available internal quarterly financial statements. SECTION 4.04. Limitation on Incurrence of Additional Indebtedness. --------------------------------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness ----- (other than Permitted Indebtedness); provided, however, that if no Default or -------- ------- Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, the Company or any of its Restricted Subsidiaries that is or, upon such incurrence, becomes a Guarantor may incur Indebtedness (including, without limitation, Acquired Indebtedness) and any Restricted Subsidiary of the Company that is not and will not, upon such incurrence, become a Guarantor may incur Acquired Indebtedness, in each case if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.25 to 1.0 if such incurrence is on or prior to November 1, 2000 and 2.5 to 1.0 if such incurrence is thereafter. -52- SECTION 4.05. Corporate Existence. ------------------- Except as otherwise permitted by Article Five, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the rights (charter and statutory) and material franchises of the Company and each of its Restricted Subsidiaries; provided, however, that the Company shall not be -------- ------- required to preserve any such right, franchise or corporate existence with respect to each such Restricted Subsidiary if the Board of Directors of the Company shall determine that the loss thereof is not, and will not be, adverse in any material respect to the Holders. SECTION 4.06. Payment of Taxes and Other Claims. --------------------------------- The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any of its Subsidiaries or upon the income, profits or property of it or any of its Restricted Subsidiaries and (b) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a material liability or Lien upon the property of it or any of its Restricted Subsidiaries; provided, however, that the Company -------- ------- shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, (i) the applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate provision has been made or (ii) where the failure to effect such payment or discharge is not adverse in any material respect to the Holders. SECTION 4.07. Maintenance of Properties and Insurance. --------------------------------------- (a) The Company shall cause all material properties owned by or leased by it or any of its Restricted Subsidiaries used or useful to the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in normal condition, repair and working order and supplied with all necessary equipment and shall cause to be made all repairs, renewals, replacements, and betterments thereof, all as in its judgement may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this -------- ------- -53- Section 4.07 shall prevent the Company or any of its Restricted Subsidiaries from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Company or any such Restricted Subsidiary desirable in the conduct of the business of the Company or any such Restricted Subsidiary, and if such discontinuance or disposal is not adverse in any material respect to the Holders; provided, further, that nothing in this -------- ------- Section 4.07 shall prevent the Company or any of its Restricted Subsidiaries from discontinuing or disposing of any properties to the extent otherwise permitted by this Indenture. (b) The Company shall maintain, and shall cause its Restricted Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses of similar size, including property and casualty loss, workers' compensation and interruption of business insurance. SECTION 4.08. Compliance Certificate; Notice of Default. ----------------------------------------- (a) The Company shall deliver to the Trustee, within 120 days after the close of each fiscal year (which on the date hereof is December 31) an Officers' Certificate stating that a review of the activities of the Company has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of such Officer's knowledge, the Company during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant and no Default or Event of Default occurred during such year and at the date of such certificate there is no Default or Event of Default that has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe its status with particularity. The Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year end. (c) The annual financial statements delivered pursuant to Section 4.10 shall be accompanied by a written report of the Company's independent accountants (who shall be a firm of established national reputation) that in conducting their audit of such financial statements nothing has come to their attention that would lead them to believe that the Company has vio- -54- lated any provisions of Article Four, Five or Six of this Indenture insofar as they relate to accounting matters or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default in the performance of any covenant, agreement or condition contained in this Indenture, an Officers' Certificate specifying the Default or Event of Default and describing its status with particularity. SECTION 4.09. Compliance with Laws. -------------------- The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole. SECTION 4.10. Reports to Holders. ------------------ Whether or not required by the rules and regulations of the Commission, so long as any Securities are outstanding, the Company shall furnish the Holders of Securities: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company, if any) and, with respect to the annual information only, a report -55- thereon by the Company's certified independent accountants; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports, in each case within two days after the time periods specified in the Commission's rules and regulations. In addition, following the consummation of the exchange offer contemplated by the Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, for so long as any Securities remain outstanding, the Company shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A (d) (4) under the Securities Act. The Company will also comply with the other provisions of TIA (S) 314(a). SECTION 4.11. Waiver of Stay, Extension or Usury Laws. --------------------------------------- Each of the Company and each Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company or such Guarantor from paying all or any portion of the principal of and/or interest on the Securities or the Guarantee of any such Guarantor as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent that it may lawfully do so) each hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.12. Limitations on Transactions with Affiliates. ------------------------------------------- (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, en- -56- ter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate --------------------- Transactions permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $3.0 million shall be approved by the Board of Directors of the Company or such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that such Board of Directors has determined that such transaction complies with the foregoing provisions. If the Company or any Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $10.0 million, the Company or such Restricted Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee. (b) The restrictions set forth in clause (a) shall not apply to (i) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees, consultants or investment bankers of the Company or any Restricted Subsidiary of the Company as determined in good faith by the Company's Board of Directors or senior management; (ii) transactions exclusively between or among the Company and any of its Wholly Owned Restricted Subsidiaries, or exclusively between or among such Wholly Owned Restricted Subsidiaries, provided such transactions are not otherwise prohibited by this -------- Indenture; (iii) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) or any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (iv) Restricted Payments permitted by this Indenture; (v) transactions in which the Company or any of -57- its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or meets the requirements of the first sentence of this Section 4.12; (vi) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, the Investors' Rights Agreement, the Securities Purchase Agreement, any stockholders' agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or -------- ------- the performance by the Company or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (vi) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Securities in any material respect; (vii) the issuance of securities or other payments, awards or grants, in cash, securities or otherwise, pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of the Company in good faith and loans to employees of the Company and its Subsidiaries which are approved by senior management of the Company in good faith; (viii) the payment of all fees and expenses related to the Transactions; (ix) transactions with customers, clients, suppliers, purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture, which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of senior management of the Company, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and (x) transactions reasonably related to (x) the exercise of rights and remedies with respect to the Convertible Subordinated Notes or (y) the conversion or exchange of the Convertible Subordinated Notes (each to the extent not otherwise prohibited in this Indenture). SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. --------------------------------------------------------------- The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Re- -58- stricted Subsidiary of the Company to (a) pay dividends or make any other distributions on or in respect of its Capital Stock; (b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or (c) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company, except, with respect to each of clauses, (a), (b) or (c), for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) this Indenture; (3) customary non- assignment provisions of any contract or any lease governing a leasehold interest of, or any license held by, any Restricted Subsidiary of the Company; (4) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (5) the Credit Agreement; (6) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; (7) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clauses (2), (4), (5) or (6) above and (8) and (10) below; provided, however, that the provisions -------- ------- relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Directors of the Company or senior management in its reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (4), (5), (6), (8), and (10); (8) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (c) above on the property so acquired; (9) contracts for the sale of assets, including without limitation, customary restrictions with respect to a Restricted Subsidiary of the Company pursuant to an agreement that has been entered into for the sale or disposition of the Capital Stock or assets of such Restricted Subsidiary; (10) secured Indebtedness otherwise permitted to be incurred pursuant to Sections 4.04 and 4.14 that limits the right of the debtor to dispose of the assets securing such Indebtedness; (11) customary provisions in joint venture agreements, licenses and leases and other similar agreements entered into in the ordinary course of business; (12) net worth provisions in leases and other agreements entered into by the Company or any Restricted Subsidiary; and (13) an agreement governing Indebtedness (including any Credit Facilities) permitted to be incurred pursuant to Section 4.04; provided that provisions relating to such encumbrance or -------- restriction contained in such Indebtedness are no less favorable to the Company in any -59- material respect as determined by senior management of the Company in its reasonable and good faith judgment than the provisions contained in the Credit Agreement as in effect on the Issue Date. SECTION 4.14. Limitation on Liens. ------------------- The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless (i) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Securities, the Securities are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens and (ii) in all other cases, the Securities are equally and ratably secured, except for (A) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (B) Liens securing Senior Debt and Liens securing Guarantor Senior Debt; (C) Liens securing the Securities and the Guarantees; (D) Liens of the Company or a Wholly Owned Restricted Subsidiary of the Company on assets of any Restricted Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, however, that such Liens (x) are no -------- ------- less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced and (y) do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F) Permitted Liens. SECTION 4.15. Change of Control. ----------------- (a) Upon the occurrence of a Change of Control, the Company shall be obligated to make an offer to purchase (the "Change of Control Offer"), and ----------------------- shall purchase, on a Business Day (the "Change of Control Payment Date") as ------------------------------ described below, all of the then outstanding Securities at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the Change of Control Payment Date. The Change of Control Offer shall remain open for -60- at least 20 Business Days and until the close of business on the Change of Control Payment Date. (b) Prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, the Company covenants to (i) repay in full and terminate all commitments under Indebtedness under the Credit Agreement and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full and terminate all commitments under all Indebtedness under the Credit Agreement and all other such Senior Debt and to repay the Indebtedness owed to each lender which has accepted such offer or (ii) obtain the requisite consents under the Credit Agreement and all other Senior Debt to permit the repurchase of the Securities as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Securities pursuant to the provisions described below. The Company's failure to comply with the covenant described in the second preceding sentence (and any failure to send the notice referred to in clause (c) below because same is prohibited by the second preceding sentence) may (with notice and lapse of time) constitute an Event of Default described in clause (c) of Section 6.01 but shall not constitute an Event of Default described in clause (b) of Section 6.01. (c) Within 30 days following the date upon which a Change of Control occurs (the "Change of Control Date"), the Company shall send, by first class ---------------------- mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Change of Control Offer. Such notice shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Securities tendered and not withdrawn will be accepted for payment; (2) the purchase price (including the amount of accrued interest) and the Change of Control Payment Date, which shall be a Business Day, that is not earlier than 30 days or later than 60 days from the date such notice is mailed; (3) that any Security not tendered will continue to accrue interest; -61- (4) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Security purchased pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security purchased; (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered; and (8) the circumstances and relevant facts regarding such Change of Control. On or before the Change of Control Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Securities so tendered and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price plus accrued interest, if any, and upon written order of the Company the Trustee shall promptly authenticate and mail to such Holders new Securities equal in principal amount to any unpurchased portion of the Securities surrendered. Any Securities not so accepted shall be promptly mailed by the Company to the Holder thereof. For purposes of this Section 4.15, the Trustee shall act as the Paying Agent. -62- Any amounts remaining with the Paying Agent after the purchase of Securities pursuant to a Change of Control Offer shall be returned by the Trustee to the Company. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Securities pursuant to a Change of Control Offer. To the extent the provisions of any securities laws or regulations conflict with the provisions of this Section 4.15, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.15 by virtue thereof. SECTION 4.16. Limitation on Asset Sales. ------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by senior management or, in the case of an Asset Sale in excess of $5 million, by the Company's Board of Directors); (ii) at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; provided that the amount of (a) any liabilities (as -------- shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Securities) that are assumed by the transferee of any such assets, and (b) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash within 180 days after such Asset Sale (to the extent of the cash received) shall be deemed to be cash for the purposes of this provision; and (iii) upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof either (A) to prepay any Senior Debt or Guarantor Senior Debt and, in the case of any Senior Debt or Guarantor Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility, (B) to make an Investment in properties and assets that replace the properties and assets -63- that were the subject of such Asset Sale or in properties and assets that will be used in the business of the company and its Restricted Subsidiaries as existing on the Issue Date or in business reasonably related, complementary or ancillary thereto or a reasonable expansion thereof ("Replacement Assets"), ------------------ and/or (C) a combination of prepayment and investment permitted by the foregoing clauses (iii) (A) and (iii) (B). On the 361st day after an Asset Sale or such earlier date, if any, as the senior management or Board of Directors, as the case may be, of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (iii) (A), (iii) (B) and (iii) (C) of the next preceding sentence (each, a "Net --- Proceeds Offer Trigger Date"), such aggregate amount of Net Proceeds Offer - --------------------------- which have been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (iii) (A), (iii) (B) and (iii) (C) of the nest preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the Company or ------------------------- such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds ------------ Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor - ----- ------------------------------- more than 60 days following the application Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that amount of Securities equal to the Net --- ---- Proceeds Offer Amount at a price equal to 100% of the principal amount of the Securities to be purchased, plus accrued and unpaid interest thereon, if any,to the date of purchase; provided, however, that if at any time any non-cash -------- ------- consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net cash Proceeds thereof shall be applied in accordance with this Section 4.16. The Company may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $10.0 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $10.0 million, shall be applied as required pursuant to this paragraph). In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted under Section 5.01, which transaction does not constitute a Change of Control, the successor corporation shall be deemed to have sold the properties and assets of the Company and its Restricted Subsidiaries not so transferred for purposes -64- of this Section 4.16, and shall comply with the provisions of this Section 4.16 with respect to such deemed sale as if it were an Asset Sale. In addition, the fair market value of such properties and assets of the Company or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this Section 4.16. Notwithstanding the first two paragraphs of this Section 4.16, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent: (1) at least 75% of the consideration for such Asset Sale constitutes Replacement Assets; and (2) such Asset Sale is for fair market value; provided that any consideration not constituting Replacement Assets received by - -------- the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds subject to the provisions of the first two paragraphs of this Section 4.16. Notice of each Net Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be mailed, by first class mail, by the Company within 30 days following the applicable Net Proceeds Offer Trigger Date to all Holders at their last registered addresses, with a copy to the Trustee. A Net Proceeds Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Net Proceeds Offer and shall state the following terms: (1) that the Net Proceeds Offer is being made pursuant to this Section 4.16 and that all Securities tendered will be accepted for payment; provided, however, that if the principal amount of Securities tendered in -------- ------- the Net Proceeds Offer exceeds the aggregate amount of Net Proceeds Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis; (2) the purchase price (including the amount of accrued interest, if any) and the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by applicable law); -65- (3) that any Security not tendered will continue to accrue interest; (4) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net Proceeds Offer Payment Date; (5) that Holders electing to have a Security purchased pursuant to the Net Proceeds Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Net Proceeds Offer Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Net Proceeds Offer Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security purchased; and (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount at maturity equal to the unpurchased portion of the Securities surrendered. On or before the Net Proceeds Offer Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to the Net Proceeds Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price, plus accrued interest, if any, of all Securities to be purchased and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, plus accrued interest, if any, thereon set forth in the notice of such Net Proceeds Offer. Any Security not so accepted shall be promptly mailed by the Company to the Holder thereof. For purposes of this Section 4.16, the Trustee shall act as the Paying Agent. Any amounts remaining after the purchase of Securities pursuant to a Net Proceeds Offer shall be returned by the Trustee to the Company. -66- The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Securities pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.16, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.16 by virtue thereof. SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt. ---------------------------- The Company shall not, and shall not permit any Restricted Subsidiary that is a Guarantor to, incur or suffer to exist Indebtedness that is senior in right of payment to the Securities or such Guarantor's Guarantee, as the case may be, and subordinate in right of payment to any other Indebtedness of the Company or such Guarantor, as the case may be. SECTION 4.18. Additional Subsidiary Guarantees. -------------------------------- If the Company or any of its Restricted Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Domestic Restricted Subsidiary that is not a Guarantor, or if the Company or any of its Restricted Subsidiaries shall organize, acquire or otherwise invest in another Domestic Restricted Subsidiary having total assets with a book value in excess of $1 million, then such transferee or acquired or other Restricted Subsidiary shall (i) execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Company's obligations under the Securities and this Indenture on the terms set forth in this Indenture and (ii) deliver to the Trustee an Opinion of Counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture. SECTION 4.19. Conduct of Business. ------------------- The Company and its Restricted Subsidiaries shall not engage in any businesses which are not substantially related, ancillary or complementary to the businesses in which the Com- -67- pany and its Restricted Subsidiaries are engaged on the Issue Date or a reasonable expansion thereof. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets. ---------------------------------------- (a) The Company shall not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and the Company's Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless: (i) either (1) the Company shall be the surviving or continuing corporation or (2) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company's Restricted Subsidiaries substantially as an entirety (the "Surviving Entity"); (x) shall be ---------------- a corporation, partnership, trust or a limited liability company organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (y) shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Securities and the performance of every covenant of the Securities, this Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed; provided that if at any time the Company or the Surviving Entity is a -------- limited liability company, partnership or trust, there shall be a co-issuer of the Securities that is a Restricted Subsidiary of the Company and that is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; (ii) immediately after giving effect to such transaction and the assumption contemplated by clause (i) (2) (y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be shall -68- be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.04; (iii) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (i) (2) (y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (iv) the Company or the Surviving Entity shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. Notwithstanding the foregoing, the merger of the Company with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction shall be permitted. (b) For purposes of the foregoing paragraph (a), the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. (c) Each Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and this Indenture in connection with any transaction complying with the provisions of Section 4.16) shall not, and the Company shall not cause or permit any Guarantor to, consolidate with or merge with or into any Person other than the Company or any other Guarantor unless: (i) the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) is a corporation, partnership, trust or limited liability company organized and existing under the laws of the United States or any State thereof or the District of Columbia; (ii) such entity assumes by supplemental indenture all of the obligations of the Guarantor on the Guarantee; (iii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (iv) immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, the --------- -69- Company could satisfy the provisions of clause (a) (ii) of this Section 5.01. Any merger or consolidation of a Guarantor with and into the Company (with the Company being the surviving entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company need only comply with clause (a) (iv) of Section 5.01. SECTION 5.02. Successor Corporation Substituted. --------------------------------- Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with Section 5.01 in which the Company is not the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Securities with the same effect as if such Surviving Entity had been named as such. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. ----------------- Each of the following shall be an "Event of Default": ---------------- (a) the failure to pay interest on any Securities when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by Article Ten or Article Twelve of this Indenture); (b) the failure to pay the principal on any Securities, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Securities tendered pursuant to a Change of Control Offer or a Net Proceeds Offer on the date specified for such payment in the applicable offer to purchase) (whether or not such payment shall be prohibited by Article Ten or Article Twelve of this Indenture); -70- (c) a default in the observance or performance of any other covenant or agreement contained in this Indenture, which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Securities; (d) the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Significant Subsidiary of the Company which failure continues for at least 20 days, or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 20 days of receipt by the Company or such Significant Subsidiary of notice of any such acceleration) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated (in each case with respect to which the 20-day period described above has passed), aggregates $10.0 million or more at any time; (e) one or more judgments in an aggregate amount in excess of $10.0 million (exclusive of amounts covered by insurance) shall have been rendered against the Company or any of its Significant Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; (f) the Company or any of its Significant Subsidiaries (i) commences a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (ii) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (iii) consents to the appointment of a custodian of it or for substantially all of its property, (iv) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it, (v) makes a general assignment for the benefit of its creditors or (vi) takes any corporate action to authorize or effect any of the foregoing; (g) a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Company -71- or any of its Significant Subsidiaries in an involuntary case or proceeding under any Bankruptcy Law, which shall (i) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any of its Significant Subsidiaries, (ii) appoint a Custodian of the Company or any of its Significant Subsidiaries or for substantially all of any of its property or (iii) order the winding-up or liquidation of its affairs; and such judgment, decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (h) any Guarantee of a Significant Subsidiary ceases to be in full force and effect or any Guarantee of a Significant Subsidiary is declared to be null and void and unenforceable or any Guarantee of a Significant Subsidiary is found to be invalid or any Guarantor that is a Significant Subsidiary denies its liability under its Gaurantee (other than by reason of release of a Guarantor in accordance with the terms of this Indenture). SECTION 6.02. Acceleration. ------------ If an Event of Default (other than an Event of Default specified in either clause (f) or (g) of Section 6.01 above with respect to the Company) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Securities may declare the principal of and accrued interest on all the Securities to be due and payable by notice in writing to the Company (and the Trustee if given by the Holders) specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same (i) shall become immediately due and ------------------- payable or (ii) if there are any amounts outstanding under the Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the Credit Agreement or 5 business days after receipt by the Company and the Representative under the Credit Agreement of such Acceleration Notice but only if such Event of Default is then continuing. If an Event of Default specified in either clause (f) or (g) of Section 6.01 above with respect to the Company occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding Securities shall ipso facto become and be immediately due and payable without ---- ----- any declaration or other act on the part of the trustee or any Holder. -72- At any time after a declaration of acceleration with respect to the Securities as described in the preceding paragraph, the Holders of a majority in principal amount of the Securities may rescind and cancel such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of an Event of Default of the type described in either clause (f) or (g) of Section 6.01, the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. -------------- If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. ----------------------- Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less than a majority in principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of or interest on any Security as specified in clauses (a) and (b) of Section 6.01. The Company shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have con- -73- sented to such waiver and attaching copies of such consents. When a Default or Event of Default is waived, it is cured and ceases. SECTION 6.05. Control by Majority. ------------------- The Holders of not less than a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Securityholder, or that may involve the Trustee in personal liability; provided -------- that the Trustee may take any other action deemed proper by the trustee which is not inconsistent with such direction. In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against any loss or expense caused by taking such action or following such direction. SECTION 6.06. Limitation on Suits. ------------------- A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holder or Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 45 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (5) during such 45-day period the Holder or Holders of a majority in principal amount of the outstanding Securities do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. -74- A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. SECTION 6.07. Rights of Holders To Receive Payment. ------------------------------------ Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. -------------------------- If an Event of Default in payment of principal or interest specified in clause (a) or (b) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal and accrued interest and fees remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum --- ----- borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relating to the Company, its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trus- -75- tee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. SECTION 6.10. Priorities. ---------- If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order: First: to the Trustee for amounts due under Section 7.07; Second: to Holders for interest accrued on the Securities, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; Third: to Holders for principal amounts due and unpaid on the Securities, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal; and Fourth: to the Company or, if applicable, the Guarantors, as their respective interests may appear. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Hold- -76- ers of more than 10% in principal amount of the outstanding Securities. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. ----------------- (a) If a Default or an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of a Default or an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth herein or in the TIA and no duties, covenants, responsibilities or obligations shall be implied in this Indenture against the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates (including Officers' Certificates) or opinions (including Opinions of Counsel) furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) Notwithstanding anything to the contrary herein, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. -77- (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) In the absence of bad faith, negligence or willful misconduct on the part of the Trustee, the Trustee shall not be responsible for the application of any money by any Paying Agent other than the Trustee. SECTION 7.02. Rights of Trustee. ----------------- Subject to Section 7.01: (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel, which shall conform to the provisions of Section 13.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than an agent who is an employee of the Trustee) appointed with due care. -78- (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records, and premises of the Company, personally or by agent or attorney. (h) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (i) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties. SECTION 7.03. Individual Rights of Trustee. ---------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries, or their respective Affiliates with the same rights it would have if it were not -79- Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. -------------------- The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or any document issued in connection with the sale of Securities or any statement in the Securities other than the Trustee's certificate of authentication. The Trustee makes no representations with respect to the effectiveness or adequacy of this Indenture. SECTION 7.05. Notice of Default. ----------------- If a Default or an Event of Default occurs and is continuing and the Trustee receives actual notice of such Default or Event of Default, the Trustee shall mail to each Securityholder notice of the uncured Default or Event of Default within 60 days after such Default or Event of Default occurs. Except in the case of a Default or an Event of Default in payment of principal of, or interest on, any Security, including an accelerated payment and the failure to make payment on the Change of Control Payment Date pursuant to a Change of Control Offer or the Net Proceeds Offer Payment Date pursuant to a Net Proceeds Offer, the Trustee may withhold the notice if and so long as the Board of Directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determines that withholding the notice is in the interest of the Securityholders. SECTION 7.06. Reports by Trustee to Holders. ----------------------------- Within 60 days after each May 15, beginning with the first May 15 following the date of this Indenture, the Trustee shall, to the extent that any of the events described in TIA (S) 313(a) occurred within the previous twelve months, but not otherwise, mail to each Securityholder a brief report dated as of such date that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b), 313(c) and 313(d). A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the Commission and each securities exchange, if any, on which the Securities are listed. -80- The Company shall notify the Trustee if the Securities become listed on any securities exchange or of any delisting thereof and the Trustee shall comply with TIA (S) 313(d). SECTION 7.07. Compensation and Indemnity. -------------------------- The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances (including reasonable fees and expenses of counsel) incurred or made by it in addition to the compensation for its services, except any such disbursements, expenses and advances as may be attributable to the Trustee's negligence, bad faith or willful misconduct. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and its agents, employees, officers, stockholders and directors for, and hold them harmless against, any loss, liability or expense incurred by them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against or investigating any claim or liability in connection with the exercise or performance of any of the Trustee's rights, powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee or any of its agents, employees, officers, stockholders and directors for which it may seek indemnity. The Company may, subject to the approval of the Trustee, defend the claim and the Trustee shall cooperate in the defense. The Trustee and its agents, employees, officers, stockholders and directors subject to the claim may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided, however, that the Company will not -------- ------- be required to pay such fees and expenses if, subject to the approval of the Trustee, it assumes the Trustee's defense and there is no conflict of interest between the Company and the Trustee and its agents, employees, officers, stockholders and directors subject to the claim in connection with such defense as reasonably determined by the Trustee. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by -81- the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a senior claim prior to the Securities against all money or property held or collected by the Trustee, in its capacity as Trustee. The obligations of the Company and the Guarantors under this Section shall not be subordinated to the payment of Senior Debt pursuant to Article Ten or Article Twelve except assets or money held in trust to pay principal of or interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in clause (f) or (g) of Section 6.01 occurs, such expenses and the compensation for such services shall be paid to the extent allowed under any Bankruptcy Law. Notwithstanding any other provision in this Indenture, the foregoing provisions of this Section 7.07 shall survive the satisfaction and discharge of the Indenture or the appointment of a successor Trustee. SECTION 7.08. Replacement of Trustee. ---------------------- The Trustee may resign at any time by so notifying the Company in writing. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. -82- A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided that such -------- corporation shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. Eligibility; Disqualification. ----------------------------- This Indenture shall always have a Trustee who satisfies the requirement of TIA (S)(S) 310 (a) (1), 310 (a) (2) and 310 (a) (5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of the bank holding company, -83- shall meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S) 310(b); provided, however, that there shall be excluded from -------- ------- the operation of TIA (S) 310(b)(1) and indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the Company and any other obligor of the Securities. SECTION 7.11. Preferential Collection of Claims Against Company. ------------------------------------------------- The Trustee, in its capacity as Trustee hereunder shall comply with TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated. ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of the Company's Obligations. ---------------------------------------- The Company may terminate its obligations under the Securities and this Indenture, except those obligations referred to in the penultimate paragraph of this Section 8.01, if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment U.S. Legal Tender has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company, as provided in Section 8.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if: (a) either (i) pursuant to Article Three, the Company shall have given notice to the Trustee and mailed a notice of redemption to each Holder of the redemption of all of the Securities in accordance with the provisions hereof or (ii) all Securities have otherwise become due and payable hereunder; -84- (b) the Company shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Holders of that purpose, U.S. Legal Tender in such amount as is sufficient without consideration of reinvestment of such interest, to pay principal of, premium, if any, and interest on the outstanding Securities to maturity or redemption; provided that the Trustee shall have been -------- irrevocably instructed to apply such U.S. Legal Tender to the payment of said principal, premium, if any, and interest with respect to the Securities and provided, further, that from and after the time of deposit, -------- ------- the money deposited shall not be subject to the rights of holders of Senior Debt or Guarantor Senior Debt pursuant to the provisions of Article Ten or Twelve, as the case may be; (c) no Default or Event of Default with respect to this Indenture or the Securities shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, the Indenture, the Credit Agreement, any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which it is bound; (d) the Company shall have paid all other sums payable by it hereunder; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for or relating to the termination of the Company's obligations under the Securities and this Indenture have been complied with. Such Opinion of Counsel shall also state that such satisfaction and discharge does not result in a default under the Credit Agreement or any other material agreement or instrument then known to such counsel that binds or affects the Company. Subject to the next sentence and notwithstanding the foregoing paragraph, the Company's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive until the Securities are no longer outstanding pursuant to the last paragraph of Section 2.08. After the Securities are no longer outstanding, the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. -85- After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations specified above. SECTION 8.02. Legal Defeasance and Covenant Defeasance. ---------------------------------------- (a) The Company may, at its option by Board Resolution of the Board of Directors of the Company, at any time, elect to have either paragraph (b) or (c) below be applied to all outstanding Securities upon compliance with the conditions set forth in Section 8.03. (b) Upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Company shall, subject to the satisfaction of the conditions set forth in Section 8.03, be deemed to have been discharged from its obligations with respect to all outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, "Legal ----- Defeasance"). For this purpose, Legal Defeasance means that the Company shall be - ---------- deemed to have paid and discharged the entire Indebtedness represented by the outstanding Securities, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.04 hereof and the other Sections of this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Securities and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), and Holders of the Securities and any amounts deposited under Section 8.03 hereof shall cease to be subject to any obligations to, or the rights of, any holder of Senior Debt under Article Ten or otherwise, except for the following provisions, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Securities to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of premium, if any, and interest on such Securities when such payments are due, (ii) the Company's obligations with respect to such Securities under Article Two and Section 4.02 hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (iv) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) hereof. -86- (c) Upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Company shall, subject to the satisfaction of the conditions set forth in Section 8.03 hereof, be released from its obligations under the covenants contained in Sections 4.03, 4.04 and Sections 4.12 through 4.19 and Article Five hereof with respect to the outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall ------------------- thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed outstanding for accounting purposes) and Holders of the Securities and any amounts deposited under Section 8.03 hereof shall cease to be subject to any obligations to, or the rights of, any holder of Senior Debt under Article Ten or otherwise. For this purpose, such Covenant Defeasance means that, with respect to the outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01(c) hereof, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.03 hereof, Sections 6.01(c), 6.01(d) and 6.01(e) shall not constitute Events of Default. SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance. ----------------------------------------------------- The following shall be the conditions to the application of either Section 8.02(b) or 8.02(c) hereof to the outstanding Securities: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, U.S. Legal Tender or U.S. Government Obligations or a combina- -87- tion thereof which through the scheduled payment of principal and interest in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment on the Securities, U.S. Legal Tender in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Securities on the stated date for payment thereof or on the applicable redemption date, as the case may be; (b) in the case of an election under Section 8.02(b) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.02(c) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Securities pursuant to this Article Eight concurrently with such incurrence) or insofar as Sections 6.01(f) and 6.01(g) hereof are concerned, at any time in the period ending on the 91st day after the date of such deposit; -88- (e) such legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under this Indenture, the Credit Agreement or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party of by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (g) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (h) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (i) the trust funds will not be subject to any rights of any holders of Senior Debt, including, without limitation, those arising under this Indenture, and (ii) assuming no intervening bankruptcy or insolvency of the Company between the date of deposit and the 91st day following the deposit and that no Holder is an insider of the Company, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable Bankruptcy Law. Notwithstanding the foregoing, the Opinion of Counsel required by clause (b) above of this Section 8.03 with respect to a Legal Defeasance need not be delivered if all Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable or (ii) will become due and payable on the Maturity Date within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. SECTION 8.04. Application of Trust Money. -------------------------- The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to this Article Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Securities. The Trustee shall be -89- under no obligation to invest said U.S. Legal Tender or U.S. Government Obligations except as it may agree with the Company. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant to Section 8.03 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the Company's request any U.S. Legal Tender or U.S. Government Obligations held by it as provided in Section 8.03 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.05. Repayment to the Company. ------------------------ Subject to this Article Eight, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess U.S. Legal Tender or U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years; provided that the -------- Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person. SECTION 8.06. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance -90- with this Article Eight by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article Eight until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with this Article Eight; provided that if -------- the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. -------------------------- Subject to Section 9.03, the Company, the Guarantors and the Trustee, together, may amend or supplement this Indenture, the Securities or the Guarantees without notice to or consent of any Securityholder: (1) to cure any ambiguity, defect or inconsistency; (2) to evidence the succession in accordance with Article Five hereof of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; (4) to make any other change that does not adversely affect the rights of any Securityholders hereunder in any material respect; (5) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; or -91- (6) to add or release any Guarantor pursuant to the terms of this Indenture; provided that the Company has delivered to the Trustee an Opinion of Counsel and - -------- an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. With Consent of Holders. ----------------------- Subject to Sections 6.07 and 9.03, the Company, the Guarantors and the Trustee, together, with the written consent of the Holder or Holders of at least a majority in aggregate principal amount of the outstanding Securities, may amend or supplement this Indenture, the Securities or the Guarantees, without notice to any other Securityholders. Subject to Sections 6.07 and 9.03, the Holder or Holders of a majority in aggregate principal amount of the outstanding Securities may waive compliance by the Company with any provision of this Indenture, the Securities or the Guarantees without notice to any other Securityholder. Without the consent of each Securityholder affected, however, no amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may: (1) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (2) reduce the rate of or change or have the effect of changing the time for payment of interest, including default interest, on any Securities; (3) reduce the principal of or change or have the effect of changing the fixed maturity of any Securities, or change the date on which any Securities may be subject to redemption or repurchase, or reduce the redemption or purchase price therefor; (4) make any Securities payable in money other than that stated in the Securities; (5) make any change in provisions of this Indenture protecting the right of each Holder to receive payment of principal of and interest on such Security on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of the Securities to waive Defaults or Events of Default; -92- (6) modify or change any provision of this Indenture or the related definitions affecting the subordination or ranking of the Securities or any Guarantee, in a manner which adversely affects the Holders; (7) after the Company's obligation to purchase Securities arises thereunder, amend, modify or change in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated, or modify any of the provisions or definitions with respect thereto; or (8) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Guarantee or this Indenture otherwise than in accordance with the terms of this Indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Effect on Senior Debt. --------------------- No amendment of, or supplement or waiver to, this Indenture shall adversely affect the rights of any holder of Senior Debt or Guarantor Senior Debt under Article Ten or Article Twelve, as the case may be, of this Indenture, without the consent of such holder. SECTION 9.04. Compliance with TIA. ------------------- From the date on which this Indenture is qualified under the TIA, every amendment, waiver or supplement of this Indenture, the Securities or the Guarantees shall comply with the TIA as then in effect. -93- SECTION 9.05. Revocation and Effect of Consents. --------------------------------- Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of his Security by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (1) through (9) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; provided that any such waiver -------- shall not impair or affect the right or any Holder to receive payment of principal of and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.06. Notation on or Exchange of Securities. ------------------------------------- If an amendment, supplement or waiver changes the terms of a Security, the Company may require the Holder of the Security to deliver it to the Trustee. The Company shall provide the Trustee with an appropriate notation on the Security -94- about the changed terms and cause the Trustee to return it to the Holder at the Company's expense. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.07. Trustee To Sign Amendments, Etc. ------------------------------- The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided that the Trustee may, but -------- shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and constituted the legal, valid and binding obligations of the Company enforceable in accordance with its terms. Such Opinion of Counsel shall be at the expense of the Company. ARTICLE TEN SUBORDINATION OF SECURITIES SECTION 10.01. Securities Subordinated to Senior Debt. --------------------------------------- Anything herein to the contrary notwithstanding, the Company, for itself and its successors, and each Holder, by his or her acceptance of Securities, agrees that the payment of all Obligations owing to the Holders in respect of the Securities is subordinated, to the extent and in the manner provided in this Article Ten, to the prior payment in full in cash of Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, of all Obligations on Senior Debt (including the Obligations with respect to the Credit Agreement). Notwithstanding the foregoing, payments and distributions made relating to the Notes pursuant to the trust described under Article Eight shall not, so long as the conditions specified in Article Eight (without any waiver or modification of the requirement that the deposits pursuant thereto do -95- not conflict with the terms of the Credit Agreement or any other Senior Debt or Guarantor Senior Debt) are satisfied on the date of any deposit pursuant to said trust, be so subordinated in right of payment. This Article Ten shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTION 10.02. Suspension of Payment When Senior Debt Is in Default. ---------------------------------------------------- (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Senior Debt (a "Payment Default"), then no payment or distribution of any kind or character --------------- shall be made by or on behalf of the Company or any other Person on its or their behalf with respect to any Obligations on or relating to the Securities or to acquire any of the Securities for cash or property or otherwise. (b) If any other event of default (other than a Payment Default) occurs and is continuing with respect to any Designated Senior Debt (as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt) permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof (a "Non-payment Default") ------------------- and if the Representative for the respective issue of Designated Senior Debt gives notice of the event of default to the Trustee stating that such notice is a payment blockage notice (a "Payment Blockage Notice"), then, unless and until ----------------------- all events of default have been cured or waived or have ceased to exist or the Trustee receives notice thereof from the Representative for the respective issue of Designated Senior Debt terminating the Payment Blockage Period (as defined below), during the 180 days after the delivery of such Payment Blockage Notice (the "Payment Blockage Period"), neither the Company nor any other Person on its ----------------------- behalf shall (x) make any payment of any kind or character with respect to any Obligations on or with respect to the Securities or (y) acquire any of the Securities for cash or property or otherwise. Notwithstanding anything herein to the contrary, (x) in no event will a Payment Blockage Period extend beyond 180 days from the date the applicable Payment Blockage Notice is received by the Trustee and (y) only -96- one such Payment Blockage Period may be commenced within any 360 consecutive days. For all purposes of this Section 10.02(b), no event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for the commencement of a second Payment Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Payment Blockage that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the foregoing provisions of this Section 10.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives), as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if any, received from the holders of Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Senior Debt. Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of Securities to take any action to accelerate the maturity of the Securities pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to be -------- due shall first be paid in full in cash or Cash Equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Securities. -97- SECTION 10.03. Securities Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company. -------------------------------------------------------------- (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary , all Obligations due or to become due upon all Senior Debt shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on or relating to the Securities, or for the acquisition of any of the Securities for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders or the Securities of the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or -98- other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.03, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. (d) The consolidation of the Company with, or the merger of the Company with or into, another corporation, partnership, trust or limited liability company or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its assets, to another corporation, partnership, trust or limited liability company upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Company's obligations hereunder in accordance with Article Five hereof. SECTION 10.04. Payments May Be Paid Prior to Dissolution. -------------------------- Nothing contained in this Article Ten or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Sections 10.02 and 10.03, from making payments at any time for the purpose of making payments of principal of and interest on the Securities, or from depositing with the Trustee any moneys for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 10.02 or 10.03, the application by the Trustee of any moneys deposited with it for the purpose of making such payments of principal of, and interest on, the -99- Securities to the Holders entitled thereto unless at least two Business Days prior to the date upon which such payment would otherwise become due and payable a Trust Officer shall have actually received the written notice provided for in the first sentence of Section 10.02(b) or in Section 10.07 (provided that, -------- notwithstanding the foregoing, the Holders receiving any payments made in contravention of Section 10.02 and/or 10.03 (and the respective such payments) shall otherwise be subject to the provisions of Section 10.02 and Section 10.03). The Company shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of the Company, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt. ------------------------------------------------------------ Subject to the payment in full in cash or Cash Equivalents of all Senior Debt, the Holders of the Securities shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the Securities shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company, or by or on behalf of the Holders by virtue of this Article Ten, which otherwise would have been made to the Holders shall, as between the Company and the Holders, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article Ten are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Debt, on the other hand. SECTION 10.06. Obligations of the Company Unconditional. ---------------------------------------- Nothing contained in this Article Ten or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Debt, and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and any interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder of any Security or the Trustee on -100- its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, in respect of cash, property or securities of the Company received upon the exercise of any such remedy. SECTION 10.07. Notice to Trustee. ----------------- The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities pursuant to the provisions of this Article Ten, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. Regardless of anything to the contrary contained in this Article Ten or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Company, or from a holder of Senior Debt or a Representative therefor and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of any notice pursuant to this Section 10.07 to establish that such notice has been given by a holder of Senior Debt (or a trustee thereof). In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Ten, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidation Agent. -------------------------------- Upon any payment or distribution of assets of the Company referred to in this Article Ten, the Trustee, subject to the provisions of Article Seven hereof, and the Holders of the Securities shall be entitled to rely upon any order or de- -101- cree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders of the Securities, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. SECTION 10.09. Trustee's Relation to Senior Debt. --------------------------------- The Trustee and any agent of the Company or the Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt. Whenever a distribution is to be made or a notice given to holders or owners of Senior Debt, the distribution may be made and the notice may be given to their Representative, if any. SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt. ----------------------------------- No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Indenture, -102- regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Securities and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders of the Securities to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination ------------------------------------------------------------- of Securities. ------------- Each Holder of Securities by its acceptance of them authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders of Securities, the subordination provided in this Article Ten, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of the Company, the filing of a claim for the unpaid balance of its Securities and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Securities. Nothing herein contained shall be deemed to authorize the Trustee or -103- the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 10.12. This Article Ten Not To Prevent Events of Default. ------------------------------------------------- The failure to make a payment on account of principal of or interest on the Securities by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default. SECTION 10.13. Trustee's Compensation Not Prejudiced. ------------------------------------- Nothing in this Article Ten will apply to amounts due to the Trustee pursuant to other sections of this Indenture. ARTICLE ELEVEN GUARANTEE OF SECURITIES SECTION 11.01. Unconditional Guarantee. ----------------------- Subject to the provisions of this Article Eleven, each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably guarantees, on a senior subordinated basis (such guarantees to be referred to herein as a "Guarantee") to each Holder of a Security authenticated and --------- delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Securities or the obligations of the Company or any other Guarantors to the Holders or the Trustee hereunder or thereunder, that: (a) the principal of, premium, if any, and interest on the Securities shall be duly and punctually paid in full when due, whether at maturity, upon redemption at the option of Holders pursuant to the provisions of the Securities relating thereto, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Securities and all other obligations of the Company or the Guarantors to the Holders or the Trustee hereunder or thereunder (including amounts due the -104- Trustee under Section 7.07 hereof) and all other obligations shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders under this Indenture or under the Securities, for whatever reason, each Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Securities shall constitute an event of default under this Guarantee, and shall entitle the Holders of Securities to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the obligations of the Company. Each of the Guarantors hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Guarantee is affixed to any particular Security, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each of the Guarantors hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the company, protest, notice and all demands whatsoever and covenants that its Guarantee shall not be discharged except by complete performance of the obligations contained in the Securities, this Indenture and this Guarantee. This Guarantee is a guarantee of payment and not of collection. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Securities and the Trustee, on the other hand, (a) subject to this Article Eleven, the maturity of the obligations guaranteed -105- hereby may be accelerated as provided in Article Six hereof for the purpose of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. No stockholder, officer, director, employee or incorporator, past, present or future, or any Guarantor, as such, shall have any personal liability under this Guarantee by reason of his, her or its status as such stockholder, officer, director, employee or incorporator. Each Guarantor that makes a payment or distribution under its Guarantee shall be entitled to a contribution from each other Guarantor, determined in accordance with GAAP. SECTION 11.02. Limitations on Guarantees. ------------------------- The obligations of each Guarantor under its Guarantee are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor (including without limitation, its guarantee of Obligations pursuant to the Credit Agreement and any other Guarantor Senior Debt) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, will result in the obligations of such Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in an amount pro rata, based on the net assets of each Guarantor, determined in --- ---- accordance with GAAP. SECTION 11.03. Execution and Delivery of Guarantee. ----------------------------------- To further evidence the Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Guarantee, substantially in the form of Exhibit E hereto, shall be endorsed on each Security authenticated and --------- delivered by the Trustee. Such Guarantee shall be executed on behalf of each Guarantor by either manual or facsimile signature of one Officer of each Guarantor who shall have been duly authorized to so execute by all requisite corporation action. The valid- -106- ity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Security. Each of the Guarantors hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee. If an Officer of a Guarantor whose signature is on this Indenture or a Guarantee no longer holds that office at the time the Trustee authenticates the Security on which such Guarantee is endorsed or at any time thereafter, such Guarantor's Guarantee of such Security shall nevertheless be valid. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of each Guarantor. SECTION 11.04. Release of a Guarantor. ---------------------- (a) Upon the sale or disposition of all of the Capital Stock of a Guarantor by the Company, in a transaction or series of related transactions that either (i) does not constitute an Asset Sale or (ii) constitutes an Asset Sale the Net Cash Proceeds of which are applied in accordance with Section 4.16, or upon the consolidation or merger of a Guarantor with or into any Person in compliance with Article Five (in each case, other than to the Company or an Affiliate of the Company), or if any Guarantor is dissolved or liquidated in accordance with this Indenture, such Guarantor's Guarantee will be automatically discharged and released from all obligations under this Article Eleven without any further action required on the part of the Trustee or any Holder. Any Guarantor not so released or the entity surviving such Guarantor, as applicable, shall remain or be liable under its Guarantee as provided in this Article Eleven. (b) The Trustee shall deliver an appropriate instrument evidencing the release of a Guarantor upon receipt of a request by the Company or such Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel certifying as to the compliance with this Section 11.04; provided, however, that -------- ------- the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers' Certificates of the Company. -107- The Trustee shall execute any documents reasonably requested by the Company or a Guarantor in order to evidence the release of such Guarantor from its obligations under its Guarantee endorsed on the Securities and under this Article Eleven. Except as set forth in Articles Four and Five and this Section 11.04, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. SECTION 11.05. Waiver of Subrogation. --------------------- Until this Indenture is discharged and all of the Securities are discharged and paid in full, each Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company's obligations under the Securities or this Indenture and such Guarantor's obligations under this Guarantee and this Indenture, in any such instance including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Holders against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and any amounts owing to the Trustee or the Holders of Securities under the Securities, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Trustee or the Holders and shall forthwith be paid to the Trustee for the benefit of itself or such Holders to be credited and applied to the obligations in favor of the Trustee or the Holders, as the case may be, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture -108- and that the waiver set forth in this Section 11.05 is knowingly made in contemplation of such benefits. SECTION 11.06. Immediate Payment. ----------------- Each Guarantor agrees to make immediate payment to the Trustee on behalf of the Holders of all Obligations owing or payable to the respective Holders upon receipt of a demand for payment therefor by the Trustee to such Guarantor in writing. SECTION 11.07. No Set-Off. ---------- Each payment to be made by a Guarantor hereunder in respect of the Obligations shall be payable in the currency or currencies in which such Obligations are denominated, and shall be made without set-off, counterclaim, reduction or diminution of any kind or nature. SECTION 11.08. Obligations Absolute. --------------------- The obligations of each Guarantor hereunder are and shall be absolute and unconditional and any monies or amounts expressed to be owing or payable by each Guarantor hereunder which may not be recoverable from such Guarantor on the basis of a Guarantee shall be recoverable from such Guarantor as a primary obligor and principal debtor in respect thereof. SECTION 11.09. Obligations Continuing. ---------------------- The obligations of each Guarantor hereunder shall be continuing and shall remain in full force and effect until all the obligations have been paid and satisfied in full. Each Guarantor agrees with the Trustee that it will from time to time deliver to the Trustee suitable acknowledgments of this continued liability hereunder and under any other instrument or instruments in such form as counsel to the Trustee may advise and as will prevent any action brought against it in respect of any default hereunder being barred by any statute of limitations now or hereafter in force and, in the event of the failure of a Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and agent of such Guarantor to make, execute and deliver such written acknowledgment or acknowledgments or other instruments as may from time to time become necessary or advisable, in the judgment of the Trustee on the advice of counsel, to fully maintain and keep in force the liability of such Guarantor hereunder. -109- SECTION 11.10. Obligations Not Reduced. ----------------------- The obligations of each Guarantor hereunder shall not be satisfied, reduced or discharged solely by the payment of such principal, premium, if any, interest, fees and other monies or amounts as may at any time prior to discharge of this Indenture pursuant to Article Eight be or become owing or payable under or by virtue of or otherwise in connection with the Securities or this Indenture. SECTION 11.11. Obligations Reinstated. ---------------------- The obligations of each Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced the obligations of any Guarantor hereunder (whether such payment shall have been made by or on behalf of the Company or by or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Company or any Guarantor or otherwise, all as though such payment had not been made. If demand for, or acceleration of the time for, payment by the Company is stayed upon the insolvency, bankruptcy, liquidation or reorganization of the Company, all such Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Guarantor as provided herein. SECTION 11.12. Obligations Not Affected. ------------------------ The obligations of each Guarantor hereunder shall not be affected, impaired or diminished in any way by any act, omission, matter or thing whatsoever, occurring before, upon or after any demand for payment hereunder (and whether or not known or consented to by any Guarantor or any of the Holders) which, but for this provision, might constitute a whole or partial defense to a claim against any Guarantor hereunder or might operate to release or otherwise exonerate any Guarantor from any of its obligations hereunder or otherwise affect such obligations, whether occasioned by default of any of the Holders or otherwise, including, without limitation: (a) any limitation of status or power, disability, incapacity or other circumstance relating to the Company or any other Person, including any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding-up or other proceeding involving or affecting the Company or any other Person; -110- (b) any irregularity, defect, unenforceability or invalidity in respect of any indebtedness or other obligation of the Company or any other Person under this Indenture, the Securities or any other document or instrument; (c) any failure of the Company, whether or not without fault on its part, to perform or comply with any of the provisions of this Indenture or the Securities, or to give notice thereof to a Guarantor; (d) the taking or enforcing or exercising or the refusal or neglect to take or enforce or exercise any right or remedy from or against the Company or any other Person or their respective assets or the release or discharge of any such right or remedy; (e) the granting of time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; (f) any change in the time, manner or place of payment of, or in any other term of, any of the Securities, or any other amendment, variation, supplement, replacement or waiver of, or any consent to departure from, any of the Securities or this Indenture, including, without limitation, any increase or decrease in the principal amount of or premium, if any, or interest on any of the Securities; (g) any change in the ownership, control, name objects, businesses, assets, capital structure or constitution of the Company or a Guarantor; (h) any merger or amalgamation of the Company or a Guarantor with any Person or Persons; (i) the occurrence of any change in the laws, rules regulations or ordinances of any jurisdiction by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the Obligations or the obligations of a Guarantor under its Guarantee; and (j) any other circumstance, including release of the Guarantor pursuant to Section 11.04 (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of the Com- -111- pany under this Indenture or the Securities or of a Guarantor in respect of its Guarantee hereunder. SECTION 11.13. Waiver. ------ Without in any way limiting the provisions of Section 11.01 hereof, each Guarantor hereby waives notice of acceptance hereof, notice of any liability of any Guarantor hereunder, notice or proof of reliance by the Holders upon the obligations of any Guarantor hereunder, and diligence, presentment, demand for payment on the Company, protest, notice of dishonor or non-payment of any of the Obligations, or other notice or formalities to the Company or any Guarantor of any kind whatsoever. SECTION 11.14. No Obligation To Take Action Against the Company. ------------------------------------------------ Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for the Obligations or against the Company or any other Person or any property of the Company or any other Person before the Trustee is entitled to demand payment and performance by any or all Guarantors of their liabilities and obligations under their Guarantees or under this Indenture. SECTION 11.15. Dealing with the Company and Others. ----------------------------------- The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Guarantor hereunder and without the consent of or notice to any Guarantor, may (a) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; (b) take or abstain from taking security or collateral from the Company or from perfecting security or collateral of the Company; (c) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Company or any third party with respect to the obligations or matters contemplated by this Indenture or the Securities; -112- (d) accept compromises or arrangements from the Company; (e) apply all monies at any time received from the Company or from any security upon such part of the Obligations as the Holders may see fit or change any such application in whole or in part from time to time as the Holders may see fit; and (f) otherwise deal with, or waive or modify their right to deal with, the Company and all other Persons and any security as the Holders or the Trustee may see fit. SECTION 11.16. Default and Enforcement. ----------------------- If any Guarantor fails to pay in accordance with Section 11.06 hereof, the Trustee may proceed in its name as trustee hereunder in the enforcement of the Guarantee of any such Guarantor and such Guarantor's obligations thereunder and hereunder by any remedy provided by law, whether by legal proceedings or otherwise, and to recover from such Guarantor the obligations. SECTION 11.17. Amendment, Etc. -------------- No amendment, modification or waiver of any provision of this Indenture relating to any Guarantor or consent to any departure by any Guarantor or any other Person from any such provision will in any event be effective unless it is signed by such Guarantor and the Trustee. SECTION 11.18. Acknowledgment. -------------- Each Guarantor hereby acknowledges communication of the terms of this Indenture and the Securities and consents to and approves of the same. SECTION 11.19. Costs and Expenses. ------------------ Each Guarantor shall pay on demand by the Trustee any and all costs, fees and expenses (including, without limitation, legal fees on a solicitor and client basis) incurred by the Trustee, its agents, advisors and counsel or any of the Holders in enforcing any of their rights under any Guarantee. -113- SECTION 11.20. No Merger or Waiver; Cumulative Remedies. ---------------------------------------- No Guarantee shall operate by way of merger of any of the obligations of a Guarantor under any other agreement, including, without limitation, this Indenture. No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, remedy, power or privilege hereunder or under this Indenture or the Securities, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under this Indenture or the Securities preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges in the Guarantee and under this Indenture, the Securities and any other document or instrument between a Guarantor and/or the Company and the Trustee are cumulative and not exclusive of any rights, remedies, powers and privilege provided by law. SECTION 11.21. Survival of Obligations. ----------------------- Without prejudice to the survival of any of the other obligations of each Guarantor hereunder, the obligations of each Guarantor under Section 11.01 shall survive the payment in full of the Obligations and shall be enforceable against such Guarantor without regard to and without giving effect to any defense, right of offset or counterclaim available to or which may be asserted by the Company or any Guarantor. SECTION 11.22. Guarantee in Addition to Other Obligations. ------------------------------------------ The obligations of each Guarantor under its Guarantee and this Indenture are in addition to and not in substitution for any other obligations to the Trustee or to any of the Holders in relation to this Indenture or the Securities and any guarantees or security at any time held by or for the benefit of any of them. SECTION 11.23. Severability. ------------ Any provision of this Article Eleven which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction unless its removal would substantially defeat the basic intent, spirit and purpose of this Indenture and this Article Eleven. -114- SECTION 11.24. Successors and Assigns. ---------------------- Each Guarantee shall be binding upon and inure to the benefit of each Guarantor and the Trustee and the other Holders and their respective successors and permitted assigns, except that no Guarantor may assign any of its obligations hereunder or thereunder. ARTICLE TWELVE SUBORDINATION OF GUARANTEE SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt. ---------------------------------- Anything herein to the contrary notwithstanding, each of the Guarantors, for itself and its successors, and each Holder, by his or her acceptance of Guarantees, agrees that the payment of all Obligations owing to the Holders in respect of its Guarantee (collectively, as to any Guarantor, its "Guarantee Obligations") is subordinated, to the extent and in the manner --------------------- provided in this Article Twelve, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, of all Obligations on Guarantor Senior Debt of such Guarantor. This Article Twelve shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Guarantor Senior Debt, and such provisions are made for the benefit of the holders of Guarantor Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTIONS 12.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default. ---------------------------------------- (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Guarantor Senior Debt, then no payment of any kind or character shall be made by or on behalf of such Guarantor or any other Person on its behalf with respect to any Guarantee Obligations or to acquire any of the Securities for cash or property or otherwise and un- -115- til such Payment Default shall have been cured or waived or shall have ceased to exist or such Guarantor Senior Debt shall have been discharged or paid in full in cash or Cash Equivalents. (b) At any time while any Payment Blockage Period is in existence, neither any Guarantor nor any other Person on any Guarantor's behalf shall (x) make any payment of any kind or character with respect to any Obligations on its Guarantee or (y) acquire any of the Securities for cash or otherwise. (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the foregoing provisions of this Section 12.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Guarantor Senior Debt, if any, received from the holders of Guarantor Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from a Guarantor and only amounts included in the information provided to the Trustee shall be paid to the holders of Guarantor Senior Debt. SECTION 12.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor. --------------------------------------- (a) Upon any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to such Guarantor or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Guarantor Senior Debt shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, before any payment or distribution of any kind or character is made on account of any Guarantee Obligations or for the acquisition of any of the Securities for cash or property or otherwise. Upon any such dissolution, -116- winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amounts of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Guarantor Senior Debt. (b) To the extent any payment of Guarantor Senior Debt (whether by or on behalf of a Guarantor, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Guarantor Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 12.03, such payment of distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt -117- remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Debt. (d) The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of a Guarantor following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Guarantor Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assumes the Guarantee of such Guarantor hereunder in accordance with Article Five hereof. SECTION 12.04. Payments May Be Paid Prior to Dissolution. ------------------------------------------ Nothing contained in this Article Twelve or elsewhere in this Indenture shall prevent (i) any Guarantor, except under the conditions described in Sections 12.02 and 12.03, from making payments at any time for the purpose of making payments on Guarantee Obligations, or from depositing with the Trustee any moneys for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 12.02 or 12.03, the application by the Trustee of any moneys deposited with it for the purpose of making such payments on Guarantee Obligations to the Holders entitled thereto unless at least two Business Days prior to the date upon which such payment would otherwise become due and payable a Trust Officer shall have actually received the written notice provided for in the first sentence of Section 10.02(b) or in Section 12.07 (provided that, notwithstanding the foregoing, the -------- Holders receiving any payments made in contravention of Sections 12.02 and/or 12.03 (and the respective such payments) shall otherwise be subject to the provisions of Section 12.02 and Section 12.03). Each Guarantor shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of such Guarantor, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. -118- SECTION 12.05. Holders of Guarantee Obligations To Be Subrogated to Rights of -------------------------------------------------------------- Holders of Guarantor Senior Debt. -------------------------------- Subject to the payment in full in cash or Cash Equivalents of all Guarantor Senior Debt, the Holders of Guarantee Obligations of any Guarantor shall be subrogated to the rights of the holders of Guarantor Senior Debt of such Guarantor to receive payments or distributions of cash, property or securities of such Guarantor applicable to such Guarantor Senior Debt until all amounts owing on or in respect of the Guarantee Obligations shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of such Guarantor Senior Debt by or on behalf of such Guarantor, or by or on behalf of the Holders by virtue of this Article Twelve, which otherwise would have been made to the Holders shall, as between such Guarantor and the Holders, be deemed to be a payment by such Guarantor to or on account of such Guarantor Senior Debt, it being understood that the provisions of this Article Twelve are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Guarantor Senior Debt, on the other hand. SECTION 12.06. Obligations of the Guarantors Unconditional. ------------------------------------------- Nothing contained in this Article Twelve or elsewhere in this Indenture or in the Guarantees is intended to or shall impair, as among the Guarantors, their creditors other than the holders of Guarantor Senior Debt, and the Holders, the obligation of the Guarantors, which is absolute and unconditional, to pay to the Holders all amounts due and payable under the Guarantees as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Guarantors other than the holders of the Guarantor Senior Debt, nor shall anything herein or therein prevent any Holder or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, in respect of cash, property or securities of the Guarantors received upon the exercise of any such remedy. SECTION 12.07. Notice to Trustee. ----------------- Each Guarantor shall give prompt written notice to the Trustee of any fact known to such Guarantor which would prohibit the making of any payment to or by the Trustee in re- -119- spect of the Guarantees pursuant to the provisions of this Article Twelve, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. Regardless of anything to the contrary contained in this Article Twelve or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Guarantor Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from a Guarantor, or from a holder of Guarantor Senior Debt or a Representative therefor and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of any notice pursuant to this Section 12.07 to establish that such notice has been given by a holder of Senior Debt (or a trustee thereof). In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Guarantor Senior Debt to participate in any payment or distribution pursuant to this Article Twelve, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amounts of Guarantor Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Twelve, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 12.08. Reliance on Judicial Order or Certificate of Liquidating Agent. -------------------------------- Upon any payment of distribution of assets of a Guarantor referred to in this Article Twelve, the Trustee, subject to the provisions of Article Seven hereof, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders, for the purpose of ascertaining the persons entitled to participate in such payment or distribu- -120- tion, the holders of the Guarantor Senior Debt and other Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Twelve. SECTION 12.09. Trustee's Relation to Guarantor Senior Debt. ------------------------------------------- The Trustee and any agent of a Guarantor or the Trustee shall be entitled to all the rights set forth in this Article Twelve with respect to any Guarantor Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Guarantor Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. With respect to the holders of Guarantor Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Twelve, and no implied covenants or obligations with respect to the holders of Guarantor Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior Debt. Whenever a distribution is to be made or a notice given to holders or owners of Guarantor Senior Debt, the distribution may be made and the notice may be given to their Representative, if any. SECTION 12.10. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Debt. -------------------------------------- No right of any present or future holders of any Guarantor Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by any Guarantor with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Guarantor Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Securities and without impairing or releasing the subordination provided in this Article Twelve -121- or the obligations hereunder of the Holders of the Securities to the holders of Guarantor Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner Guarantor Senior Debt, or any instrument evidencing the same or any agreement under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain from exercising any rights against the Guarantors and any other Person. SECTION 12.11. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations. --------------------------------------- Each Holder of Guarantee Obligations by its acceptance of them authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Guarantor Senior Debt and the Holders, the subordination provided in this Article Twelve, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of any Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of any Guarantor, the filing of a claim for the unpaid balance under its Guarantee Obligations and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Guarantor Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Guarantee Obligations. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Guarantee Obligations or the rights of any Holder thereof, or to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. -122- SECTION 12.12. This Article Twelve Not To Prevent Events of Default. -------------------------- The failure to make a payment on account of principal of or interest on the Guarantees by reason of any provision of this Article Twelve will not be construed as preventing the occurrence of an Event of Default. SECTION 12.13. Trustee's Compensation Not Prejudiced. -------------- Nothing in this Article Twelve will apply to amounts due to the Trustee pursuant to other sections of this Indenture. ARTICLE THIRTEEN MISCELLANEOUS SECTION 13.01. TIA Controls. ------------ If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required or deemed to be included in this Indenture by the TIA, such required or deemed provision shall control. SECTION 13.02. Notices. ------- Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company or a Guarantor: Building One Services Corporation 800 Connecticut Avenue, NW Washington, DC 20006 Attention: Chief Financial Officer Telephone: (202) 261-6000 Facsimile: (202) 261-6020 -123- with a copy to: Morgan Lewis & Bockius LLP 1800 M Street, NW Washington, DC 20036 Attention: Linda L. Griggs Telephone: (202) 467-7245 Facsimile: (202) 467-7176 if to the Trustee: IBJ Whitehall Bank & Trust Company One State Street New York, NY 10004 Attention: Corporate Trust Administration Telephone: (212) 858-2657 Facsimile: (212) 858-2592 Each of the Company and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Company and the Trustee, shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if telecopied; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Securityholder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. -124- SECTION 13.03. Communications by Holders with Other Holders. -------------------------------------------- Securityholders may communicate pursuant to TIA (S) 312(b) with other Securityholders with respect to their rights under this Indenture, the Securities or the Guarantees. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA (S) 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. -------------------------------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee: (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed or effected by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, any and all such conditions precedent have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. --------------------------------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.08, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and -125- (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, -------- however, that with respect to matters of fact an Opinion of Counsel may ------- rely on an Officers' Certificate or certificates of public officials. SECTION 13.06. Rules by Trustee, Paying Agent, Registrar. ----------------------------------------- The Trustee, Paying Agent or Registrar may make reasonable rules for its functions. SECTION 13.07. Legal Holidays. -------------- If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day. SECTION 13.08. Governing Law. ------------- THIS INDENTURE, THE SECURITIES AND THE GUARANTEES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture, the Securities or the Guarantees. SECTION 13.09. No Adverse Interpretation of Other Agreements. --------------------------------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. No Recourse Against Others. -------------------------- A director, officer, employee, stockholder or incorporator, as such, of the Company or any of its subsidiaries shall not have any liability for any obligations of the Company under the Securities, this Indenture or the Guarantees or for any claim based on, in respect of or by reason of such obligations of their creation. Each Securityholder by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. -126- SECTION 13.11. Successors. ---------- All agreements of the Company and the Guarantors in this Indenture, the Securities and the Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 13.12. Duplicate Originals. ------------------- All parties may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. SECTION 13.13. Severability. ------------ In case any one or more of the provisions in this Indenture, in the Securities or in the Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. -127- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the date first written above. BUILDING ONE SERVICES CORPORATION, as Issuer By: /s/ Timothy C Clayton -------------------------------- Name: Timothy C. Clayton Title: Executive Vice President By: /s/ F.T. Beck --------------------------------- Name: F. Traynor Beck Title: Executive Vice President ADVENT ELECTRIC CO., INC. AMERICAN AIR COMPANY, INC. APPEARANCE MANAGEMENT SERVICES, INC. BELTLINE MECHANICAL SERVICES, INC. BOXBERGER, INC. BRICK, INC. BUILDING ONE MECHANICAL SERVICES, INC. BUILDING ONE SERVICE SOLUTIONS, INC. BUYR, INC. CENTER SERVICES, INC. CONSOLIDATED ELECTRICAL GROUP, INC. D/FW MECHANICAL SERVICES, INC. FLOR-SHIN, INC. GAMEWELL MECHANICAL, INC. GARFIELD - INDECON ELECTRICAL SERVICES, INC. G.S. GROUP, INC. G.S. FINANCIAL, INC. GULF STATES, INC. G.S.I. OF CALIFORNIA, INC. TESTRONICS, INC. BRAZOSPORT MANAGEMENT, INC. HUNT ELECTRIC, INC. IVEY MECHANICAL COMPANY, INC. BARNES IVEY MECHANICAL COMPANY, L.L.C. LEXINGTON/IVEY MECHANICAL COMPANY, LLC IVEY MECHANICAL SERVICES, L.L.C. THE LEWIS COMPANIES, INC. OIL CAPITAL ELECTRIC, INC. ENGINEERING DESIGN GROUP, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. FRED CLARK ELECTRICAL CONTRACTOR, INC. OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES MCINTOSH MECHANICAL, INC. NATIONAL NETWORK SERVICES, INC. PERIMETER MAINTENANCE CORPORATION POTTER ELECTRIC CO., INC. REGENCY ELECTRIC COMPANY, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. REGENCY ELECTRIC COMPANY ATLANTA OFFICE REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY SOUTH FLORIDA, INC. REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. RELIABLE PAPER SERVICE COMPANY, INC. RIVIERA ELECTRIC CONSTRUCTION CO. RIVIERA ELECTRIC OF CALIFORNIA, INC. ROBINSON MECHANICAL COMPANY SANDERS BROS., INC. SKC ELECTRIC, INC. CRAMAR ELECTRIC, INC. SKCE, INC. PRO WIRE SECURITY SYSTEMS, INC. SPANN BUILDING MAINTENANCE COMPANY SPANN MANAGEMENT GROUP, INC. TAYLOR ELECTRIC, INC. TESS HOLDINGS, INC. CREST INTERNATIONAL, LLC TOWN & COUNTRY ELECTRIC, INC. TRI-CITY ELECTRICAL CONTRACTORS, INC. TRI-M HOLDING CORP. TRI-M CORPORATION TRI-M ELECTRICAL CONSTRUCTION CORP. TRI-M BUILDING AUTOMATION SYSTEMS CORP. TRI-M INFORMATION SYSTEMS CORP. TRI-M INTEGRATED SYSTEM SOLUTIONS CORP. WALKER ENGINEERING, INC. WARREN ELECTRICAL CONSTRUCTION CORP. WATSON ELECTRICAL CONSTRUCTION CO. WILSON ELECTRIC COMPANY, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. By: /s/ F. T. Beck -------------------------------- Name: F. Traynor Beck Title: Vice President IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee By: /s/ Luis Perez -------------------------------- Name: Luis Perez Title: Asst. Vice President EX-4.2 5 SUPPLEMENTAL INDENTURE DATED 11/12/99 EXHIBIT 4.2 ================================================================================ BUILDING ONE SERVICES CORPORATION, as Issuer, ELECTRICAL CONTRACTING, INC., B & R ELECTRIC, INC., ATLANTIC ELECTRIC, INC., SULLIVAN ELECTRIC, INC., K & A MECHANICAL, INC. MOUNTAIN VIEW ELECTRIC, INC., and the other GUARANTORS named herein, as Guarantors AND IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee _________________________________ SUPPLEMENTAL INDENTURE Dated as of November 12, 1999 ________________________________ Relating to up to $400,000,000 _________________________________ 10 1/2% Senior Subordinated Notes due 2009 ================================================================================ SUPPLEMENTAL INDENTURE This supplemental Indenture (the "Supplemental Indenture") dated as of November 12, 1999, among Electrical Contracting, Inc, K & A Mechanical, Inc., B & R Electric, Inc., Atlantic Electric, Inc., Sullivan Electric, Inc. and Mountain View Electric, Inc. (the "New Guarantors"), companies acquired by BUILDING ONE SERVICES CORPORATION, a Delaware corporation (the "Company"), since the date of the Indenture (defined below), the existing subsidiary guarantors listed as signatories hereto (the "Existing Guarantors") and IBJ Whitehall Bank & Trust Company, a New York banking corporation, as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Company and the Existing Guarantors have heretofore executed and delivered to the Trustee an indenture (the "Indenture") dated as of April 30, 1999, providing for the issuance of an aggregate principal amount of up to $400,000,000 of 10 1/2% Senior Subordinated Notes due 2009 (the "Securities"); WHEREAS, Section 4.18 of the Indenture provides that under certain circumstances the Company is required to cause the newly acquired subsidiaries to execute and deliver to the Trustee a supplemental indenture pursuant to which such subsidiaries shall unconditionally guarantee all of the Company's obligations under the Securities on the terms and conditions set forth herein; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the Existing Guarantors are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantors, the Company and the Existing Guarantors mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. AGREEMENT TO GUARANTEE. The New Guarantors hereby agree, jointly and severally with all of the Existing Guarantors, to unconditionally guarantee the Company's obligations under the Securities on the terms set forth in the Indenture. 2. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURE PART OF INDENTURE. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all of the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 3. GOVERNING LAW. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. 1 4. TRUSTEE MAKES NO REPRESENTATION. The recitals contained herein shall be taken as the statements of the Company and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 5. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. ELECTRICAL CONTRACTING, INC. MOUNTAIN VIEW ELECTRIC, INC., B & R ELECTRIC, INC. ATLANTIC ELECTRIC, INC. K & A MECHANICAL, INC. SULLIVAN ELECTRIC, INC. by: /s/ F. T. BECK _____________________________ Name: F. Traynor Beck Title: Vice President & Assistant Secretary BUILDING ONE SERVICES CORPORATION by: /s/ F. T. BECK _____________________________ Name: F. Traynor Beck Title: Executive Vice President ADVENT ELECTRIC CO., INC. AMERICAN AIR CO., INC. BARNES IVEY MECHANICAL COMPANY, L.L.C. BELTLINE MECHANICAL SERVICES, INC. BOXBERGER, INC. BRAZOSPORT MANAGEMENT, INC. BUILDING ONE MECHANICAL SERVICES, INC. BUILDING ONE SERVICE SOLUTIONS, INC. BUYR, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. -2- CONSOLIDATED ELECTRICAL GROUP, INC. CRAMAR ELECTRIC, INC. CREST INTERNATIONAL, LLC D/FW MECHANICAL SERVICES, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. FLOR-SHIN, INC. FRED CLARK ELECTRICAL CONTRACTORS, INC. G.S. FINANCIAL, INC. G.S. GROUP, INC. GAMEWELL MECHANICAL, INC. GARFIELD-INDECON ELECTRICAL SERVICES, INC. G.S.I. OF CALIFORNIA, INC. GULF STATES, INC. HUNT ELECTRIC, INC. IVEY MECHANICAL COMPANY, INC. IVEY MECHANICAL SERVICES, L.L.C. LEXINGTON/IVEY MECHANICAL COMPANY, L.L.C. MCINTOSH MECHANICAL, INC. NATIONAL NETWORK SERVICES, INC. OIL CAPITAL ELECTRIC, INC. OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES PERIMETER MAINTENANCE CORPORATION POTTER ELECTRIC CO., INC. PRO WIRE SECURITY SYSTEMS, INC. REGENCY ELECTRIC COMPANY ATLANTA OFFICE REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY SOUTH FLORIDA, INC. REGENCY ELECTRIC COMPANY, INC. RIVIERA ELECTRIC CONSTRUCTION CO. RIVIERA ELECTRIC OF CALIFORNIA, INC. ROBINSON MECHANICAL COMPANY -3- SANDERS BROS., INC. SKC ELECTRIC, INC. SKCE, INC. SPANN BUILDING MAINTENANCE COMPANY SPANN MANAGEMENT GROUP, INC. TAYLOR ELECTRIC, INC. TESS HOLDINGS, INC. TESTRONICS, INC. THE LEWIS COMPANIES, INC. TOWN & COUNTRY ELECTRIC, INC. TRI-CITY ELECTRICAL CONTRACTORS, INC. TRI-M HOLDING CORP. TRI-M CORPORATION TRI-M ELECTRICAL CONSTRUCTION CORP. TRI-M BUILDING AUTOMATION SYSTEMS CORP. TRI-M INFORMATION SYSTEMS CORP. TRI-M INTEGRATED SYSTEMS SOLUTIONS CORP. WALKER ENGINEERING, INC. WARREN ELECTRICAL CONSTRUCTION CORP. WATSON ELECTRICAL CONSTRUCTION CO. WILSON ELECTRIC COMPANY, INC. by /s/ F. T. BECK _____________________________ Name: F. Traynor Beck Title: Vice President & Assistant Secretary IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee by /s/ TERENCE RAWLINS __________________________________ Name: Terence Rawlins Title: Vice President -4- EX-4.3 6 SUPPLEMENTAL INDENTURE DATED 01/31/00 EXHIBIT 4.3 ================================================================================ BUILDING ONE SERVICES CORPORATION, as Issuer, C.R. HIPP CONSTRUCTION COMPANY, INC., DEL-AIR SERVICE COMPANY, INC., MH TECHNOLOGIES, INC., S.L. PAGE CORPORATION, TRI-STATE ELECTRIC, INC., TRI-STATE, INC., WALTER C. DAVIS & SON, INC., and the other GUARANTORS named herein, as Guarantors AND IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee _________________________________ SUPPLEMENTAL INDENTURE Dated as of January 31, 2000 _________________________________ Relating to up to $400,000,000 _________________________________ 10 1/2% Senior Subordinated Notes due 2009 ================================================================================ SUPPLEMENTAL INDENTURE This supplemental Indenture (the "Supplemental Indenture") dated as of January 31, 2000, among C.R. Hipp Construction Company, Inc., Del-Air Service Company, Inc., MH Technologies, Inc., S.L. Page Corporation, Tri-State Electric, Inc., Tri-State, Inc. and Walter C. Davis & Son, Inc. (the "New Guarantors"), companies acquired by BUILDING ONE SERVICES CORPORATION, a Delaware corporation (the "Company") of wholly owned subsidiaries thereof, since the date of the Indenture (defined below), the existing subsidiary guarantors listed as signatories hereto (the "Existing Guarantors") and IBJ Whitehall Bank & Trust Company, a New York banking corporation, as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Company and the Existing Guarantors have heretofore executed and delivered to the Trustee an indenture (the "Indenture") dated as of April 30, 1999, providing for the issuance of an aggregate principal amount of up to $400,000,000 of 10 1/2% Senior Subordinated Notes due 2009 (the "Securities"); WHEREAS, Section 4.18 of the Indenture provides that under certain circumstances the Company is required to cause the newly acquired subsidiaries to execute and deliver to the Trustee a supplemental indenture pursuant to which such subsidiaries shall unconditionally guarantee all of the Company's obligations under the Securities on the terms and conditions set forth herein; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the Existing Guarantors are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantors, the Company and the Existing Guarantors mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. AGREEMENT TO GUARANTEE. The New Guarantors hereby agree, jointly and severally with all of the Existing Guarantors, to unconditionally guarantee the Company's obligations under the Securities on the terms set forth in the Indenture. 2. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURE PART OF INDENTURE. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all of the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 3. GOVERNING LAW. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. -1- 4. TRUSTEE MAKES NO REPRESENTATION. The recitals contained herein shall be taken as the statements of the Company and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 5. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. C.R. HIPP CONSTRUCTION COMPANY, INC., DEL-AIR SERVICE COMPANY, INC., MH TECHNOLOGIES, INC., S.L. PAGE CORPORATION, TRI-STATE ELECTRIC, INC., TRI-STATE, INC., WALTER C. DAVIS & SON, INC. by: /s/ F. T. BECK _____________________________ Name: F. Traynor Beck Title: Vice President & Assistant Secretary BUILDING ONE SERVICES CORPORATION by: /s/ F. T. BECK _____________________________ Name: F. Traynor Beck Title: Executive Vice President ADVENT ELECTRIC CO., INC. AMERICAN AIR CO., INC. BARNES IVEY MECHANICAL COMPANY, L.L.C. BELTLINE MECHANICAL SERVICES, INC. BOXBERGER, INC. BRAZOSPORT MANAGEMENT, INC. BUILDING ONE MECHANICAL SERVICES, INC. BUILDING ONE SERVICE SOLUTIONS, INC. BUYR, INC. -2- CHAMBERS ELECTRONIC COMMUNICATIONS, INC. CONSOLIDATED ELECTRICAL GROUP, INC. CRAMAR ELECTRIC, INC. CREST INTERNATIONAL, LLC D/FW MECHANICAL SERVICES, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. FLOR-SHIN, INC. FRED CLARK ELECTRICAL CONTRACTORS, INC. G.S. FINANCIAL, INC. G.S. GROUP, INC. GAMEWELL MECHANICAL, INC. GARFIELD-INDECON ELECTRICAL SERVICES, INC. G.S.I. OF CALIFORNIA, INC. GULF STATES, INC. HUNT ELECTRIC, INC. IVEY MECHANICAL COMPANY, INC. IVEY MECHANICAL SERVICES, L.L.C. LEXINGTON/IVEY MECHANICAL COMPANY, L.L.C. MCINTOSH MECHANICAL, INC. NATIONAL NETWORK SERVICES, INC. OIL CAPITAL ELECTRIC, INC. OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES PERIMETER MAINTENANCE CORPORATION POTTER ELECTRIC CO., INC. PRO WIRE SECURITY SYSTEMS, INC. REGENCY ELECTRIC COMPANY ATLANTA OFFICE REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY SOUTH FLORIDA, INC. REGENCY ELECTRIC COMPANY, INC. RIVIERA ELECTRIC CONSTRUCTION CO. -3- RIVIERA ELECTRIC OF CALIFORNIA, INC. ROBINSON MECHANICAL COMPANY SANDERS BROS., INC. SKC ELECTRIC, INC. SKCE, INC. SPANN BUILDING MAINTENANCE COMPANY SPANN MANAGEMENT GROUP, INC. TAYLOR ELECTRIC, INC. TESS HOLDINGS, INC. TESTRONICS, INC. THE LEWIS COMPANIES, INC. TOWN & COUNTRY ELECTRIC, INC. TRI-CITY ELECTRICAL CONTRACTORS, INC. TRI-M HOLDING CORP. TRI-M CORPORATION TRI-M ELECTRICAL CONSTRUCTION CORP. TRI-M BUILDING AUTOMATION SYSTEMS CORP. TRI-M INFORMATION SYSTEMS CORP. TRI-M INTEGRATED SYSTEMS SOLUTIONS CORP. WALKER ENGINEERING, INC. WARREN ELECTRICAL CONSTRUCTION CORP. WATSON ELECTRICAL CONSTRUCTION CO. WILSON ELECTRIC COMPANY, INC. ELECTRICAL CONTRACTING, INC. MOUNTAIN VIEW ELECTRIC, INC., B & R ELECTRIC, INC. ATLANTIC ELECTRIC, INC. K & A MECHANICAL, INC. SULLIVAN ELECTRIC, INC. by /s/ F. T. BECK _____________________________ Name: F. Traynor Beck Title: Vice President & Assistant Secretary IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee by -4- /s/ TERENCE RAWLINS __________________________________ Name: Terence Rawlins Title: Vice President -5- EX-4.4 7 THIRD SUPPLEMENTAL INDENTURE DATED 02/22/00 EXHIBIT 4.4 ================================================================================ BUILDING ONE SERVICES CORPORATION, as Issuer, GROUP MAINTENANCE AMERICA CORP., assuming the obligations of Issuer, and the other GUARANTORS named herein, as Guarantors AND IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee _________________________________ THIRD SUPPLEMENTAL INDENTURE Dated as of February 22, 2000 ________________________________ Relating to up to $400,000,000 _________________________________ 10 1/2% Senior Subordinated Notes due 2009 ================================================================================ THIRD SUPPLEMENTAL INDENTURE This Third Supplemental Indenture (the "Supplemental Indenture") dated as of February 22, 2000, among Building One Services Corporation, a Delaware corporation (the "Company"), the existing subsidiary guarantors (the "Existing Guarantors"), Group Maintenance America Corp., a Texas corporation ("GroupMAC"), GroupMAC's subsidiaries listed on the signature page hereof (the "New Guarantors") and IBJ Whitehall Bank & Trust Company, a New York banking corporation, as trustee under the Indenture referred to below (the "Trustee"), is entered into in connection with the merger (the "Merger") of the Company with and into GroupMAC. W I T N E S S E T H: WHEREAS, the Company and the Existing Guarantors have heretofore executed and delivered to the Trustee an indenture (the "Indenture") dated as of April 30, 1999, as supplemented from time to time, providing for the issuance of an aggregate principal amount of up to $400,000,000 of 10 1/2% Senior Subordinated Notes due 2009 (the "Securities"); WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated November 2, 1999, as amended, whereby the Company has agreed to merge with and into GroupMAC; WHEREAS, Section 5.01 of the Indenture provides that upon a merger of the Company into another person, such as GroupMAC, GroupMAC is required to execute and deliver to the Trustee a supplemental indenture pursuant to which GroupMAC shall unconditionally assume all of the Company's obligations under the Securities on the terms and conditions set forth in the Indenture; WHEREAS, pursuant to Section 4.18 of the Indenture, the New Guarantors are required to execute and deliver to the Trustee a supplemental indenture pursuant to which they unconditionally guarantee all of the Company's obligations under the Securities and the Indenture on the terms set forth in the Indenture; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the Company, the Existing Guarantors, GroupMAC and the New Guarantors are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, it is hereby mutually covenanted and agreed for the equal and ratable benefit of the holders of the Securities as follows: 1. AGREEMENT TO ASSUME. GroupMAC hereby assumes the due and punctual payment of the principal of, and premium, if any, and interest on all of the Securities and the performance of every covenant of the Securities, the Indenture and the Registration Rights Agreement, dated as of April 30, 1999, among the Company, the Guarantors and the Initial Purchasers on the part of the Company to be performed or observed; provided, however, that such assumption shall not become effective until the effective time of the Merger; 2. AGREEMENT TO GUARANTEE. The New Guarantors hereby unconditionally guarantee GroupMAC's obligations under the Securities on the terms set forth in the Indenture; provided, however, that such guarantee shall not become effective until the effective time of the Merger. Notwithstanding the foregoing, this guarantee shall be automatically and unconditionally released and discharged (with respect to each of the New Guarantors) upon the terms and conditions specified in Section 11.04 of the Indenture. 3. SUPPLEMENTAL INDENTURE PART OF INDENTURE. Except as expressly amended hereby, all of the terms, conditions and provisions of the Indenture shall remain in full force and effect. This Third Supplemental Indenture shall form a part of the Indenture for all purposes and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 4. GOVERNING LAW. This Third Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. 5. TRUSTEE MAKES NO REPRESENTATION. The recitals contained herein shall be taken as the statements of the Company and GroupMAC, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Third Supplemental Indenture. 6. COUNTERPARTS. The parties may sign any number of counterparts of this Third Supplemental Indenture. Each signed counterpart shall be an original, but all of them together represent the same agreement. 7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed as of the date first above written. BUILDING ONE SERVICES CORPORATION By: /s/ F. T. BECK _______________________________________________ F. Traynor Beck Executive Vice President Guarantors: ALLIANCE SUPPLY CO., LLC ADVENT ELECTRIC CO., INC. AMERICAN AIR COMPANY., INC. ATLANTIC ELECTRIC COMPANY, INC. B & R ELECTRICAL SERVICES, INC. BARNES IVEY MECHANICAL COMPANY, L.L.C. BELTLINE MECHANICAL SERVICES, INC. BRAZOSPORT MANAGEMENT, INC. BUILDING ONE MECHANICAL SERVICES, INC. BUILDING ONE SERVICE SOLUTIONS, INC. BUYR, INC. C.R. HIPP CONSTRUCTION COMPANY, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. CONSOLIDATED ELECTRICAL GROUP, INC. CRAMAR ELECTRIC, INC. DEL-AIR SERVICE COMPANY, INC. D/FW MECHANICAL SERVICES, INC. DIVERSIFIED MANAGEMENT SERVICES, U.S.A., INC. EDG POWER GROUP, INC. ELECTRICAL CONTRACTING, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. FRED CLARK ELECTRICAL CONTRACTORS, INC. G.S. FINANCIAL, INC. G.S. GROUP, INC. GAMEWELL MECHANICAL, INC. GARFIELD-INDECON ELECTRICAL SERVICES, INC. G.S.I. OF CALIFORNIA, INC. GULF STATES, INC. HYDRO COOLING, INC. INTERSTATE BUILDING SERVICES, LLC IVEY MECHANICAL COMPANY, INC. IVEY MECHANICAL SERVICES, L.L.C. K & A MECHANICAL, INC. LEXINGTON/IVEY MECHANICAL COMPANY, L.L.C. MH TECHNOLOGIES, INC. MCINTOSH MECHANICAL, INC. NATIONAL NETWORK SERVICES, INC. OIL CAPITAL ELECTRIC, INC. OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES POTTER ELECTRIC, INC. PRO WIRE SECURITY SYSTEMS, INC. PROCESS DESIGN BUILDERS, LLC REGENCY ELECTRIC COMPANY ATLANTA OFFICE REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY SOUTH FLORIDA, INC. REGENCY ELECTRIC COMPANY, INC. RIVIERA ELECTRIC CONSTRUCTION CO. RIVIERA ELECTRIC OF CALIFORNIA, INC. ROBINSON MECHANICAL COMPANY SANDERS BROS., INC. SKC ELECTRIC, INC. SKCE, INC. S.L. PAGE CORPORATION SPANN BUILDING MAINTENANCE COMPANY n/k/a BUILDING ONE COMMERCIAL, INC. SULLIVAN ELECTRIC, INC. TAYLOR-HUNT ELECTRIC, INC. TESTRONICS, INC. THE LEWIS COMPANIES, INC. TOWN & COUNTRY ELECTRIC, INC. TRI-CITY ELECTRICAL CONTRACTORS, INC. TRI-M HOLDING CORP. TRI-M CORPORATION TRI-M ELECTRICAL CONSTRUCTION CORP. TRI-M BUILDING AUTOMATION SYSTEMS CORP. TRI-STATE ELECTRIC, INC. TRI-STATE, INC. WALKER ENGINEERING, INC. WATSON ELECTRIC CONSTRUCTION CO. WILSON ELECTRIC COMPANY, INC. WALTER C. DAVIS & SON, INC. ZWART, INC. d/b/a MOUNTAIN VIEW ELECTRIC, INC. By: /s/ F. T. BECK _______________________________________________ F. Traynor Beck Vice President & Assistant Secretary GROUP MAINTENANCE AMERICA CORP. By: /s/ DARREN B. MILLER _______________________________________________ Darren B. Miller Executive Vice President Guarantors: A-1 MECHANICAL OF LANSING, INC. AA ADVANCE AIR, INC. A-ABC APPLIANCE, INC. A-ABC SERVICES, INC. A JARL, INC. AIR CONDITIONING ENGINEERS, INC. AIR CONDITIONING, PLUMBING & HEATING SERVICE CO., INC. AIR SYSTEMS, INC. AIRCON ENERGY INCORPORATED AIRTRON, INC. AIRTRON OF CENTRAL FLORIDA, INC. ALL SERVICE ELECTRIC, INC. ARKANSAS MECHANICAL SERVICES, INC. ATLANTIC INDUSTRIAL CONSTRUCTORS, INC. CALLAHAN ROACH PRODUCTS & PUBLICATIONS, INC. CARDINAL CONTRACTING CORPORATION CENTRAL AIR CONDITIONING CONTRACTORS, INC. CENTRAL CAROLINA AIR CONDITIONING COMPANY CHAPEL ELECTRIC CO. CHARLIE CRAWFORD, INC. CLARK CONVERSE ELECTRIC SERVICE, INC. COLONIAL AIR CONDITIONING COMPANY COMMERCIAL AIR HOLDING COMPANY COMMERCIAL AIR, POWER & CABLE, INC. CONTINENTAL ELECTRICAL CONSTRUCTION CO. COSTA AND RIHL, INC. COSTA & RIHL PLUMBING, INC. COSTNER BROTHERS, INC. DIVCO, INC. DYNALINK CORPORATION ELECTRICAL ASSOCIATES OF DALLAS, INC. EVANS SERVICES, INC. THE FARFIELD COMPANY FERGUSON ELECTRIC CORPORATION GENTZLER ELECTRICAL CONTRACTORS, INC. GILBERT MECHANICAL CONTRACTORS, INC. GREENWAY INVESTMENT CORP. GROUPMAC FACILITY SERVICES, INC. GROUPMAC HOLDING CORP. GROUPMAC MANAGEMENT CO. GROUPMAC MARYLAND CORP. HPS PLUMBING SERVICES, INC. HALLMARK AIR CONDITIONING, INC. HUNGERFORD MECHANICAL CORPORATION J.D. STEWARD AIR CONDITIONING, INC. K & N PLUMBING, HEATING AND AIR CONDITIONING, INC. LANEY'S, INC. LINFORD SERVICE CO. L. T. MECHANICAL, INC. MACDONALD-MILLER CO., INC. MACDONALD-MILLER INDUSTRIES, INC. MACDONALD-MILLER OF OREGON, INC. MACDONALD-MILLER SERVICE, INC. MASTERS, INC. MECHANICAL INTERIORS, INC. MECHANICAL SERVICES OF ORLANDO, INC. MERRITT ISLAND AIR & HEAT, INC. NEW CONSTRUCTION AIR CONDITIONING, INC. NORON, INC. PACIFIC RIM MECHANICAL CONTRACTORS, INC. PAUL E. SMITH CO., INC. PHOENIX ELECTRIC COMPANY RAY AND CLAUDE GOODWIN, INC. RELIABLE MECHANICAL, INC. ROMANOFF ELECTRIC CORP. SEQUOYAH CORPORATION SIBLEY SERVICES, INCORPORATED SNYDER MECHANICAL SOUTHEAST MECHANICAL SERVICE, INC. STATEWIDE HEATING & AIR CONDITIONING, INC. STEPHEN C. POMEROY, INC. STERLING AIR CONDITIONING, INC. SUN PLUMBING, INC. TEAM MECHANICAL, INC. TOWER ELECTRIC COMPANY TRINITY CONTRACTORS, INC. UNITED ACQUISITION CORP. VALLEY WIDE PLUMBING AND HEATING, INC. VAN'S COMFORTEMP AIR CONDITIONING, INC. VANTAGE MECHANICAL CONTRACTORS, INC. VERMONT MECHANICAL, INC. WADE'S HEATING & COOLING, INC. WIEGOLD & SONS, INC. WILLIS REFRIGERATION, AIR CONDITIONING & HEATING, INC. YALE INCORPORATED By: /s/ DARREN B. MILLER _______________________________________________ Darren B. Miller Vice President GROUPMAC INDIANA, LLC By: AIRTRON, INC. By: /s/ DARREN B. MILLER ____________________________________________ Darren B. Miller Vice President GROUPMAC TEXAS L.P. By: GROUPMAC HOLDING CORP., general partner By: /s/ DARREN B. MILLER _________________________________________ Darren B. Miller Vice President THE BANK OF NEW YORK, AS SUCCESSOR TO IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee By: /s/ TERENCE RAWLINS ____________________________________________ Name: Terence Rawlins Title: Vice President EX-10.7 8 EMPLOYMENT AGREEMENT ALFRED R. ROACH EXHIBIT 10.7 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is effective as of March 1, --------- 1998, between GroupMAC Management Co., a Delaware corporation (the "Company"), ------- Group Maintenance America Corp., a Texas corporation ("GroupMAC"), and Alfred R. -------- Roach, Jr., a resident of Harris County, Texas ("Employee"). -------- W I T N E S S E T H: WHEREAS, Employee and GroupMAC entered into an Employment Agreement dated as of August 1, 1997 (the "Original Employment Agreement"); and ----------------------------- WHEREAS, GroupMAC assigned the Original Employment Agreement to the Company, and Employee became an employee of the Company, effective as of March 1, 1998; and WHEREAS, the Company, GroupMAC and Employee desire to amend and restate the Original Employment Agreement to reflect the effects of the foregoing assignment, to modify the provisions of the Original Employment Agreement pertaining to changes of control of GroupMAC, and to make certain other changes; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereby amend and restate the Original Employment Agreement as follows: 1. Employment. The Company hereby agrees to employ Employee and the ---------- Employee hereby agrees to work for the Company as its Executive Vice President- Commercial Group. Employee's principal office shall be in Houston, Texas. Employee will report to the President of the Company. Subject to consultation with the President, Employee will have direct supervisory responsibility and authority for the operations of the Company's commercial/ industrial businesses. So long as he is employed by the Company, Employee shall devote his skill, energy and best efforts to the faithful discharge of his duties as an employee of the Company. In providing services hereunder, Employee shall comply with and follow all directives, policies, standards and regulations from time to time established by the Board of Directors of the Company. 2. Term of Employment. Employee's employment by the Company pursuant to ------------------ this Agreement shall continue in effect for an initial term of three years from the date of this Agreement, unless terminated in accordance with Section 7, and shall be extended from year to year thereafter, unless terminated effective as of the end of the initial term or any one-year extension thereafter by written notice from the Company to Employee, or by written notice of Employee to the Company, delivered not less than 90 days prior to the end of the initial term, or the anniversary of such one-year extension, as applicable. 3. Representations and Warranties. Employee represents and warrants that ------------------------------ he is under no contractual or other restrictions or obligations that will significantly limit his activities on behalf of the Company or will prohibit or limit the disclosure or use of by Employee of any information which directly or indirectly relates to the nature of the Company or the services to be rendered by Employee under this Agreement. 4. Compensation. Subject to the provisions of Section 10, Employee will ------------ be entitled to the compensation and benefits set forth in this Section 4. (a) During 1998, the Company shall pay Employee an Annual Base Salary, payable semi-monthly, in equal semi-monthly installments at a rate equal to $150,000 per year. In each subsequent calendar year during the term of this Agreement, the Company shall pay to Employee an Annual Base Salary equal to the greater of (i) his salary for the immediately preceding year or (ii) if determined otherwise by the Board of Directors, an Annual Base Salary determined by the Board of Directors following its annual salary and performance review. (b) Employee shall be eligible to receive an annual bonus pursuant to the incentive compensation program in effect from time to time for executive employees of GroupMAC. The target bonus of Employee under such program shall not be less than 90% of Employee's annual salary. (c) All payments of salary and other compensation to Employee shall be made after deduction of any taxes required to be withheld with respect thereto under applicable federal and state laws. 5. Fringe Benefits; Expenses. (a) Employee shall participate in all ------------------------- employee benefit plans sponsored by the Company or GroupMAC for its executive employees, including but not limited to stock bonus, stock purchase and stock option plans, sick leave and disability leave, health insurance, dental insurance and pension and/or profit sharing plans; provided, however, that except as provided below, the nature, amount and limitations of such plans shall be determined from time to time by the Board of Directors of the Company. (b) The Company will reimburse Employee for all reasonable business expenses incurred by Employee in the scope of his employment; provided, however, that Employee must file expense reports with respect to such expenses in accordance with the Company's policies as are in effect from time to time. (c) Employee shall be entitled to a minimum of three weeks paid vacation during each calendar year, increasing to four weeks at June 1, 2000, and to paid holidays and other paid leave set forth in the Company's policies in effect from time to time. Any vacation not used during a calendar year may not be used during any subsequent period. (d) The Company will pay all license fees, occupation taxes and reasonable educational costs and expenses necessary to maintain Employee's good standing under any professional licenses. 2 (e) The Company shall use reasonable efforts to provide (i) life insurance payable to Employee's designated beneficiary in an amount at least three times Employee's Annual Base Salary and (ii) disability insurance on behalf of Employee which, as a goal, shall provide for salary continuation in the event of permanent disability in an amount not less than 60% of Employee's Annual Base Salary, it being acknowledged by Employee that GroupMAC's present disability insurance provides a limit of $5,000 per month. 6. Indemnification and Insurance. The Company shall indemnify Employee ----------------------------- with respect to matters relating to his services as an officer and/or director of the Company or any of its Affiliates to the extent set forth in the Company's By-laws and in accordance with the terms of any other indemnification which is generally applicable to executive officers of the Company or any of its Affiliates that may be provided by the Company or any such Affiliate from time to time. The foregoing indemnity is contractual and will survive any adverse amendment to or repeal of the By-laws. The Company will also cover Employee under a policy of officers' and directors' liability insurance providing coverage that is comparable to that provided now or hereafter to any other executive officer or director of the Company or GroupMAC. The provisions of this Section 6 will survive the termination of Employee's employment for any reason and the term of this Agreement. 7. Change in Control of the Company. -------------------------------- (a) If a Change of Control (as defined in Exhibit A attached hereto) occurs and if during the Protected Period (as defined in Exhibit A attached hereto), Employee's employment is terminated, whether by the Company or by Employee, then the Company shall promptly pay or otherwise provide to Employee the benefits set forth below: (i) An amount equal to two times the sum of (A) Employee's Annual Base Salary then in effect and (B) Employee's target bonus for the calendar year in which such termination occurs (assuming the maximum target bonus will be earned for such year), payable in a single lump sum by certified or bank cashier's check within five days of such termination; and (ii) An amount equal to the product of (A) the maximum monthly premium payment that may be charged to continue coverage for Employee and Employee's dependents under the Company's health insurance plan under COBRA, multiplied by (B) 24 months. ---------- Notwithstanding the foregoing, Employee shall not be entitled to any benefits under this Section 7 if such termination is (i) due to Employee's death, (ii) by the Company on account of Employee's Disability as provided in Section 10(d) below, (iii) by the Company for Cause as provided in Section 10(a) below, or (iv) by Employee for other than Good Reason (as defined in Exhibit A attached hereto) as provided in Section 10 below. 8. Gross-Up of Parachute Payments. ------------------------------ 3 (a) To provide Employee with adequate protection in connection with his ongoing employment with the Company, this Agreement provides Employee with various benefits in the event of termination of Employee's employment with the Company during the Protected Period. If Employee's employment is terminated following a "change of control" of GroupMAC or the Company, within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), a ---- portion of those benefits could be characterized as "excess parachute payments" within the meaning of Section 280G of the Code. The parties hereto acknowledge that the protections set forth in this Section 8 are important, and it is agreed that Employee should not have to bear the burden of any excise tax that might be levied under Section 4999 of the Code or any similar provision of state or federal law, in the event that any portion of the benefits payable to Employee pursuant to this Agreement are treated as an excess parachute payment. The parties, therefore, have agreed as set forth in this Section 8. (b) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution (including income recognized by Employee upon the early vesting of restricted property or upon the exercise of options whose exercise date has been accelerated) by GroupMAC or the Company or any other person to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 8) (a "Payment") would be subject to the excise tax imposed ------- by Section 4999 of the Code or any similar provision of state or federal law or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company ---------- shall pay an additional payment (a "Gross-Up Payment") in an amount such that ---------------- after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. (c) Subject to the provisions of Section 8(d) below, all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an independent public accounting firm with a national reputation selected by Employee (the "Accounting Firm") that shall provide detailed supporting --------------- calculations both to the Company and to Employee within 15 business days after the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in control of GroupMAC or the Company, Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Company shall indemnify and hold harmless Employee, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed on Employee as a result of such payment of fees and expenses. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to Employee within five days of the receipt of the Accounting 4 Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the Excise Tax on Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding on the Company and Employee. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments may not have been made by the Company that should have been made ("Underpayment"), consistent with the calculations ------------ required to be made hereunder. If the Company exhausts its remedies pursuant to Section 8(d) below and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee. (d) Employee shall notify the Company in writing of any claim (including any threatened tax lien related to or based on any such claims) by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Employee is informed in writing of such claim (or threatened lien) and shall apprize the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due or such tax lien would be imposed). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim (or threatened lien), Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claims (or threatened lien); (ii) take such action in connection with contesting such claim (or threatened lien) as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim (or threatened lien); and (iv) permit the Company to participate in any proceedings relating to such claims (or threatened lien); provided, however, that the Company shall bear and pay directly all costs and expenses (including legal fees and expenses, additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(d), the Company shall control all proceedings taken in 5 connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee shall prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Employee shall determine (but in no event shall the Company permit or direct Employee to allow a tax lien to be imposed on Employee's property); provided, further, that if the Company directs Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. In addition, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 8(d), Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to the Company's complying with the requirements of Section 8(d) above) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If after the receipt by Employee of an amount advanced by the Company pursuant to Section 8(d) above, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 9. Acceleration of Options. Upon the occurrence of any of the following ----------------------- events at a time while Employee holds outstanding options to purchase GroupMAC Common Stock, all such options shall be immediately exercisable in full: (i) the acquisition described in clause (i) of the definition of Change of Control; (ii) the change in the composition of the Board of Directors described in clause (ii) of such definition; (iii) the shareholder approval or adoption described in clauses (iii) or (iv) of such definition; 6 (iv) the commencement date of any tender offer subject to the terms of Section 14(d)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or exchange offer subject to the terms of the Securities ------------ Act of 1933, as amended (the "Securities Act"), or any other offer or -------------- series of offers to purchase for cash, or to exchange for securities of a person other than the Company or any of its affiliates, GroupMAC Common Stock by any "person" or "group" of persons (as such terms are used in Rule 13d of the Exchange Act) other than an offer or offers by GroupMAC or by employee benefit plan(s) sponsored by GroupMAC ("Tender Offer") if such ------------ person or group would hold 30% or more of the then outstanding GroupMAC Common Stock after the consummation of the Tender Offer. 10. Termination. ----------- (a) Either the Company or Employee may terminate Employee's employment hereunder at any time by delivery of written notice by the terminating party of its election to terminate this Agreement to the other party. Promptly after such termination of employment, the Company shall pay to Employee an amount equal to the sum of (i) Employee's earned but unpaid Annual Base Salary through the date of termination of employment at the rate in effect at the time of such termination, (ii) vacation pay earned but not taken to the date of such termination, and (iii) all other amounts previously deferred by Employee or earned but not paid as of such date under all Company incentive or deferred compensation plans or programs. (b) If the Company terminates Employee's employment without Cause, then the Company shall promptly pay to Employee the following amounts in addition to those set forth in Section 10(a): (i) If such termination occurred during a Protected Period, the amounts set forth in Section 7; and (ii) If such termination did not occur during a Protected Period, (A) an amount equal to 12 months' compensation at Employee's then current Annual Base Salary, payable semimonthly, and shall continue to provide benefits in the kind and amounts provided up to the date of termination for a 12 month period including, without limitation, continuation of any Company-paid benefits as described in Section 5 for Employee and Employee's family; (B) any portion of Employee's bonus for the calendar year prior to the calendar year in which such termination of employment occurs which has not been paid; and (C) an additional amount equal to a prorated portion of Employee's target bonus for the calendar year in which such termination occurs, assuming that Employee would have earned the maximum target bonus for such year (such prorated portion to be determined based upon the number of working days 7 Employee is employed by the Company during the calendar year in which Employee's employment is terminated divided by the total number of working days in such calendar year). The amounts described in clauses (B) and (C) above shall be paid promptly after the determination of such bonuses, but in any event prior to the publication of financial statements of GroupMAC for such year. (c) If Employee terminates Employee's employment for Good Reason during a Protected Period, then the Company shall promptly pay to Employee, in addition to the amounts set forth in Section 10(a), the amounts set forth in Section 7. (d) In the event this Agreement is terminated by the Company without Cause or by Employee with Good Reason, Employee agrees to accept, in full settlement of any and all claims, losses, damages and other demands that Employee may have arising out of such termination, as liquidated damages and not as a penalty, the payments set forth in this Agreement. Employee hereby waives any and all rights Employee may have to bring any cause of action or proceeding contesting any termination without Cause or Good Reason; provided, however, that such waiver shall not be deemed to affect Employee's rights to enforce any other obligations of the Company. Under no circumstances shall Employee be entitled to any compensation or confirmation of any benefits under this Agreement for any period of time following Employee's date of termination if Employee's termination is for Cause. (e) If at any time during the term of this Agreement, Employee is unable due to physical or mental disability, to perform effectively Employee's duties hereunder, the Company shall continue payment of compensation as provided in Section 4 during the first 12 month period of such disability to the extent not covered by the Company's disability insurance policies. Upon the expiration of such 12 month period, the Company, at its sole option, may continue payment of Employee's salary for such additional periods as the Company elects, or may terminate this Agreement without any further obligations hereunder. If Employee should die during the term of this Agreement, Employee's employment and the Company's obligations hereunder shall terminate as of the end of the month in which Employee's death occurs. (f) So long as Employee receives a severance as provided in Section 10(b) above, Employee shall sign any lock-up letters, standstill agreements, or other similar documentation required by an underwriter in connection with a public offering of securities by GroupMAC or take other actions reasonably related thereto as requested by the Board of Directors of GroupMAC; provided, however, that the period of any such lock-up or standstill agreement shall not exceed the shorter of (i) 180 days or (ii) the balance of the severance period. Failure to take any such action shall cause Employee to forfeit any further rights to the salary continuation payments in Section 10(b)(ii). In addition, in such event the Company can seek and obtain specific performance of such covenant, including any injunction requiring execution thereof, and Employee hereby appoints the then current president of the Company to sign any such documents on his behalf so long as such documents are prepared on the same basis as other shareholders generally or as all management shareholders. 8 11. No Mitigation Obligation. The Company acknowledges that it will be ------------------------ difficult and may be impossible (i) for Employee to find reasonably comparable employment following termination of Employee's employment and (ii) to measure the amount of damages which Employee may suffer as a result of the termination of Employee's employment. Accordingly, all amounts paid to Employee under this Agreement following Employee's termination of employment are acknowledged by the Company to be reasonable and to be liquidated damages, and Employee will not be required to mitigate the amount of such payments by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever (including from other employment) create any mitigation, offset, reduction or any other obligation on the part of Employee under this Agreement. 12. Covenant Not to Compete. ----------------------- (a) During Employee's employment with the Company or any of its Affiliates (as defined in Exhibit A attached hereto) and thereafter during the Restricted Period (as defined in Exhibit A attached hereto), regardless of the reason for the termination of Employee's employment, Employee will not engage in or carry on, directly or indirectly, either for himself or as a member of a partnership or as a shareholder, investor, owner, officer or director of a company or other entity, or as an employee, agent, associate or consultant of any person, partnership, corporation or other entity, any business in any State of the United States or in any other part of the world that directly competes with any services or products produced, sold, conducted, developed, or in the process of development by the Company or its Affiliates on the date of termination of Employee's employment. (b) Notwithstanding the foregoing, Employee shall be permitted to engage in the following activities which could otherwise be covered by Section 12(a): (i) the ownership of less than one percent of any class of securities of a publicly-held company whose gross assets exceed $100,000,000; and (ii) working in the indoor air quality, heating, ventilation and air conditioning or plumbing maintenance services industry if such activities are not in direct competition with any products or services produced, sold, conducted, developed, or in the process of development by the Company or its Affiliates on the date of termination of Employee's employment. (c) Employee acknowledges that the limitations set forth herein on his rights to compete with the Company and its Affiliates are reasonable and necessary for the protection of the Company and its Affiliates. In this regard, Employee specifically agrees that the limitations as to period of time and geographic area, as well as all other restrictions on his activities specified herein, are reasonable and necessary for the protection of the Company and its Affiliates. In particular, Employee acknowledges that the parties anticipate that Employee will be actively seeking markets for the products and services of the Company and its Affiliates throughout the United States during Employee's employment with the Company. 9 (d) In the event that there shall be any violation of the covenant not to compete set forth in this Section 12, then the time limitation thereof shall be extended for a period of time equal to the period of time during which such violation continues; and in the event the Company is required to seek relief from such violation in any court, board of arbitration or other tribunal, then the covenant shall be extended for a period of time equal to the pendency of such proceedings, including all appeals. (e) Employee agrees that the remedy at law for any breach by Employee of this Section 12 will be inadequate and that the Company shall also be entitled to injunctive relief. 13. Confidential Information. During the term of this Agreement, and for ------------------------ five years after Employee's termination of employment, Employee shall not use or disclose, without the prior written consent of the Company, Confidential Information (as defined in Exhibit A attached hereto) relating to the Company or any of its Affiliates, and upon termination of Employee's employment will return to the Company all written materials in Employee's possession embodying such Confidential Information. Employee will promptly disclose to the Company all Confidential Information, as well as any business opportunity which comes to Employee's attention during the term of Employee's employment with the Company. Employee will not take advantage of or divert any business opportunity for the benefit of Employee or any other Person (as defined in Exhibit A attached hereto) without the prior written consent of the Company. Employee agrees that the remedy at law for any breach by him of this Section 13 will be inadequate and that the Company shall also be entitled to injunctive relief. 14. Intellectual Property. --------------------- (a) To the extent they relate to, or result from, directly or indirectly, the actual or anticipated operations of the Company or any of its Affiliates, Employee hereby agrees that all patents, trademarks, copyrights, trade secrets, and other intellectual property rights, all inventions, whether or not patentable, and any product, drawing, design, recording, writing, literary work or other author's work, in any other tangible form developed in whole or in part by Employee during the term of this Agreement, or otherwise developed, purchased or acquired by the Company or any of its Affiliates, shall be the exclusive property of the Company or such Affiliate, as the case may be ("Intellectual ------------ Property"). - -------- (b) Employee will hold all Intellectual Property in trust for the Company and will deliver all Intellectual Property in his possession or control to the Company upon request and, in any event, at the end of his employment with the Company. (c) Employee shall assign and does hereby assign to the Company all property rights that he may now or hereafter have in the Intellectual Property. Employee shall take such action, including, but not limited to, the execution, acknowledgment, delivery and assistance in preparation of documents, and the giving of testimony, as may be requested by the Company to evidence, transfer, vest or confirm the Company's right, title and interest in the Intellectual Property. 10 (d) Employee will not contest the validity of any invention, any copyright, any trademark or any mask work registration owned by or vesting in the Company or any of its Affiliates under this Agreement. 15. Definitions. As used in this Agreement , the terms defined in Exhibit ----------- A have the means assigned to such terms in such exhibit. 16. Notices. All notices, requests, demands and other communications ------- required by or permitted under this Agreement shall be in writing and shall be sufficiently delivered if delivered by hand, by courier service, or sent by registered or certified mail, postage prepaid, to the parties at their respective addresses listed below: (a) If to Employee: 2313 Briarglen Houston, Texas 77027 (b) If to the Company or GroupMAC: GroupMAC Management Co. 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 Attention: Corporate Secretary Facsimile: 713-626-4788 Any party may change such party's address by such notice to the other parties. 17. No Set-off Rights. The Company's obligations to make the payments and ----------------- provide the benefits required by this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against Employee or others. 18. Assignment. This Agreement is personal to Employee, and Employee ---------- shall not assign any of Employee's rights or delegate any of Employee's duties hereunder without the prior written consent of the Company. Neither Employee nor Employee's spouse will have the right to commute, encumber, or otherwise dispose of any payments under this Agreement. The Company shall have the right to assign this Agreement to a successor in interest in connection with a merger, sale of substantially all assets, or the like; provided however, that an assignment of this Agreement to an entity with operations, products or services outside of the industries in which the Company is then active shall not be deemed to expand the scope of Employee's covenant not to compete with such operations, products or services without Employee's written consent. The Company shall require any Person who is the successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, or otherwise) to all or substantially all of the business and/or assets of the Company or GroupMAC to expressly assume and agree to perform, by a written agreement in form and substance reasonably satisfactory to Employee, all of the 11 obligations of the Company and GroupMAC under this Agreement. As used in this Agreement, the term "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement, or otherwise, and the term "GroupMAC" means GroupMAC as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement or otherwise. 19. Survival. The provisions of this Agreement shall survive the -------- termination of Employee's employment hereunder in accordance with their terms. 20. Governing Law. This Agreement shall be governed by, and construed and ------------- enforced in accordance with, the laws of Texas without regard to the choice-of- law principles thereof. 21. Binding Upon Successors. This Agreement shall be binding upon, and ----------------------- shall inure to the benefit of, the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. 22. Entire Agreement. This Agreement constitutes the entire agreement ---------------- between the Company and Employee with respect to the terms of employment of Employee by the Company and supersedes all prior agreements and understandings, whether written or oral, between them concerning such terms of employment. 23. Amendments and Waivers. This Agreement may be amended, modified or ---------------------- supplemented, and any obligation hereunder may be waived, only by a written instrument executed by the parties hereto. The waiver by either party of a breach of any provision of this Agreement shall not operate as a waiver of any subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver hereof, nor shall any single or partial exercise of any such right or remedy by such party preclude any other or further exercise thereof or the exercise of any other right or remedy. 24. Cumulative Rights And Remedies. All rights and remedies hereunder are ------------------------------ cumulative and are in addition to all other rights and remedies provided by law, agreement or otherwise. Employee's obligations to the Company and the Company's rights and remedies hereunder are in addition to all other obligations of Employee and rights and remedies of the Company created pursuant to any other agreement. 25. Construction. Each party to this Agreement has had the opportunity to ------------ review this Agreement with legal counsel. This Agreement shall not be construed or interpreted against any party on the basis that such party drafted or authored a particular provision, parts of or the entirety of this Agreement. 26. Severability. In the event that any provision or provisions of this ------------ Agreement is held to be invalid, illegal or unenforceable by any court of law or otherwise, the remaining 12 provisions of this Agreement shall nevertheless continue to be valid, legal and enforceable as though the invalid or unenforceable parts had not been included therein. In addition, in such event the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible with respect to those provisions which were held to be invalid, illegal or unenforceable. 27. Attorneys' Fees and Costs. If any action at law or in equity is ------------------------- brought to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which it may be entitled. 28. GroupMAC Performance Agreement. GroupMAC shall cause the Company to ------------------------------ perform each and every obligation to be performed by the Company hereunder. IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the date first above written. GROUPMAC MANAGEMENT CO. By: /s/ J. PATRICK MILLINOR, JR. ------------------------------ J. Patrick Millinor, Jr. President GROUP MAINTENANCE AMERICA CORP. By: /s/ DONALD L. LUKE ------------------------------ Donald L. Luke President EMPLOYEE: Alfred R. Roach, Jr. ----------------------------------- Alfred R. Roach, Jr. 13 EXHIBIT A DEFINITIONS "Annual Base Salary" means the salary of Employee in effect at the relevant ------------------ time determined in accordance with Section 4(a) hereof. "Affiliate" means, with respect to any Person, each other Person who --------- controls, is controlled by, or is under common control with the Person specified. "Cause" when used in connection with the termination of employment with the ----- Company, means the termination of Employee's employment by the Company by reason of (i) the conviction of Employee of a crime involving moral turpitude by a court of competent jurisdiction as to which no further appeal can be taken; (ii) the proven commission by Employee of an act of fraud upon the Company; (iii) the willful and proven misappropriation of any funds or property of the Company by Employee; (iv) the willful, continued and unreasonable failure by Employee to perform material duties assigned to Employee and agreed to by Employee after reasonable notice and opportunity to cure such performance; (v) the knowing engagement by Employee in any direct, material conflict of interest with the Company without compliance with the Company's conflict of interest policy, if any, then in effect; (vi) the knowing engagement by Employee, without the written approval of the Board of Directors of the Company, in any activity which competes with the business of the Company or any of its Affiliates or which would result in a material injury to the Company or any of its Affiliates; or (vii) the knowing engagement in any activity which would constitute a material violation of the provisions of the Company's Insider Trading Policy or Business Ethics Policy, if any, then in effect. "Change of Control" means ----------------- (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Designated ---------- Person") of beneficial ownership (within the meaning of Rule 13d-3 ------ promulgated under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) of 30% or more of either (1) the then outstanding shares ------------ of Common Stock of GroupMAC (the "Outstanding GroupMAC Common Stock") or --------------------------------- (2) the combined voting power of the then outstanding voting securities of GroupMAC entitled to vote generally in the election of directors (the "Outstanding GroupMAC Voting Securities"); provided, however, that the -------------------------------------- following acquisitions shall not constitute a Change in Control if: (i) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC directly from GroupMAC (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC by GroupMAC, (iii) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC by any employee benefit plan(s) (or related trust(s)) sponsored or maintained by GroupMAC or any corporation controlled by GroupMAC and approved by the Incumbent Board, or (iv) any acquisition by any corporation pursuant to a reorganization, 14 merger or consolidation, if, immediately following such reorganization, merger or consolidation, the conditions described in clauses (1), (2) and (3) of paragraph (iii) of this definition are satisfied; or (ii) individuals who, as of the date hereof, constitute the entire Board of Directors of GroupMAC (the "Incumbent Board") cease for any reason --------------- to constitute at least a majority of the Board of Directors of GroupMAC (the "Board"); provided, however, that any individual becoming a director ----- subsequent to the date hereof whose election, or nomination for election by GroupMAC's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either (1) an actual or threatened election contest (as such terms are used in Rule 14a-11 of the Regulation 14A promulgated under the Exchange Act), or an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board or (2) a plan or agreement to replace a majority of the members of the Board then comprising the Incumbent Board; or (iii) approval by the shareholders of GroupMAC of a reorganization, merger or consolidation, in each case unless, immediately following such reorganization, merger or consolidation, (1) more than 60% (or such greater percentage as may be approved by the Incumbent Board) of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation (including, without limitation, a corporation which as a result of such transaction owns GroupMAC through one or more subsidiaries) and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation, of the Outstanding GroupMAC Common Stock or Outstanding GroupMAC Voting Securities, as the case may be, (2) no Designated Person (excluding GroupMAC, any employee benefit plan(s) (or related trust(s)) of GroupMAC and/or its subsidiaries or any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of the Outstanding GroupMAC Common Stock or Outstanding GroupMAC Voting Securities, as the case may be) beneficially owns, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (3) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the 15 execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) approval by the shareholders of GroupMAC of (1) a complete liquidation or dissolution of GroupMAC or (2) the sale or other disposition of all or substantially all of the assets of GroupMAC, other than to a corporation, with respect to which immediately following such sale or other disposition, (A) more than 60% (or such greater percentage as may be approved by the Incumbent Board) of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were beneficial owners, respectively, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities, as the case may be, (B) no Designated Person (excluding GroupMAC and any employee benefit plan (or related trust) of GroupMAC and/or its subsidiaries or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of the Outstanding GroupMAC Stock or Outstanding GroupMAC Voting Securities, as the case may be) beneficially owns, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of, respectively, the then outstanding shares of common stock of such corporation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of GroupMAC. "Confidential Information" includes information conveyed or assigned to the ------------------------ Company or any of its Affiliates by Employee or conceived, compiled, created, developed, discovered or obtained by Employee from and during his employment relationship with the Company, whether solely by Employee or jointly with others, which concerns the affairs of the Company or its Affiliates and which the Company could reasonably be expected to desire be held in confidence, or the disclosure of which would likely be embarrassing, detrimental or disadvantageous to the Company or its Affiliates and without limiting the generality of the foregoing includes information relating to inventions, and the trade secrets, technologies, algorithms, products, services, finances, business plans, marketing plans, legal affairs, supplier lists, client lists, potential clients, business prospects, business opportunities, personnel assignments, contracts and assets of the Company or any of its Affiliates and information made available to the Company or any of its Affiliates by other parties under a confidential relationship. Confidential Information, however, shall not include information (a) which is, at the time in question, in the public domain through no wrongful act of Employee, (b) which is later disclosed to Employee by one not under obligations of confidentiality to the Company or any of its Affiliates or Employee, (c) which is 16 required by court or governmental order, law or regulation to be disclosed, or (d) which the Company has expressly given Employee the right to disclose pursuant to written agreement. "Good Reason" means the occurrence of any of the following events: ----------- (a) Employee is assigned any duties materially inconsistent with, or diminished from, Employee's positions, duties, responsibilities and status with the Company or GroupMAC immediately prior to the commencement of the Protected Period, or Employee's status, reporting responsibilities, titles or offices are materially diminished from those in effect immediately prior to the commencement of the Protected Period, or Employee is removed from or is not re-elected or appointed to any of such responsibilities, titles, offices or positions, or Employee's duties and responsibilities are materially increased without a corresponding increase in the Employee's compensation (such increase in compensation to be satisfactory to Employee, in Employee's sole reasonable judgment), except in each case in connection with the termination of Employee's employment by the Company for Cause or on account of disability, or as a result of the Employee's death, or by the Employee for other than Good Reason; provided, however, that Good Reason shall not be triggered under this subsection (a) by an insubstantial action not taken in bad faith and that is remedied by the Company promptly after receipt of written notice from Employee; or (b) Employee's Annual Base Salary is reduced from that in effect immediately prior to the commencement of the Protected Period or as the same may be increased from time to time thereafter; or (c) The Company or GroupMAC fails to continue in effect any benefit or compensation plan, including, but not limited to, the annual bonus plan, qualified retirement plan, executive life insurance plan and/or health and accident plan, in which Employee is participating immediately prior to the commencement of the Protected Period, or plans providing, in the sole reasonable judgment of Employee, Employee with substantially similar benefits, or the Company or GroupMAC takes any action that would adversely affect Employee's participation in or reduce Employee's benefits under any of such plans (excluding any such action by the Company or GroupMAC that is required by law); or (d) The Company's or GroupMAC's principal executive offices are relocated at any time following a Change in Control more than 20 miles from where such offices were located immediately prior to such Change in Control; or (e) The Company requires Employee at any time following a Change in Control to relocate more than 20 miles from where Employee's office was located immediately prior to such Change in Control; or (f) The amendment, modification or repeal of any provision of the Certificate of Incorporation or Bylaws of the Company or GroupMAC that was in effect immediately prior to the commencement of the Protected Period, if such amendment, modification or repeal would materially adversely affect Employee's rights to indemnification by the Company; or 17 (g) The Company or GroupMAC shall violate or breach any obligation of the Company or GroupMAC in effect immediately prior to the commencement of the Protected Period (regardless whether such obligation be set forth in the Bylaws of the Company or GroupMAC and/or in this Agreement or any other separate agreement entered into between the Company or GroupMAC and Employee) to indemnify Employee against any claim, loss, expense or liability sustained or incurred by Employee by reason, in whole or in part, of the fact that Employee is or was an officer or director of the Company; or (h) The Company or GroupMAC shall violate or breach any other material obligation of the Company or GroupMAC owing to Employee in effect immediately prior to the commencement of the Protected Period relating to Employee's employment with the Company, but only if such violation or breach (if capable of being remedied) shall continue unremedied for more than 15 days after written notice thereof is given by Employee to the Company; or (i) The Board (or any nominating committee of the Board) fails to recommend and support Employee's re-election as a director of the Company or GroupMAC if the Employee is a director of the Company or GroupMAC immediately prior to the commencement of the Protected Period; or (j) The Company and GroupMAC shall fail to keep in force, for the benefit of Employee, directors' and officers' insurance policy with coverage amounts and scope equal to the coverage amounts and scope under such policy immediately prior to the commencement of the Protected Period; or (k) The Company or GroupMAC fail to obtain from a successor (including a successor to a material portion of the business or assets of the Company or GroupMAC) a satisfactory assumption in writing of the Company's or GroupMAC's obligations under this Agreement; or (l) The Company fails to provide Employee with office space, related facilities and support personnel (including, but not limited to, administrative and secretarial assistance) that are both commensurate with the Employee's position and Employee's responsibilities to and position with the Company immediately prior to the Change of Control and not materially dissimilar to the office space, related facilities and support personnel provided to other executive officers of the Company; or (m) The Company or GroupMAC notifies Employee of the Company's or GroupMAC's intention not to observe or perform one or more of the obligations of the Company or GroupMAC under this Agreement. "Person" means any individual, corporation, trust, partnership, limited ------ partnership, foundation, association, limited liability company, joint stock association or other legal entity. "Protected Period" means the period of time beginning with a Change of ---------------- Control and ending 24 months following such Change of Control; provided, however, that if any event has 18 occurred which could reasonably be expected to result in a Change of Control and a Change of Control occurs within six months after such event, then the Protected Period will begin on the date of such event. "Restricted Period" means the period beginning on the date of the ----------------- termination of Employee's employment with the Company and its Affiliates and ending as follows, as applicable: (i) six months after the termination of Employee's employment; (ii) one year after the termination of Employee's employment, if Employee is entitled to benefits under Section 10(b)(ii); or (iii) two years after the termination of Employee's employment, if Employee is entitled to benefits under Section 10(b)(i). 19 EX-10.8 9 EMPLOYMENT AGREEMENT CHESTER J. JACHIMIEC EXHIBIT 10.8 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is effective as of March 1, --------- 1998, between GroupMAC Management Co., a Delaware corporation (the "Company"), ------- Group Maintenance America Corp., a Texas corporation ("GroupMAC"), and Chester -------- J. Jachimiec, a resident of Harris County, Texas ("Employee"). -------- W I T N E S S E T H: WHEREAS, Employee and GroupMAC entered into an Employment Agreement dated as of October 24, 1996 (the "Original Employment Agreement"); and ----------------------------- WHEREAS, GroupMAC assigned the Original Employment Agreement to the Company, and Employee became an employee of the Company, effective as of March 1, 1998; and WHEREAS, the Company, GroupMAC and Employee desire to amend and restate the Original Employment Agreement to reflect the effects of the foregoing assignment, to modify the provisions of the Original Employment Agreement pertaining to changes of control of GroupMAC, and to make certain other changes; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereby amend and restate the Original Employment Agreement as follows: 1. Employment. The Company hereby agrees to employ Employee and the ---------- Employee hereby agrees to work for the Company as its Executive Vice President- Acquisitions. Employee's principal office shall be in Houston, Texas. Employee will report to the Chief Executive Officer of the Company. Subject to consultation with the Chief Executive Officer, Employee will have direct supervisory responsibility and authority for the implementation of the Company's program to expand its business through acquisitions. So long as he is employed by the Company, Employee shall devote his skill, energy and best efforts to the faithful discharge of his duties as an employee of the Company. In providing services hereunder, Employee shall comply with and follow all directives, policies, standards and regulations from time to time established by the Board of Directors of the Company. 2. Term of Employment. Employee's employment by the Company pursuant to ------------------ this Agreement shall continue in effect for an initial term of three years from the date of this Agreement, unless terminated in accordance with Section 7, and shall be extended from year to year thereafter, unless terminated effective as of the end of the initial term or any one-year extension thereafter by written notice from the Company to Employee, or by written notice of Employee to the Company, delivered not less than 90 days prior to the end of the initial term, or the anniversary of such one-year extension, as applicable. 3. Representations and Warranties. Employee represents and warrants that ------------------------------- he is under no contractual or other restrictions or obligations that will significantly limit his activities on behalf of the Company or will prohibit or limit the disclosure or use of by Employee of any information which directly or indirectly relates to the nature of the Company or the services to be rendered by Employee under this Agreement. 4. Compensation. Subject to the provisions of Section 10, Employee will ------------ be entitled to the compensation and benefits set forth in this Section 4. (a) During 1998, the Company shall pay Employee an Annual Base Salary, payable semi-monthly, in equal semi-monthly installments at a rate equal to $140,000 per year. In each subsequent calendar year during the term of this Agreement, the Company shall pay to Employee an Annual Base Salary equal to the greater of (i) his salary for the immediately preceding year or (ii) if determined otherwise by the Board of Directors, an Annual Base Salary determined by the Board of Directors following its annual salary and performance review. (b) Employee shall be eligible to receive an annual bonus pursuant to the incentive compensation program in effect from time to time for executive employees of GroupMAC. The target bonus of Employee under such program shall not be less than 90% of Employee's annual salary. (c) All payments of salary and other compensation to Employee shall be made after deduction of any taxes required to be withheld with respect thereto under applicable federal and state laws. 5. Fringe Benefits; Expenses. (a) Employee shall participate in all ------------------------- employee benefit plans sponsored by the Company or GroupMAC for its executive employees, including but not limited to stock bonus, stock purchase and stock option plans, sick leave and disability leave, health insurance, dental insurance and pension and/or profit sharing plans; provided, however, that except as provided below, the nature, amount and limitations of such plans shall be determined from time to time by the Board of Directors of the Company. (b) The Company will reimburse Employee for all reasonable business expenses incurred by Employee in the scope of his employment; provided, however, that Employee must file expense reports with respect to such expenses in accordance with the Company's policies as are in effect from time to time. (c) Employee shall be entitled to a minimum of three weeks paid vacation during each calendar year, increasing to four weeks at January 1, 1999, and to paid holidays and other paid leave set forth in the Company's policies in effect from time to time. Any vacation not used during a calendar year may not be used during any subsequent period. (d) The Company will pay all license fees, occupation taxes and reasonable educational costs and expenses necessary to maintain Employee's good standing under any professional licenses. 2 (e) The Company shall use reasonable efforts to provide (i) life insurance payable to Employee's designated beneficiary in an amount at least three times Employee's Annual Base Salary and (ii) disability insurance on behalf of Employee which, as a goal, shall provide for salary continuation in the event of permanent disability in an amount not less than 60% of Employee's Annual Base Salary, it being acknowledged by Employee that GroupMAC's present disability insurance provides a limit of $5,000 per month. 6. Indemnification and Insurance. The Company shall indemnify Employee ----------------------------- with respect to matters relating to his services as an officer and/or director of the Company or any of its Affiliates to the extent set forth in the Company's By-laws and in accordance with the terms of any other indemnification which is generally applicable to executive officers of the Company or any of its Affiliates that may be provided by the Company or any such Affiliate from time to time. The foregoing indemnity is contractual and will survive any adverse amendment to or repeal of the By-laws. The Company will also cover Employee under a policy of officers' and directors' liability insurance providing coverage that is comparable to that provided now or hereafter to any other executive officer or director of the Company or GroupMAC. The provisions of this Section 6 will survive the termination of Employee's employment for any reason and the term of this Agreement. 7. Change in Control of the Company. -------------------------------- (a) If a Change of Control (as defined in Exhibit A attached hereto) occurs and if during the Protected Period (as defined in Exhibit A attached hereto), Employee's employment is terminated, whether by the Company or by Employee, then the Company shall promptly pay or otherwise provide to Employee the benefits set forth below: (i) An amount equal to two times the sum of (A) Employee's Annual Base Salary then in effect and (B) Employee's target bonus for the calendar year in which such termination occurs (assuming the maximum target bonus will be earned for such year), payable in a single lump sum by certified or bank cashier's check within five days of such termination; and (ii) An amount equal to the product of (A) the maximum monthly premium payment that may be charged to continue coverage for Employee and Employee's dependents under the Company's health insurance plan under COBRA, multiplied by (B) 24 months. ---------- Notwithstanding the foregoing, Employee shall not be entitled to any benefits under this Section 7 if such termination is (i) due to Employee's death, (ii) by the Company on account of Employee's Disability as provided in Section 10(d) below, (iii) by the Company for Cause as provided in Section 10(a) below, or (iv) by Employee for other than Good Reason (as defined in Exhibit A attached hereto) as provided in Section 10 below. 8. Gross-Up of Parachute Payments. ------------------------------ 3 (a) To provide Employee with adequate protection in connection with his ongoing employment with the Company, this Agreement provides Employee with various benefits in the event of termination of Employee's employment with the Company during the Protected Period. If Employee's employment is terminated following a "change of control" of GroupMAC or the Company, within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), a ---- portion of those benefits could be characterized as "excess parachute payments" within the meaning of Section 280G of the Code. The parties hereto acknowledge that the protections set forth in this Section 8 are important, and it is agreed that Employee should not have to bear the burden of any excise tax that might be levied under Section 4999 of the Code or any similar provision of state or federal law, in the event that any portion of the benefits payable to Employee pursuant to this Agreement are treated as an excess parachute payment. The parties, therefore, have agreed as set forth in this Section 8. (b) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution (including income recognized by Employee upon the early vesting of restricted property or upon the exercise of options whose exercise date has been accelerated) by GroupMAC or the Company or any other person to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 8) (a "Payment") would be subject to the excise tax imposed ------- by Section 4999 of the Code or any similar provision of state or federal law or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company ---------- shall pay an additional payment (a "Gross-Up Payment") in an amount such that ---------------- after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. (c) Subject to the provisions of Section 8(d) below, all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an independent public accounting firm with a national reputation selected by Employee (the "Accounting Firm") that shall provide detailed supporting --------------- calculations both to the Company and to Employee within 15 business days after the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in control of GroupMAC or the Company, Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Company shall indemnify and hold harmless Employee, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed on Employee as a result of such payment of fees and expenses. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to Employee within five days of the receipt of the Accounting 4 Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the Excise Tax on Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding on the Company and Employee. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments may not have been made by the Company that should have been made ("Underpayment"), consistent with the calculations ------------ required to be made hereunder. If the Company exhausts its remedies pursuant to Section 8(d) below and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee. (d) Employee shall notify the Company in writing of any claim (including any threatened tax lien related to or based on any such claims) by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Employee is informed in writing of such claim (or threatened lien) and shall apprize the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due or such tax lien would be imposed). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim (or threatened lien), Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claims (or threatened lien); (ii) take such action in connection with contesting such claim (or threatened lien) as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim (or threatened lien); and (iv) permit the Company to participate in any proceedings relating to such claims (or threatened lien); provided, however, that the Company shall bear and pay directly all costs and expenses (including legal fees and expenses, additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(d), the Company shall control all proceedings taken in 5 connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee shall prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Employee shall determine (but in no event shall the Company permit or direct Employee to allow a tax lien to be imposed on Employee's property); provided, further, that if the Company directs Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. In addition, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 8(d), Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to the Company's complying with the requirements of Section 8(d) above) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If after the receipt by Employee of an amount advanced by the Company pursuant to Section 8(d) above, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 9. Acceleration of Options. Upon the occurrence of any of the following ----------------------- events at a time while Employee holds outstanding options to purchase GroupMAC Common Stock, all such options shall be immediately exercisable in full: (i) the acquisition described in clause (i) of the definition of Change of Control; (ii) the change in the composition of the Board of Directors described in clause (ii) of such definition; (iii) the shareholder approval or adoption described in clauses (iii) or (iv) of such definition; 6 (iv) the commencement date of any tender offer subject to the terms of Section 14(d)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or exchange offer subject to the terms of the Securities ------------ Act of 1933, as amended (the "Securities Act"), or any other offer or -------------- series of offers to purchase for cash, or to exchange for securities of a person other than the Company or any of its affiliates, GroupMAC Common Stock by any "person" or "group" of persons (as such terms are used in Rule 13d of the Exchange Act) other than an offer or offers by GroupMAC or by employee benefit plan(s) sponsored by GroupMAC ("Tender Offer") if such ------------ person or group would hold 30% or more of the then outstanding GroupMAC Common Stock after the consummation of the Tender Offer. 10. Termination. ----------- (a) Either the Company or Employee may terminate Employee's employment hereunder at any time by delivery of written notice by the terminating party of its election to terminate this Agreement to the other party. Promptly after such termination of employment, the Company shall pay to Employee an amount equal to the sum of (i) Employee's earned but unpaid Annual Base Salary through the date of termination of employment at the rate in effect at the time of such termination, (ii) vacation pay earned but not taken to the date of such termination, and (iii) all other amounts previously deferred by Employee or earned but not paid as of such date under all Company incentive or deferred compensation plans or programs. (b) If the Company terminates Employee's employment without Cause, then the Company shall promptly pay to Employee the following amounts in addition to those set forth in Section 10(a): (i) If such termination occurred during a Protected Period, the amounts set forth in Section 7; and (ii) If such termination did not occur during a Protected Period, (A) an amount equal to 12 months' compensation at Employee's then current Annual Base Salary, payable semimonthly, and shall continue to provide benefits in the kind and amounts provided up to the date of termination for a 12 month period including, without limitation, continuation of any Company-paid benefits as described in Section 5 for Employee and Employee's family; (B) any portion of Employee's bonus for the calendar year prior to the calendar year in which such termination of employment occurs which has not been paid; and (C) an additional amount equal to a prorated portion of Employee's target bonus for the calendar year in which such termination occurs, assuming that Employee would have earned the maximum target bonus for such year (such prorated portion to be determined based upon the number of working days 7 Employee is employed by the Company during the calendar year in which Employee's employment is terminated divided by the total number of working days in such calendar year). The amounts described in clauses (B) and (C) above shall be paid promptly after the determination of such bonuses, but in any event prior to the publication of financial statements of GroupMAC for such year. (c) If Employee terminates Employee's employment for Good Reason during a Protected Period, then the Company shall promptly pay to Employee, in addition to the amounts set forth in Section 10(a), the amounts set forth in Section 7. (d) In the event this Agreement is terminated by the Company without Cause or by Employee with Good Reason, Employee agrees to accept, in full settlement of any and all claims, losses, damages and other demands that Employee may have arising out of such termination, as liquidated damages and not as a penalty, the payments set forth in this Agreement. Employee hereby waives any and all rights Employee may have to bring any cause of action or proceeding contesting any termination without Cause or Good Reason; provided, however, that such waiver shall not be deemed to affect Employee's rights to enforce any other obligations of the Company. Under no circumstances shall Employee be entitled to any compensation or confirmation of any benefits under this Agreement for any period of time following Employee's date of termination if Employee's termination is for Cause. (e) If at any time during the term of this Agreement, Employee is unable due to physical or mental disability, to perform effectively Employee's duties hereunder, the Company shall continue payment of compensation as provided in Section 4 during the first 12 month period of such disability to the extent not covered by the Company's disability insurance policies. Upon the expiration of such 12 month period, the Company, at its sole option, may continue payment of Employee's salary for such additional periods as the Company elects, or may terminate this Agreement without any further obligations hereunder. If Employee should die during the term of this Agreement, Employee's employment and the Company's obligations hereunder shall terminate as of the end of the month in which Employee's death occurs. (f) So long as Employee receives a severance as provided in Section 10(b) above, Employee shall sign any lock-up letters, standstill agreements, or other similar documentation required by an underwriter in connection with a public offering of securities by GroupMAC or take other actions reasonably related thereto as requested by the Board of Directors of GroupMAC; provided, however, that the period of any such lock-up or standstill agreements shall not exceed the shorter of (i) 180 days or (ii) the balance of the severance period. Failure to take any such action shall cause Employee to forfeit any further rights to the salary continuation payments in Section 10(b)(ii). In addition, in such event the Company can seek and obtain specific performance of such covenant, including any injunction requiring execution thereof, and Employee hereby appoints the then current president of the Company to sign any such documents on his behalf so long as such documents are prepared on the same basis as other shareholders generally or as all management shareholders. 8 11. No Mitigation Obligation. The Company acknowledges that it will be ------------------------ difficult and may be impossible (i) for Employee to find reasonably comparable employment following termination of Employee's employment and (ii) to measure the amount of damages which Employee may suffer as a result of the termination of Employee's employment. Accordingly, all amounts paid to Employee under this Agreement following Employee's termination of employment are acknowledged by the Company to be reasonable and to be liquidated damages, and Employee will not be required to mitigate the amount of such payments by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever (including from other employment) create any mitigation, offset, reduction or any other obligation on the part of Employee under this Agreement. 12. Covenant Not to Compete. ----------------------- (a) During Employee's employment with the Company or any of its Affiliates (as defined in Exhibit A attached hereto) and thereafter during the Restricted Period (as defined in Exhibit A attached hereto), regardless of the reason for the termination of Employee's employment, Employee will not engage in or carry on, directly or indirectly, either for himself or as a member of a partnership or as a shareholder, investor, owner, officer or director of a company or other entity, or as an employee, agent, associate or consultant of any person, partnership, corporation or other entity, any business in any State of the United States or in any other part of the world that directly competes with any services or products produced, sold, conducted, developed, or in the process of development by the Company or its Affiliates on the date of termination of Employee's employment. (b) Notwithstanding the foregoing, Employee shall be permitted to engage in the following activities which could otherwise be covered by Section 12(a): (i) the ownership of less than one percent of any class of securities of a publicly-held company whose gross assets exceed $100,000,000; and (ii) working in the indoor air quality, heating, ventilation and air conditioning or plumbing maintenance services industry if such activities are not in direct competition with any products or services produced, sold, conducted, developed, or in the process of development by the Company or its Affiliates on the date of termination of Employee's employment. (c) Employee acknowledges that the limitations set forth herein on his rights to compete with the Company and its Affiliates are reasonable and necessary for the protection of the Company and its Affiliates. In this regard, Employee specifically agrees that the limitations as to period of time and geographic area, as well as all other restrictions on his activities specified herein, are reasonable and necessary for the protection of the Company and its Affiliates. In particular, Employee acknowledges that the parties anticipate that Employee will be actively seeking markets for the products and services of the Company and its Affiliates throughout the United States during Employee's employment with the Company. 9 (d) In the event that there shall be any violation of the covenant not to compete set forth in this Section 12, then the time limitation thereof shall be extended for a period of time equal to the period of time during which such violation continues; and in the event the Company is required to seek relief from such violation in any court, board of arbitration or other tribunal, then the covenant shall be extended for a period of time equal to the pendency of such proceedings, including all appeals. (e) Employee agrees that the remedy at law for any breach by Employee of this Section 12 will be inadequate and that the Company shall also be entitled to injunctive relief. 13. Confidential Information. During the term of this Agreement, and for ------------------------ five years after Employee's termination of employment, Employee shall not use or disclose, without the prior written consent of the Company, Confidential Information (as defined in Exhibit A attached hereto) relating to the Company or any of its Affiliates, and upon termination of Employee's employment will return to the Company all written materials in Employee's possession embodying such Confidential Information. Employee will promptly disclose to the Company all Confidential Information, as well as any business opportunity which comes to Employee's attention during the term of Employee's employment with the Company. Employee will not take advantage of or divert any business opportunity for the benefit of Employee or any other Person (as defined in Exhibit A attached hereto) without the prior written consent of the Company. Employee agrees that the remedy at law for any breach by him of this Section 13 will be inadequate and that the Company shall also be entitled to injunctive relief. 14. Intellectual Property. --------------------- (a) To the extent they relate to, or result from, directly or indirectly, the actual or anticipated operations of the Company or any of its Affiliates, Employee hereby agrees that all patents, trademarks, copyrights, trade secrets, and other intellectual property rights, all inventions, whether or not patentable, and any product, drawing, design, recording, writing, literary work or other author's work, in any other tangible form developed in whole or in part by Employee during the term of this Agreement, or otherwise developed, purchased or acquired by the Company or any of its Affiliates, shall be the exclusive property of the Company or such Affiliate, as the case may be ("Intellectual ------------ Property"). - -------- (b) Employee will hold all Intellectual Property in trust for the Company and will deliver all Intellectual Property in his possession or control to the Company upon request and, in any event, at the end of his employment with the Company. (c) Employee shall assign and does hereby assign to the Company all property rights that he may now or hereafter have in the Intellectual Property. Employee shall take such action, including, but not limited to, the execution, acknowledgment, delivery and assistance in preparation of documents, and the giving of testimony, as may be requested by the Company to evidence, transfer, vest or confirm the Company's right, title and interest in the Intellectual Property. 10 (d) Employee will not contest the validity of any invention, any copyright, any trademark or any mask work registration owned by or vesting in the Company or any of its Affiliates under this Agreement. 15. Definitions. As used in this Agreement , the terms defined in Exhibit ----------- A have the means assigned to such terms in such exhibit. 16. Notices. All notices, requests, demands and other communications ------- required by or permitted under this Agreement shall be in writing and shall be sufficiently delivered if delivered by hand, by courier service, or sent by registered or certified mail, postage prepaid, to the parties at their respective addresses listed below: (a) If to Employee: 2035 Island Oak Houston, Texas 77062 (b) If to the Company or GroupMAC: GroupMAC Management Co. 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 Attention: Corporate Secretary Facsimile: 713-626-4788 Any party may change such party's address by such notice to the other parties. 17. No Set-off Rights. The Company's obligations to make the payments and ----------------- provide the benefits required by this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against Employee or others. 18. Assignment. This Agreement is personal to Employee, and Employee shall ---------- not assign any of Employee's rights or delegate any of Employee's duties hereunder without the prior written consent of the Company. Neither Employee nor Employee's spouse will have the right to commute, encumber, or otherwise dispose of any payments under this Agreement. The Company shall have the right to assign this Agreement to a successor in interest in connection with a merger, sale of substantially all assets, or the like; provided however, that an assignment of this Agreement to an entity with operations, products or services outside of the industries in which the Company is then active shall not be deemed to expand the scope of Employee's covenant not to compete with such operations, products or services without Employee's written consent. The Company shall require any Person who is the successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, or otherwise) to all or substantially all of the business and/or assets of the Company or GroupMAC to expressly assume and agree to perform, by a written agreement in form and substance reasonably satisfactory to Employee, all of the 11 obligations of the Company and GroupMAC under this Agreement. As used in this Agreement, the term "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement, or otherwise, and the term "GroupMAC" means GroupMAC as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement or otherwise. 19. Survival. The provisions of this Agreement shall survive the -------- termination of Employee's employment hereunder in accordance with their terms. 20. Governing Law. This Agreement shall be governed by, and construed and ------------- enforced in accordance with, the laws of Texas without regard to the choice-of- law principles thereof. 21. Binding Upon Successors. This Agreement shall be binding upon, and ----------------------- shall inure to the benefit of, the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. 22. Entire Agreement. This Agreement constitutes the entire agreement ---------------- between the Company and Employee with respect to the terms of employment of Employee by the Company and supersedes all prior agreements and understandings, whether written or oral, between them concerning such terms of employment. 23. Amendments and Waivers. This Agreement may be amended, modified or ---------------------- supplemented, and any obligation hereunder may be waived, only by a written instrument executed by the parties hereto. The waiver by either party of a breach of any provision of this Agreement shall not operate as a waiver of any subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver hereof, nor shall any single or partial exercise of any such right or remedy by such party preclude any other or further exercise thereof or the exercise of any other right or remedy. 24. Cumulative Rights And Remedies. All rights and remedies hereunder are ------------------------------ cumulative and are in addition to all other rights and remedies provided by law, agreement or otherwise. Employee's obligations to the Company and the Company's rights and remedies hereunder are in addition to all other obligations of Employee and rights and remedies of the Company created pursuant to any other agreement. 25. Construction. Each party to this Agreement has had the opportunity to ------------ review this Agreement with legal counsel. This Agreement shall not be construed or interpreted against any party on the basis that such party drafted or authored a particular provision, parts of or the entirety of this Agreement. 26. Severability. In the event that any provision or provisions of this ------------ Agreement is held to be invalid, illegal or unenforceable by any court of law or otherwise, the remaining 12 provisions of this Agreement shall nevertheless continue to be valid, legal and enforceable as though the invalid or unenforceable parts had not been included therein. In addition, in such event the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible with respect to those provisions which were held to be invalid, illegal or unenforceable. 27. Attorneys' Fees and Costs. If any action at law or in equity is ------------------------- brought to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which it may be entitled. 28. GroupMAC Performance Agreement. GroupMAC shall cause the Company to ------------------------------ perform each and every obligation to be performed by the Company hereunder. IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the date first above written. GROUPMAC MANAGEMENT CO. By: J. PATRICK MILLINOR, JR. ------------------------------ J. Patrick Millinor, Jr. President GROUP MAINTENANCE AMERICA CORP. By: DONALD L. LUKE ------------------------------ Donald L. Luke President EMPLOYEE: CHESTER J. JACHIMIEC ----------------------------------- Chester J. Jachimiec 13 EXHIBIT A DEFINITIONS "Annual Base Salary" means the salary of Employee in effect at the relevant ------------------ time determined in accordance with Section 4(a) hereof. "Affiliate" means, with respect to any Person, each other Person who --------- controls, is controlled by, or is under common control with the Person specified. "Cause" when used in connection with the termination of employment with the ----- Company, means the termination of Employee's employment by the Company by reason of (i) the conviction of Employee of a crime involving moral turpitude by a court of competent jurisdiction as to which no further appeal can be taken; (ii) the proven commission by Employee of an act of fraud upon the Company; (iii) the willful and proven misappropriation of any funds or property of the Company by Employee; (iv) the willful, continued and unreasonable failure by Employee to perform material duties assigned to Employee and agreed to by Employee after reasonable notice and opportunity to cure such performance; (v) the knowing engagement by Employee in any direct, material conflict of interest with the Company without compliance with the Company's conflict of interest policy, if any, then in effect; (vi) the knowing engagement by Employee, without the written approval of the Board of Directors of the Company, in any activity which competes with the business of the Company or any of its Affiliates or which would result in a material injury to the Company or any of its Affiliates; or (vii) the knowing engagement in any activity which would constitute a material violation of the provisions of the Company's Insider Trading Policy or Business Ethics Policy, if any, then in effect. "Change of Control" means ----------------- (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Designated ---------- Person") of beneficial ownership (within the meaning of Rule 13d-3 ------ promulgated under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) of 30% or more of either (1) the then outstanding shares ------------ of Common Stock of GroupMAC (the "Outstanding GroupMAC Common Stock") or --------------------------------- (2) the combined voting power of the then outstanding voting securities of GroupMAC entitled to vote generally in the election of directors (the "Outstanding GroupMAC Voting Securities"); provided, however, that the -------------------------------------- following acquisitions shall not constitute a Change in Control if: (i) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC directly from GroupMAC (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC by GroupMAC, (iii) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC by any employee benefit plan(s) (or related trust(s)) sponsored or maintained by GroupMAC or any corporation controlled by GroupMAC and approved by the Incumbent Board, or (iv) any acquisition by any corporation pursuant to a reorganization, 14 merger or consolidation, if, immediately following such reorganization, merger or consolidation, the conditions described in clauses (1), (2) and (3) of paragraph (iii) of this definition are satisfied; or (ii) individuals who, as of the date hereof, constitute the entire Board of Directors of GroupMAC (the "Incumbent Board") cease for any reason --------------- to constitute at least a majority of the Board of Directors of GroupMAC (the "Board"); provided, however, that any individual becoming a director ----- subsequent to the date hereof whose election, or nomination for election by GroupMAC's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either (1) an actual or threatened election contest (as such terms are used in Rule 14a-11 of the Regulation 14A promulgated under the Exchange Act), or an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board or (2) a plan or agreement to replace a majority of the members of the Board then comprising the Incumbent Board; or (iii) approval by the shareholders of GroupMAC of a reorganization, merger or consolidation, in each case unless, immediately following such reorganization, merger or consolidation, (1) more than 60% (or such greater percentage as may be approved by the Incumbent Board) of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation (including, without limitation, a corporation which as a result of such transaction owns GroupMAC through one or more subsidiaries) and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation, of the Outstanding GroupMAC Common Stock or Outstanding GroupMAC Voting Securities, as the case may be, (2) no Designated Person (excluding GroupMAC, any employee benefit plan(s) (or related trust(s)) of GroupMAC and/or its subsidiaries or any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of the Outstanding GroupMAC Common Stock or Outstanding GroupMAC Voting Securities, as the case may be) beneficially owns, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (3) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the 15 execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) approval by the shareholders of GroupMAC of (1) a complete liquidation or dissolution of GroupMAC or (2) the sale or other disposition of all or substantially all of the assets of GroupMAC, other than to a corporation, with respect to which immediately following such sale or other disposition, (A) more than 60% (or such greater percentage as may be approved by the Incumbent Board) of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were beneficial owners, respectively, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities, as the case may be, (B) no Designated Person (excluding GroupMAC and any employee benefit plan (or related trust) of GroupMAC and/or its subsidiaries or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of the Outstanding GroupMAC Stock or Outstanding GroupMAC Voting Securities, as the case may be) beneficially owns, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of, respectively, the then outstanding shares of common stock of such corporation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of GroupMAC. "Confidential Information" includes information conveyed or assigned to the ------------------------ Company or any of its Affiliates by Employee or conceived, compiled, created, developed, discovered or obtained by Employee from and during his employment relationship with the Company, whether solely by Employee or jointly with others, which concerns the affairs of the Company or its Affiliates and which the Company could reasonably be expected to desire be held in confidence, or the disclosure of which would likely be embarrassing, detrimental or disadvantageous to the Company or its Affiliates and without limiting the generality of the foregoing includes information relating to inventions, and the trade secrets, technologies, algorithms, products, services, finances, business plans, marketing plans, legal affairs, supplier lists, client lists, potential clients, business prospects, business opportunities, personnel assignments, contracts and assets of the Company or any of its Affiliates and information made available to the Company or any of its Affiliates by other parties under a confidential relationship. Confidential Information, however, shall not include information (a) which is, at the time in question, in the public domain through no wrongful act of Employee, (b) which is later disclosed to Employee by one not under obligations of confidentiality to the Company or any of its Affiliates or Employee, (c) which is 16 required by court or governmental order, law or regulation to be disclosed, or (d) which the Company has expressly given Employee the right to disclose pursuant to written agreement. "Good Reason" means the occurrence of any of the following events: ----------- (a) Employee is assigned any duties materially inconsistent with, or diminished from, Employee's positions, duties, responsibilities and status with the Company or GroupMAC immediately prior to the commencement of the Protected Period, or Employee's status, reporting responsibilities, titles or offices are materially diminished from those in effect immediately prior to the commencement of the Protected Period, or Employee is removed from or is not re-elected or appointed to any of such responsibilities, titles, offices or positions, or Employee's duties and responsibilities are materially increased without a corresponding increase in the Employee's compensation (such increase in compensation to be satisfactory to Employee, in Employee's sole reasonable judgment), except in each case in connection with the termination of Employee's employment by the Company for Cause or on account of disability, or as a result of the Employee's death, or by the Employee for other than Good Reason; provided, however, that Good Reason shall not be triggered under this subsection (a) by an insubstantial action not taken in bad faith and that is remedied by the Company promptly after receipt of written notice from Employee; or (b) Employee's Annual Base Salary is reduced from that in effect immediately prior to the commencement of the Protected Period or as the same may be increased from time to time thereafter; or (c) The Company or GroupMAC fails to continue in effect any benefit or compensation plan, including, but not limited to, the annual bonus plan, qualified retirement plan, executive life insurance plan and/or health and accident plan, in which Employee is participating immediately prior to the commencement of the Protected Period, or plans providing, in the sole reasonable judgment of Employee, Employee with substantially similar benefits, or the Company or GroupMAC takes any action that would adversely affect Employee's participation in or reduce Employee's benefits under any of such plans (excluding any such action by the Company or GroupMAC that is required by law); or (d) The Company's or GroupMAC's principal executive offices are relocated at any time following a Change in Control more than 20 miles from where such offices were located immediately prior to such Change in Control; or (e) The Company requires Employee at any time following a Change in Control to relocate more than 20 miles from where Employee's office was located immediately prior to such Change in Control; or (f) The amendment, modification or repeal of any provision of the Certificate of Incorporation or Bylaws of the Company or GroupMAC that was in effect immediately prior to the commencement of the Protected Period, if such amendment, modification or repeal would materially adversely affect Employee's rights to indemnification by the Company; or 17 (g) The Company or GroupMAC shall violate or breach any obligation of the Company or GroupMAC in effect immediately prior to the commencement of the Protected Period (regardless whether such obligation be set forth in the Bylaws of the Company or GroupMAC and/or in this Agreement or any other separate agreement entered into between the Company or GroupMAC and Employee) to indemnify Employee against any claim, loss, expense or liability sustained or incurred by Employee by reason, in whole or in part, of the fact that Employee is or was an officer or director of the Company; or (h) The Company or GroupMAC shall violate or breach any other material obligation of the Company or GroupMAC owing to Employee in effect immediately prior to the commencement of the Protected Period relating to Employee's employment with the Company, but only if such violation or breach (if capable of being remedied) shall continue unremedied for more than 15 days after written notice thereof is given by Employee to the Company; or (i) The Board (or any nominating committee of the Board) fails to recommend and support Employee's re-election as a director of the Company or GroupMAC if the Employee is a director of the Company or GroupMAC immediately prior to the commencement of the Protected Period; or (j) The Company and GroupMAC shall fail to keep in force, for the benefit of Employee, directors' and officers' insurance policy with coverage amounts and scope equal to the coverage amounts and scope under such policy immediately prior to the commencement of the Protected Period; or (k) The Company or GroupMAC fail to obtain from a successor (including a successor to a material portion of the business or assets of the Company or GroupMAC) a satisfactory assumption in writing of the Company's or GroupMAC's obligations under this Agreement; or (l) The Company fails to provide Employee with office space, related facilities and support personnel (including, but not limited to, administrative and secretarial assistance) that are both commensurate with the Employee's position and Employee's responsibilities to and position with the Company immediately prior to the Change of Control and not materially dissimilar to the office space, related facilities and support personnel provided to other executive officers of the Company; or (m) The Company or GroupMAC notifies Employee of the Company's or GroupMAC's intention not to observe or perform one or more of the obligations of the Company or GroupMAC under this Agreement. "Person" means any individual, corporation, trust, partnership, limited ------ partnership, foundation, association, limited liability company, joint stock association or other legal entity. "Protected Period" means the period of time beginning with a Change of ---------------- Control and ending 24 months following such Change of Control; provided, however, that if any event has 18 occurred which could reasonably be expected to result in a Change of Control and a Change of Control occurs within six months after such event, then the Protected Period will begin on the date of such event. "Restricted Period" means the period beginning on the date of the ----------------- termination of Employee's employment with the Company and its Affiliates and ending as follows, as applicable: (i) six months after the termination of Employee's employment; (ii) one year after the termination of Employee's employment, if Employee is entitled to benefits under Section 10(b)(ii); or (iii) two years after the termination of Employee's employment, if Employee is entitled to benefits under Section 10(b)(i). 19 EX-10.9 10 EMPLOYMENT AGREEMENT DARREN B. MILLER EXHIBIT 10.9 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is effective as of March 1, --------- 1998, between GroupMAC Management Co., a Delaware corporation (the "Company"), ------- Group Maintenance America Corp., a Texas corporation ("GroupMAC"), and Darren B. -------- Miller, a resident of Ft. Bend County, Texas ("Employee"). -------- W I T N E S S E T H: WHEREAS, Employee and GroupMAC entered into an Employment Agreement dated as of October 24, 1996 (the "Original Employment Agreement"); and ----------------------------- WHEREAS, GroupMAC assigned the Original Employment Agreement to the Company, and Employee became an employee of the Company, effective as of March 1, 1998; and WHEREAS, the Company, GroupMAC and Employee desire to amend and restate the Original Employment Agreement to reflect the effects of the foregoing assignment, to modify the provisions of the Original Employment Agreement pertaining to changes of control of GroupMAC, and to make certain other changes; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereby amend and restate the Original Employment Agreement as follows: 1. Employment. The Company hereby agrees to employ Employee and the ---------- Employee hereby agrees to work for the Company as its Executive Vice President and Chief Financial Officer. Employee's principal office shall be in Houston, Texas. Employee will report to the Chief Executive Officer of the Company. Subject to consultation with the Chief Executive Officer, Employee will have direct supervisory responsibility and authority for the financing, financial reporting, tax and risk management function of GroupMAC. So long as he is employed by the Company, Employee shall devote his skill, energy and best efforts to the faithful discharge of his duties as an employee of the Company. In providing services hereunder, Employee shall comply with and follow all directives, policies, standards and regulations from time to time established by the Board of Directors of the Company. 2. Term of Employment. Employee's employment by the Company pursuant to ------------------ this Agreement shall continue in effect for an initial term of three years from the date of this Agreement, unless terminated in accordance with Section 7, and shall be extended from year to year thereafter, unless terminated effective as of the end of the initial term or any one-year extension thereafter by written notice from the Company to Employee, or by written notice of Employee to the Company, delivered not less than 90 days prior to the end of the initial term, or the anniversary of such one-year extension, as applicable. 3. Representations and Warranties. Employee represents and warrants that ------------------------------ he is under no contractual or other restrictions or obligations that will significantly limit his activities on behalf of the Company or will prohibit or limit the disclosure or use of by Employee of any information which directly or indirectly relates to the nature of the Company or the services to be rendered by Employee under this Agreement. 4. Compensation. Subject to the provisions of Section 10, Employee will ------------ be entitled to the compensation and benefits set forth in this Section 4. (a) During 1998, the Company shall pay Employee an Annual Base Salary, payable semi-monthly, in equal semi-monthly installments at a rate equal to $140,000 per year. In each subsequent calendar year during the term of this Agreement, the Company shall pay to Employee an Annual Base Salary equal to the greater of (i) his salary for the immediately preceding year or (ii) if determined otherwise by the Board of Directors, an Annual Base Salary determined by the Board of Directors following its annual salary and performance review. (b) Employee shall be eligible to receive an annual bonus pursuant to the incentive compensation program in effect from time to time for executive employees of GroupMAC. The target bonus of Employee under such program shall not be less than 90% of Employee's annual salary. (c) All payments of salary and other compensation to Employee shall be made after deduction of any taxes required to be withheld with respect thereto under applicable federal and state laws. 5. Fringe Benefits; Expenses. (a) Employee shall participate in all ------------------------- employee benefit plans sponsored by the Company or GroupMAC for its executive employees, including but not limited to stock bonus, stock purchase and stock option plans, sick leave and disability leave, health insurance, dental insurance and pension and/or profit sharing plans; provided, however, that except as provided below, the nature, amount and limitations of such plans shall be determined from time to time by the Board of Directors of the Company. (b) The Company will reimburse Employee for all reasonable business expenses incurred by Employee in the scope of his employment; provided, however, that Employee must file expense reports with respect to such expenses in accordance with the Company's policies as are in effect from time to time. (c) Employee shall be entitled to a minimum of three weeks paid vacation during each calendar year, increasing to four weeks at January 1, 1999, and to paid holidays and other paid leave set forth in the Company's policies in effect from time to time. Any vacation not used during a calendar year may not be used during any subsequent period. (d) The Company will pay all license fees, occupation taxes and reasonable educational costs and expenses necessary to maintain Employee's good standing under any professional licenses. 2 (e) The Company shall use reasonable efforts to provide (i) life insurance payable to Employee's designated beneficiary in an amount at least three times Employee's Annual Base Salary and (ii) disability insurance on behalf of Employee which, as a goal, shall provide for salary continuation in the event of permanent disability in an amount not less than 60% of Employee's Annual Base Salary, it being acknowledged by Employee that GroupMAC's present disability insurance provides a limit of $5,000 per month. 6. Indemnification and Insurance. The Company shall indemnify Employee ----------------------------- with respect to matters relating to his services as an officer and/or director of the Company or any of its Affiliates to the extent set forth in the Company's By-laws and in accordance with the terms of any other indemnification which is generally applicable to executive officers of the Company or any of its Affiliates that may be provided by the Company or any such Affiliate from time to time. The foregoing indemnity is contractual and will survive any adverse amendment to or repeal of the By-laws. The Company will also cover Employee under a policy of officers' and directors' liability insurance providing coverage that is comparable to that provided now or hereafter to any other executive officer or director of the Company or GroupMAC. The provisions of this Section 6 will survive the termination of Employee's employment for any reason and the term of this Agreement. 7. Change in Control of the Company. -------------------------------- (a) If a Change of Control (as defined in Exhibit A attached hereto) occurs and if during the Protected Period (as defined in Exhibit A attached hereto), Employee's employment is terminated, whether by the Company or by Employee, then the Company shall promptly pay or otherwise provide to Employee the benefits set forth below: (i) An amount equal to two times the sum of (A) Employee's Annual Base Salary then in effect and (B) Employee's target bonus for the calendar year in which such termination occurs (assuming the maximum target bonus will be earned for such year), payable in a single lump sum by certified or bank cashier's check within five days of such termination; and (ii) An amount equal to the product of (A) the maximum monthly premium payment that may be charged to continue coverage for Employee and Employee's dependents under the Company's health insurance plan under COBRA, multiplied by (B) 24 months. ---------- Notwithstanding the foregoing, Employee shall not be entitled to any benefits under this Section 7 if such termination is (i) due to Employee's death, (ii) by the Company on account of Employee's Disability as provided in Section 10(d) below, (iii) by the Company for Cause as provided in Section 10(a) below, or (iv) by Employee for other than Good Reason (as defined in Exhibit A attached hereto) as provided in Section 10 below. 8. Gross-Up of Parachute Payments. ------------------------------ 3 (a) To provide Employee with adequate protection in connection with his ongoing employment with the Company, this Agreement provides Employee with various benefits in the event of termination of Employee's employment with the Company during the Protected Period. If Employee's employment is terminated following a "change of control" of GroupMAC or the Company, within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), a ---- portion of those benefits could be characterized as "excess parachute payments" within the meaning of Section 280G of the Code. The parties hereto acknowledge that the protections set forth in this Section 8 are important, and it is agreed that Employee should not have to bear the burden of any excise tax that might be levied under Section 4999 of the Code or any similar provision of state or federal law, in the event that any portion of the benefits payable to Employee pursuant to this Agreement are treated as an excess parachute payment. The parties, therefore, have agreed as set forth in this Section 8. (b) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution (including income recognized by Employee upon the early vesting of restricted property or upon the exercise of options whose exercise date has been accelerated) by GroupMAC or the Company or any other person to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 8) (a "Payment") would be subject to the excise tax imposed ------- by Section 4999 of the Code or any similar provision of state or federal law or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company ---------- shall pay an additional payment (a "Gross-Up Payment") in an amount such that ---------------- after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. (c) Subject to the provisions of Section 8(d) below, all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an independent public accounting firm with a national reputation selected by Employee (the "Accounting Firm") that shall provide detailed supporting --------------- calculations both to the Company and to Employee within 15 business days after the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in control of GroupMAC or the Company, Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Company shall indemnify and hold harmless Employee, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed on Employee as a result of such payment of fees and expenses. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to Employee within five days of the receipt of the Accounting 4 Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the Excise Tax on Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding on the Company and Employee. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments may not have been made by the Company that should have been made ("Underpayment"), consistent with the calculations ------------ required to be made hereunder. If the Company exhausts its remedies pursuant to Section 8(d) below and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee. (d) Employee shall notify the Company in writing of any claim (including any threatened tax lien related to or based on any such claims) by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Employee is informed in writing of such claim (or threatened lien) and shall apprize the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due or such tax lien would be imposed). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim (or threatened lien), Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claims (or threatened lien); (ii) take such action in connection with contesting such claim (or threatened lien) as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim (or threatened lien); and (iv) permit the Company to participate in any proceedings relating to such claims (or threatened lien); provided, however, that the Company shall bear and pay directly all costs and expenses (including legal fees and expenses, additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(d), the Company shall control all proceedings taken in 5 connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee shall prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Employee shall determine (but in no event shall the Company permit or direct Employee to allow a tax lien to be imposed on Employee's property); provided, further, that if the Company directs Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. In addition, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (e) If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 8(d), Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to the Company's complying with the requirements of Section 8(d) above) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If after the receipt by Employee of an amount advanced by the Company pursuant to Section 8(d) above, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 9. Acceleration of Options. Upon the occurrence of any of the following ----------------------- events at a time while Employee holds outstanding options to purchase GroupMAC Common Stock, all such options shall be immediately exercisable in full: (i) the acquisition described in clause (i) of the definition of Change of Control; (ii) the change in the composition of the Board of Directors described in clause (ii) of such definition; (iii) the shareholder approval or adoption described in clauses (iii) or (iv) of such definition; 6 (iv) the commencement date of any tender offer subject to the terms of Section 14(d)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or exchange offer subject to the terms of the Securities ------------ Act of 1933, as amended (the "Securities Act"), or any other offer or -------------- series of offers to purchase for cash, or to exchange for securities of a person other than the Company or any of its affiliates, GroupMAC Common Stock by any "person" or "group" of persons (as such terms are used in Rule 13d of the Exchange Act) other than an offer or offers by GroupMAC or by employee benefit plan(s) sponsored by GroupMAC ("Tender Offer") if such ------------ person or group would hold 30% or more of the then outstanding GroupMAC Common Stock after the consummation of the Tender Offer. 10. Termination. ----------- (a) Either the Company or Employee may terminate Employee's employment hereunder at any time by delivery of written notice by the terminating party of its election to terminate this Agreement to the other party. Promptly after such termination of employment, the Company shall pay to Employee an amount equal to the sum of (i) Employee's earned but unpaid Annual Base Salary through the date of termination of employment at the rate in effect at the time of such termination, (ii) vacation pay earned but not taken to the date of such termination, and (iii) all other amounts previously deferred by Employee or earned but not paid as of such date under all Company incentive or deferred compensation plans or programs. (b) If the Company terminates Employee's employment without Cause, then the Company shall promptly pay to Employee the following amounts in addition to those set forth in Section 10(a): (i) If such termination occurred during a Protected Period, the amounts set forth in Section 7; and (ii) If such termination did not occur during a Protected Period, (A) an amount equal to 12 months' compensation at Employee's then current Annual Base Salary, payable semimonthly, and shall continue to provide benefits in the kind and amounts provided up to the date of termination for a 12 month period including, without limitation, continuation of any Company-paid benefits as described in Section 5 for Employee and Employee's family; (B) any portion of Employee's bonus for the calendar year prior to the calendar year in which such termination of employment occurs which has not been paid; and (C) an additional amount equal to a prorated portion of Employee's target bonus for the calendar year in which such termination occurs, assuming that Employee would have earned the maximum target bonus for such year (such prorated portion to be determined based upon the number of working days 7 Employee is employed by the Company during the calendar year in which Employee's employment is terminated divided by the total number of working days in such calendar year). The amounts described in clauses (B) and (C) above shall be paid promptly after the determination of such bonuses, but in any event prior to the publication of financial statements of GroupMAC for such year. (c) If Employee terminates Employee's employment for Good Reason during a Protected Period, then the Company shall promptly pay to Employee, in addition to the amounts set forth in Section 10(a), the amounts set forth in Section 7. (d) In the event this Agreement is terminated by the Company without Cause or by Employee with Good Reason, Employee agrees to accept, in full settlement of any and all claims, losses, damages and other demands that Employee may have arising out of such termination, as liquidated damages and not as a penalty, the payments set forth in this Agreement. Employee hereby waives any and all rights Employee may have to bring any cause of action or proceeding contesting any termination without Cause or Good Reason; provided, however, that such waiver shall not be deemed to affect Employee's rights to enforce any other obligations of the Company. Under no circumstances shall Employee be entitled to any compensation or confirmation of any benefits under this Agreement for any period of time following Employee's date of termination if Employee's termination is for Cause. (e) If at any time during the term of this Agreement, Employee is unable due to physical or mental disability, to perform effectively Employee's duties hereunder, the Company shall continue payment of compensation as provided in Section 4 during the first 12 month period of such disability to the extent not covered by the Company's disability insurance policies. Upon the expiration of such 12 month period, the Company, at its sole option, may continue payment of Employee's salary for such additional periods as the Company elects, or may terminate this Agreement without any further obligations hereunder. If Employee should die during the term of this Agreement, Employee's employment and the Company's obligations hereunder shall terminate as of the end of the month in which Employee's death occurs. (f) So long as Employee receives a severance as provided in Section 10(b) above, Employee shall sign any lock-up letters, standstill agreements, or other similar documentation required by an underwriter in connection with a public offering of securities by GroupMAC or take other actions reasonably related thereto as requested by the Board of Directors of GroupMAC; provided, however, that the period of any such lock-up or standstill agreements shall not exceed the shorter of (i) 180 days or (ii) the balance of the severance period. Failure to take any such action shall cause Employee to forfeit any further rights to the salary continuation payments in Section 10(b)(ii). In addition, in such event the Company can seek and obtain specific performance of such covenant, including any injunction requiring execution thereof, and Employee hereby appoints the then current president of the Company to sign any such documents on his behalf so long as such documents are prepared on the same basis as other shareholders generally or as all management shareholders. 8 11. No Mitigation Obligation. The Company acknowledges that it will be ------------------------ difficult and may be impossible (i) for Employee to find reasonably comparable employment following termination of Employee's employment and (ii) to measure the amount of damages which Employee may suffer as a result of the termination of Employee's employment. Accordingly, all amounts paid to Employee under this Agreement following Employee's termination of employment are acknowledged by the Company to be reasonable and to be liquidated damages, and Employee will not be required to mitigate the amount of such payments by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever (including from other employment) create any mitigation, offset, reduction or any other obligation on the part of Employee under this Agreement. 12. Covenant Not to Compete. ----------------------- (a) During Employee's employment with the Company or any of its Affiliates (as defined in Exhibit A attached hereto) and thereafter during the Restricted Period (as defined in Exhibit A attached hereto), regardless of the reason for the termination of Employee's employment, Employee will not engage in or carry on, directly or indirectly, either for himself or as a member of a partnership or as a shareholder, investor, owner, officer or director of a company or other entity, or as an employee, agent, associate or consultant of any person, partnership, corporation or other entity, any business in any State of the United States or in any other part of the world that directly competes with any services or products produced, sold, conducted, developed, or in the process of development by the Company or its Affiliates on the date of termination of Employee's employment. (b) Notwithstanding the foregoing, Employee shall be permitted to engage in the following activities which could otherwise be covered by Section 12(a): (i) the ownership of less than one percent of any class of securities of a publicly-held company whose gross assets exceed $100,000,000; and (ii) working in the indoor air quality, heating, ventilation and air conditioning or plumbing maintenance services industry if such activities are not in direct competition with any products or services produced, sold, conducted, developed, or in the process of development by the Company or its Affiliates on the date of termination of Employee's employment. (c) Employee acknowledges that the limitations set forth herein on his rights to compete with the Company and its Affiliates are reasonable and necessary for the protection of the Company and its Affiliates. In this regard, Employee specifically agrees that the limitations as to period of time and geographic area, as well as all other restrictions on his activities specified herein, are reasonable and necessary for the protection of the Company and its Affiliates. In particular, Employee acknowledges that the parties anticipate that Employee will be actively seeking markets for the products and services of the Company and its Affiliates throughout the United States during Employee's employment with the Company. 9 (d) In the event that there shall be any violation of the covenant not to compete set forth in this Section 12, then the time limitation thereof shall be extended for a period of time equal to the period of time during which such violation continues; and in the event the Company is required to seek relief from such violation in any court, board of arbitration or other tribunal, then the covenant shall be extended for a period of time equal to the pendency of such proceedings, including all appeals. (e) Employee agrees that the remedy at law for any breach by Employee of this Section 12 will be inadequate and that the Company shall also be entitled to injunctive relief. 13. Confidential Information. During the term of this Agreement, and for ------------------------ five years after Employee's termination of employment, Employee shall not use or disclose, without the prior written consent of the Company, Confidential Information (as defined in Exhibit A attached hereto) relating to the Company or any of its Affiliates, and upon termination of Employee's employment will return to the Company all written materials in Employee's possession embodying such Confidential Information. Employee will promptly disclose to the Company all Confidential Information, as well as any business opportunity which comes to Employee's attention during the term of Employee's employment with the Company. Employee will not take advantage of or divert any business opportunity for the benefit of Employee or any other Person (as defined in Exhibit A attached hereto) without the prior written consent of the Company. Employee agrees that the remedy at law for any breach by him of this Section 13 will be inadequate and that the Company shall also be entitled to injunctive relief. 14. Intellectual Property. --------------------- (a) To the extent they relate to, or result from, directly or indirectly, the actual or anticipated operations of the Company or any of its Affiliates, Employee hereby agrees that all patents, trademarks, copyrights, trade secrets, and other intellectual property rights, all inventions, whether or not patentable, and any product, drawing, design, recording, writing, literary work or other author's work, in any other tangible form developed in whole or in part by Employee during the term of this Agreement, or otherwise developed, purchased or acquired by the Company or any of its Affiliates, shall be the exclusive property of the Company or such Affiliate, as the case may be ("Intellectual ------------ Property"). - -------- (b) Employee will hold all Intellectual Property in trust for the Company and will deliver all Intellectual Property in his possession or control to the Company upon request and, in any event, at the end of his employment with the Company. (c) Employee shall assign and does hereby assign to the Company all property rights that he may now or hereafter have in the Intellectual Property. Employee shall take such action, including, but not limited to, the execution, acknowledgment, delivery and assistance in preparation of documents, and the giving of testimony, as may be requested by the Company to evidence, transfer, vest or confirm the Company's right, title and interest in the Intellectual Property. 10 (d) Employee will not contest the validity of any invention, any copyright, any trademark or any mask work registration owned by or vesting in the Company or any of its Affiliates under this Agreement. 15. Definitions. As used in this Agreement , the terms defined in Exhibit ----------- A have the means assigned to such terms in such exhibit. 16. Notices. All notices, requests, demands and other communications ------- required by or permitted under this Agreement shall be in writing and shall be sufficiently delivered if delivered by hand, by courier service, or sent by registered or certified mail, postage prepaid, to the parties at their respective addresses listed below: (a) If to Employee: 4122 St. Ives Sugarland, Texas 77479 (b) If to the Company or GroupMAC: GroupMAC Management Co. 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 Attention: Corporate Secretary Facsimile: 713-626-4788 Any party may change such party's address by such notice to the other parties. 17. No Set-off Rights. The Company's obligations to make the payments and ----------------- provide the benefits required by this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against Employee or others. 18. Assignment. This Agreement is personal to Employee, and Employee shall ---------- not assign any of Employee's rights or delegate any of Employee's duties hereunder without the prior written consent of the Company. Neither Employee nor Employee's spouse will have the right to commute, encumber, or otherwise dispose of any payments under this Agreement. The Company shall have the right to assign this Agreement to a successor in interest in connection with a merger, sale of substantially all assets, or the like; provided however, that an assignment of this Agreement to an entity with operations, products or services outside of the industries in which the Company is then active shall not be deemed to expand the scope of Employee's covenant not to compete with such operations, products or services without Employee's written consent. The Company shall require any Person who is the successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, or otherwise) to all or substantially all of the business and/or assets of the Company or GroupMAC to expressly assume and agree to perform, by a written agreement in form and substance reasonably satisfactory to Employee, all of the 11 obligations of the Company and GroupMAC under this Agreement. As used in this Agreement, the term "Company" means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement, or otherwise, and the term "GroupMAC" means GroupMAC as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement or otherwise. 19. Survival. The provisions of this Agreement shall survive the -------- termination of Employee's employment hereunder in accordance with their terms. 20. Governing Law. This Agreement shall be governed by, and construed and ------------- enforced in accordance with, the laws of Texas without regard to the choice-of- law principles thereof. 21. Binding Upon Successors. This Agreement shall be binding upon, and ----------------------- shall inure to the benefit of, the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. 22. Entire Agreement. This Agreement constitutes the entire agreement ---------------- between the Company and Employee with respect to the terms of employment of Employee by the Company and supersedes all prior agreements and understandings, whether written or oral, between them concerning such terms of employment. 23. Amendments and Waivers. This Agreement may be amended, modified or ---------------------- supplemented, and any obligation hereunder may be waived, only by a written instrument executed by the parties hereto. The waiver by either party of a breach of any provision of this Agreement shall not operate as a waiver of any subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver hereof, nor shall any single or partial exercise of any such right or remedy by such party preclude any other or further exercise thereof or the exercise of any other right or remedy. 24. Cumulative Rights And Remedies. All rights and remedies hereunder are ------------------------------ cumulative and are in addition to all other rights and remedies provided by law, agreement or otherwise. Employee's obligations to the Company and the Company's rights and remedies hereunder are in addition to all other obligations of Employee and rights and remedies of the Company created pursuant to any other agreement. 25. Construction. Each party to this Agreement has had the opportunity to ------------ review this Agreement with legal counsel. This Agreement shall not be construed or interpreted against any party on the basis that such party drafted or authored a particular provision, parts of or the entirety of this Agreement. 26. Severability. In the event that any provision or provisions of this ------------ Agreement is held to be invalid, illegal or unenforceable by any court of law or otherwise, the remaining 12 provisions of this Agreement shall nevertheless continue to be valid, legal and enforceable as though the invalid or unenforceable parts had not been included therein. In addition, in such event the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible with respect to those provisions which were held to be invalid, illegal or unenforceable. 27. Attorneys' Fees and Costs. If any action at law or in equity is ------------------------- brought to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which it may be entitled. 28. GroupMAC Performance Agreement. GroupMAC shall cause the Company to ------------------------------ perform each and every obligation to be performed by the Company hereunder. IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the date first above written. GROUPMAC MANAGEMENT CO. By: J. PATRICK MILLINOR, JR. --------------------------- J. Patrick Millinor, Jr. President GROUP MAINTENANCE AMERICA CORP. By: DONALD L. LUKE --------------------------- Donald L. Luke President EMPLOYEE: DARREN B. MILLER -------------------------------- Darren B. Miller 13 EXHIBIT A DEFINITIONS "Annual Base Salary" means the salary of Employee in effect at the relevant ------------------ time determined in accordance with Section 4(a) hereof. "Affiliate" means, with respect to any Person, each other Person who --------- controls, is controlled by, or is under common control with the Person specified. "Cause" when used in connection with the termination of employment with the ----- Company, means the termination of Employee's employment by the Company by reason of (i) the conviction of Employee of a crime involving moral turpitude by a court of competent jurisdiction as to which no further appeal can be taken; (ii) the proven commission by Employee of an act of fraud upon the Company; (iii) the willful and proven misappropriation of any funds or property of the Company by Employee; (iv) the willful, continued and unreasonable failure by Employee to perform material duties assigned to Employee and agreed to by Employee after reasonable notice and opportunity to cure such performance; (v) the knowing engagement by Employee in any direct, material conflict of interest with the Company without compliance with the Company's conflict of interest policy, if any, then in effect; (vi) the knowing engagement by Employee, without the written approval of the Board of Directors of the Company, in any activity which competes with the business of the Company or any of its Affiliates or which would result in a material injury to the Company or any of its Affiliates; or (vii) the knowing engagement in any activity which would constitute a material violation of the provisions of the Company's Insider Trading Policy or Business Ethics Policy, if any, then in effect. "Change of Control" means ----------------- (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Designated ---------- Person") of beneficial ownership (within the meaning of Rule 13d-3 ------ promulgated under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) of 30% or more of either (1) the then outstanding shares ------------ of Common Stock of GroupMAC (the "Outstanding GroupMAC Common Stock") or --------------------------------- (2) the combined voting power of the then outstanding voting securities of GroupMAC entitled to vote generally in the election of directors (the "Outstanding GroupMAC Voting Securities"); provided, however, that the -------------------------------------- following acquisitions shall not constitute a Change in Control if: (i) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC directly from GroupMAC (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC by GroupMAC, (iii) any acquisition of Common Stock of GroupMAC or voting securities of GroupMAC by any employee benefit plan(s) (or related trust(s)) sponsored or maintained by GroupMAC or any corporation controlled by GroupMAC and approved by the Incumbent Board, or (iv) any acquisition by any corporation pursuant to a reorganization, 14 merger or consolidation, if, immediately following such reorganization, merger or consolidation, the conditions described in clauses (1), (2) and (3) of paragraph (iii) of this definition are satisfied; or (ii) individuals who, as of the date hereof, constitute the entire Board of Directors of GroupMAC (the "Incumbent Board") cease for any reason --------------- to constitute at least a majority of the Board of Directors of GroupMAC (the "Board"); provided, however, that any individual becoming a director ----- subsequent to the date hereof whose election, or nomination for election by GroupMAC's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either (1) an actual or threatened election contest (as such terms are used in Rule 14a-11 of the Regulation 14A promulgated under the Exchange Act), or an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board or (2) a plan or agreement to replace a majority of the members of the Board then comprising the Incumbent Board; or (iii) approval by the shareholders of GroupMAC of a reorganization, merger or consolidation, in each case unless, immediately following such reorganization, merger or consolidation, (1) more than 60% (or such greater percentage as may be approved by the Incumbent Board) of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation (including, without limitation, a corporation which as a result of such transaction owns GroupMAC through one or more subsidiaries) and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation, of the Outstanding GroupMAC Common Stock or Outstanding GroupMAC Voting Securities, as the case may be, (2) no Designated Person (excluding GroupMAC, any employee benefit plan(s) (or related trust(s)) of GroupMAC and/or its subsidiaries or any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of the Outstanding GroupMAC Common Stock or Outstanding GroupMAC Voting Securities, as the case may be) beneficially owns, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (3) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the 15 execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) approval by the shareholders of GroupMAC of (1) a complete liquidation or dissolution of GroupMAC or (2) the sale or other disposition of all or substantially all of the assets of GroupMAC, other than to a corporation, with respect to which immediately following such sale or other disposition, (A) more than 60% (or such greater percentage as may be approved by the Incumbent Board) of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were beneficial owners, respectively, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding GroupMAC Common Stock and Outstanding GroupMAC Voting Securities, as the case may be, (B) no Designated Person (excluding GroupMAC and any employee benefit plan (or related trust) of GroupMAC and/or its subsidiaries or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of the Outstanding GroupMAC Stock or Outstanding GroupMAC Voting Securities, as the case may be) beneficially owns, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of, respectively, the then outstanding shares of common stock of such corporation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of GroupMAC. "Confidential Information" includes information conveyed or assigned to the ------------------------ Company or any of its Affiliates by Employee or conceived, compiled, created, developed, discovered or obtained by Employee from and during his employment relationship with the Company, whether solely by Employee or jointly with others, which concerns the affairs of the Company or its Affiliates and which the Company could reasonably be expected to desire be held in confidence, or the disclosure of which would likely be embarrassing, detrimental or disadvantageous to the Company or its Affiliates and without limiting the generality of the foregoing includes information relating to inventions, and the trade secrets, technologies, algorithms, products, services, finances, business plans, marketing plans, legal affairs, supplier lists, client lists, potential clients, business prospects, business opportunities, personnel assignments, contracts and assets of the Company or any of its Affiliates and information made available to the Company or any of its Affiliates by other parties under a confidential relationship. Confidential Information, however, shall not include information (a) which is, at the time in question, in the public domain through no wrongful act of Employee, (b) which is later disclosed to Employee by one not under obligations of confidentiality to the Company or any of its Affiliates or Employee, (c) which is 16 required by court or governmental order, law or regulation to be disclosed, or (d) which the Company has expressly given Employee the right to disclose pursuant to written agreement. "Good Reason" means the occurrence of any of the following events: ----------- (a) Employee is assigned any duties materially inconsistent with, or diminished from, Employee's positions, duties, responsibilities and status with the Company or GroupMAC immediately prior to the commencement of the Protected Period, or Employee's status, reporting responsibilities, titles or offices are materially diminished from those in effect immediately prior to the commencement of the Protected Period, or Employee is removed from or is not re-elected or appointed to any of such responsibilities, titles, offices or positions, or Employee's duties and responsibilities are materially increased without a corresponding increase in the Employee's compensation (such increase in compensation to be satisfactory to Employee, in Employee's sole reasonable judgment), except in each case in connection with the termination of Employee's employment by the Company for Cause or on account of disability, or as a result of the Employee's death, or by the Employee for other than Good Reason; provided, however, that Good Reason shall not be triggered under this subsection (a) by an insubstantial action not taken in bad faith and that is remedied by the Company promptly after receipt of written notice from Employee; or (b) Employee's Annual Base Salary is reduced from that in effect immediately prior to the commencement of the Protected Period or as the same may be increased from time to time thereafter; or (c) The Company or GroupMAC fails to continue in effect any benefit or compensation plan, including, but not limited to, the annual bonus plan, qualified retirement plan, executive life insurance plan and/or health and accident plan, in which Employee is participating immediately prior to the commencement of the Protected Period, or plans providing, in the sole reasonable judgment of Employee, Employee with substantially similar benefits, or the Company or GroupMAC takes any action that would adversely affect Employee's participation in or reduce Employee's benefits under any of such plans (excluding any such action by the Company or GroupMAC that is required by law); or (d) The Company's or GroupMAC's principal executive offices are relocated at any time following a Change in Control more than 20 miles from where such offices were located immediately prior to such Change in Control; or (e) The Company requires Employee at any time following a Change in Control to relocate more than 20 miles from where Employee's office was located immediately prior to such Change in Control; or (f) The amendment, modification or repeal of any provision of the Certificate of Incorporation or Bylaws of the Company or GroupMAC that was in effect immediately prior to the commencement of the Protected Period, if such amendment, modification or repeal would materially adversely affect Employee's rights to indemnification by the Company; or 17 (g) The Company or GroupMAC shall violate or breach any obligation of the Company or GroupMAC in effect immediately prior to the commencement of the Protected Period (regardless whether such obligation be set forth in the Bylaws of the Company or GroupMAC and/or in this Agreement or any other separate agreement entered into between the Company or GroupMAC and Employee) to indemnify Employee against any claim, loss, expense or liability sustained or incurred by Employee by reason, in whole or in part, of the fact that Employee is or was an officer or director of the Company; or (h) The Company or GroupMAC shall violate or breach any other material obligation of the Company or GroupMAC owing to Employee in effect immediately prior to the commencement of the Protected Period relating to Employee's employment with the Company, but only if such violation or breach (if capable of being remedied) shall continue unremedied for more than 15 days after written notice thereof is given by Employee to the Company; or (i) The Board (or any nominating committee of the Board) fails to recommend and support Employee's re-election as a director of the Company or GroupMAC if the Employee is a director of the Company or GroupMAC immediately prior to the commencement of the Protected Period; or (j) The Company and GroupMAC shall fail to keep in force, for the benefit of Employee, directors' and officers' insurance policy with coverage amounts and scope equal to the coverage amounts and scope under such policy immediately prior to the commencement of the Protected Period; or (k) The Company or GroupMAC fail to obtain from a successor (including a successor to a material portion of the business or assets of the Company or GroupMAC) a satisfactory assumption in writing of the Company's or GroupMAC's obligations under this Agreement; or (l) The Company fails to provide Employee with office space, related facilities and support personnel (including, but not limited to, administrative and secretarial assistance) that are both commensurate with the Employee's position and Employee's responsibilities to and position with the Company immediately prior to the Change of Control and not materially dissimilar to the office space, related facilities and support personnel provided to other executive officers of the Company; or (m) The Company or GroupMAC notifies Employee of the Company's or GroupMAC's intention not to observe or perform one or more of the obligations of the Company or GroupMAC under this Agreement. "Person" means any individual, corporation, trust, partnership, limited ------ partnership, foundation, association, limited liability company, joint stock association or other legal entity. "Protected Period" means the period of time beginning with a Change of ---------------- Control and ending 24 months following such Change of Control; provided, however, that if any event has 18 occurred which could reasonably be expected to result in a Change of Control and a Change of Control occurs within six months after such event, then the Protected Period will begin on the date of such event. "Restricted Period" means the period beginning on the date of the ----------------- termination of Employee's employment with the Company and its Affiliates and ending as follows, as applicable: (i) six months after the termination of Employee's employment; (ii) one year after the termination of Employee's employment, if Employee is entitled to benefits under Section 10(b)(ii); or (iii) two years after the termination of Employee's employment, if Employee is entitled to benefits under Section 10(b)(i). 19 EX-10.15 11 CREDIT AGREEMENT DATED FEBRUARY 22, 2000 EXHIBIT 10.15 Credit Agreement $500,000,000 Revolving Credit Facility $130,000,000 Tranche A Term Loan Facility and $170,000,000 Tranche B Term Loan Facility Among Group Maintenance America Corp., as the Company, The Subsidiaries of the Company, as Guarantors, Bank of America, N.A., as the Administrative Agent, Chase Bank of Texas, National Association, as the Syndication Agent, First Union National Bank, as the Documentation Agent, ABN-AMRO BANK NV THE BANK OF NOVA SCOTIA BANK ONE, N.A. CREDIT LYONNAIS, New York Branch GMAC COMMERCIAL CREDIT LLC MERCANTILE BANK NATIONAL ASSOCIATION and UNION BANK OF CALIFORNIA, N.A., As Co-Managing Agents, and The Banks Named Herein Dated as of February 22, 2000 Banc of America Securities llc Chase Securities Inc. CO-LEAD ARRANGERS AND CO-BOOK MANAGERS Article I DEFINITIONS; ACCOUNTING TERMS; INTERPRETATION........................................... 1 Section 1.01 Definitions.................................................................... 1 Section 1.02 Types of Advances.............................................................. 25 Section 1.03 Accounting Terms............................................................... 25 Section 1.04 Schedules...................................................................... 25 Article II THE LOANS............................................................................... 25 Section 2.01 The Loans...................................................................... 25 Section 2.02 The Notes...................................................................... 27 Section 2.03 Notice of Advance.............................................................. 27 Section 2.04 Disbursement of Funds for Loans................................................ 28 Section 2.05 Conversions and Continuances................................................... 28 Section 2.06 Voluntary Prepayments.......................................................... 29 Section 2.07 Mandatory Repayment of Term Loans; Mandatory Prepayments....................... 29 Section 2.08 Method and Place of Payment.................................................... 31 Section 2.09 Pro Rata Advances.............................................................. 31 Section 2.10 Interest....................................................................... 31 Section 2.11 Interest Periods............................................................... 32 Section 2.12 Interest Rate Not Ascertainable................................................ 33 Section 2.13 Legality....................................................................... 33 Section 2.14 Change in Law.................................................................. 34 Section 2.15 Eurodollar Advance Prepayment and Default Penalties............................ 35 Section 2.16 Additional Costs, Taxes or Similar Requirements................................ 36 Section 2.17 Tax Forms...................................................................... 37 Section 2.18 Voluntary Reduction of Commitment.............................................. 37 Section 2.19 Fees........................................................................... 37 Section 2.20 Replacement of Banks........................................................... 38 Article III LETTERS OF CREDIT...................................................................... 38 Section 3.01 Letters of Credit.............................................................. 38 Section 3.02 Letters of Credit Requests..................................................... 39 Section 3.03 Letter of Credit Participations................................................ 40 Section 3.04 Increased Costs................................................................ 41 Section 3.05 Conflict between Applications and Agreement.................................... 42 Article IV CONDITIONS PRECEDENT.................................................................... 42 Section 4.01 Conditions Precedent to the Initial Advance.................................... 42 Section 4.02 Conditions Precedent to All Credit Events...................................... 45 Section 4.03 Delivery of Documents.......................................................... 45 Article V REPRESENTATIONS AND WARRANTIES........................................................... 46 Section 5.01 Organization and Qualification................................................. 46 Section 5.02 Authorization and Validity..................................................... 46 Section 5.03 Governmental Consents.......................................................... 46 Section 5.04 Conflicting or Adverse Agreements or Restrictions.............................. 46 Section 5.05 Title to Assets; Liens......................................................... 47 Section 5.06 Litigation..................................................................... 47 Section 5.07.................................................................................. 47
i Section 5.08 Default........................................................................ 48 Section 5.09 Investment Company Act......................................................... 48 Section 5.10 Public Utility Holding Company Act............................................. 48 Section 5.11 ERISA.......................................................................... 48 Section 5.12 Tax Returns and Payments....................................................... 48 Section 5.13 Environmental Matters.......................................................... 48 Section 5.14 Purpose of Loans............................................................... 49 Section 5.15 Franchises and Other Rights.................................................... 49 Section 5.16 Subsidiaries and Assets........................................................ 50 Section 5.17 Solvency....................................................................... 50 Section 5.18 Year 2000...................................................................... 50 Section 5.19 Transaction Documents.......................................................... 50 Section 5.20 Disclosure..................................................................... 50 Article VI affirmative covenants................................................................... 51 Section 6.01 Information Covenants.......................................................... 51 Section 6.02 Books, Records and Inspections................................................. 53 Section 6.03 Insurance and Maintenance of Properties........................................ 53 Section 6.04 Payment of Taxes............................................................... 54 Section 6.05 Corporate Existence............................................................ 54 Section 6.06 Compliance with Statutes....................................................... 54 Section 6.07 Material Privileges, Permits, Licenses and Other Rights; Landlord Waivers...... 54 Section 6.08 ERISA.......................................................................... 54 Section 6.09 Additional Subsidiaries........................................................ 55 Section 6.10 Acquisition Agreements......................................................... 55 Section 6.11 Year 2000 Compliance........................................................... 55 Article VII NEGATIVE COVENANTS..................................................................... 55 Section 7.01 Change in Business............................................................. 55 Section 7.02 Consolidation, Merger or Sale of Assets........................................ 55 Section 7.03 Indebtedness................................................................... 56 Section 7.04 Liens.......................................................................... 57 Section 7.05 Investments.................................................................... 58 Section 7.06 Restricted Payments............................................................ 59 Section 7.07 Change in Accounting........................................................... 60 Section 7.08 Certain Indebtedness........................................................... 60 Section 7.09 Transactions with Affiliates................................................... 60 Section 7.10 Consolidated Net Worth......................................................... 61 Section 7.11 Funded Debt to Pro Forma EBITDA Ratio.......................................... 61 Section 7.12 Senior Debt to Pro Forma EBITDA Ratio.......................................... 61 Section 7.13 Capital Expenditures........................................................... 61 Section 7.14 Fixed Charge Coverage Ratio.................................................... 61 Section 7.15 Limitations on Acquisitions.................................................... 62 Section 7.16 Subordinated Debt.............................................................. 62 Article VIII GUARANTY.............................................................................. 62 Section 8.01 Guaranty....................................................................... 63
ii Section 8.02 Continuing Guaranty............................................................ 63 Section 8.03 Effect of Debtor Relief Laws................................................... 64 Section 8.04 Waiver of Subrogation.......................................................... 65 Section 8.05 Subordination.................................................................. 65 Section 8.06 Waiver......................................................................... 66 Section 8.07 Full Force and Effect.......................................................... 66 Section 8.08 Negative Pledge................................................................ 66 Article IX EVENTS OF DEFAULT AND REMEDIES.......................................................... 66 Section 9.01 Events of Default.............................................................. 67 Section 9.02 Primary Remedies............................................................... 68 Section 9.03 Other Remedies................................................................. 69 Section 9.04 Cash Collateral................................................................ 69 Article X THE ADMINISTRATIVE AGENT................................................................. 69 Section 10.01 Authorization and Action....................................................... 69 Section 10.02 Administrative Agent's Reliance................................................ 70 Section 10.03 Administrative Agent and Affiliates; Bank of America and Affiliates............ 70 Section 10.04 Banks' Credit Decision......................................................... 71 Section 10.05 Administrative Agent's Indemnity............................................... 71 Section 10.06 Successor Administrative Agent................................................. 72 Section 10.07 Notice of Default.............................................................. 72 Article XI MISCELLANEOUS........................................................................... 73 Section 11.01 Amendments..................................................................... 73 Section 11.02 Notices........................................................................ 73 Section 11.03 No Waiver; Remedies............................................................ 74 Section 11.04 Costs and Expenses............................................................. 74 Section 11.05 Release and Indemnity.......................................................... 74 Section 11.06 Right of Setoff................................................................ 75 Section 11.07 Governing Law.................................................................. 75 Section 11.08 Interest....................................................................... 76 Section 11.09 Survival of Representations and Warranties..................................... 77 Section 11.10 Successors and Assigns; Participations......................................... 77 Section 11.11 Confidentiality................................................................ 78 Section 11.12 Pro Rata Treatment............................................................. 79 Section 11.13 Separability................................................................... 79 Section 11.14 Execution in Counterparts...................................................... 79 Section 11.15 Interpretation................................................................. 79 Section 11.16 SUBMISSION TO JURISDICTION..................................................... 80 Section 11.17 WAIVER OF JURY TRIAL........................................................... 81 Section 11.18 Collateral..................................................................... 81 Section 11.19 FINAL AGREEMENT OF THE PARTIES................................................. 81
iii Exhibits and Schedules: Exhibit 1.01A Administrative Questionnaire Exhibit 1.01B Form of Adoption Agreement Exhibit 1.01C Form of Application for Letter of Credit Exhibit 1.01D Form of Shareholder Subordinated Note Exhibit 2.02(a-1) Form of Revolving Note Exhibit 2.02(a-2) Form of Swingline Note Exhibit 2.02(b) Form of Tranche A Term Note Exhibit 2.02(c) Form of Tranche B Term Note Exhibit 2.03 Form of Notice of Advance Exhibit 2.05 Form of Notice of Conversion Exhibit 3.02 Form of Letter of Credit Request Exhibit 4.01(d)(i) Form of Security Agreement Exhibit 4.01(d)(ii) Form of Pledge Agreement Exhibit 4.01(h)(i) Form of Opinion of Company's Counsel - Bracewell & Patterson Exhibit 4.01(h)(ii) Form of Opinion of Company's Counsel - Randolph W. Bryant Exhibit 4.01(h)(iii) Form of Opinion of BOSC's Counsel - Morgan Lewis & Bockius LLP Exhibit 4.01(h)(iv) Form of Opinion of BOSC's Counsel - F. Traynor Beck Exhibit 11.10(c) Form of Assignment and Acceptance Schedule 1.01 Management Participants Schedule 3.01 Existing Letters of Credit Schedule 5.04 Agreements Schedule 5.06 Litigation Schedule 5.13 Exceptions to Environmental Matters Schedule 5.16 Subsidiaries Schedule 6.03 Existing Insurance Policies Schedule 7.02 Consolidations, Mergers, etc. Schedule 7.03(b) Existing Indebtedness Schedule 7.04(a) Existing Liens Schedule 7.05(b) Investments iv Credit Agreement This CREDIT AGREEMENT dated as of February 22, 2000 (this "Agreement") is --------- among GROUP MAINTENANCE AMERICA CORP., after the date hereof to be named Encompass Services Corporation, a Texas corporation (the "Company"), the ------- Subsidiaries of the Company listed on the signature pages hereto as Guarantors (together with each other Person who subsequently becomes a Guarantor, collectively the "Guarantors"), the banks and other financial institutions ---------- listed on the signature pages hereto under the caption "Banks" (together with each other person who becomes a Bank, collectively the "Banks") CHASE BANK OF ----- TEXAS, NATIONAL ASSOCIATION, individually as a Bank and as Syndication Agent, FIRST UNION NATIONAL BANK, individually as a Bank and as Documentation Agent, and BANK OF AMERICA, N.A., individually as a Bank ("Bank of America") and as --------------- Administrative Agent for the other Banks (in such capacity, together with any other Person who becomes the administrative agent, the "Administrative Agent"). -------------------- The Company has requested that the Banks extend credit to the Company in the form of a revolving credit facility and two term credit facilities. The Banks are willing to extend such credit to the Company upon the terms and conditions hereinafter set forth. NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS; ACCOUNTING TERMS; INTERPRETATION Section 1.01 Definitions. As used in this Agreement, the following terms ----------- have the following meanings: "Accounts" means all accounts, accounts receivable or other indebtedness owing to the Company or any Guarantor as consideration for goods sold or services rendered. "Acquired Business" shall mean any Person or business, division or product line acquired pursuant to a Permitted Acquisition. "Acquired Person" shall have the meaning provided in the definition of Permitted Acquisition. "Acquisition Agreements" has the meaning set forth in Section 6.10. ------------ _______________________________ 1 The name of the Company will be changed to Encompass Services Corporation effective upon consummation of the Merger. "Add-Back Adjustments" means, with respect to any Qualified Company and for any specified period, (i) those pro forma adjustments for such period referred to in 17 CFR 210.11-02(b)(6) plus (ii) those demonstrable cost-savings adjustments (in each case not otherwise included pursuant to clause (i) of this definition of Add Back Adjustments) reasonably anticipated by the Company to be achieved in connection with such Qualified Company for the 12 month period following the consummation of the Permitted Acquisition thereof, as if such cost-savings were realized on the first day of the relevant period which cost- savings adjustments shall be estimated on a good faith basis by the Company and, if requested by the Administrative Agent, be reported on or otherwise confirmed consistent with the auditing standards of the American Institute of Certified Public Accountants by a nationally recognized accounting firm or as otherwise agreed to by the Administrative Agent. "Administrative Agent" has the meaning specified in the introduction to this Agreement. "Administrative Questionnaire" means the questionnaire attached hereto as Exhibit 1.01A to be completed by each Bank and returned to the Administrative - ------------- Agent. "Adoption Agreement" means an agreement in the form of Exhibit 1.01B ------------- pursuant to which one or more Subsidiaries may become a party hereto and to the relevant Security Documents from time to time. "Advance" means (i) an advance, pursuant to a Notice of Advance, comprised of a single Type of Loan from all the Banks (or resulting from a conversion or conversions on the same date having, in the case of Eurodollar Rate Advances, the same Interest Period (except as otherwise provided in this Agreement)), made by all of the Banks concurrently to the Company, or (ii) a Swingline Advance from Bank of America or any successor swingline lender approved by the Company and the Administrative Agent. "Advance Date" means, with respect to each Advance, the Business Day upon which the proceeds of such Advance are to be made available to the Company. "Affiliate" means, as to any Person, any other Person directly or indirectly controlling (including all directors and officers of such first Person), controlled by, or under direct or indirect common control with such first Person, and any other Person in which such first Person's direct or indirect equity interest is 20% or more of the total outstanding equity interests of such first Person and any immediate family member (parent, spouse or child) and all spouses of such first Person. "Agreement" has the meaning specified in the introduction to this Agreement. "Alternate Base Rate" means, for any day, a rate per annum (adjusted, to the nearest 1/16 of 1%) equal to the greater of (a) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% and (b) the Prime Rate in effect on such day. For purposes hereof, the term "Prime Rate" means, as of a ---------- particular date, the prime rate of Bank of America most recently announced by Bank of America and in effect on such date, automatically fluctuating upward or downward, as the case may be, with and at the time of each change therein without notice to the Company or any other 2 Person, which prime rate may not necessarily represent the lowest or best rate actually charged to a customer. "Federal Funds Effective Rate" means, for any ---------------------------- day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If, for any reason, the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Alternate Base Rate Advance" means any Advance bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. ---------- "Apollo Group" shall mean BOSS II, LLC, a Delaware limited liability company, Boss Investment LLC, a Delaware limited liability company, and Apollo Advisors, L.P., Apollo Advisors IV, L.P., Apollo Management, L.P., Apollo Management IV, L.P., Apollo Investment Fund, L.P., Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P., all Delaware limited partnerships. "Applicable Lending Office" means, with respect to each Bank, such Bank's Domestic Lending Office in the case of an Alternate Base Rate Advance and such Bank's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Application for Letter of Credit" shall mean an Application and Agreement for Letter of Credit substantially in the form attached hereto as Exhibit 1.01C ------------- or such other form as may be agreed to by the Company and the Issuing Bank, properly completed by the Company or Guarantor, as the case may be, and delivered to the Administrative Agent. "Approved Securitization" has the meaning specified in Section 7.02. ------------ "Asset Disposition" means, with respect to any Person, the disposition of any asset of such Person (including, without limitation, the sale of any Capital Stock of any Subsidiary of such Person) other than (i) sales of Inventory in the ordinary course of business, (ii) dispositions of equipment no longer used in such Person's business, (iii) sales of Janitorial Equipment provided that Net Proceeds of such sales are reinvested in Janitorial Equipment within 270 days of the date of such disposition; (iv) issuance of such Person's capital stock; (v) disposition to a Wholly-Owned Subsidiary of the Company or to the Company; (vi) sales of items in one transaction or a series of related transactions which generate aggregate proceeds of $100,000 or less; (vii) insurance recoveries with respect to 3 casualty losses; or (viii) dispositions of other equipment to be replaced (and such equipment is so replaced) with other equipment within one hundred eighty (180) days of the disposition thereof. "Assignment and Acceptance" has the meaning specified in Section 11.10(c). ---------------- "Bank" has the meaning provided in the introduction to this Agreement. "Bank of America" means Bank of America, N.A., a national banking association. "Bankruptcy Code" has the meaning specified in Section 9.01(e). --------------- "Board" means the Board of Governors of the Federal Reserve System of the United States (or any successor). "BOSC" means Building One Services Corporation, a Delaware corporation. "BOSC Senior Subordinated Notes" shall mean the Company's 10-1/2% Senior Subordinated Notes due 2009, issued pursuant to the BOSC Senior Subordinated Notes Indenture and assumed by the Company by operation of law as part of the Merger, in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. As used herein, the term "BOSC Senior Subordinated Notes" shall include any "Exchange Securities" issued pursuant to (and as defined in) the BOSC Senior Subordinated Notes Indenture in exchange for outstanding BOSC Senior Subordinated Notes, as contemplated by the Offering Memorandum of BOSC, dated as of April 23, 1999. "BOSC Senior Subordinated Notes Indenture" shall mean the Indenture, dated as of April 30, 1999, among BOSC, certain of its Subsidiaries and the BOSC Senior Subordinated Notes Indenture Trustee, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "BOSC Senior Subordinated Notes Indenture Trustee" shall mean the IBJ Whitehall Bank & Trust Company and any successor thereto. "Business Day" means any day (other than a day which is a Saturday, Sunday or legal holiday in the State of Texas) on which most banks are open for business in Dallas, Texas; provided, however, that when used in connection with Eurodollar Rate Advances, the term Business Day shall not include any day on which banks are not open for dealings in Dollar deposits in the London interbank market. "Calculation Period" has the meaning specified in Section 7.15. ------------ "Capital Expenditures" means, with respect to any Person for any period, the sum of all expenditures (whether paid in cash, capitalized as an asset or accrued as a liability) by such Person and its consolidated Subsidiaries during such period which, in accordance with GAAP, are or should be included in capital expenditures or similar items reflected in the consolidated statement of cash 4 flows of such Person; provided, however, that Capital Expenditures shall not include any such amounts incurred in connection with the Investment in a Qualified Company permitted by Section 7.05. ------------ "Capitalized Lease Obligations" means all lease or rental obligations which, pursuant to GAAP, are capitalized for balance sheet purposes. "Capital Stock" means corporate stock and any and all shares, partnership interests, membership interests, equity interests, rights, securities, or other equivalent evidences of ownership, or any options, warrants, voting trust certificates, or other instruments evidencing an ownership interest or a right to acquire an ownership interest in a Person (however designated) issued by any entity (whether a corporation, partnership, limited liability company, limited partnership, or other type of entity). "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Bank with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Change of Control" means (a) any "person" or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on the Effective Date), other than the Permitted Holders, shall (i) have acquired, directly or indirectly, beneficial ownership of 30% or more on a fully diluted basis of the voting and/or economic interest in the Company's capital stock or (ii) obtained the power (whether or not exercised) to elect a majority of the Company's directors or (b) the Board of Directors of the Company shall cease to consist of a majority of Continuing Directors. "Change of Control Offer" has the meaning specified in the 9-3/4% Senior Subordinated Notes Indenture. "Chase" means Chase Bank of Texas, National Association, a national banking association. "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "Co-Lead Arrangers and Co-Book Managers" means Banc of America Securities LLC and Chase Securities Inc. "Collateral" means all of the capital stock of the Company's Domestic Subsidiaries, 66% of the capital stock of its first tier Foreign Subsidiaries and all of the accounts and inventory of the Company and its Domestic Subsidiaries, all as more fully described in, and subject to any exceptions set forth in, the Security Documents. 5 "Commitment" and "Commitments" means the obligation of each of the Banks to enter into and perform this Agreement, to make available the Loans to the Company in the amounts shown on the signature page of each Bank hereto and all other duties and obligations of each of the Banks hereunder and shall include, without limitation, such Bank's Revolving Loan Commitment, its Tranche A Term Loan Commitment and its Tranche B Term Loan Commitment. "Commitment Fee" has the meaning specified in Section 2.19. ------------ "Commitment Percentage" means, with respect to each Bank, the percentage equivalent of the amount of the Commitment of such Bank (or the Commitment in question) divided by the aggregate amount of all the Commitments of all of the Banks (or the Commitments in question of all the Banks). "Common Stock" means the common Capital Stock of the Company. "Common Stock Repurchase" means the conversion of Common Stock of the Company into cash and the purchase of options to purchase Common Stock pursuant to the terms of the Merger Agreement. "Company" has the meaning specified in the introduction to this Agreement. "Consolidated Net Worth" means, as at any date of determination, all items which in conformity with GAAP would be included in the calculation of shareholders' equity on a consolidated balance sheet of the Company as at such date, without giving effect to writedowns or writeoffs of intangible assets after the Effective Date, plus any amounts included on such consolidated balance sheet in respect of the Company's Preferred Stock. "Continuing Directors" shall mean the directors of the Company on the Effective Date and each other director if (x) such director's nomination for the election to the Board of Directors of the Company is recommended by a majority of the then Continuing Directors or (y) such director is appointed to the Board of Directors of the Company by Apollo Group or its Affiliates pursuant to the Investors' Rights Agreement. "Conversion" or "Convert" (in each case whether or not capitalized) means the changing of a Eurodollar Rate Advance to an Alternate Base Rate Advance or vice versa in accordance with the provisions hereof. "Convertible Preferred Stock" means the Convertible Preferred Stock to be issued pursuant to the Subscription Agreement. "Credit Event" means the making of any Advance, the conversion of any Advance into a Eurodollar Rate Advance or the issuance of any Letter of Credit. "Default" means the occurrence of any event which with or without the giving of notice or the passage of time or both would become an Event of Default. 6 "Default Rate" means, subject in each instance to Section 11.08 hereof, in ------------- respect of any principal of, and (to the extent permitted by law) any interest on, any Advance, or any other amount payable by the Company under any Loan Document which is not paid when due (whether at stated maturity, by acceleration, or otherwise), a rate per annum during the period commencing on the due date until such amount is paid in full equal to the sum of two percent (2%), plus the applicable Margin for Alternate Base Rate Advances as in effect ---- from time to time (provided, that if such amount in default is principal of a -------- Loan subject to a Eurodollar Rate and the due date is a day other than the last day of an Interest Period therefor, the "Default Rate" for such principal shall be, for the period from and including the due date and to but excluding the last day of the Interest Period therefor, two percent (2%), plus the interest rate ---- for such Loan for such Interest Period and, thereafter, the rate provided for above in this definition). "Designated Payment Date" means March 31, June 30, September 30 and December 31 of each year; provided, however, if a Designated Payment Date shall be a day which is not a Business Day, such Designated Payment Date shall be the next succeeding Business Day, and such extension of time shall be included in determining the amount to be paid on such date. "Dollar" and "$" each means freely transferable U.S. dollars. "Domestic Subsidiary" shall mean each Subsidiary of the Company incorporated or organized in the United States or any State or territory thereof. "Domestic Lending Office" means, with respect to any Bank, the office of such Bank designated from time to time as its "Domestic Lending Office" hereunder. "EBITDA" means, for any period, and determined in accordance with GAAP (to the extent applicable), the sum of: (a) the consolidated pre tax income of the Company, plus the aggregate amount which was deducted for such period in determining such consolidated pre tax income for: (i) interest expense net of interest income; (ii) depreciation expense; (iii) amortization expense; iv) compensation expense relating to the issuance of stock and stock options to employees (to the extent same do not constitute a use of cash); (v) any management fees and consulting fees paid pursuant to, and in accordance with the requirements of, clauses (iii) and (iv) of Section 7.09 during such period; and (vi) any restructuring charges, deal costs, severance costs, or expenses incurred in connection with the Transaction and charged against income on or prior to the first anniversary of the Effective Date; and plus (or minus) the aggregate amount that was deducted or added for such period in determining consolidated pre-tax income for; (vii) any extraordinary losses or gains to the extent not related to the continuing operations of the Company and its Subsidiaries; and (viii) gains or losses from asset sales (including but not limited to the sale of stock of Subsidiaries) other than sales of inventory sold in the ordinary course of business; and 7 (b) for each acquisition of a Qualified Company acquired by the Company during the twelve (12) months preceding the date as of which EBITDA is calculated and with respect to the period beginning twelve (12) months prior to the calculation of EBITDA through the date of said acquisition by the Company, the sum of the consolidated pre-tax income of such Qualified Company, plus: (A) the aggregate amount which was deducted for such period in determining such consolidated pre-tax income for (i) interest expense, (ii) depreciation expense, and (iii) amortization expense, and (B) Add-Back Adjustments of such Qualified Company; provided, said pre-acquisition EBITDA shall be included in EBITDA only to the extent any such amount is not included in subparagraph (a) above. "Effective Date" means the date on which all conditions to make an Advance set forth in Section 4.01 are first met or waived in accordance with Section ------------ ------- 11.01 hereof. - ----- "Eligible Assignee" means (a) any Bank; (b) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $1,000,000,000; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or any successor organization, or a political subdivision of any such country, and having total assets in excess of $1,000,000,000; provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the Organization for Economic Cooperation and Development or any successor organization; (d) the central bank of any country which is a member of the Organization for Economic Cooperation and Development or any successor organization; and (e) any other bank or similar financial institution approved by the Administrative Agent. "Environmental Laws" means federal, state or local laws, rules or regulations, and any judicial, arbitral or administrative interpretations thereof, including any judicial, arbitral or administrative order, judgment, permit, approval, decision or determination pertaining to conservation or protection of the environment as in effect and enforceable against the Company or any of its Subsidiaries at the time in question, including the Clean Air Act, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Federal Water Pollution Control Act, the Occupational Safety and ------ Health Act, the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Superfund Amendment and Reauthorization Act of 1986, the Hazardous Materials Transportation Act, and comparable state and local laws, and other environmental conservation and protection laws. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) which is either a member of the same "controlled group" or under "common control," within the meaning of Section 414 of the Code and the regulations thereunder, with the Company. "Eurocurrency Liabilities" has the meaning specified in Regulation D as in effect from time to time. 8 "Eurodollar Lending Office" means, with respect to each Bank, the branches or affiliates of such Bank designated as its "Eurodollar Lending Office" from time to time hereunder. "Eurodollar Rate" means, with respect to any Eurodollar Rate Advance for any Interest Period, the rate per annum (rounded to the nearest whole multiple of 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar Rate Advance for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, -------- however, if more than one rate is specified on Reuters Screen LIBO Page, the - ------- applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). "Eurodollar Rate Advance" means any Advance bearing interest at a rate determined by reference to the Eurodollar Rate in accordance with the provisions of Article II. ---------- "Events of Default" has the meaning specified in Section 9.01. ------------ "Excluded Taxes" shall mean with respect to the Administrative Agent or any Bank (a) income or franchise taxes imposed on (or measured by) its net income or net capital by the United States of America, or by the jurisdiction (or any political subdivision thereof or taxing authority therein) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Bank, in which its applicable lending office is located (provided, however, that no Bank shall be deemed to be located in any -------- ------- jurisdiction solely as a result of taking any action related to this Agreement), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, and (c) in the case of a Foreign Bank, any withholding tax that is attributable to such Foreign Bank's failure to comply with Section 2.17 (provided, however, that -------- ------- "Excluded Taxes" shall not include any such withholding tax if (x) such Foreign Bank shall have satisfied the requirements of Section 2.17 on the date such Foreign Bank became a party to this Agreement, and (y) as a result of any change thereafter in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation thereof, such Foreign Bank is no longer properly entitled to deliver forms, certificates or other evidence establishing that such Foreign Bank is not subject to withholding). "Execution Date" means February 22, 2000. "Existing Letters of Credit" means all letters of credit issued by Chase, outstanding on the Effective Date and described in Section 3.01(c). --------------- "Federal Funds Effective Rate" has the meaning specified in the definition of the term "Alternate Base Rate." ------------------- 9 "Fees" has the meaning specified in Section 2.19. ------------ "Financials" has the meaning specified in Section 5.07. ------------ "Foreign Bank" has the meaning specified in Section 2.17. "Foreign Subsidiary" shall mean each Subsidiary of the Company which is not a Domestic Subsidiary. "Form S-4" means the joint proxy statement and prospectus of the Company and BOSC filed with the Securities and Exchange Commission on its Form S-4 Registration Statement. "Funded Debt" means all indebtedness for borrowed money of the Company (including Capitalized Lease Obligations, the BOSC Senior Subordinated Notes and the 9-3/4% Senior Subordinated Notes) evidenced by a written document and subject to periodic, required payments of interest and/or principal. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States as set forth in the opinions, statements and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the Financial Accounting Standards Board and such other Persons who shall be approved by a significant segment of the accounting profession and concurred in by the independent certified public accountants certifying any audited financial statements of the Company. "Governmental Authority" means the government of the United States of America, any other national or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guaranteed Obligations" has the meaning specified in Section 8.01. ------------ "Guarantors" has the meaning provided in the introduction to this Agreement and, except as otherwise agreed by the Majority Banks and the Company, shall include all of the Domestic Subsidiaries of the Company. "Guaranty" means the obligations contained in Article VIII hereof. ------------ "Hazardous Materials" means (a) hazardous waste as defined in the Resource Conservation and Recovery Act of 1976, or in any applicable federal, state or local law or regulation, (b) hazardous substances, as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, (d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable federal, state or local law or regulation or (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and 10 Rodenticide Act of 1975, or in any applicable federal, state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Highest Lawful Rate" means, as to any Bank, the maximum nonusurious rate of interest that, under applicable law, may be contracted for, taken, reserved, charged or received by such Bank on the Loans or under the Loan Documents at any time or from time to time. If the maximum rate of interest which, under applicable law, any of the Banks are permitted to charge the Company on the Loans shall change after the date hereof, to the extent permitted by applicable law, the Highest Lawful Rate shall be automatically increased or decreased, as the case may be, as of the effective time of such change without notice to the Company or any other Person. "Indebtedness" means, without duplication, (a) all indebtedness for borrowed money (whether by loan or the issuance and sale of debt securities), (b) all indebtedness evidenced by bonds, debentures, notes or other similar instruments, (c) all Capitalized Lease Obligations, (d) all obligations to reimburse the issuer of any Letter of Credit for amounts drawn or drawable, (e) the deferred purchase price of assets or services payable to the sellers thereof or any of such seller's assignees which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person but excluding deferred rent as determined in accordance with GAAP, provided that Indebtedness described -------- in this clause (e) shall not include (x) trade payables and accrued expenses, in each case arising in the ordinary course of business and (y) contingent purchase price obligations and other earnout obligations of the Company and its Subsidiaries incurred in connection with Permitted Acquisitions on a basis consistent with past practices of the Company and its Subsidiaries as in effect on the Effective Date, which obligations are not required to be included as indebtedness on the face of the Company's consolidated balance sheet in accordance with GAAP, (f) asset securitizations, (g) all net indebtedness, liabilities, and obligations under Interest Rate Protection Agreements and (h) all Indebtedness of others guaranteed by such Person or for which such Person is providing an indemnity or otherwise assuring payment thereof. "Indentures" means the BOSC Senior Subordinated Notes Indenture and the 9- 3/4% Senior Subordinated Notes Indenture and "Indenture" means either of such Indentures. "Interest Period" has the meaning specified in Section 2.11. ------------ "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement. "Inventory" means all inventory now owned or hereafter acquired by any Person wherever located and whether or not in transit, which is or may at any time be held for sale or lease, or furnished under any contract (exclusive of leases of real Property) for service or held or used as raw materials, work-in- process, or supplies or materials used or consumed in the business of such Person. "Investment" means, as applied to any Person, any direct or indirect purchase or other acquisition by such Person of the stock, other securities or all or a significant portion of the assets of any other Person (other than inventory or supplies acquired in the ordinary course of business), 11 or any direct or indirect loan, advance or capital contribution by such Person to any other Person, and any other item which would be classified as an "investment" on a balance sheet of such Person, including any direct or indirect contribution by such Person of property or assets to a joint venture, partnership or other business entity in which such Person retains an interest but shall not include demand deposits. "Investors' Rights Agreement" means the Investors' Rights Agreement dated as of November 2, 1999, between the Company and certain of its investors. "Issuing Bank" means Bank of America, in its capacity as a Bank, or such other Bank(s) to which the Company and the Majority Banks subsequently agree and shall include Chase and Bankers Trust Company as the Issuing Banks with respect to the Existing Letters of Credit previously issued by such Banks, respectively. "Janitorial Equipment" shall mean buffers and scrubbers and other janitorial equipment used by the Building One Services Solution Division (or its successors) of the Company and its Subsidiaries. "Letter of Credit Fee" has the meaning specified in Section 2.19(b). --------------- "Letter of Credit Liabilities" means, at any time, the sum of (a) the aggregate undrawn face amount of all outstanding Letters of Credit, plus (b) all ---- unreimbursed drawings under Letters of Credit. "Letter of Credit Request" has the meaning specified in Section 3.02(a). --------------- "Letters of Credit" has the meaning specified in Section 3.01(a). --------------- "Lien" means, when used with respect to any Person, any mortgage, lien, charge, pledge, security interest or encumbrance of any kind (whether voluntary or involuntary and whether imposed or created by operation of law or otherwise) upon, or pledge of, any of its property or assets, whether now owned or hereafter acquired, any capital lease in the nature of the foregoing, any conditional sale agreement or other title retention agreement, in each case, for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation. "Loan" and "Loans" means Revolving Loans (including Swingline Advances), Tranche A Term Loans, and Tranche B Term Loans. "Loan Documents" means this Agreement, the Notes, the Security Documents, the Notices of Advance, any Interest Rate Protection Agreements entered into with the Administrative Agent, any other Bank or any of their Affiliates, and the corporate resolutions authorizing the Loan Documents. "Majority Banks" means Banks holding greater than 50% of the Total Commitment. 12 "Management Participants" shall mean those individuals identified on Schedule 1.01, immediate family members thereof, trusts for the benefit of their - ------------- family members and certain members of management of the Company previously identified and satisfactory to the Administrative Agent, immediate family members thereof and trusts for the benefit of their family members. "Margin" means, (a) with respect to Revolving Loans (including Swingline Advances) and to Alternate Base Rate Advances, Eurodollar Rate Advances, or Commitment Fees, as applicable, the percentage determined in accordance with the following table:
--------------------------------------------------------------------------------------------------- Equal to Equal to Equal to Equal to Funded Debt/ or greater or greater or greater or greater Pro Forma than than than than Less than --------- EBITDA Ratio 3.50 to 1.00 2.75 to 1.00 2.00 to 1.00 1.50 to 1.00 1.50 to 1.00 ------------ -------------- and and and ------------- less than less than less than 3.50 to 1.00 2.75 to 1.00 2.00 to 1.00 -------------- -------------- ------------- --------------------------------------------------------------------------------------------------- Alternate Base Rate Margin .50% .25% 0% 0% 0% --------------------------------------------------------------------------------------------------- Eurodollar Margin 2.00% 1.75% 1.50% 1.25% 1.00% --------------------------------------------------------------------------------------------------- Commitment Fee .375% .375% .375% .25% .25% ---------------------------------------------------------------------------------------------------
and (b) with respect to Term Loans and to Alternate Base Rate Advances, Eurodollar Rate Advances, or Commitment Fees (for the Tranche A Term Loan Commitment only), as applicable, the percentage determined in accordance with the following table:
-------------------------------------------------------------------------------------------- Equal to Equal to Equal to Funded Debt/ or greater or greater or greater Pro Forma than than than Less than --------- EBITDA Ratio 3.50 to 1.00 2.75 to 1.00 2.00 to 1.00 1.50 to 1.00 ------------ -------------- and and ------------- less than less than 3.50 to 1.00 2.75 to 1.00 -------------- -------------- -------------------------------------------------------------------------------------------- Alternate Base Rate Margin 1.0% .75% .50% 0.25% -------------------------------------------------------------------------------------------- Eurodollar Margin 2.50% 2.25% 2.00% 1.75% -------------------------------------------------------------------------------------------- Commitment Fee .50% .50% .50% .50% --------------------------------------------------------------------------------------------
provided that: (i) for six months after the Effective Date the Margin for Revolving Loans (including Swingline Advances) shall be 0% or greater for Alternate Base Rate Advances, 1.50% or greater for Eurodollar Rate Advances and 0.375% for the Commitment Fee; and (ii) for twelve months after 13 the Effective Date, the Margin for Term Loans shall be 0.50% or greater for Alternate Base Rate Advances, 2.0% or greater for Eurodollar Rate Advances and .50% for Commitment Fees. If sufficient information does not exist to calculate the applicable Margin, Eurodollar Rate Advances shall not be available to the Company and the applicable Margin for Alternate Base Rate Advances shall be deemed to be .50% for Revolving Loans and 1.00% for Term Loans. "Margin Period" means a period commencing three (3) days after the date on which the quarterly or annual financial statements of the Company are required to be delivered pursuant to Section 6.01(a) or Section 6.01(b), as the case may --------------- --------------- be, and ending three (3) days after the next date a financial statement is required to be so delivered. "Material Adverse Effect" means, relative to any occurrence of whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding), (a) a material adverse effect on the financial condition, business or operations of the Company and its Subsidiaries taken as a whole or (b) a material impairment of the collective ability of the Company and its Subsidiaries taken as a whole to make payment hereunder or under any Note or the right of any Bank to enforce any of its remedies to collect any amounts owing under the Loan Documents. "Material Contract" means the Contracts listed on Schedule 6.11, as ------------- amended from time to time. "Maximum Guaranteed Amount" means for each Guarantor the maximum amount which any Guarantor could pay under the Guaranty without having such payment set aside as a fraudulent transfer or conveyance or similar action under the Bankruptcy Code or any applicable state or foreign law. "Merger" means the merger of BOSC with and into the Company with the Company as the surviving corporation. "Merger Agreement" means the Agreement and Plan of Merger dated as of November 2, 1999, as amended, between the Company and BOSC. "Multiemployer Plan" means any plan that is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of ERISA). "Net Proceeds" means (a) in connection with any disposition of Property of the Company or any of its Subsidiaries, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from any sale of assets, net of (i) reasonable transaction costs (including, without limitation, any underwriting, brokerage or other customary selling commissions and reasonable legal, advisory and other fees and expenses, including title and recording expenses, associated therewith) and payments of unassumed liabilities relating to the assets sold at the time of, or within 30 days after, the date of such sale, (ii) the amount of such gross cash proceeds required to be used to repay any 14 Indebtedness (other than Indebtedness of the Banks pursuant to this Agreement) which is secured by the respective assets which were sold, and (iii) the estimated marginal increase in income taxes which will be payable by the Company's consolidated group with respect to the fiscal year in which the sale occurs as a result of such sale; provided, however, that such gross proceeds -------- ------- shall not include any portion of such gross cash proceeds which the Company determines in good faith should be reserved for post-closing adjustments (including indemnification payments) (to the extent the Company delivers to the Administrative Agent a certificate signed by its chief financial officer or treasurer, controller or chief accounting officer as to such determination), it being understood and agreed that on the day that all such post-closing adjustments have been determined (which shall not be later than six months following the date of the respective asset sale), the amount (if any) by which the reserved amount in respect of such sale or disposition exceeds the actual post-closing adjustment payable by the Company or any of its Subsidiaries shall constitute Net Proceeds as of such date of determination (it being understood that Net Proceeds shall not include any trade-in-credits or purchase price reductions received by the Company or any of its Subsidiaries in connection with an exchange of equipment for replacement equipment that is the functional equivalent of such exchanged equipment); and (b) in connection with issuance of any securities, the cash proceeds received from such issuance, net of all costs of such issuance (including, without limitation, reasonable out-of-pocket professional fees and expenses, notarial fees, underwriting discounts and commissions, and other customary fees and expenses) actually paid. "9-3/4% Senior Subordinated Notes" shall mean the Company's 9-3/4% Senior Subordinated Notes due 2009, issued pursuant to the 9-3/4% Senior Subordinated Notes Indenture, in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. As used herein, the term "9-3/4% Senior Subordinated Notes" shall include any Exchange Securities issued pursuant to the 9-3/4% Senior Subordinated Notes Indenture in exchange for outstanding 9-3/4% Senior Subordinated Notes. "9-3/4% Senior Subordinated Notes Indenture" shall mean the Indenture, dated as of January 22, 1999, among the Company, certain of its Subsidiaries and the 9-3/4% Senior Subordinated Notes Indenture Trustee, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "9-3/4% Senior Subordinated Notes Indenture Trustee" shall mean State Street Bank and Trust Company and any successor thereto. "Note" and "Notes" mean the Revolving Notes, the Swingline Note, the Tranche A Term Notes and the Tranche B Term Notes. "Notice of Advance" has the meaning provided in Section 2.03. ------------ "Notice of Conversion" has the meaning provided in Section 2.05. ------------ "Notice of Default" has the meaning specified in Section 9.02. ------------ 15 "Obligations" means all the obligations of the Company now or hereafter existing under the Loan Documents, whether for principal, interest, Fees, expenses, indemnification or otherwise. "Offer to Purchase" means the Company's Offer to Purchase its 9-3/4% Senior Subordinated Notes to be funded out of the proceeds of the Tranche A Term Loan. "Other Activities" has the meaning specified in Section 10.03. ------------- "Other Financings" has the meaning specified in Section 10.03. ------------- "Outstanding Revolving Credit" means, at any time of determination, the sum of (a) the aggregate amount of Revolving Loans then outstanding; plus (b) the aggregate amount of Letter of Credit Liabilities (or when calculated with respect to any Bank, such Bank's pro rata share of the Revolving Loans then outstanding and participation or other interest in such Letter of Credit Liabilities). "Payment Office" means the office of the Administrative Agent located at 901 Main Street, Dallas, Texas 75202, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to all or a substantial portion of its functions under ERISA. "Permitted Acquired Debt" has the meaning specified in Section 7.03(n). --------------- "Permitted Acquisition" shall mean the acquisition by the Company or any of its Wholly-Owned Domestic Subsidiaries of assets constituting a business, division or product line of any Person, not already a Wholly-Owned Subsidiary of the Company or any of its Wholly-Owned Subsidiaries, or of 100% of the capital stock or other equity interests of any such Person, which Person shall be engaged in a Permitted Business and, as a result of such acquisition, become a Wholly-Owned Domestic Subsidiary of the Company or such Wholly-Owned Domestic Subsidiary, provided that (a) the consideration paid by the Company or such Wholly-Owned Domestic Subsidiary consists solely of cash (including proceeds of Revolving Loans) or the issuance of the Company's Common Stock (including options, warrants or other equity-linked instruments), the issuance of Indebtedness otherwise permitted by Section 7.03 (including Permitted ------------ Subordinated Indebtedness) and the assumption/acquisition of any Permitted Acquired Debt (calculated in accordance with GAAP) relating to such business, division, product line or Person which is permitted to remain outstanding in accordance with the requirements of Section 7.03, (b) in the case of the ------------ acquisition of 100% of the capital stock or other equity interests of any Person, such Person (the "Acquired Person") shall own no capital stock or other --------------- equity interests of any other Person unless either (x) the Acquired Person owns 100% of the capital stock or other equity interests of such other Person or (y) if the Acquired Person owns capital stock or equity interests in any other Person which is not a Wholly-Owned Subsidiary of the Acquired Person (a "Non- --- Wholly Owned Entity"), (1) the Acquired Person shall not have been created or - ------------------- established in contemplation of, or for 16 purposes of, the respective Permitted Acquisition, (2) any Non-Wholly Owned Entity of the Acquired Person shall have been non-wholly-owned prior to the date of the respective Permitted Acquisition and not created or established in contemplation thereof and (3) such Person and/or its Wholly-Owned Subsidiaries own 80% of the consolidated assets of such Person and its Subsidiaries, (c) the assets acquired, or the business of the Acquired Person, shall be in a Permitted Business and (d) all applicable requirements of Section 7.15 applicable to ------------ Permitted Acquisitions are satisfied. Notwithstanding anything to the contrary contained in the immediately preceding sentence, an acquisition which does not otherwise meet the requirements set forth above in the definition of "Permitted --------- Acquisition" shall constitute a Permitted Acquisition if, and to the extent, the - ----------- Majority Banks agree in writing that such acquisition shall constitute a Permitted Acquisition for purposes of this Agreement. "Permitted Business" shall mean the provision of all manner of facilities services to the owners or operators of industrial, commercial, institutional and residential plants, buildings and homes, including without limitation, (i) design, engineering, construction, project management, repair, replacement, maintenance and service of all of the mechanical (HVAC; plumbing and piping; fire suppression systems) and electrical (internal and external wiring; generators and UPS systems; voice and data systems; fire and life safety systems; temperature control, building automation and energy management systems), (ii) rigging, millwright and other industrial services, (iii) janitorial, specialty cleaning and other services for the repair, maintenance and upkeep of plants and buildings and their adjacent grounds, including the provision of onsite maintenance and support personnel and the outsourcing of the facilities management function by an owner or operator, (iv) provision of ancillary services to support the foregoing, including performance contracting, energy management and aggregation, and project financing and (v) businesses reasonably related to any of the foregoing. "Permitted Debt" shall mean and include Permitted Acquired Debt, Permitted Subordinated Refinancing Indebtedness and Permitted Subordinated Indebtedness. "Permitted Holders" shall mean Apollo Group and its Affiliates and the Management Participants. "Permitted Investments" means, as to any Person: (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full -------- faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition thereof, (b) time deposits and certificates of deposit with maturities of not more than twelve months from the date of acquisition by such Person which deposits or certificates are either: (i) fully insured by the Federal Deposit Insurance Corporation or (ii) in any Bank or other commercial bank incorporated in the United States or any U.S. branch of any other commercial bank, in each case having capital, surplus and undivided profits aggregating $100,000,000 or more with a long-term unsecured debt rating of at least A- from Standard & Poor's Ratings Group or A3 from Moody's Investors Service, 17 (c) commercial paper issued by any Person incorporated in the United States rated at least A2 or the equivalent thereof by Standard & Poor's Ratings Group or at least P2 or the equivalent thereof by Moody's Investors Service and, in each case, maturing not more than 270 days after the date of issuance, (d) investments in money market mutual funds having assets in excess of $2,000,000,000 substantially all of whose assets are comprised of securities of the types described in clauses (a) through (c) above, and (e) repurchase or reverse purchase agreements respecting obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any bank listed in or meeting the qualifications specified in clause (b) above. (f) cash; (g) investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers or customers or in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; and (h) Capital Expenditures (other than Permitted Acquisitions) and Liens not prohibited by this Agreement. "Permitted Liens" means, as to any Person: (a) Liens for taxes, assessments, levies or other governmental charges not yet due or which are being contested in good faith by appropriate proceedings and for which adequate reserves are maintained in accordance with GAAP; (b) Liens in connection with worker's compensation, unemployment insurance or other social security, old age pension or public liability obligations not yet due or which are being contested in good faith by appropriate proceedings and for which adequate reserves are maintained in accordance with GAAP; (c) operator's, vendors', carriers', warehousemen's, repairmen's, mechanics', workers', materialmen's or other like Liens arising by operation of law in the ordinary course of business (or deposits to obtain the release of any such Lien) and securing amounts of $500,000 or less or amounts not yet due or which are being contested in good faith by appropriate proceedings and for which adequate reserves are maintained in accordance with GAAP; (d) deposits to secure insurance or adequate self insurance arrangements in the ordinary course of business; 18 (e) deposits and other Liens to secure the performance of bids, tenders, contracts (other than contracts for the payment of indebtedness for borrowed money or the deferred purchase price of goods or services), leases, licenses, franchises, trade contracts, statutory obligations, surety and appeal bonds and performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights of way, covenants, restrictions, reservations, exceptions, encroachments, zoning and similar restrictions and other similar encumbrances (other than to secure the payment of indebtedness for borrowed money or the deferred purchase price of goods or services) or title defects, in each case incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case singly or in the aggregate materially detract from the value or usefulness of the Property subject thereto for the business conducted by the Company and its Subsidiaries or materially interfere with the ordinary conduct of the business of the Company and its Subsidiaries; (g) bankers' liens arising by operation of law; (h) inchoate Liens arising under ERISA to secure contingent liabilities of the Company and its Subsidiaries; (i) landlord's liens arising in the ordinary course of business which have not arisen to secure Indebtedness for borrowed money and which do not in the aggregate materially detract from the value of the Collateral or materially effect the use of the assets of such Person; (j) Liens on assets of Subsidiaries to secure Indebtedness to the Company provided same are collaterally assigned to the Administrative Agent, provided, such Liens may be incurred only to the extent the underlying Indebtedness is otherwise permitted under the terms of this Agreement; (k) Liens on the right to rebates of prepaid insurance premiums financed by third parties on behalf of the Company or any of its Subsidiaries to secure up to $10,000,000 outstanding at any time. (l) judgment Liens that do not constitute an Event of Default; and (m) Liens permitted under Section 7.04 (excluding subsection (c) ------------ thereof). "Permitted Subordinated Indebtedness" shall mean subordinated Indebtedness of the Company or any Subsidiary thereof (subordinated, among other things, to such Subsidiary's Guaranty), incurred in connection with a Permitted Acquisition and in accordance with Sections 7.03 and 7.15 (which subordinated Indebtedness ------------- ---- may, at the option of the Company, be convertible into Company common stock), which Permitted Subordinated Indebtedness and all terms and conditions thereof (including, without limitation, the maturity thereof, the interest rate applicable thereto, 19 amortization, defaults, remedies, voting rights, subordination provisions, conversion provisions, etc.), and the documentation therefor, shall be reasonably satisfactory to the Administrative Agent, provided that in any event, unless the Majority Banks otherwise expressly consent in writing prior to the incurrence thereof, no such Indebtedness shall be secured by any asset of the Company or any of its Subsidiaries. The incurrence of Permitted Subordinated Indebtedness shall be deemed to be a representation and warranty by the Company that all conditions thereto have been satisfied in all material respects and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 4.02 and ------------- 9.01. - ---- "Permitted Subordinated Refinancing Indebtedness" shall mean Indebtedness of the Company issued or given in exchange for, or the proceeds of which are used to refinance, the BOSC Senior Subordinated Notes and/or 9-3/4% Senior Subordinated Notes and otherwise applied in accordance with Section 2.07(b)(iii) so long as (a) after giving effect to the incurrence of such Indebtedness, the weighted average life to maturity of the Funded Debt of the Company and its Subsidiaries is not shorter than prior to such incurrence, (b) Funded Debt of the Company after such refinancing does not exceed the sum of the total amount of Funded Debt of the Company outstanding immediately prior to such refinancing plus accrued interest and the costs and expenses associated with such refinancing (including, without limitation, reasonable out-of-pocket professional fees and expenses, investment banking fees, financial advisory fees and other customary fees and expenses), (c) such Indebtedness does not add guarantors, obligors or security from that which applied to the BOSC Senior Subordinated Notes or 9 3/4% Senior Subordinated Notes, as the case may be, (d) such Indebtedness has substantially the same (or, from the perspective of the Banks, more favorable) subordination provisions as applied to the BOSC Senior Subordinated Notes or 9 3/4% Senior Subordinated Notes, as the case may be, and (e) all other terms of such refinancings (including, without limitation, with respect to covenants, defaults and remedies), are not, taken as a whole, materially less favorable to the Company than those in this Agreement. "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a foreign or domestic state or political subdivision thereof or any agency of such state or subdivision. "Plan" means any employee pension benefit plan (as defined in Section 3(2) of ERISA), subject to Title IV of ERISA or Section 412 of the Code, other than a Multiemployer Plan, with respect to which the Company or an ERISA Affiliate contributes or has an obligation or liability to contribute, including any such plan that may have been terminated. "Pledge Agreement" has the meaning specified in Section 4.01(d)(ii). ------------------- "Preferred Stock" means preferred Capital Stock of the Company designated as such by a certificate of designation in existence and delivered to the Administrative Agent on the Execution Date and additional preferred Capital Stock the designations for which provide for no mandatory redemption on or prior to the Term Loan Maturity Date and provide that no cash dividends are 20 required or permitted at any time that a Default or an Event of Default exists under this Agreement or would result from the payment of such cash dividend. "Prescribed Forms" shall mean such duly executed form(s) or statement(s), and in such number of copies, which may, from time to time, be prescribed by law and which, pursuant to applicable provisions of the Code or an income tax treaty between the United States and the country of residence of the party providing the form(s) or statement(s), permit each of the Company and the Administrative Agent to make payments hereunder for the account of such party free of deduction or withholding of income and other taxes. "Pro Forma Financial Statements" shall mean the pro forma financial statements to be provided as required by Section 4.01(u). --------------- "Projections" means the Company's forecasted consolidated: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all materially consistent with the Company's historical financial statements, together with appropriate supporting details and a statement of underlying assumptions. "Property" or "assets" (whether or not capitalized) means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Qualified Company" means any Person in a Permitted Business. "Qualified High Yield Offerings" means one or more issuances on or before the first anniversary of the Effective Date of subordinated, unsecured debt securities by the Company and/or one or more of its Subsidiaries (which may be guaranteed by the Company and any of its Subsidiaries on a subordinated basis) in an aggregate principal amount not to exceed $300,000,000 at any one time outstanding with a maturity date after the Term Loan Maturity Date and with an average life to maturity greater than that of the Term Loans (as of the date of each such Qualified High Yield Offering). "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment or discarding of barrels, containers and other closed receptacles). "Reportable Event" means an event described in Section 4043(b) of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by the PBGC. "Requirements of Environmental Laws" means, as to any Person, the requirements of any applicable Environmental Law relating to or affecting such Person or the condition or operation of such Person's business or its properties, both real and personal. "Reserve Percentage" means, for any Interest Period and for any Bank, the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board (or if more than one such percentage is so applicable, the daily average for such percentages 21 for those days in such Interest Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including any marginal, supplemental or emergency reserves) for such Bank in respect of liabilities or assets consisting of or including Eurocurrency Liabilities. "Responsible Officer" means the president, chief executive officer, chief operating officer, treasurer or chief financial officer of the Company. "Revolving Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name on its signature page directly below the heading entitled "Revolving Loan Commitment" as the same may be reduced or terminated pursuant to Sections 2.18 and/or 9.02. ------------- ---- "Revolving Loan Maturity Date" shall mean February 22, 2005. "Revolving Loans" means Advances made pursuant to Section 2.01(a). --------------- "Revolving Note" shall have the meaning provided in Section 2.02. ------------ "Securities" means any stock, shares, options, warrants, voting trust certificates, or other instruments evidencing an ownership interest or a right to acquire an ownership interest in a Person or any bonds, debentures, notes, or other evidences of indebtedness for borrowed money, secured or unsecured. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Agreement" has the meaning specified in Section 4.01(d)(i). ------------------ "Security Documents" means the documents described in Section 4.01(d) of --------------- this Agreement executed by the Company and its Subsidiaries in favor of Bank of America, as Administrative Agent, for the benefit of the Banks, pursuant to the terms hereof. "Senior Debt" means Funded Debt other than the BOSC Senior Subordinated Notes, the 9-3/4% Senior Subordinated Notes, Permitted Subordinated Indebtedness, Permitted Subordinated Refinancing Indebtedness and any other subordinated Indebtedness permitted hereby. "Shareholder Subordinated Notes" means an unsecured junior subordinated note issued by the Company (and not guaranteed or supported in any way by any of its Subsidiaries) in the form of Exhibit 1.01D. ------------- "Significant Subsidiary" means, at any time, any Subsidiary of the Company having at such time either (i) total gross revenues as of the date of determination in excess of 1/2% of total gross revenues for the Company and its Subsidiaries or (ii) total assets, as of the last day of the preceding fiscal quarter, having a net book value in excess of 1/2% of the consolidated assets of 22 the Company and its Subsidiaries, in each case based upon the Company's most recent annual or quarterly financial statements delivered to the Banks and the Administrative Agent under Section 6.01. "Solvent" means, with respect to any Person as of the date of any determination, that on such date (a) the fair value of the Property of such Person (both at fair valuation and at present fair saleable value) is greater than the total liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be require to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations, and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in a business or a transaction and is not about to engage in a business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving due consideration to current and anticipated future capital requirements and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, such liabilities shall be computed at the amount which, in light of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Subscription Agreement" means the Subscription and Exchange Agreement dated as of November 2, 1999, between the Company and BOSS II, LLC, a Delaware limited liability company. "Subsidiary" means, with respect to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person, directly or indirectly, and (b) any partnership, association, joint venture or other entity in which such Person, directly or indirectly, has greater than 50% of the equity interest. Unless otherwise provided or the context otherwise requires, the term "Subsidiary" or "Subsidiaries" shall mean a Subsidiary or Subsidiaries of the Company. "Swingline Advances" has the meaning specified in Section 2.01(a). --------------- "Swingline Lender" has the meaning specified in Section 2.01(a). --------------- "Swingline Note" means the swingline promissory note provided for by Section 2.02 and all amendments and other modifications thereof. - ------------ "Syndication Agent" means Chase. "Taxes" shall mean taxes, levies, imposts, deductions, charges or withholdings, excluding Excluded Taxes. 23 "Term Loans" means, collectively, the Tranche A Term Loans and the Tranche B Term Loans. "Term Loan Maturity Date" shall mean February 22, 2006. "Total Commitment" means the aggregate Commitments of all Banks totaling a maximum of $800,000,000 for all Banks. "Total Revolving Loan Commitment" shall mean $500,000,000, the sum of the Revolving Loan Commitments of each of the Banks, as the same may be terminated or reduced pursuant to Sections 2.18 and/or 9.02. ------------- ---- "Total Tranche A Term Loan Commitment" shall mean $130,000,000, the sum of the Tranche A Term Loan Commitments of each of the Banks. "Total Tranche B Term Loan Commitment" shall mean $170,000,000, the sum of the Tranche B Term Loan Commitments of each of the Banks. "Tranche A Term Loan" shall have the meaning provided in Section 2.01(b). --------------- "Tranche A Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name on its signature page directly below the heading entitled "Tranche A Term Loan Commitment" as the same may be terminated or reduced pursuant to Sections 2.18 and/or 9.02. ------------- ---- "Tranche A Term Loan Maturity Date" shall mean February 22, 2006. "Tranche A Term Note" shall have the meaning provided in Section 2.02. ------------ "Tranche B Term Loan" shall have the meaning provided in Section 2.01(c). --------------- "Tranche B Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name on its signature page directly below the heading entitled "Tranche B Term Loan Commitment." "Tranche B Term Loan Maturity Date" shall mean February 22, 2006. "Tranche B Term Note" shall have the meaning provided in Section 2.02. ------------ "Transaction" shall mean, collectively, (i) the Merger, (ii) the Common Stock Repurchase, (iii) the purchase of 9-3/4% Senior Subordinated Notes and/or amendment to the 9-3/4% Senior Subordinated Notes Indenture, (iv) the issuance of Convertible Preferred Stock, (v) the entering into of the Loan Documents and the incurrence of Loans on the Effective Date and (vi) the payment of fees and expenses in connection with the foregoing. 24 "Transaction Documents" shall mean, collectively, (i) the Merger Agreement, (ii) the Subscription Agreement, (iii) the Investors' Rights Agreement, (iv) the Loan Documents, (v) the Offer to Purchase, and (vi) the Form S-4. "Unutilized Commitment" means the Total Revolving Loan Commitment less the sum of outstanding Revolving Loans (excluding therefrom Swingline Advances, which shall not constitute usage for purposes of calculating the Commitment Fee) and Letter of Credit Liabilities. "U.S." means the United States of America. "Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary. "Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any Wholly- Owned Subsidiary of such Person which is not a Domestic Subsidiary. "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director's qualifying shares and/or other nominal amounts of shares required to be held other than by such Person under applicable law) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly- Owned Subsidiaries of such Person has a 100% equity interest at such time. Section 1.02 Types of Advances. Advances and Loans hereunder are ----------------- distinguished by "Type". The Type of an Advance refers to the determination whether such Advance is a Eurodollar Rate Advance or an Alternate Base Rate Advance. Section 1.03 Accounting Terms. All accounting terms not defined herein ---------------- shall be construed in accordance with GAAP, as applicable, and all calculations required to be made hereunder and all financial information required to be provided hereunder shall be done or prepared in accordance with GAAP, if applicable. Section 1.04 Schedules. Schedules hereto may be updated by the Company --------- from time to time to reflect transactions and other matters not prohibited by the Loan Documents. ARTICLE II THE LOANS --------- Section 2.01 The Loans. --------- (a) Revolving Loans/Swingline Advances. Subject to the terms and ---------------------------------- conditions hereof, each Bank severally agrees at any time and from time to time on and after the Execution Date and prior to the Revolving Loan Maturity Date, to make and maintain a revolving credit loan or loans (each a "Revolving Loan" and collectively, the "Revolving Loans") to the Company not to exceed at any time outstanding the maximum amount of its Revolving Loan Commitment, which Loans 25 (i) shall, at the option of the Company, be made and maintained pursuant to one or more Advances comprised of Alternate Base Rate Advances or Eurodollar Rate Advances, provided that, except as otherwise specifically provided herein, all Advances made pursuant to a single Notice of Advance shall be of the same Type, (ii) in the case of Eurodollar Rate Advances, shall be made in the minimum amount of $1,000,000 and integral multiples of $1,000,000 and, in the case of Alternate Base Rate Advances, in the minimum amount of $1,000,000 and integral multiples of $500,000, or, in either case, the amount of the Unutilized Commitment, (iii) may be repaid and, so long as no Default or Event of Default exists hereunder, reborrowed, at the option of the Company in accordance with the provisions hereof, and (iv) shall, in the aggregate at any time outstanding, together with the Letter of Credit Liabilities, not exceed the Total Revolving Loan Commitment. There shall be no further Advances after the Revolving Loan Maturity Date. Notwithstanding anything to the contrary contained in this Agreement, the Company may from time to time request, and Bank of America (or any successor Bank acting as swingline lender, approved by the Company and the Administrative Agent, the "Swingline Lender") may at its discretion from time to time advance (but shall in no event be obligated to advance), Revolving Loans which are to be funded solely by the Swingline Lender (the "Swingline Advances"); provided however, that (i) the aggregate principal amount of the Swingline Advances outstanding at any time shall not exceed $30,000,000 and the aggregate principal amount of the Outstanding Revolving Credit at any time (inclusive of the Swingline Advances) shall not exceed the Total Revolving Loan Commitment, (ii) all Swingline Advances shall bear interest at the Swingline Lender's cost of funds (as determined by the Swingline Lender in good faith) plus the applicable Margin for Revolving Loans, (iii) each Swingline Advance shall be a minimum principal amount of $1,000,000 or any larger amount in increments of $100,000, (iv) each Swingline Advance shall be payable upon demand, but in any event no later than the 7th day after the making of such Swingline Advance, and (v) the Swingline Lender shall give the Administrative Agent and each Bank written notice of the aggregate outstanding principal amount of the Swingline Advances upon the written request of the Administrative Agent or any Bank (but no more often than once every calendar quarter). Furthermore, upon one Business Day's prior written notice given by the Swingline Lender to the Administrative Agent and the other Banks at any time and from time to time (including, without limitation, at any time following the occurrence of a Default or an Event of Default) and, in any event, without notice on the Business Day immediately preceding the Revolving Loan Maturity Date, each Bank (including, without limitation, the Swingline Lender) severally agrees, as provided in the first sentence of this Section 2.01(a), and notwithstanding anything to the contrary contained in this Agreement, any Default or Event of Default or the inability or failure of the Company or any of its Subsidiaries to satisfy any condition precedent to funding any of the Revolving Loans contained in Article IV (which conditions precedent shall not apply to this sentence), to make a Revolving Loan, in the form of an Alternate Base Rate Advance, in an amount equal to its Revolving Loan Commitment Percentage of the aggregate principal amount of the Swingline Advances then outstanding, and the proceeds of such Revolving Loans shall be promptly paid by the Administrative Agent to the Swingline Lender and applied as a repayment of the aggregate principal amount of the Swingline Advances then outstanding. (b) Tranche A Term Loans. Subject to the terms and conditions hereof, each -------------------- Bank severally agrees at any time and from time to time on and after the Execution Date and prior to the 26 same day of the month three months thereafter, to make and maintain a term loan or loans (each a "Tranche A Term Loan" and collectively, the "Tranche A Term ------------------- -------------- Loans") to the Company not to exceed at any time outstanding the maximum amount - ----- of its Tranche A Term Loan Commitment, which Loans (i) shall, at the option of the Company, be made and maintained pursuant to one or more Advances comprised of Alternate Base Rate Advances or Eurodollar Rate Advances, provided that, -------- except as otherwise specifically provided herein, (ii) in the case of Eurodollar Rate Advances, shall be made in the minimum amount of $5,000,000 and integral multiples of $1,000,000 and, in the case of Alternate Base Rate Advances, in the minimum amount of $1,000,000 and integral multiples of $500,000, or, in either case, the remaining amount of the Total Tranche A Term Loan Commitment, (iii) may be repaid (but not reborrowed) at the option of the Company in accordance with the provisions hereof, and (iv) shall, in the aggregate at any time outstanding, not exceed the Total Tranche A Term Loan Commitment. There shall be no further Advances of Tranche A Term Loans after three months from the Execution Date. (c) Tranche B Term Loans. Subject to the terms and conditions hereof, each -------------------- Bank severally agrees at the closing to be held on the Effective Date, to make a single advance of a term loan (each a "Tranche B Term Loan") to the Company not ------------------- to exceed at any time outstanding the maximum amount of its Tranche B Term Loan Commitment, which Loans (i) shall, at the option of the Company, be made and maintained pursuant to one or more Advances comprised of Alternate Base Rate Advances or Eurodollar Rate Advances, provided that, except as otherwise -------- specifically provided herein, (ii) in the case of Eurodollar Rate Advances, shall be made in the minimum amount of $5,000,000 and integral multiples of $1,000,000 and, in the case of Alternate Base Rate Advances, in the minimum amount of $1,000,000 and integral multiples of $500,000, (iii) may be repaid (but not reborrowed) at the option of the Company in accordance with the provisions hereof, and (iv) shall, in the aggregate at any time outstanding, not exceed the Total Tranche B Term Loan Commitment. There shall be no further Advances of Tranche B Term Loans after the initial closing on the Effective Date. Section 2.02 The Notes. The Revolving Loans shall be evidenced by a Note --------- in favor of each Bank (individually a "Revolving Note" and collectively, the -------------- "Revolving Notes") substantially in the form of Exhibit 2.02(a-1) hereto, --------------- provided however, that the Swingline Advances made by the Swingline Lender shall - -------- ------- be evidenced by a single Note of the Company (the "Swingline Note") in the -------------- maximum original principal amount of $30,000,000 payable to the order of the Swingline Lender substantially in the form of Exhibit 2.02(a-2) hereto. The ----------------- Tranche A Term Loans shall be evidenced by a Note in favor of each Bank (individually a "Tranche A Term Note" and collectively, the "Tranche A Term ------------------- ------------- Notes") substantially in the form of Exhibit 2.02(b) hereto. The Tranche B Term - ----- --------------- Loans shall be evidenced by a Note in favor of each Bank (individually a "Tranche B Term Note" and collectively, the "Tranche B Term Notes") ------------------- -------------------- substantially in the form of Exhibit 2.02(c) hereto. --------------- Section 2.03 Notice of Advance. Whenever the Company desires an Advance, ----------------- it shall give written notice thereof (a "Notice of Advance") (or telephonic notice promptly confirmed in writing) to the Administrative Agent in the case of an Alternate Base Rate Advance, not later than 11:00 a.m. (Dallas, Texas time) on the date of such Advance and in the case of a Eurodollar Rate Advance, not later than 11:00 a.m. (Dallas, Texas time) three Business Days prior to the date of such Advance. Each Notice of Advance shall be irrevocable and shall be in the form of Exhibit 2.03 hereto, ------------ 27 specifying (i) the aggregate principal amount of the Advance to be made, (ii) the date of such Advance (which shall be a Business Day), (iii) the Type of Advance, and (iv) if the proposed Advance is to be a Eurodollar Rate Advance, the initial Interest Period to be applicable thereto. The Administrative Agent shall promptly give the Banks written notice or telephonic notice (promptly confirmed in writing) of each proposed Advance, of each Bank's proportionate share thereof and of the other matters covered by each Notice of Advance. Section 2.04 Disbursement of Funds for Loans. No later than 1:00 p.m. ------------------------------- (Dallas, Texas time) on any Advance Date for Loans, each Bank shall make available its pro rata portion of the amount of such Advance in Dollars and in immediately available funds at the Payment Office. At such time, the Administrative Agent shall credit the amounts so received to the general deposit account of the Company maintained with the Administrative Agent in immediately available funds. Unless the Administrative Agent shall have been notified by any Bank prior to disbursement of the Advance by the Administrative Agent that such Bank does not intend to make available to the Administrative Agent such Bank's portion of the Advance to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such Advance Date and the Administrative Agent may, in reliance upon such assumption, make available to the Company a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Bank and the Administrative Agent has made available same to the Company, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Company, and the Company shall pay such corresponding amount to the Administrative Agent within two (2) Business Days after demand therefor. The Administrative Agent shall also be entitled to recover from such Bank or the Company, as the case may be, interest on such corresponding amount from the date such corresponding amount was made available by the Administrative Agent to the Company to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to the Alternate Base Rate or the Eurodollar Rate plus the applicable Margin, as ---- appropriate. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its Commitments hereunder or to prejudice any rights which the Company may have against any Bank as a result of any default by such Bank hereunder. No failure of any Bank hereunder shall relieve any other Bank of its obligations. Section 2.05 Conversions and Continuances. The Company shall have the ---------------------------- option to convert or continue on any Business Day all or a portion of the outstanding principal amount of one Type of Advance into another Type of Advance, provided no Advances may be converted into or continued as Eurodollar -------- Rate Advances if a Default or Event of Default is in existence on the date of the conversion. Any continuation of an Advance as the same Type of Advance in the same amount shall be effected by the Company giving notice to the Administrative Agent, in writing, or by telephone promptly confirmed in writing, of its intention to continue such Advance as an Advance of the same Type. Each such conversion shall be effected by the Company giving the Administrative Agent written notice (each a "Notice of Conversion"), substantially in the form of -------------------- 28 Exhibit 2.05 hereto, prior to 11:00 a.m. (Dallas, Texas time) at least (a) three - ------------ (3) Business Days prior to the date of such conversion in the case of conversion into or continuance as Eurodollar Rate Advances and (b) prior to 11:00 a.m. (Dallas, Texas time) one Business Day prior to the date of conversion in the case of a conversion into Alternate Base Rate Advances, specifying each Advance (or portions thereof) to be so converted and, if to be converted into or continued as Eurodollar Rate Advances, the Interest Period to be initially applicable thereto. The Administrative Agent shall thereafter promptly notify each Bank of such Notice of Conversion. Section 2.06 Voluntary Prepayments. Upon at least one (1) Business Day --------------------- prior written notice given before 12:00 noon (Dallas, Texas time), the Company shall have the right to voluntarily prepay the Loans in whole or in part at any time on the following terms and conditions: no Eurodollar Rate Advance may be prepaid prior to the last day of its Interest Period unless, simultaneously therewith, the Company pays to the Administrative Agent for the benefit of the Banks all sums necessary to compensate the Banks for all reasonable costs and expenses actually incurred by the Banks as a result of such prepayment (excluding loss of anticipated profits), as reasonably determined by the Banks, including but not limited to those costs described in Section 2.15 hereof; and ------------ each prepayment pursuant to this section shall be applied first, to the payment of Swingline Advances, thereafter to accrued and unpaid interest, then, to Revolving Loans if so designated by the Company (provided no Default or Event of Default then exists) and otherwise pro rata to reduce the principal installments due under the Term Loans in the order of their maturity. Section 2.07 Mandatory Repayment of Term Loans; Mandatory Prepayments. -------------------------------------------------------- (a) Repayment of the Term Loans The Company shall pay to the Administrative Agent for the account of the Banks who hold Term Loans the aggregate principal amount of the Term Loans advanced in installments as follows: (i) Twenty-Four consecutive principal installments due and payable on each Designated Payment Date commencing on the first Designated Payment Date after the Effective Date and continuing on each Designated Payment Date thereafter, through and including the Designated Payment Date just prior to the Term Loan Maturity Date in an amount equal to 1/4% of the Tranche A Term Loan outstanding on the first Designated Payment Date or the Tranche B Term Loan outstanding on the first Designated Payment Date, as applicable; and (ii) In any event, all unpaid Obligations in respect of the Term Loans will be due and payable on the Term Loan Maturity Date. (b) Mandatory Prepayments (i) Revolving Loans. If at any time the Outstanding Revolving Credit --------------- exceeds the Total Revolving Loan Commitment, the Company shall, within one (1) Business Day after the occurrence thereof, prepay outstanding Swingline Advances (first) and the outstanding Revolving Loans by the amount of such excess. 29 (ii) Prepayments from Asset Dispositions. If the Company or any of ----------------------------------- its Subsidiaries receives Net Proceeds of any Asset Disposition, the Company shall make a prepayment in accordance with the terms of this Section in respect of the Obligations equal to the amount of such Net Proceeds and the Revolving Loan Commitment shall be permanently reduced by the amount of such prepayment, in each case as provided in clause (v) below; provided, however, that if no Default or Event of ---------- -------- ------- Default has occurred and is continuing, the Company shall not be required to make such prepayment to the extent that the Net Proceeds (excluding Net Proceeds reinvested pursuant to this clause (ii)) from such Asset Dispositions during any fiscal year of the Company do not exceed $15,000,000 in the aggregate; provided, further, however, that -------- ------- ------- no such prepayment will be required if and to the extent that the Net Proceeds of any such Asset Disposition is fully re-invested or contracted to be re-invested in productive assets used in the ordinary course of such Person's business within one hundred eighty (180) days of the receipt of such Net Proceeds; and provided, further, however, -------- ------- ------- that neither of the two foregoing provisos shall apply to the Net Proceeds of an Approved Securitization, all the Net Proceeds of which shall be applied in accordance with this Section without regard to such two prior provisions. (iii) Prepayments from Debt Offerings. In the event that the Company ------------------------------- or any Subsidiary of the Company issues any debt Securities for cash (other than Qualified High Yield Offerings and other Indebtedness permitted by Section 7.03) no later than the third Business Day ------------ following the date of receipt of the proceeds from such issuance, Borrower shall make a prepayment in respect of the Obligations equal to the amount of the Net Proceeds thereof in prepayment of the Loans as provided in clause (v) below; provided, however, that such ---------- -------- ------- mandatory prepayment shall be reduced to 75% of such proceeds when the Company's Funded Debt to pro forma EBITDA ratio (calculated and determined as provided in Section 7.11 is less than 2.25 to 1.00 at ------------ the end of the Company's most recently completed fiscal quarter. (iv) Prepayments from Equity Offerings. In the event that the --------------------------------- Company or any Subsidiary of the Company issues Capital Stock in any public offering (other than public offerings of Capital Stock pursuant to employee benefit plans sponsored by the Company and other than additional equity investments made in connection with such public offering by Apollo Group and its Affiliates) no later than the third Business Day following the date of receipt of the Net Proceeds from such issuance, the Company shall make a prepayment in respect of the Obligations equal to 50% of the amount of such Net Proceeds in prepayment of the Loans as provided in clause (v) below; provided, ---------- -------- however, that such mandatory prepayment shall be reduced to 0% of such ------- proceeds when the Company's Funded Debt to pro forma EBITDA ratio (calculated and determined as provided in Section 7.11) is less than ------------ 2.00 to 1.00 at the end of the Company's most recently completed fiscal quarter. (v) Application of Proceeds of Prepayments. All prepayments -------------------------------------- pursuant to this Section 2.07, other than pursuant to clauses (i) and ------------ --------------- (ii) above, shall be applied to the ---- 30 Term Loans, pro rata with respect to each remaining installment of principal (including the final installment due on the Term Loan Maturity Date), until the Term Loans are paid in full and thereafter to the Revolving Loans without any reduction in the Revolving Loan Commitments. Prepayments made pursuant to clause (i) above shall be ---------- applied to the Revolving Loans without any reduction in the Revolving Loan Commitments. Prepayments made pursuant to clause (ii) above shall ----------- be applied pro rata to all of the Loans (and pro rata with respect to each remaining installment (including the final installment) of the Term Loans) with a permanent reduction of the Revolving Loan Commitments in the amount of the prepayment applied to the Revolving Loans. Section 2.08 Method and Place of Payment. Except as otherwise --------------------------- specifically provided herein, all payments under this Agreement due from the Company shall be made to the Administrative Agent for the benefit of the Banks, without setoff or deduction of any kind against deposits held or other indebtedness owing by the Administrative Agent or any Bank to the Company or any Guarantor or for any other reason, not later than 1:00 p.m. (Dallas, Texas time) on the date when due and shall be made in lawful money of the United States in immediately available funds at the Payment Office. Section 2.09 Pro Rata Advances. All Advances (other than Swingline ----------------- Advances) under this Agreement shall be incurred from the Banks pro rata, on the basis of their respective Commitments. It is understood that no Bank shall be responsible for any default by any other Bank in its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Bank to fulfill its commitments hereunder. Section 2.10 Interest. -------- (a) Subject to Section 2.01(a) (in the case of Swingline Advances) and --------------- Section 11.08, the Company shall pay interest on the total outstanding principal - ------------- balance of all Alternate Base Rate Advances from the date of each respective Advance to maturity of said Loan (whether by acceleration or otherwise) at a rate per annum which shall at all times be equal to the lesser of (i) the Highest Lawful Rate and (ii) the Alternate Base Rate in effect from time to time plus the applicable Margin for Alternate Base Rate Advances applicable to the Loans in question, which applicable Margin shall be adjusted on the first day of each Margin Period. If the Alternate Base Rate is based on the Prime Rate, interest shall be computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be. If the Alternate Base Rate is based on the Federal Funds Effective Rate, interest shall be computed on the basis of the actual number of days elapsed over a year of 360 days. (b) Subject to Section 2.01(a) (in the case of Swingline Advances) and --------------- Section 11.08, the Company shall pay interest on the total outstanding principal - ------------- balance of all Eurodollar Rate Advances under all of the Loans from the date of each respective Advance to maturity of said Loan (whether by acceleration or otherwise) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) which shall, during each Interest Period applicable 31 thereto, be equal to the lesser of (i) the Highest Lawful Rate and (ii) the applicable Eurodollar Rate for such Interest Period plus the applicable Margin for Eurodollar Rate Advances applicable to the Loans in question. The applicable Eurodollar Rate shall be fixed for each Interest Period and shall not change during said Interest Period nor shall the applicable Margin, which is added to said Eurodollar Rate to determine the total interest payable to the Banks, be adjusted until the first day of each Interest Period that begins after the effective date of the new Margin Period. (c) Subject to Section 11.08, overdue principal and, to the extent ------------- permitted by law, overdue interest in respect of any Advance and all other overdue amounts owing hereunder shall bear interest for each day that such amounts are overdue at a rate per annum equal to the Default Rate. (d) Interest on each Advance shall accrue from and including the date of such Advance to but excluding the date of any repayment thereof and shall be payable in arrears (i) in respect of Eurodollar Rate Advances (A) on the last day of the Interest Period applicable thereto and on each Designated Payment Date during any Interest Period in excess of three (3) months and (B) on the date of any voluntary or mandatory prepayment or any conversion or continuance on the amount repaid, converted or continued; (ii) in respect of Alternate Base Rate Advances (A) on each Designated Payment Date commencing May 31, 2000, and (B) on the date of any voluntary or mandatory prepayment of such Advances on the principal amount repaid and (iii) in respect of each Advance, at maturity (whether by acceleration or otherwise) and, after maturity, on demand. (e) The Administrative Agent, upon determining the Eurodollar Rate for any Interest Period, shall notify the Company thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. In addition, prior to the due date for the payment of interest on any Advances set forth in the immediately preceding paragraph, the Administrative Agent shall notify the Company of the amount of interest due by the Company on all outstanding Advances on the applicable due date, but any failure of the Administrative Agent to so notify the Company shall not reduce the Company's liability for the amount owed. (f) So long as any Bank shall be required under regulations of the Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities and, as a result, the cost to such Bank is increased above the level it would be but for such requirement, then such Bank may require the Company to pay to the Administrative Agent, for the account of such Bank, additional interest on the unpaid principal amount of each such Eurodollar Rate Advance, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times during the Interest Period for such Advance to the lesser of (i) the Highest Lawful Rate and (ii) the remainder obtained by subtracting (A) the Eurodollar Rate for such Interest Period from (B) the rate obtained by dividing such Eurodollar Rate referred to in clause (A) above by that percentage equal to 100% minus the Reserve Percentage of such Bank for such Interest Period. Such additional interest shall be determined by such Bank as incurred and shall be payable upon written demand therefor by the Bank to the Company within 180 days of the incurrence thereof. Each determination by such Bank of additional interest due under this Section shall be conclusive and binding for all purposes in the absence of manifest error if such determination is made on a reasonable basis. 32 Section 2.11 Interest Periods. ---------------- (a) At the time the Company gives any Notice of Advance or Notice of Conversion or provides notice of its intent to continue a loan as the same Type in respect of the making of, or conversion into, a Eurodollar Rate Advance, the Company shall have the right to elect, by giving the Administrative Agent on the dates and at the times specified in Section 2.03 or Section 2.05, as the case ------------ ------------ may be, notice of the interest period (each an "Interest Period") applicable to --------------- such Eurodollar Rate Advance, which Interest Period shall be a one, two, three, six, nine or twelve month period; provided, that: -------- (i) the initial Interest Period for any Eurodollar Rate Advance shall commence on the date of such Eurodollar Rate Advance (including the date of any conversion thereto or continuance thereof pursuant to Section 2.05); each Interest Period occurring thereafter in respect of ------------ such Eurodollar Rate Advance shall commence on the expiration date of the immediately preceding Interest Period; (ii) if any Interest Period relating to a Eurodollar Rate Advance begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided, that if there are no more Business -------- Days in that month, the Interest Period shall expire on the preceding Business Day; (iv) no Interest Period for Advances shall extend beyond the applicable Maturity Date; and (v) the Company shall be entitled to have a maximum of fifteen (15) separate Eurodollar Rate Advances hereunder for all Loans outstanding at any one time. (b) If, upon the expiration of any Interest Period applicable to a Eurodollar Rate Advance, the Company has failed to elect a new Interest Period to be applicable to such Advance as provided above, the Company shall be deemed to have elected to convert such Advance into an Alternate Base Rate Advance effective as of the expiration date of such current Interest Period. Section 2.12 Interest Rate Not Ascertainable. In the event that the ------------------------------- Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) that on any date for determining the Eurodollar Rate for any Interest Period, by reason of any changes arising after the date of this Agreement affecting the Eurodollar interbank market adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate, then, and in any such event, the Administrative Agent shall forthwith give notice to the Company and to the Banks of such determination. Until the Administrative Agent notifies the Company that the circumstances giving rise to the suspension 33 described herein no longer exist, the obligations of the Banks to make Eurodollar Rate Advances shall be suspended. Section 2.13 Legality. -------- (a) Notwithstanding anything to the contrary herein contained, if any law or regulation or the interpretation thereof by any governmental authority charged with the administration or interpretation thereof makes it unlawful for any Bank or its Eurodollar Lending Office to make or maintain any Eurodollar Rate Advance or to give effect to its obligations as contemplated hereby, then, by prompt written notice to the Company, such Bank may: (i) declare that Eurodollar Rate Advances will not thereafter be made by such Bank hereunder, whereupon the right of the Company to receive Eurodollar Rate Advances from such Bank hereunder shall be suspended until such declaration is subsequently withdrawn, provided, such -------- request for a Eurodollar Rate Advance shall be automatically converted (as to such Bank) into a request for an Alternate Base Rate Advance and the affected Bank or Banks shall respond thereto as provided herein; and (ii) require that all outstanding Eurodollar Rate Advances made by such Bank be converted to Alternate Base Rate Advances, in which event (A) all such Eurodollar Rate Advances shall be automatically converted to Alternate Base Rate Advances as of the effective date of such notice as provided in paragraph (b) below if required by applicable law or regulation, or if not so required, at the end of the current Interest Period and (B) all payments and prepayments of principal which would otherwise have been applied to repay the converted Eurodollar Rate Advances shall instead be applied to repay the Alternate Base Rate Advances resulting from the conversion of such Eurodollar Rate Advances. (b) For purposes of this Section, a notice to the Company by a Bank, pursuant to paragraph (a) above shall be effective on the date of receipt thereof by the Company. Section 2.14 Change in Law. ------------- (a) If any Change in Law (i) shall change the basis of taxation of payments to such Bank of the principal of or interest on any Eurodollar Rate Advance made by such Bank or any other fees or amounts payable hereunder with respect to Eurodollar Rate Advances (other than Excluded Taxes), (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement with respect to Eurodollar Rate Advances against assets of, deposits with or for the account of, or credit extended by, such Bank (without duplication of any amounts paid pursuant to Section 2.10(f)), or --------------- 34 (iii) shall impose on such Bank any other condition affecting this Agreement with respect to Eurodollar Rate Advances or any Eurodollar Rate Advance made by such Bank, and the result of any of the foregoing clauses (i), (ii) or (iii) shall be to increase the cost to such Bank of maintaining its Commitment or of making or maintaining any Eurodollar Rate Advance or to reduce the amount of any sum received or receivable by such Bank hereunder (whether of principal, interest or otherwise) in respect thereof by an amount deemed in good faith by such Bank to be material, then the Company shall pay to such Bank such additional amount as will compensate it for such increase or reduction within ten (10) days after notice thereof pursuant to Section 2.14(c). --------------- (b) If any Bank shall have determined in good faith that any Change in Law has or would have the effect of reducing the rate of return on the capital of such Bank as a consequence of, or with reference to, such Bank's obligations to lend hereunder to a level below that which it could have achieved but for such Change in Law by an amount deemed by such Bank to be material, then, from time to time, the Company shall pay to the Administrative Agent for the benefit of such Bank such additional amount as will reasonably compensate it for such reduction within ten (10) days after notice thereof pursuant to Section 2.14(c). --------------- (c) Each Bank will notify the Company through the Administrative Agent of any event occurring after the date of this Agreement which will entitle it to compensation pursuant to this Section, as promptly as practicable after it becomes aware thereof and determines to request compensation and in any case within 120 days after becoming aware thereof. A certificate setting forth in reasonable detail the amount necessary to compensate the Bank in question as specified in paragraph (a) or (b) above, as the case may be, and the calculation of such amount shall be delivered to the Company and shall be conclusive absent manifest error if such determination is made on a reasonable basis. The Company shall pay to the Administrative Agent for the account of such Bank the amount shown as due on any such certificate within ten (10) days after its receipt of the same. The failure on the part of any Bank to demand increased compensation with respect to any Interest Period shall not constitute a waiver of the right to demand compensation with respect to subsequent Interest Periods within the 120 day time limit set forth above. Each Bank agrees, to the extent it may lawfully do so without incurring additional costs, to use its best efforts to minimize costs arising under this section by designating another lending office for the Loans affected, provided no Bank shall be required to do so. -------- (d) Any notice given pursuant to this Section 2.14 shall be deemed to ------------ contain a representation by the Bank issuing such notice that the increased costs and charges are common to substantially all of the loan customers of such Bank and are not unique to the Company. Section 2.15 Eurodollar Advance Prepayment and Default Penalties. Subject --------------------------------------------------- to Section 11.08, the Company shall indemnify each Bank against any loss or ------------- expense (excluding loss of anticipated profits) which it may sustain or incur as a consequence of (a) an Advance of, or a conversion from or into, Eurodollar Rate Advances that does not occur on the date specified therefor in a Notice of Advance or Notice of Conversion, (b) any payment, prepayment or conversion of a Eurodollar Rate Advance required by any other provision of this Agreement or otherwise made on 35 a date other than the last day of the applicable Interest Period (including any thereof arising in connection with syndication of the Commitments within six (6) months after the Effective Date), or (c) any default in the payment or prepayment of the principal amount of any Eurodollar Rate Advance or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, by notice of prepayment or otherwise). Such loss or expense shall include an amount equal to the excess determined by each Bank of (i) its cost of obtaining the funds for the Advance being paid, prepaid or converted or not borrowed (based on the Eurodollar Rate) for the period from the date of such payment, prepayment or conversion or failure to borrow to the last day of the Interest Period for such Advance (or, in the case of a failure to borrow, the Interest Period for the Advance which would have commenced on the date of such failure to borrow) over (ii) the amount of interest (as determined by each ---- Bank) that would be realized in reemploying the funds so paid, prepaid or converted or not borrowed for such period or Interest Period, as the case may be. The Administrative Agent, on behalf of the Banks, will notify the Company of any loss or expense which will entitle the Banks to compensation pursuant to this Section, as promptly as possible after it becomes aware thereof, but failure to so notify shall not affect the Company's liability therefor. A certificate of any Bank setting forth any amount which it is entitled to receive pursuant to this Section shall be delivered to the Company and shall be conclusive absent manifest error if such determination is made on a reasonable basis. The Company shall pay to the Administrative Agent for the account of the Banks the amount shown as due on any certificate within ten (10) days after its receipt of the same. Without prejudice to the survival of any other obligations of the Company hereunder, the obligations of the Company under this Section shall survive the termination of this Agreement and the assignment of any of the Notes. Section 2.16 Additional Costs, Taxes or Similar Requirements. ----------------------------------------------- (a) General. Any and all payments by the Company to or for the account of any Bank or the Administrative Agent hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future Taxes. If the Company shall be required by Law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Bank or the Administrative Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16) such Bank or the Administrative Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions, (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Law, and (iv) the Company shall furnish to the Administrative Agent, at its address listed in Section 11.02, the original or a certified copy of a receipt evidencing payment - ------------- thereof. (b) Stamp and Documentary Taxes. In addition, to the extent permitted by applicable Law, the Company agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). 36 (c) Indemnification for Taxes. The Company agrees to indemnify each Bank and the Administrative Agent for the full amount of Taxes and Other Taxes which the Company is obligated to pay under this Section 2.16 (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 2.16) paid by such Bank or the Administrative Agent (as the case may be) and any liability (including penalties, interest, and expenses except any thereof arising from such Bank's willful misconduct or gross negligence) arising therefrom or with respect thereto. (d) If the Administrative Agent or a Bank (or transferee) receives a refund (as determined in its sole discretion) of any Taxes or Other Taxes in or with respect to the taxable year in which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.16, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.16 with respect to the Taxes or Other Taxes giving rise of such refund), net of all out-of-pocket expenses of the Administrative Agent or such Bank (or transferee) and taxes and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund) (all as determined in the Administrative Agent's or Bank's sole discretion); provided, however, that the Borrower, upon the request -------- ------- of the Administrative Agent or such Bank (or transferee), agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Bank (or transferee) in the event the Administrative Agent or such Bank (or transferee) is required to repay such refund to such Governmental Authority. Nothing contained in this Section 2.16 shall require the Administrative Agent or any Bank to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the Borrower or any other Person. Section 2.17 Tax Forms. If any Bank or any entity that is or hereafter --------- becomes a Bank is organized under the laws of a jurisdiction outside the United States (a "Foreign Bank"), such Person shall provide the Administrative Agent and the other parties hereto with the Prescribed Forms on the date it becomes a party hereto, and from time to time thereafter if requested by the affected party hereto or the Administrative Agent. The Administrative Agent, if required by applicable law or regulation, may withhold taxes from payments under the Loan Documents at the applicable rate in the case of payments to or for any Foreign Bank. Any Person which is not a "United States person" (as defined in Section 7701 (a)(30) of the Code) that seeks to become a Bank under this Agreement shall provide the Prescribed Forms to the Company and the Administrative Agent prior to becoming a Bank hereunder, and no such Person may become a Bank hereunder if such Person is unable to deliver the Prescribed Forms. Section 2.18 Voluntary Reduction of Commitment. Upon at least three (3) --------------------------------- Business Day's prior written notice, the Company shall have the right, without premium or penalty, to reduce ratably in part or terminate in whole the unused portions of the respective Commitments of the Banks, provided that each partial -------- reduction shall be in the aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof and provided further that the Company -------- ------- shall not have the right to terminate or reduce in part an unused portion of the Revolving Loan Commitments that could or may be required to pay or refinance Swingline Advances or Letter of Credit Liabilities then outstanding. 37 Section 2.19 Fees. Subject to Section 11.08 hereof, the Company agrees to ---- ------------- pay the following fees (the "Fees"): ---- (a) The Company shall pay to the Administrative Agent for the ratable account of the Banks a commitment fee (the "Commitment Fee") for, in the case of -------------- Revolving Loan Commitments, the period from and including the Execution Date to the Revolving Loan Maturity Date calculated on the basis of a 360-day year and computed on the daily average of the Unutilized Commitment of each Bank at the rate for Commitment Fees set forth in the definition of Margin and, in the case of the Tranche A Term Loan Commitment, the period from and including the Execution Date to May 31, 2000 calculated on such basis and computed on the unused portion of the Tranche A Term Loan Commitment during such period. Commitment Fees shall be due and payable in arrears on each Designated Payment Date commencing on the first such date following the Execution Date and on the Revolving Loan Maturity Date. (b) The Company shall pay to the Administrative Agent for the benefit of the Banks (and, in the case of clause (z) below, for the benefit of the Issuing Bank) an annual fee (the "Letter of Credit Fee") in respect of each Letter of -------------------- Credit issued hereunder equal to (y) the greater of (i) the then effective Eurodollar Margin for Revolving Loans multiplied by the face amount of such Letter of Credit (computed on the basis of the actual number of days elapsed over a year of 360 days) or (ii) $500, plus (z) 0.125% per annum multiplied by the face amount of such Letter of Credit, to be paid to the Issuing Bank. Such fees shall be payable quarterly in arrears on each Designated Payment Date commencing May 31, 2000 and on the Maturity Date. Section 2.20 Replacement of Banks. If any Bank requests compensation -------------------- under Section 2.10(f), 2.14, 2.16 or 3.04 or if any Bank notifies the Company --------------- ---- ---- ---- that it cannot fund certain Loans or is unable to deliver the Prescribed Forms, or if any Bank defaults in its obligation to fund Advances or issue Letters of Credit hereunder, then the Company may, at its sole expense and effort, upon notice to such Bank and the Administrative Agent, require such Bank to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.10), all its interests, rights and ------------- obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Bank, if a Bank accepts such assignment); provided that (i) the Company shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Bank shall have received payment of an amount equal to the outstanding principal of its Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.10(f), 2.14 or 2.16, --------------- ---- ---- such assignment will result in a reduction in such compensation. A Bank shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Bank or otherwise, the circumstances entitling the Company to require such assignment and delegation cease to apply. 38 ARTICLE III LETTERS OF CREDIT ----------------- Section 3.01 Letters of Credit. ----------------- (a) Subject to and upon the terms and conditions herein set forth, the Issuing Bank will, at any time and from time to time on or after the Execution Date and prior to the Revolving Loan Maturity Date, promptly following its receipt of a Letter of Credit Request and Application for Letter of Credit, issue for the account of the Company or any of the Guarantors and in support of the obligations of the Company or any of its Subsidiaries, one or more irrevocable letters of credit (all such letters of credit together with the Existing Letters of Credit collectively, the "Letters of Credit"), up to a ----------------- maximum amount outstanding at any one time for all Letters of Credit and Existing Letters of Credit equal to $50,000,000, provided that the Issuing Bank -------- shall not issue any Letter of Credit if at the time of such issuance: (i) the stated amount of such Letter of Credit is greater than an amount which, when added to the Outstanding Revolving Credit would exceed the Total Revolving Loan Commitment; or (ii) the expiry date or, in the case of any Letter of Credit containing an expiry date that is extendible at the option of the Issuing Bank, the initial expiry date of such Letter of Credit is a date that is later than the Revolving Loan Maturity Date, unless such Letter of Credit is secured by cash. (b) The Issuing Bank shall neither renew nor permit the renewal of any Letter of Credit if any of the conditions precedent to such renewal set forth in Section 4.02 are not satisfied or, after giving effect to such renewal, the - ------------ expiry date of such Letter of Credit would be a date that is later than the Revolving Loan Maturity Date. (c) The Company, the Administrative Agent and the Banks acknowledge that Chase and Bankers Trust Company have issued, for the account of the Company, the Existing Letters of Credit described on Schedule 3.01 hereto. Upon the ------------- Execution Date, the Letters of Credit outstanding shall be that amount equal to the aggregate stated amount of the Existing Letters of Credit, and the amount available for Loans and Letters of Credit under the Commitments shall be reduced by such amount so long as said Letters of Credit are outstanding and the amount available under each Bank's Commitment shall be reduced by such Bank's percentage participation of such amount. If the Company or any of the Guarantors desires to extend the existing expiry date of any Existing Letter of Credit, or request a substitute letter of credit be issued for any reason in respect of any Existing Letter of Credit, the Company or any of the Guarantors shall submit to the Issuing Bank a Letter of Credit Request as provided in Section 3.02(a). --------------- Section 3.02 Letters of Credit Requests. -------------------------- (a) Whenever the Company desires that a Letter of Credit be issued for its account or that the existing expiry date shall be extended, it shall deliver to the Issuing Bank (with copies to be sent to the Administrative Agent) in the case of a Letter of Credit to be issued, at least three (3) Business Days' prior written request therefor and in the case of the extension of the existing expiry date of any Letter of Credit, at least five days prior to the date on which the Issuing Bank must notify the beneficiary thereof that the Issuing Bank does not intend to extend such existing expiry date. Each such request shall be executed by the Company and shall be in the form of Exhibit 3.02 attached ------------ 39 hereto (each a "Letter of Credit Request") and shall be accompanied by an ------------------------ application for Letter of Credit therefor, completed to the reasonable satisfaction of the Issuing Bank, and such other certificates, documents and other papers and information as the Issuing Bank or any Bank (through the Administrative Agent) may reasonably request. Each Letter of Credit shall be denominated in U.S. dollars, shall expire no later than the date specified in Section 3.01, shall not be in an amount greater than is permitted under clauses - ------------ (i) or (ii) of Section 3.01(a) and shall be in such form as may be reasonably --------------- approved from time to time by the Issuing Bank and the Company. (b) The delivery of each Letter of Credit Request shall be deemed to be a representation and warranty by the Company that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, this Agreement or the terms of any other Indebtedness of the Company (including, without limitation, the Indentures). Unless the Issuing Bank has received notice from any Bank before it issues the respective Letter of Credit or extends the existing expiry date of a Letter of Credit that one or more of the conditions specified in Article IV are not then satisfied, or that the issuance of such ---------- Letter of Credit would violate this Agreement, then the Issuing Bank may issue the requested Letter of Credit in accordance with the Issuing Bank's usual and customary practices. Upon its issuance of any Letter of Credit or the extension of the existing expiry date of any Letter of Credit, as the case may be, the Issuing Bank shall promptly notify the Company, the Administrative Agent and each Bank of such issuance or extension, which notice shall be accompanied by a copy of the Letter of Credit actually issued or a copy of any amendment extending the existing expiry date of any Letter of Credit, as the case may be, provided that the failure of the Issuing Bank to give such notice or provide such copy shall not affect the obligations of the Banks under Section 3.03. ------------ Section 3.03 Letter of Credit Participations. ------------------------------- (a) All Obligations of the Company and the Guarantors with respect to all Existing Letters of Credit and all Letters of Credit issued subsequent hereto shall be deemed to have been sold and transferred by the Issuing Bank to each Bank, and each Bank shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Bank, without recourse or warranty, an undivided interest and participation (to the extent of such Bank's percentage participation in the Commitments) in each such Obligation, each substitute letter of credit, each drawing made thereunder and the obligations of the Company under this Agreement and the other Loan Documents with respect thereto, and any security therefor or guaranty pertaining thereto including the Guaranty. (b) The Issuing Bank shall have no obligation relative to the Banks other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. (c) In the event that the Issuing Bank makes any payment under any Letter of Credit, the same shall be considered an Alternate Base Rate Advance of a Revolving Loan without further action by any Person. The Issuing Bank shall promptly notify the Administrative Agent, which shall promptly notify each Bank thereof. Each Bank shall immediately pay to the Administrative Agent for the account of the Issuing Bank the amount of such Bank's percentage participation of such Advance. If any Bank shall not have so made its percentage participation available to the 40 Administrative Agent, such Bank agrees to pay interest thereon, for each day from such date until the date such amount is paid at the lesser of the Federal Funds Effective Rate and the Highest Lawful Rate. (d) The Issuing Bank shall not be liable for, and the obligations of the Company and the Banks to make payments to the Administrative Agent for the account of the Issuing Bank with respect to Letters of Credit shall not be subject to, any qualification or exception whatsoever, including any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, setoff, defense or other right which the Company may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit, the Administrative Agent, the Issuing Bank, any Bank, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Company and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; or (v) the occurrence of any Default or Event of Default. (e) The Issuing Bank shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Bank's gross negligence or willful misconduct. It is the express intention of the parties hereto that the Issuing Bank, its officers, directors, employees and agents shall be indemnified and held harmless from any action taken or omitted by such Person under or in connection with any Letter of Credit or any related draft or document arising out of or resulting from such Person's sole or contributory negligence. The Company agrees that any action taken or omitted by the Issuing Bank under or in connection with any Letter of Credit or the related drafts or documents, if done in accordance with the standards of care specified in the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce, Publication No. 500 (and any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Bank) and, to the extent not inconsistent therewith, the Uniform Commercial Code of the State of Texas, shall not result in any liability of the Issuing Bank to the Company. Section 3.04 Increased Costs. --------------- 41 (a) Notwithstanding any other provision herein, but subject to Section ------- 11.08, if any Bank shall have determined in good faith that any Change in Law - ----- either shall impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued, or participated in, by any Bank or shall impose on any Bank any other conditions affecting this Agreement or any Letter of Credit, and the result of any of the foregoing is to increase the cost to any Bank of issuing, maintaining or participating in any Letter of Credit, or reduce the amount received or receivable by any Bank hereunder with respect to Letters of Credit, by an amount deemed by such Bank to be material, then, from time to time, the Company shall pay to the Administrative Agent for the account of such Bank such additional amount or amounts as will reasonably compensate such Bank for such increased cost or reduction by such Bank. (b) Each Bank will notify the Company through the Administrative Agent of any event occurring after the date of this Agreement which will entitle such Bank to compensation pursuant to subsection (a) above, as promptly as practicable. A certificate of a Bank setting forth in reasonable detail such amount or amounts as shall be necessary to compensate such Bank as specified in subsection (a) above may be delivered to the Company (with a copy to the Administrative Agent) and shall be conclusive absent manifest error. The Company shall pay to the Administrative Agent for the account of such Bank the amount shown as due on any such certificate within 30 days after its receipt of the same. No Bank shall be entitled to recover any costs pursuant to this Section ------- 3.04(b) incurred more than 120 days prior to such Bank's giving notice to the - ------- Company for reimbursement thereof. Section 3.05 Conflict between Applications and Agreement. To the extent ------------------------------------------- that any provision of any application for Letter of Credit is inconsistent with the provisions of this Agreement, the provisions of this Agreement shall control. ARTICLE IV CONDITIONS PRECEDENT -------------------- Section 4.01 Conditions Precedent to the Initial Advance. The obligation of ------------------------------------------- each Bank to make its initial Advance hereunder to the Company is subject to the occurrence of or receipt by the Administrative Agent of the following, all in form and substance reasonably satisfactory to the Administrative Agent, and, where relevant, executed by all appropriate parties: (a) This Agreement (which includes the Guaranty); (b) Appropriate Notes for each Bank reflecting their respective Commitments; (c) The delivery of such third party consents, intercreditor agreements and other agreements as shall be reasonably requested by the Administrative Agent, in each case in form and substance satisfactory to the Administrative Agent; (d) Each of the following Security Documents granting a first and prior Lien or security interest on the Collateral to the Administrative Agent for the benefit of itself and the Banks as security for the Obligations, substantially in the form of Exhibits 4.01(d)(i) and (ii) hereto: ---------------------------- 42 (i) The Security Agreement (the "Security Agreement") covering ------------------ substantially all of the Accounts and Inventory of the Company and each of its Domestic Subsidiaries existent as of the date hereof (except as set forth in such Security Agreement or other Security Documents which exclusions have been agreed to by the Majority Banks), accompanied by all documents, instruments and other items necessary to obtain and perfect a Lien thereon; (ii) The Pledge Agreement (the "Pledge Agreement") pledging to the ---------------- Administrative Agent all Capital Stock owned by the Company or any Subsidiary in all Domestic Subsidiaries and 66% of the Capital Stock owned by the Company or any Subsidiary in all first tier Foreign Subsidiaries accompanied by original stock certificates evidencing such shares and executed stock powers, foreign registrations or other actions necessary to create a lien on such Capital Stock in favor of the Administrative Agent for the benefit of itself and the Banks; and (iii) UCC-1 and UCC-3 Financing Statements and other documents or instruments necessary to perfect the Liens granted in the Security Documents and to eliminate any other Liens not permitted by Section ------- 7.04; ----- (e) A Notice of Advance with respect to the initial Advance meeting the requirements of Section 2.03; ------------ (f) A certificate of the secretary, an assistant secretary or other Responsible Officer of the Company and each Guarantor certifying, inter alia, (i) true and complete copies of the resolutions adopted by the Board of Directors of the Company and each of the Guarantors (A) authorizing the execution, delivery and performance by the Company and each of its Subsidiaries of this Agreement and the other Loan Documents to which it is or will be a party and, in the case of the Company, the Advances to be made hereunder, (B) approving the forms of the Loan Documents to which it is or will be a party and which will be delivered at or prior to the date of the initial Advance hereunder and (C) authorizing officers of the Company and each of its Subsidiaries to execute and deliver the Loan Documents to which it is or will be a party and any related documents, including, any agreement contemplated by this Agreement, and (ii) the incumbency and specimen signatures of the officers of the Company and each of its Subsidiaries executing any documents on its behalf; (g) A certificate of the President, Chief Financial Officer or Treasurer of the Company certifying that there has been no change in the businesses or financial condition of the Company which could reasonably be expected to have a Material Adverse Effect since December 31, 1998; (h) Opinions addressed to the Administrative Agent and the Banks from (i) Bracewell & Patterson, L.L.P., counsel to the Company and the Guarantors, substantially in the form of Exhibit 4.01(h)(i);(ii) Randolph W. Bryant, ------------------ General Counsel to the Company, substantially in the form of Exhibit ------- 4.01(h)(ii); (iii) Morgan, Lewis & Bockius LLP, counsel to BOSC, - ----------- substantially in the form of Exhibit 4.01(h)(iii) and (iv) F. Traynor Beck, ----------------------------- General Counsel to BOSC, substantially in the form of Exhibit 4.01(h)(iv), ------------------- together with all closing opinions delivered as required by the Transaction Documents with recitations that the same may be relied upon by the Administrative Agent and the Banks as though they were the addressees thereof; 43 (i) The payment to the Administrative Agent and the Banks of all reasonable fees and expenses agreed upon by such parties to be paid on the Execution Date; (j) Copies of certificates of appropriate public officials as to the charter documents, existence, good standing and qualification to do business as a foreign corporation, as applicable, of the Company and its Subsidiaries designated by the Administrative Agent in each jurisdiction in which the ownership of its properties or the conduct of its business requires such qualifications and where the failure to so qualify or be in good standing would have a Material Adverse Effect; (k) Certificates of insurance as contemplated by Section 6.03(a); --------------- (l) UCC searches and other title information reasonably requested by the Administrative Agent on the Company and each of its Subsidiaries; (m) Copies of all Transaction Documents (and closing papers) and evidence that the Transaction has been simultaneously consummated with the proceeds of the Loans in accordance with the Transaction Documents for Merger consideration not in excess of $950,000,000 (subject to upward adjustment based on the value of the Capital Stock of the Company as of the Effective Date), in compliance with applicable law and regulatory approvals and without change in the terms thereof from the initial execution of the Transaction Documents in any respect that could reasonably be deemed adverse to the agents or the Banks without the prior written consent of the Administrative Agent and the Syndication Agent, which consent shall not unreasonably be withheld; (n) Evidence that the Company has received at least $150,000,000 from BOSS II, LLC pursuant to the Subscription Agreement in exchange for the Company's Convertible Preferred Stock; (o) Evidence of the exchange of the $100,000,000, 7.50% convertible subordinated debentures due May, 2012 (and accrued and unpaid interest thereon) of BOSC for the Company's Convertible Preferred Stock pursuant to the Subscription Agreement; (p) Evidence that all material governmental, shareholder and third party consents (including Hart-Scott Rodino clearance), permits and approvals necessary in connection with the Transaction and the other transactions contemplated hereby have been obtained; evidence that all such consents and approvals are in force and effect; and all applicable waiting periods shall have expired without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on the Transaction or such other transactions; (q) There shall not exist (a) any order, decree, judgment, ruling or injunction which restrains the consummation of the Transaction in the manner contemplated by the Transaction Documents in any material respect, or (b) any pending or threatened action, suit, investigation or proceeding, which could reasonably be expected to have a Material Adverse Effect; (r) The Company and its Subsidiaries shall be in material compliance with all existing financial obligations (after giving effect to the Transaction); (s) Projections for the period from the Execution Date through December 31, 2005. 44 (t) A letter of direction from the Company addressed to the Administrative Agent with respect to the disbursement of the proceeds of the initial Loans; (u) The Schedules to be attached hereto in form and substance satisfactory to the Administrative Agent and the Banks in their sole discretion; (v) (i) The existing credit facilities of the Company and BOSC presently maintained with Chase, as Agent and Bankers Trust Company, as Administrative Agent, respectively, shall, to the satisfaction of the Administrative Agent, be terminated, (ii) all loans and obligations thereunder shall be paid or satisfied in full, and (iii) all Liens in favor of any creditor in connection therewith shall be assigned to the Administrative Agent or terminated or released to the Administrative Agent's satisfaction. The acceptance of the benefits of the initial Credit Event hereunder shall constitute a representation and warranty by the Company to the Administrative Agent and each of the Banks that, to the best of its knowledge, all of the conditions specified in this Section above shall have been satisfied or waived as of that time. Section 4.02 Conditions Precedent to All Credit Events. The obligation of ----------------------------------------- the Banks to make any Advance, of the Issuing Bank to issue any Letter of Credit, or to continue or convert any Advance as or into a Eurodollar Rate Advance, including, without limitation, the initial Advance and Letters of Credit issued hereunder, is subject to the further conditions precedent that on the date of such Credit Event: (a) The representations and warranties set forth in Article V shall be --------- true and correct in all material respects as of, and as if such representations and warranties were made on, the date of the proposed Advance, issuance of a Letter of Credit or continuance or conversion (unless such representation and warranty expressly relates to an earlier date or is no longer true and correct solely as a result of transactions permitted by the Loan Documents), and the Company shall be deemed to have certified to the Administrative Agent and the Banks that such representations and warranties are true and correct in all material respects by submitting a Notice of Advance, a Letter of Credit Request or a Notice of Conversion. (b) The Company shall have complied with the provisions of Section 2.03, ------------ 2.05 or 3.02 hereof. - ---- ---- (c) No Default or Event of Default hereunder or under the BOSC Senior Notes Indenture shall have occurred and be continuing or would result from such Credit Event. (d) No Material Adverse Effect shall have occurred in the consolidated financial condition of the Company and its consolidated Subsidiaries since the delivery of the most recent financial statements delivered pursuant to Section 6.01(b). - --------------- (e) the Administrative Agent shall have received the most recent unqualified report and opinion on the Company's financial statements issued by KPMG LLP, or other independent certified public accountant of recognized national standing. 45 (f) Except for any Foreign Subsidiaries, all Persons that have become Subsidiaries subsequent to the Execution Date shall have executed and delivered to the Administrative Agent an Adoption Agreement to the extent required at the time of such Credit Event pursuant to Section 6.09. ------------ The acceptance of the benefits of each such Credit Event shall constitute a representation and warranty by the Company to the Administrative Agent and each of the Banks that all of the conditions specified in this Section above exist as of that time. Section 4.03 Delivery of Documents. All of the Notes, certificates, legal --------------------- opinions and other documents and papers referred to in this Article IV, unless ---------- otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Banks and, except for the Notes, in sufficient counterparts for each of the Banks requesting same and shall be reasonably satisfactory in form and substance to the Banks. ARTICLE V REPRESENTATIONS AND WARRANTIES ------------------------------ In order to induce the Banks to enter into this Agreement, to make the Advances, issue the Letters of Credit and to continue or convert any Advance as or into a Eurodollar Rate Advance, in each case as provided for herein, the Company, as to itself and each of its Subsidiaries after giving effect to the Merger (i.e., each reference to the Company, its assets, business or other matters shall include BOSC, its assets, business or other matters as having been merged with and into the Company and each reference to the Company's Subsidiaries shall include the former Subsidiaries of BOSC), makes, on or as of the occurrence of each Credit Event (except to the extent such representations or warranties relate to an earlier date or are no longer true and correct in all material respects solely as a result of transactions not prohibited by the Loan Documents), the following representations and warranties to the Administrative Agent and the Banks: Section 5.01 Organization and Qualification. Each of the Company and its ------------------------------ Subsidiaries (a) is duly formed or organized, validly existing and (where such concept is applicable) in good standing under the laws of the state of its organization except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, (b) has the power to own its property and to carry on its business as now conducted, except where the failure to do so would not have a Material Adverse Effect and (c) is duly qualified to do business and is in good standing in every jurisdiction in which the failure to be so qualified would have a Material Adverse Effect. Section 5.02 Authorization and Validity. Each of the Company and its -------------------------- Subsidiaries has the corporate or other power and authority to execute, deliver and perform its obligations hereunder and under the other Loan Documents and Transaction Documents to which it is a party and all such action has been duly authorized by all necessary corporate or other proceedings on its part. Each Loan Document and Transaction Document to which the Company or any of its Subsidiaries is a party has been duly and validly executed and delivered by such Person and constitutes a valid and legally binding agreement of such Person, enforceable in accordance with the respective terms thereof, except, in each case, as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the 46 enforcement of creditors' rights generally, and by general principles of equity regardless of whether such enforceability is sought in a proceeding in equity or at law. Section 5.03 Governmental Consents. No authorization, consent, approval, --------------------- license or exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that has not been obtained and continues in full force and effect, is necessary for the valid execution or delivery by the Company or any Subsidiary of any Loan Document or Transaction Document. Section 5.04 Conflicting or Adverse Agreements or Restrictions. Neither ------------------------------------------------- the Company nor any Subsidiary is a party to any contract or agreement or subject to any restriction which would reasonably be expected to have a Material Adverse Effect. As of the Execution Date, all agreements of the Company relating to the lending of money or the issuance of letters of credit by any party are described hereto on Schedule 5.04. Neither the execution nor delivery of the ------------- Loan Documents or the Transaction Documents nor compliance with the terms and provisions hereof or thereof will be contrary to the provisions of, or constitute a default under, (a) the organizational documents of the Company or any Subsidiary or (b) any law, regulation, order, writ, injunction or decree of any court or governmental instrumentality that is applicable to the Company or any Subsidiary or (c) any material agreement to which the Company or any of its Subsidiaries is a party or by which it is bound or to which any of them is subject including, without limitation, either of the Indentures or any other agreement listed on said Schedule 5.04. ------------- Section 5.05 Title to Assets; Liens. Each of the Company and its ---------------------- Subsidiaries has good title to all material personal property and good and indefeasible title to all material real property as reflected on the books and records of the Company or any of its Subsidiaries as being owned by them, except for properties disposed of in the ordinary course of business, subject to no Liens, except those permitted hereunder, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. The Lien of the Administrative Agent in the Collateral constitutes a perfected first priority Lien subject only to Permitted Liens. All of such assets have been and are being maintained by the appropriate Person in good working condition in accordance with industry standards, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Section 5.06 Litigation. No proceedings against the Company or any ---------- Subsidiary are pending or, to the knowledge of the Company, threatened before any court or governmental agency or department which involve a reasonable material risk of having a Material Adverse Effect except those listed on Schedule 5.06 hereof. - ------------- Section 5.07 (a) Financial Statements. Prior to the Execution Date, each of the -------------------- Company and BOSC has furnished to the Banks its audited consolidated balance sheet as of December 31, 1998, and audited consolidated income statement and statement of cash flows for the year ended December 31, 1998, and the unaudited balance sheet as of September 30, 1999, and the consolidated income statement and statement of cash flows for the period from January 1, 1999, through September 30, 1999 (such 47 financials, the "Financials"). The Financials have been prepared in conformity ---------- with GAAP consistently applied (except as otherwise disclosed in such financial statements) throughout the periods involved and present fairly, in all material respects, the consolidated financial condition of the Company and its consolidated Subsidiaries and BOSC and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations for the periods then ended, subject in the case of the September 30, 1999 statements, to changes resulting from normal year end audit adjustments. As of the Execution Date, no Material Adverse Effect has occurred in the consolidated financial condition of the Company and its consolidated Subsidiaries or BOSC and its consolidated Subsidiaries since the date of said Financials. (b) Projections. The Projections delivered by the Company to the ----------- Administrative Agent, the Syndication Agent and the Documentation Agent have been prepared by the Company in light of the past operation of the business of the Company, BOSC and their respective Subsidiaries and other information believed by the Company and its senior management to be accurate. All such Projections represent, as of the date thereof, a good faith estimate by the Company and its senior management of the financial conditions and performance of the Company and its Subsidiaries based on assumptions believed to be reasonable at the time made. Section 5.08 Default. Neither the Company nor any Subsidiary is in default ------- under any material provisions of any instrument evidencing any Indebtedness or of any agreement relating thereto, or in default in any respect under any order, writ, injunction or decree of any court, or in default in any respect under or in violation of any order, injunction or decree of any governmental instrumentality, in each case in such manner as to cause a Material Adverse Effect. Section 5.09 Investment Company Act. Neither the Company nor any ---------------------- Subsidiary is, or is directly or indirectly controlled by any Person which is, an "investment company," as such term is defined in the Investment Company Act of 1940, as amended. Section 5.10 Public Utility Holding Company Act. Neither the Company nor ---------------------------------- any Subsidiary is a non-exempt "holding company," or subject to regulation as such, or, to the knowledge of the Company's or such Subsidiary's officers, an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 5.11 ERISA. No accumulated funding deficiency (as defined in ----- Section 412 of the Code or Section 302 of ERISA), whether or not waived, exists or is expected to be incurred with respect to any Plan. No liability to the PBGC (other than required premium payments) has been or is expected by the Company to be incurred with respect to any Plan by the Company or any ERISA Affiliate. Neither the Company nor any ERISA Affiliate has incurred any withdrawal liability under Title IV of ERISA with respect to any Multi-Employer Plans which (individually or in the aggregate) exceeds $10,000,000. Section 5.12 Tax Returns and Payments. Each of the Company and its ------------------------ Subsidiaries has filed all federal income tax returns and other tax returns, statements and reports (or obtained extensions with respect thereto) which are required to be filed and has paid or deposited or made 48 adequate provision, in accordance with GAAP, for the payment of all taxes (including estimated taxes shown on such returns, statements and reports) which are shown to be due pursuant to such returns, except for such taxes as are being contested in good faith and by appropriate proceedings, except, in each such case, where such failure could not reasonably be expected to have a Material Adverse Effect. Section 5.13 Environmental Matters. Each of the Company and its ---------------------- Subsidiaries (a) possesses all environmental, health and safety licenses, permits, authorizations, registrations, approvals and similar rights necessary under law or otherwise for the Company or such Subsidiary to conduct its operations as now being conducted (other than those with respect to which the failure to possess or maintain would not, individually or in the aggregate for the Company and such Subsidiaries, reasonably be expected to have a Material Adverse Effect) and (b) each of such licenses, permits, authorizations, registrations, approvals and similar rights is valid and subsisting, in full force and effect and enforceable by the Company or such Subsidiary, and each of the Company and its Subsidiaries is in compliance with all effective terms, conditions or other provisions of such permits, authorizations, registrations, approvals and similar rights except for such failure or noncompliance that, individually or in the aggregate for the Company and such Subsidiaries, would not reasonably be expected to have a Material Adverse Effect. Except as disclosed on Schedule 5.13, since December 31, 1998, neither the ------------- Company nor any of its Subsidiaries has received any notices from any Governmental Authority of any violation of, noncompliance with, or remedial obligation under, Requirements of Environmental Laws (which violation or non- compliance has not been cured), and there are no writs, injunctions, decrees, orders or judgments outstanding, or lawsuits, claims, proceedings, investigations or inquiries pending or, to the knowledge of the Company or any Subsidiary, threatened, relating to the ownership, use, condition, maintenance or operation of, or conduct of business related to, any property owned, leased or operated by the Company or such Subsidiary or other assets of the Company or such Subsidiary, other than those violations, instances of noncompliance, obligations, writs, injunctions, decrees, orders, judgments, lawsuits, claims, proceedings, investigations or inquiries that, individually or in the aggregate for the Company and such Subsidiaries, would not have a Material Adverse Effect. Except as disclosed on Schedule 5.13, (i) there are no material obligations, ------------- undertakings or liabilities arising out of or relating to Environmental Laws to which the Company or any of its Subsidiaries has agreed, assumed or retained, or, to the knowledge of the Company, by which the Company or any of its Subsidiaries is adversely affected, by contract or otherwise, and (ii) neither the Company nor any of its Subsidiaries has received a written notice or claim to the effect that the Company or any of its Subsidiaries is or may be liable to any other Person as the result of a Release or threatened Release of a Hazardous Material which, in the case of clause (i) or (ii), could reasonably be expected to have a Material Adverse Effect. Section 5.14 Purpose of Loans. ----------------- (a) The proceeds of the Revolving Loans shall be used: (i) to refinance the outstanding amount of certain existing Indebtedness of the Company and/or of BOSC; (ii) to pay fees and expenses incurred in connection with the Transaction; and (iii) to provide for working capital, acquisitions and other general corporate purposes of the Company. The proceeds of the Tranche A Term Loans shall be used to purchase 9-3/4% Senior Subordinated Notes tendered pursuant to the 49 Offer to Purchase or pursuant to the Change of Control Offer and other general corporate purposes. The proceeds of the Tranche B Term Loans shall be used to refinance existing Indebtedness of the Company and/or of BOSC. (b) None of the proceeds of any Advance will be used directly or indirectly in violation of Regulation U. None of the proceeds of any Advance will be used to fund the Common Stock Repurchase, which is being funded entirely out of the proceeds of the $150,000,000 investment in the Company by BOSS II, LLC being made on the Effective Date. Section 5.15 Franchises and Other Rights. The Company and each of its --------------------------- Subsidiaries has all franchises, permits, licenses, patents, trademarks and other intangible assets or authority as are necessary to enable them to carry on their respective businesses as now being conducted and is not in default in respect thereof where the absence of such or any such default could reasonably be expected to have a Material Adverse Effect. Section 5.16 Subsidiaries and Assets. The Subsidiaries which are parties ----------------------- to this Agreement and listed on Schedule 5.16 are all of the Subsidiaries of the ------------- Company as of the Effective Date and after giving effect to the Merger and the address given for such Subsidiaries is the correct mailing address as of the Effective Date. Section 5.17 Solvency. After giving effect to the consummation of the -------- Transaction and each Advance hereunder and all other Indebtedness of the Company existing at the time of such Advance, the Company and its Subsidiaries, viewed as a consolidated entity, will be Solvent. Section 5.18 Year 2000. Any reprogramming required to permit the proper --------- functioning, in and following the year 2000, of (a) the Company's or any Subsidiary's computer systems and (b) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Company's systems interface) and the testing of all such systems and equipment, as so reprogrammed, have been completed, except where the failure to do such reprogramming and testing would not reasonably be expected to have a Material Adverse Effect. The cost to the Company and its Subsidiaries of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Company and its Subsidiaries (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in a Default or would not reasonably be expected to have a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of the Company and its Subsidiaries are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be sufficient to permit the Company to conduct its business in all material respects and such upgrading and maintenance would not reasonably be expected to have a Material Adverse Effect. Section 5.19 Transaction Documents. As of the Effective Date, the Company --------------------- has delivered to the Administrative Agent a complete and correct copy of the Transaction Documents and each such Transaction Documents is in full force and effect and no material term or condition thereof has been amended or otherwise waived except for such amendments and waivers approved by the Administrative Agent and the Syndication Agent (which they may give without the consent of the 50 Banks and which shall not unreasonably be withheld) and amendments or waivers that could not reasonably be deemed adverse to the agents or the Banks in any respect; none of the parties thereto has failed to perform any material obligation thereunder, and each of the representations and warranties given therein is true and correct on and as of the Effective Date. Section 5.20 Disclosure. All factual information furnished by or on ---------- behalf of the Company, BOSC, or any Subsidiary of the Company or BOSC to the Administrative Agent, the Syndication Agent, the Documentation Agent, or any Bank (including, without limitation, all information contained in the Form S-4 or the other Transaction Documents) for purposes of or in connection with this Agreement, the other Loan Documents, or any transaction contemplated herein or therein is, and all other such factual information hereafter furnished by or on behalf of the Company or any Subsidiary of the Company to the Administrative Agent, the Syndication Agent, either Arranger, or any Bank, will be true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided. ARTICLE VI AFFIRMATIVE COVENANTS --------------------- The Company, as to itself and each of its Subsidiaries (after giving effect to the Merger as aforesaid), covenants and agrees that on and after the date hereof until the Notes have been paid in full and the Commitments have terminated: Section 6.01 Information Covenants. The Company will furnish to each Bank: --------------------- (a) As soon as available, and in any event within fifty (50) days of the end of each fiscal quarter, the consolidated and, if requested by the Administrative Agent, the consolidating balance sheet of the Company and its Subsidiaries as of the end of such period and the related consolidated and, if requested by the Administrative Agent, consolidating statements of income for such period and, in each case, also for the portion of the fiscal year ended at the end of such period, setting forth comparative consolidated figures for the related periods in the prior fiscal year, all of which shall be certified by the chief financial officer or chief executive officer of the Company as fairly presenting, in all material respects, the financial position of the Company and its Subsidiaries as of the end of such period and the results of their operations for the period then ended in accordance with GAAP, subject to changes resulting from normal year-end audit adjustments. (b) (i) As soon as available, and in any event within ninety-five (95) days after the close of each fiscal year of the Company, the audited consolidated and, if requested by the Administrative Agent, the unaudited consolidating balance sheets of the Company and its Subsidiaries as at the end of such fiscal year and the related consolidated and, if requested by the Administrative Agent, consolidating statements of income, stockholders' equity and cash flows for such fiscal year, setting forth comparative figures for the preceding fiscal year and certified by KPMG LLP or other independent certified public accountants of recognized national standing acceptable to the 51 Administrative Agent, whose report shall be without limitation as to the scope of the audit and reasonably satisfactory in substance to the Banks; and (ii) upon request by the Administrative Agent, a copy of Projections for the Company's fiscal year immediately following the Fiscal Year which is the subject of the financial statements delivered pursuant to clause (i) preceding. ---------- (c) Promptly, but in any event within five (5) Business Days after any Responsible Officer of the Company obtains verified knowledge thereof, notice of: (i) any material violation of, noncompliance with, or remedial obligations under, Requirements of Environmental Laws; (ii) any material Release or threatened material Release of Hazardous Materials affecting any property owned, leased or operated by the Company or any of its Subsidiaries; (iii) any event or condition which constitutes a Default or an Event of Default (including any default under the Indentures); (iv) any condition or event which, in the opinion of management of the Company, would reasonably be expected to have a Material Adverse Effect; (v) any Person having given any written notice to the Company or taken any other action with respect to a claimed material default or event under any material instrument or material agreement; (vi) the institution of any litigation which could reasonably be expected in the good faith judgment of the Company either to have a Material Adverse Effect or result in a final, non- appealable judgment or award in excess of $10,000,000 with respect to any single cause of action unless it is covered by insurance; (vii) all ERISA notices required by Section 6.08; and ------------ (viii) any sale of assets other than as permitted hereby; Such notice shall specify in reasonable detail the nature and period of existence thereof and the action taken by such Person and the nature of any such claimed default, event or condition and, in the case of an Event of Default or Default, what action has been taken, is being taken or is proposed to be taken with respect thereto. (d) At the time of the delivery of the quarterly and annual financial statements provided for in Sections 6.01(a) and 6.01(b), a certificate of a ---------------- ------- Responsible Officer to the effect that, to his knowledge, no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof and the action that is being taken or that is proposed to be taken with respect thereto, which certificate shall set forth the calculations required to establish whether the Company was in compliance with the provisions of Sections 7.10 through 7.14 as at the end of such fiscal period ------------- ---- or year, as the case may be. 52 (e) Upon request by the Administrative Agent, a summary report (by Subsidiary) of all Accounts of the Company and its Subsidiaries. (f) Promptly following request by the Administrative Agent such environmental reports, studies and audits of the Company's procedures and policies, assets and operations in respect of Environmental Laws as the Administrative Agent may reasonably request. (g) Promptly upon receipt thereof, a copy of any report or letter submitted to the Company by its independent accountants in connection with any regular or special audit of the Company's records and simultaneously with the sending or filing thereof, copies of all proxy statements, financial statements and reports which the Company sends to its shareholders, and copies of all regular, periodic or special reports, and all registration statements, in each case, which the Company or any of its Subsidiaries files with the Securities and Exchange Commission or any other securities exchange or securities market. (h) Promptly following request by the Administrative Agent such financial projections, budgets and unaudited consolidating financial statements of the Company and its Subsidiaries as the Administrative Agent may reasonably request. (i) From time to time and with reasonable promptness, such other information or documents as the Administrative Agent or any Bank through the Administrative Agent may reasonably request. Section 6.02 Books, Records and Inspections. The Company will maintain, ------------------------------ and will cause its Subsidiaries to maintain, the corporate books and financial records of the Company and its Subsidiaries and will permit, or cause to be permitted, any Person designated by the Administrative Agent (including at the request of any Bank) to visit and inspect under the guidance of officers of the Company any of the properties of the Company and its Subsidiaries, to examine such books and records and make copies thereof or extracts therefrom, audit the accounts, inventory and finances of any such corporations with the officers, employees and agents of the Company and its Subsidiaries and with their independent public accountants (provided the Company may, if it so chooses, be present at or participate in any such discussions with such independent public accountants), all, if a Default or Event of Default does not then exist, upon reasonable advance notice and at such reasonable times and as often as the Administrative Agent may reasonably request. Such inspections shall be at the expense of the Company if made annually (or more often if a Default or Event of Default then exists), and shall be at the expense of the Bank or Banks requiring same if made more often than annually. Section 6.03 Insurance and Maintenance of Properties. --------------------------------------- (a) Each of the Company and its Subsidiaries will keep reasonably adequately insured by financially sound and reputable insurers all of its material property, which is of a character, and in amounts and against such risks, usually and reasonably insured by similar Persons engaged in the same or similar businesses, including, without limitation, insurance against fire, casualty and any other hazards normally insured against. Each of the Company and its Subsidiaries will at all times maintain insurance against its liability for injury to Persons or property, which insurance shall be by financially sound and reputable insurers and in such amounts and form as are customary for 53 corporations of established reputation engaged in the same or a similar business and owning and operating similar properties and which shall name the Administrative Agent, for the benefit of the Banks, as an additional insured. The Company shall provide the Administrative Agent a listing of all such insurance and such other certificates and other evidence thereof, on or prior to the Execution Date hereof and annually thereafter. A listing of all policies of the Company and its Subsidiaries as of the Execution Date is attached hereto as Schedule 6.03. - ------------- (b) Each of the Company and its Subsidiaries will cause all of its material properties used or useful in the conduct of its business to be maintained and kept in reasonable condition, repair and working order, ordinary wear and tear excepted, and supplied with all necessary equipment and will cause to be made all reasonably necessary repairs, renewals and replacements thereof, all as in the reasonable judgment of such Person may be reasonably necessary so that the business carried on in connection therewith may be properly conducted at all times, except where such failure could not reasonably be expected to have a Material Adverse Effect. Section 6.04 Payment of Taxes. Each of the Company and its Subsidiaries ---------------- will pay and discharge all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which material penalties attach thereto, except for such amounts that are being contested in good faith and by appropriate proceedings, except where such failure could not reasonably be expected to have a Material Adverse Effect. Section 6.05 Corporate Existence. Each of the Company and its Subsidiaries ------------------- will and keep in full force and effect (a) the existence of the Company, and (b) unless the failure to do so would not reasonably be expected to have a Material Adverse Effect, the rights and franchises of each of the Company and its Subsidiaries. Section 6.06 Compliance with Statutes. Each of the Company and its ------------------------ Subsidiaries will comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect. Section 6.07 Material Privileges,Permits, Licenses and Other Rights; ------------------------------------------------------ Landlord Waivers. Each of the Company and its Subsidiaries will do all things - ---------------- necessary to preserve and keep in full force and effect all material privileges, permits, licenses and other rights necessary to conduct business as such business is currently conducted as of the Effective Date, except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect. The Company shall use reasonable efforts to obtain after the Effective Date landlord and mortgagee waivers, warehousemen and bailee letters and other similar agreements from third parties holding Inventory as shall be reasonably requested by the Administrative Agent, in each case in form and substance reasonably satisfactory to the Administrative Agent. Section 6.08 ERISA. Immediately after any Responsible Officer of the ----- Company or any of its Subsidiaries knows or has reason to know any of the following events have occurred the 54 Company will deliver or cause to be delivered to the Banks a certificate of the chief financial officer of the Company setting forth details as to such occurrence and such action, if any, the Company or its ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Company or its ERISA Affiliate with respect thereto: (i) that a Reportable Event has occurred or that an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard; (ii) that any required contributions in excess of $5,000,000 in the aggregate to a Plan or Multiemployer Plan have not been or may not be timely made; (iii) that proceedings may be or have been instituted under Section 4069(a) of ERISA to impose liability on the Company or an ERISA Affiliate which (individually or in the aggregate) exceeds $5,000,000 or under Section 4042 of ERISA to terminate a Plan or appoint a trustee to administer a Plan; (iv) that the Company or any ERISA Affiliate has incurred or may incur any liability (including any contingent or secondary liability) on account of the termination of or withdrawal from a Plan or a Multiemployer Plan which (individually or in the aggregate) exceeds $5,000,000; and (v) that the Company or an ERISA Affiliate may be required to provide security to a Plan under Section 401(a)(29) of the Code securing an amount equal to or exceeding $5,000,000. Section 6.09 Additional Subsidiaries. The Company will cause any Person ----------------------- that becomes a Subsidiary subsequent to the Execution Date to (i) within forty- five (45) days after becoming a Subsidiary, execute and deliver to the Administrative Agent an Adoption Agreement and (ii) within forty-five (45) days after becoming a Subsidiary, deliver to the Administrative Agent evidence, satisfactory to the Administrative Agent, that all material Indebtedness owing by such Subsidiary to any other Person has been paid in full and said Indebtedness has been canceled and all Liens securing such Indebtedness have been released or have terminated, (except for Indebtedness and Liens permitted hereby); provided, if said Subsidiary is not incorporated under the laws of the -------- United States or one of its states or territories, no such guaranty will be required if the Company makes arrangements, satisfactory to the Administrative Agent, in its sole discretion, regarding restrictions on transfer of funds or other assets by the Company or any Subsidiary to said new Foreign Subsidiary. Further, the Company, or its Subsidiary (if such Subsidiary is a Domestic Subsidiary) that owns the stock of said new Subsidiary, as the case may be, will execute the Adoption Agreement referred to above. Section 6.10 Acquisition Agreements. Upon request of the Administrative ---------------------- Agent or Majority Banks, the Company shall provide the Administrative Agent and the Banks with: (a) copies of the agreements relating to the acquisitions of Qualified Companies, (the "Acquisition Agreements") and (b) a listing of each ---------------------- then existing Acquisition Agreement. Section 6.11 Year 2000 Compliance. The Company will, and will cause each -------------------- Subsidiary of the Company to, promptly notify the Administrative Agent in the event the Company or any Subsidiary of the Company discovers or determines that any computer application (including those of its suppliers and vendors) that is material to it or any of its business and operations will not be able to perform properly date sensitive functions for all dates before and after January 1, 2000, on a timely basis, except to the extent that such failure could not be expected to have a Material Adverse Effect. 55 ARTICLE VII NEGATIVE COVENANTS ------------------ The Company covenants and agrees, as to itself and, except as otherwise provided herein, each of its Subsidiaries (after giving effect to the Merger as aforesaid), that on and after the date hereof until the Notes have been paid in full and the Commitments have terminated: Section 7.01 Change in Business. The Company will not, and will not ------------------ permit any of its Subsidiaries to, engage in any businesses in any material respect other than a Permitted Business. Section 7.02 Consolidation, Merger or Sale of Assets. Except as --------------------------------------- disclosed on Schedule 7.02, the Company will not, and will not permit any of its ------------- Subsidiaries to, wind up, liquidate or dissolve their affairs, or agree to be acquired by any third party in any transaction of merger or consolidation in which the Company or a Domestic Subsidiary is not the sole surviving entity, or sell or otherwise dispose of all or any substantial part of their property or assets (including the capital stock of any Subsidiary) other than: (a) sales of inventory and surplus or obsolete assets in the ordinary course of business that do not prejudice the Banks in any material way, (b) dispositions of the stock of Subsidiaries to, or mergers with, other Wholly-Owned Domestic Subsidiaries of the Company that have complied with Section 6.09, (c) any sale of assets with a ------------ value equal to or less than the greater of $50,000,000 or five percent (5%) of the Company's Consolidated Net Worth (measured as of the most recently ended fiscal quarter), provided the proceeds of such sale are used to acquire assets -------- for use in the Company's business, or applied as required by Section ------- 2.07(b)(ii), (d) securitization of Accounts pursuant to a securitization - ----------- structure and upon terms and conditions approved by the Administrative Agent and Majority Banks (an "Approved Securitization"), provided that the proceeds of -------- such securitization are applied as required by Section 2.07(b)(ii), and (e) ------------------- liquidation of a Wholly-Owned Subsidiary into another Wholly-Owned Subsidiary. Section 7.03 Indebtedness. Neither the Company nor any Subsidiary of ------------ the Company will create, incur, assume or permit to exist any Indebtedness of the Company or any Subsidiary except: (a) Indebtedness existing hereunder; (b) Indebtedness existing on the Execution Date not being repaid or refinanced as part of the Transaction or out of proceeds of the Loans and listed on Schedule 7.03(b) on the Execution Date; ---------------- (c) Indebtedness arising as a result of the endorsement in the ordinary course of business of negotiable instruments in the course of collection; (d) accounts payable and unsecured, current and long-term, liabilities (including accrued insurance related liabilities), not the result of indebtedness for borrowed money, to vendors, suppliers and other Persons for goods and services in the ordinary course of business; (e) contingent obligations contained in agreements (including agreements of intent) to acquire any Person or assets entered into by the Company or any of its Subsidiaries in anticipation 56 of acquiring such Person or assets if such acquisition is not prohibited by this Agreement, including any ongoing, contingent payment obligations contained in such agreements; (f) Intercompany Indebtedness of any Domestic Subsidiary of the Company to the Company or any Wholly-Owned Domestic Subsidiary and Indebtedness of the Company to any Wholly-Owned Domestic Subsidiary of the Company; (g) guarantees by the Company or any of its Subsidiaries of Indebtedness of any Subsidiary of the Company permitted to be incurred, created or existing pursuant to this Agreement, provided that such guarantees are not secured by any -------- Liens; (h) current and deferred taxes; (i) contingent liabilities under surety bonds or otherwise incurred in the ordinary course of business; (j) earn-out agreements that are a part of Investments allowed under Section 7.05(d); - -------------- (k) other Indebtedness not in excess of the greater of $100,000,000 or five percent (5%) (measured as of the date of incurrence) of Consolidated Net Worth (as of the end of the Company's most recent fiscal quarter) in the aggregate at any time outstanding; (l) Indebtedness not to exceed the greater of $50,000,000 or five percent (5%) (measured as of the date of incurrence) of Consolidated Net Worth (as of the end of the Company's most recent fiscal quarter) at any time outstanding secured by Liens permitted by Section 7.04(g); --------------- (m) liabilities incurred in connection with Interest Rate Protection Agreements, provided, same are entered into in connection with the day to day business operations of the Company and not for speculative purposes; (n) Indebtedness of a Subsidiary acquired pursuant to a Permitted Acquisition (or Indebtedness assumed by the Company or any Wholly-Owned Domestic Subsidiary pursuant to a Permitted Acquisition as a result of a merger or consolidation or the acquisition of an asset securing such Indebtedness) (the "Permitted Acquired Debt"), not to exceed $50 million at any one time ----------------------- outstanding in the aggregate for all such Indebtedness, so long as such Indebtedness was not incurred in connection with or in anticipation or contemplation of such Permitted Acquisition; (o) Qualified High Yield Offerings provided that, after giving effect to the incurrence thereof, on a pro forma basis, no Default or Event of Default shall have occurred or shall result therefrom; (p) Permitted Subordinated Indebtedness (or Permitted Subordinated Refinancing Indebtedness in replacement therefor) issued in connection with Permitted Acquisitions not to exceed $100,000,000 in the aggregate at any time outstanding; and (q) refinancings, renewals and extensions (in the same or lesser principal amount plus accrued interest and the costs and expenses associated with such refinancing (including, without 57 limitation, reasonable out-of-pocket professional fees and expenses, investment banking fees, financial advisory fees and other customary fees and expenses) on similar terms and conditions) of any Indebtedness listed in subparagraphs (a) through (o) above provided that any refinancing (or subsequent refinancing) of the BOSC Senior Subordinated Notes or the 9 3/4% Senior Subordinated Notes must constitute Permitted Subordinated Refinancing Indebtedness. Section 7.04 Liens. Neither the Company nor any Subsidiary of the Company ----- will create, incur, assume or suffer to exist any Lien upon or with respect to any of its property or assets of any kind whether now owned or hereafter acquired (nor will they covenant with any other Person not to grant such a Lien to the Administrative Agent on any assets of the Borrower or any of its Subsidiaries, except for restrictions in leases, licenses, purchase money loans and other contracts entered into in the ordinary course of business and limited to the specific property subject to such lease, license, loan or contract) except: (a) Liens existing on the Execution Date and listed on Schedule 7.04(a); ---------------- (b) Liens securing currently secured Indebtedness permitted under Section ------- 7.03(b) or (m) above; - ------- (c) Permitted Liens; (d) Liens created by the Loan Documents provided that the notional amount of Interest Rate Protection Agreements secured by the Collateral may not exceed $800,000,000; (e) Other Liens on assets not included in the Collateral securing obligations allowed pursuant to Section 7.03(k) not exceeding $3,000,000.00 in --------------- the aggregate at any one time; (f) deposits under real property leases and deposits with utilities, provided that such deposits do not exceed amounts customarily deposited by other Persons similarly situated; (g) Liens arising pursuant to purchase money mortgages or security interests securing Indebtedness representing the purchase price (or financing of the purchase price within 90 days after the respective purchase) of assets acquired after the Effective Date, provided that (i) any such Liens attach only to the assets so purchased, upgrades thereon and, if the asset so purchased is an upgrade, the original asset itself (and such other assets financed by the same financing source), (ii) the Indebtedness (other than Indebtedness incurred from the same financing source to purchase other assets and excluding Indebtedness representing obligations to pay installation and delivery charges for the property so purchased) secured by any such Lien does not exceed 100%, nor is less than 80%, of the lesser of the fair market value or the purchase price of the equipment being purchased at the time of the incurrence of such Indebtedness and (iii) the Indebtedness secured thereby is permitted to be incurred pursuant to Section 7.03(l); and --------------- (h) Liens securing Indebtedness permitted by Section 7.03(n) if secured on --------------- the date of the applicable Permitted Acquisition; 58 (i) any renewal, extension or replacement of any Lien referred to above; provided, that no Lien arising or existing as a result of such extension, - -------- renewal or replacement shall be extended to cover any property not theretofore subject to the Lien being extended, renewed or replaced and provided further ---------------- that the principal amount of the Indebtedness secured thereby shall not exceed the principal amount of the Indebtedness so secured at the time of such extension, renewal or replacement plus accrued interest and the costs and expenses associated with such refinancing (including, without limitation, reasonable out-of-pocket professional fees and expenses, investment banking fees, financial advisory fees and other customary fees and expenses). Section 7.05 Investments. Neither the Company nor any Subsidiary will, ----------- directly or indirectly, make or own any Investment in any Person, except: (a) Permitted Investments; (b) Investments owned on the Execution Date as set forth on Schedule -------- 7.05(b), including Investments in the Subsidiaries, direct and indirect; - ------- (c) Investments arising out of loans and advances for expenses, travel per diem and similar items in the ordinary course of business to officers, directors and employees and intercompany Indebtedness permitted by Section 7.03(f); --------------- (d) Subject to the limitations contained in Section 7.15, investments in ------------ the stock, warrants, stock appreciation rights, other securities and/or other assets of Qualified Companies; (e) other Investments not exceeding the greater of $75,000,000 or five percent (5%) (measured as of the date of the investment) of Consolidated Net Worth (as of the end of the Company's most recent fiscal quarter) in the aggregate at any one time outstanding; (f) Investments in the form of stock buy backs allowed under Section 7.06; ------------ and (g) Investments in the Company or in Wholly-Owned Domestic Subsidiaries of the Company. (h) interest rate hedging and swap agreements entered into in compliance with Section 7.03(m); (i) loans and advances by the Company and its Subsidiaries to employees of the Company and its Subsidiaries in connection with relocations, purchases by such employees of Company Common Stock or options or similar rights to purchase Company Common Stock and other ordinary course of business purposes; (j) obligations of one or more officers or other employees of the Company or its Subsidiaries in connection with such officers' or employees' acquisition of shares of Company Common Stock, so long as no cash is actually advanced by the Company or any of its Subsidiaries to such officers or employees in connection with the acquisition of any such obligations; and 59 (k) Investments in the form of loans, leases or advances to customers of the Company and its Subsidiaries, not to exceed $50,000,000 at any one time outstanding, made to finance the acquisition of equipment by such customers. Section 7.06 Restricted Payments. The Company will not pay any dividends ------------------- or redeem, retire, purchase or guaranty the value of or make any other acquisition, direct or indirect, of any shares of any class of Capital Stock of the Company, or of any warrants, rights or options to acquire any such Capital Stock, now or hereafter outstanding, except to the extent that the consideration therefor consists solely of shares of stock (including warrants, rights or options relating thereto) of the Company or is approved by the Majority Banks; provided, the Company may: (i) complete the Common Stock Repurchase; (ii) - -------- purchase shares of Common Stock and options to purchase Common Stock out of the proceeds of the $150,000,000 investment in the Company by BOSS II, LLC not required for the Common Stock Repurchase; (iii) repurchase its Common Stock, including Common Stock to be reissued in connection with acquisitions, provided that the aggregate amount of all such repurchase from and after the Effective Date (excluding repurchases permitted by clauses (i) and (ii) above) shall not exceed $50,000,000 plus the aggregate amount of cash paid to acquire shares of ---- Common Stock after the Effective Date that are reissued (or shall be reissued within 180 days of the acquisition thereof) as part of the consideration paid to a seller in connection with an acquisition permitted hereby; (iv) redeem or purchase shares of Company Common Stock or options to purchase Company Common Stock, as the case may be, held by former employees of the Company or any of its Subsidiaries following the termination of their employment (by death, disability or otherwise), provided that (x) the only consideration paid by the Company in -------- respect of such redemptions and/or purchases shall be cash, forgiveness of liabilities and/or Shareholder Subordinated Notes, (y) the sum of (A) the aggregate amount paid by the Company in cash in respect of all such redemptions and/or purchases plus (B) the aggregate amount of liabilities so forgiven plus (C) the aggregate amount of' all cash principal and interest payments made on Shareholder Subordinated Notes, in each case after the Effective Date, shall not exceed $10,000,000, and (z) at the time of any cash payment or forgiveness of liabilities permitted to be made pursuant to this Section 7.06(iv), including any cash payment under a Shareholder Subordinated Note, no Default or Event of Default shall then exist or result therefrom; (v) so long as no Default or Event of Default exists or would result therefrom, pay regularly accruing cash dividends on Preferred Stock, with such dividends to be paid in accordance with the terms of the respective statement of designation therefor, but not otherwise; and (vi) pay cash in lieu of fractional shares of Common Stock issued in connection with a conversion of Preferred Stock into Common Stock in accordance with the relevant provisions of the statement of designation therefor, so long as the aggregate amount of all cash paid pursuant to this clause (vi) does not exceed $75,000 in any calendar year. Section 7.07 Change in Accounting. The Company will not and will not permit any -------------------- Subsidiary to, change its method of accounting except for (a) changes permitted by GAAP in which the Company's auditors concur, (b) changes with respect to any Person (including, without limitation, BOSC) or assets acquired by the Company to conform with the Company's policies and procedures and which are permitted by GAAP or (c) changes required by GAAP. The Company shall advise the Administrative Agent in writing promptly upon making any material change in its method of accounting to the extent same is not disclosed in the financial statements required under Section 6.01 hereof. In the event of any such change, ------------ the Company, the Banks and the 60 Administrative Agent agree to negotiate amendments to Sections 7.10 through 7.14 ------------- ---- hereof (and related definitions, if relevant) so as to equitably reflect such changes thereon with the intended result that the criteria for evaluating the financial condition of the Company and its Subsidiaries shall be substantially the same after such changes as before. Section 7.08 Certain Indebtedness. The Company will not make, and will not -------------------- permit any of its Subsidiaries to make, after the occurrence and during the continuance of any Event of Default, any prepayments of principal or interest on any other of the Company's Indebtedness, except as may be required thereby and permitted by any applicable subordination and intercreditor agreements. Section 7.09 Transactions with Affiliates. The Company will not, directly ---------------------------- or indirectly, engage in any transaction with any Affiliate, including the purchase, sale or exchange of assets or the rendering of any service, except in the ordinary course of business or pursuant to the reasonable requirements of its business and, in each case, upon terms that are no less favorable in all material respects than those which might be obtained in an arm's-length transaction at the time from non-Affiliates provided, that the following shall -------- in any event be permitted: (i) the Transaction; (ii) intercompany transactions among the Company and its Domestic Subsidiaries; (iii) the payment on the Effective Date of onetime consulting and advisory fees to Apollo Group and its Affiliates in an aggregate amount not to exceed $2,500,000; (iv) the reimbursement of Apollo Group and its Affiliates for its reasonable out-of- pocket expenses incurred in connection with performing management services to the Company and its Subsidiaries or in connection with the Transaction; (v) so long as no Default or Event of Default is then in existence or would result therefrom, the payment to Apollo Group and its Affiliates of management, consulting or investment banking fees as may be approved by senior management of the Borrower in good faith; (vi) customary fees to non-officer directors of the Company and its Subsidiaries; and (vii) the Company and its Subsidiaries may enter into employment arrangements with respect to the procurement of services with their respective officers and employees in the ordinary course of business. Section 7.10 Consolidated Net Worth. The Company will not permit its ---------------------- Consolidated Net Worth as of the end of any fiscal quarter to be less than the greater of $650,000,000 or 80% of the amount thereof as reported in the Company's Form 10-Q for its fiscal quarter ending March 31, 2000, plus, in all cases: (a) 100% of the Net Proceeds received from the issuance of any Capital Stock by the Company or any of its Subsidiaries subsequent to the Effective Date at any time during the term hereof, and (b) 50% of the consolidated after tax income (if positive, and without reduction for negative income) of the Company and its Subsidiaries since March 31, 2000 for each fiscal year during the term hereof (including any Subsidiaries acquired subsequent hereto). Section 7.11 Funded Debt to Pro Forma EBITDA Ratio. The Company will not ------------------------------------- permit, as of the last day of any fiscal quarter (beginning with the first fiscal quarter ending after the Effective Date), the ratio of its Funded Debt to pro forma EBITDA calculated for the preceding four (4) quarters on a rolling four (4) quarter basis to be greater than 4.00 to 1.0 if measured as of the end of any fiscal quarter ending on or prior to March 31, 2001, 3.75 to 1.00 thereafter through December 31, 2002, or 3.50 to 1.00 thereafter. 61 Section 7.12 Senior Debt to Pro Forma EBITDA Ratio. The Company will not ------------------------------------- permit, as of the last day of any fiscal quarter (beginning with the first fiscal quarter ending after the Effective Date), the ratio of Senior Debt to its pro forma EBITDA calculated for the preceding four (4) quarters on a rolling four (4) quarter basis to be greater than 3.00 to 1.00 if measured as of the end of any fiscal quarter ending on or prior to March 31, 2001, 2.75 to 1.00 thereafter through December 31, 2002, or 2.50 to 1.00 thereafter. Section 7.13 Capital Expenditures. During any fiscal year during the term -------------------- hereof, the Company will not permit non-acquisition related consolidated Capital Expenditures (including Capitalized Lease Obligations but excluding Janitorial Equipment) to be greater than the greater of $60,000,000 or six percent (6%) of Consolidated Net Worth as of the end of such fiscal year. Section 7.14 Fixed Charge Coverage Ratio. The Company will not permit, as --------------------------- of the last day of any fiscal quarter (beginning with the first fiscal quarter ending after the Effective Date), the ratio of (a) pro forma EBITDA calculated for the preceding four (4) quarters on a rolling four (4) quarter basis, to (b) the sum of (without duplication): (i)(A) cash interest expense net of interest income, (B) scheduled amortization of principal of the Term Loans and any other amortizing loans and scheduled payments in respect of Capitalized Lease Obligations, and (C) mandatory cash dividends paid on Preferred Stock, all calculated for the preceding four (4) quarters on a rolling four quarter basis, plus (ii) 1/7th of the average of Revolving Loan Advances outstanding under this Agreement during such period, to be less than 1.40 to 1.0, as of the end of any fiscal quarter. Section 7.15 Limitations on Acquisitions. The Company will not and will --------------------------- not permit any Subsidiary to acquire any Person or business; provided, however -------- ------- that: (a) Subject to the provisions of this Section 7.15 and the requirements contained in the definition of Permitted Acquisition, the Company and any of its Wholly-Owned Domestic Subsidiaries may from time to time effect Permitted Acquisitions, so long as (in each case except to the extent the Majority Banks otherwise specifically agree in writing in the case of a specific Permitted Acquisition): (i) no Default or Event of Default shall be in existence at the time of the consummation of the proposed Permitted Acquisition or immediately after giving effect thereto; and (ii) the Company shall have given the Administrative Agent and the Banks at least five Business Days' prior written notice of the proposed Permitted Acquisition if the total aggregate cash consideration payable (or assumed, in the case of assumed Indebtedness) exceeds $50,000,000, such notice to include calculations by the Company demonstrating compliance with the covenants contained in Sections 7.10, 7.11, 7.12 and 7.14 ---------------------------------- for the period of four consecutive fiscal quarters (taken as one accounting period) most recently ended prior to the date of such Permitted Acquisition (each, a "Calculation Period"), on a pro forma basis as if the respective Permitted Acquisition (as well as all other Permitted Acquisitions theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period; (b) Within forty-five (45) days of each Permitted Acquisition involving the creation or acquisition of a Subsidiary, or the acquisition of Capital Stock of any Person that constitutes a Domestic Subsidiary or a first tier Foreign Subsidiary, all Capital Stock (or 66% in the case of a first tier Foreign Subsidiary) thereof created or acquired in connection with such Permitted Acquisition 62 shall be pledged for the benefit of the Banks pursuant to the Pledge Agreement in accordance with Section 6.09; (c) The Company shall cause each Subsidiary which is formed to effect, or is acquired pursuant to, a Permitted Acquisition to comply with, and to execute and deliver, all of the documentation required by, Section 6.09 to ------------ the satisfaction of the Administrative Agent; and (d) The consummation of each Permitted Acquisition shall be deemed to be a representation and warranty by the Company that the certifications by the Company (or by one or more of its Responsible Officers) pursuant to Section ------- 7.15(a) are true and correct and that all conditions thereto have been satisfied - ------- and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 4.01 and ------------- 9.01. - ---- Section 7.16 Subordinated Debt. ----------------- (a) The Company will not make any optional payment, prepayment or redemption of any Indebtedness permitted under Section 7.03(o) or (p) except in ---------------------- connection with a refinancing otherwise permitted herein. (b) The Company will not amend or obtain or grant a waiver of any provision of (i) the Indentures, or (ii) any subordinated Indebtedness listed on Schedule 7.03(b) or any agreement or arrangement in respect thereof, except - ---------------- for amendments and waivers that are not to the material detriment of the Banks. ARTICLE VIII GUARANTY -------- Section 8.01 Guaranty. In consideration of, and in order to induce the -------- Banks to make the Loans hereunder, the Guarantors hereby absolutely, unconditionally and irrevocably, jointly and severally guarantee the punctual payment and performance when due, whether at stated maturity, by acceleration or otherwise, of the Obligations, and all other obligations and covenants of the Company now or hereafter existing under this Agreement, the Notes and the other Loan Documents whether for principal, interest (including interest accruing or becoming owing both prior to and subsequent to the commencement of any proceeding against or with respect to the Company under any chapter of the Bankruptcy Code), Fees, commissions, expenses (including reasonable attorneys' fees and expenses) or otherwise, and all reasonable costs and expenses, if any, incurred by the Administrative Agent or any Bank in connection with enforcing any rights under this Guaranty (all such obligations being the "Guaranteed Obligations"), and agree to pay any and all reasonable expenses incurred by each Bank and the Administrative Agent in enforcing this Guaranty; provided that notwithstanding anything contained herein or in any of the Loan Documents to the contrary, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed such Guarantor's Maximum Guaranteed Amount, and provided further, each Guarantor shall be unconditionally required to pay all amounts demanded of it hereunder prior to any determination of such Maximum Guaranteed Amount and the recipient of such payment, if so 63 required by a final non-appealable order of a court of competent jurisdiction, shall then be liable for the refund of any excess amounts. If any such rebate or refund is ever required, all other Guarantors (and the Company) shall be fully liable for the repayment thereof to the maximum extent allowed by applicable law. This Guaranty is an absolute, unconditional, present and continuing guaranty of payment and not of collectibility and is in no way conditioned upon any attempt to collect from the Company or any other action, occurrence or circumstance whatsoever. Each Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the Maximum Guaranteed Amount of such Guarantor without impairing this Guaranty or affecting the rights and remedies of the Banks hereunder. Section 8.02 Continuing Guaranty. Each Guarantor guarantees that the ------------------- Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement, the Notes and the other Loan Documents. Each Guarantor agrees that the Guaranteed Obligations and Loan Documents may be extended or renewed, and Loans repaid and reborrowed in whole or in part, without notice to or assent by such Guarantor, and that it will remain bound upon this Guaranty notwithstanding any extension, renewal or other alteration of any Guaranteed Obligations or Loan Documents, or any repayment and reborrowing of Loans. To the maximum extent permitted by applicable law, the obligations of each Guarantor under this Guaranty shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms hereof under any circumstances whatsoever, including: (a) any extension, renewal, modification, settlement, compromise, waiver or release in respect of any Guaranteed Obligations; (b) any extension, renewal, amendment, modification, rescission, waiver or release in respect of any Loan Documents; (c) any release, exchange, substitution, non-perfection or invalidity of, or failure to exercise rights or remedies with respect to, any direct or indirect security for any Guaranteed Obligations, including the release of any Guarantor or other Person liable on any Guaranteed Obligations; (d) any change in the corporate existence, structure or ownership of the Company, any Guarantor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company, such Guarantor, any other Guarantor or any of their respective assets; (e) the existence of any claim, defense, set-off or other rights or remedies which such Guarantor at any time may have against the Company, or the Company or such Guarantor may have at any time against the Administrative Agent, any Bank, any other Guarantor or any other Person, whether in connection with this Guaranty, the Loan Documents, the transactions contemplated thereby or any other transaction other than by the payment in full by the Company of the Guaranteed Obligations after the termination of the Commitments of the Banks; (f) any invalidity or unenforceability for any reason of this Agreement or other Loan Documents, or any provision of law purporting to prohibit the payment or performance by the 64 Company, such Guarantor or any other Guarantor of the Guaranteed Obligations or Loan Documents, or of any other obligation to the Administrative Agent or any Bank; or (g) any other circumstances or happening whatsoever, whether or not similar to any of the foregoing. Section 8.03 Effect of Debtor Relief Laws. If after receipt of any payment ---------------------------- of, or proceeds of any security applied (or intended to be applied) to the payment of all or any part of the Guaranteed Obligations, the Administrative Agent or any Bank is for any reason compelled to surrender or voluntarily surrenders (under circumstances in which it believes it could reasonably be expected to be so compelled if it did not voluntarily surrender), such payment or proceeds to any Person (a) because such payment or application of proceeds is or may be avoided, invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, fraudulent conveyance, fraudulent transfer, impermissible set-off or a diversion of trust funds or (b) for any other similar reason, including (i) any judgment, decree or order of any court or administrative body having jurisdiction over the Administrative Agent, any Bank or any of their respective properties or (ii) any settlement or compromise of any such claim effected by the Administrative Agent or any Bank with any such claimant (including the Company), then the Guaranteed Obligations or part thereof intended to be satisfied shall be reinstated and continue, and this Guaranty shall continue in full force as if such payment or proceeds have not been received, notwithstanding any revocation thereof or the cancellation of any Note or any other instrument evidencing any Guaranteed Obligations or otherwise; and the Guarantors, jointly and severally, shall be liable to pay the Administrative Agent and the Banks, and hereby do indemnify the Administrative Agent and the Banks and hold them harmless for the amount of such payment or proceeds so surrendered and all expenses (including reasonable attorneys' fees, court costs and expenses attributable thereto) incurred by the Administrative Agent or any Bank in the defense of any claim made against it that any payment or proceeds received by the Administrative Agent or any Bank in respect of all or part of the Guaranteed Obligations must be surrendered. The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of the Company by virtue of any payment, court order or any federal or state law. Section 8.04 Waiver of Subrogation. Notwithstanding any payment or --------------------- payments made by any Guarantor hereunder, or any set-off or application by the Administrative Agent or any Bank of any security or of any credits or claims, no Guarantor will assert or exercise any rights of the Administrative Agent or any Bank or of such Guarantor against the Company to recover the amount of any payment made by such Guarantor to the Administrative Agent or any Bank hereunder by way of any claim, remedy or subrogation, reimbursement, exoneration, contribution, indemnity, participation or otherwise arising by contract, by statute, under common law or otherwise, and such Guarantor shall not have any right of recourse to or any claim against assets or property of the Company, in each case unless and until the Obligations of the Company guaranteed hereby and then due have been fully and finally satisfied. Until such tim e, each Guarantor hereby expressly waives any right to exercise any claim, right or remedy which such Guarantor may now have or hereafter acquire against the Company that arises under this Agreement or any other Loan Document or from the performance by any Guarantor of the Guaranty hereunder including any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification or participation in any 65 claim, right or remedy of the Administrative Agent or any Bank against the Company or any Guarantor, or any security that the Administrative Agent or any Bank now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise. If any amount shall be paid to a Guarantor by the Company or another Guarantor after payment in full of the Obligations, and the Obligations shall thereafter be reinstated in whole or in part and the Administrative Agent or any Bank forced to repay any sums received by any of them in payment of the Obligations, this Guaranty shall be automatically reinstated and such amount shall be held in trust for the benefit of the Administrative Agent and the Banks and shall forthwith be paid to the Administrative Agent to be credited and applied to the Guaranteed Obligations, whether matured or unmatured. The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of the Company by virtue of any payment, court order or any federal or state law. Section 8.05 Subordination. If any Guarantor becomes the holder of any ------------- indebtedness payable by the Company or another Guarantor, each Guarantor hereby subordinates all indebtedness owing to it from the Company or such other Guarantor to all indebtedness of the Company to the Administrative Agent and the Banks, and agrees that during the continuance of any Event of Default and at the request of the Administrative Agent it shall not accept any payment on the same until payment in full of the Obligations of the Company under this Agreement and the other Loan Documents after the termination of the Commitments of the Banks and shall in no circumstance whatsoever attempt to set-off or reduce any obligations hereunder because of such indebtedness. If any amount shall nevertheless be paid in violation of the foregoing to a Guarantor by the Company or another Guarantor prior to payment in full of the Guaranteed Obligations, such amount shall be held in trust for the benefit of the Administrative Agent and the Banks and shall forthwith be paid to the Administrative Agent to be credited and applied to the Guaranteed Obligations, whether matured or unmatured. Section 8.06 Waiver. Each Guarantor hereby waives promptness, diligence, ------ notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and waives presentment, demand of payment, notice of intent to accelerate, notice of dishonor or nonpayment and any requirement that the Administrative Agent or any Bank institute suit, collection proceedings or take any other action to collect the Guaranteed Obligations, including any requirement that the Administrative Agent or any Bank protect, secure, perfect or insure any Lien against any property subject thereto or exhaust any right or take any action against the Company or any other Person or any collateral (it being the intention of the Administrative Agent, the Banks and each Guarantor that this Guaranty is to be a guaranty of payment and not of collection). It shall not be necessary for the Administrative Agent or any Bank, in order to enforce any payment by any Guarantor hereunder, to institute suit or exhaust its rights and remedies against the Company, any other Guarantor or any other Person, including others liable to pay any Guaranteed Obligations, or to enforce its rights against any security ever given to secure payment thereof. Each Guarantor hereby expressly waives to the maximum extent permitted by applicable law each and every right to which it may be entitled by virtue of the suretyship laws of the State of Texas, including any and all rights it may have pursuant to Rule 31, Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code. Each Guarantor hereby waives marshaling of assets and liabilities, notice by the 66 Administrative Agent or any Bank of any indebtedness or liability to which such Bank applies or may apply any amounts received by such Bank, and of the creation, advancement, increase, existence, extension, renewal, rearrangement or modification of the Guaranteed Obligations. Each Guarantor expressly waives, to the extent permitted by applicable law, the benefit of any and all laws providing for exemption of property from execution or for valuation and appraisal upon foreclosure. Section 8.07 Full Force and Effect. This Guaranty is a continuing guaranty --------------------- and shall remain in full force and effect until all of the Obligations of the Company under this Agreement and the other Loan Documents and all other amounts payable under this Guaranty have been paid in full (after the termination of the Commitments of the Banks). All rights, remedies and powers provided in this Guaranty may be exercised, and all waivers contained in this Guaranty may be enforced, only to the extent that the exercise or enforcement thereof does not violate any provisions of applicable law which may not be waived. Section 8.08 Negative Pledge. No Guarantor will create any lien on its --------------- assets to any other Person during the pendency of this Agreement except for liens that would be permitted by Section 7.04 nor will any of them enter any ------------ agreement with any Person not to grant liens on or pledge assets to the Administrative Agent, except for restrictions in leases, licenses, purchase money loans and other contracts entered into in the ordinary course of business and limited to the specific property subject to such lease, license, loan or contract. ARTICLE IX EVENTS OF DEFAULT AND REMEDIES ------------------------------ Section 9.01 Events of Default. The following events shall constitute ----------------- Events of Default ("Events of Default") hereunder: ----------------- (a) any installment of principal is not paid when due or any payment of interest or Fees is not paid on the date on which such payment is due and such failure continues for a period of five (5) days; or (b) any representation or warranty made or deemed made by the Company or any Subsidiary herein or in any of the Loan Documents or other document, certificate or financial statement delivered in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made or reaffirmed, as the case may be; or (c) the Company or any Subsidiary shall fail to perform or observe any duty or covenant contained in Article VI of this Agreement or in any of the ---------- other Loan Documents and such failure continues for a period of thirty (30) days after notice from the Administrative Agent or shall fail to perform or observe any covenant contained in Article VIII of this Agreement; or ------------ (d) the Company or any Subsidiary shall fail to make (whether as primary obligor or as guarantor or other surety) any principal payment of or interest or premium, if any, on any instrument of Indebtedness in excess of $10,000,000 outstanding beyond any period of grace provided 67 with respect thereto or shall fail to duly observe, perform or comply with any agreement with any Person or any term or condition of any instrument of Indebtedness in excess of $10,000,000, if the effect of such failure is to cause, or to permit the holder or holders to cause, such obligations to become due prior to any stated maturity; or (e) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company or any Significant Subsidiary, or of a substantial part of the property or assets of the Company or any Significant Subsidiary, under Title 11 of the United States Code, as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"), or any other federal or state --------------- bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary diary or for a substantial part of the property or assets of the Company or any Significant Subsidiary or (iii) the winding-up or liquidation of the Company or any Significant Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or (f) the Company or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under the Bankruptcy Code or any other federal or state bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (e) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of the property or assets of the Company or any Significant Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, or admit in writing its inability or fail generally, to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; or (g) any Loan Document shall become or be deemed to be unenforceable in any material respect except as permitted herein; or (h) a judgment or order, which with other outstanding judgments and orders against the Company and its Significant Subsidiaries equal or exceed $10,000,000 in the aggregate (to the extent not covered by insurance as to which the respective insurer has acknowledged coverage), shall be entered against the Company or any Significant Subsidiary and (i) within 30 days after entry thereof such judgment shall not have been paid or discharged or execution thereof stayed pending appeal or, within 30 days after the expiration of any such stay, such judgment shall not have been paid or discharged or (ii) any enforcement proceeding shall have been commenced (and not stayed) by any creditor or upon such judgment; or (i) any Plan shall incur an accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) which (individually or collectively) exceeds $10,000,000, whether or not waived, or a waiver in excess of $10,000,000 of the minimum funding standard or material extension of any amortization period is sought or granted under Section 412 of the Code with respect 68 to a Plan; any proceeding shall have occurred or is reasonably likely to occur by the PBGC under Section 4069(a) of ERISA to impose liability on the Company, any Subsidiary or an ERISA Affiliate which (individually or collectively) exceeds $10,000,000; any required contribution to a Plan or Multiemployer Plan in excess of $10,000,000 shall not have been made within 15 days of the date such contribution is due; or the Company, any Subsidiary or any ERISA Affiliate has incurred or is reasonably likely to incur a liability to or on account of a Plan or Multiemployer Plan under Section 515, 4062, 4063, 4201 or 4204 of ERISA, and there shall result (individually or collectively) from any such event or events a material risk of either (i) the imposition of a Lien(s) upon, or the granting of a security interest(s) in, the assets of the Company, any Subsid iary and/or an ERISA Affiliate securing an amount(s) equal to or exceeding $10,000,000, or (ii) the Company, any Subsidiary and/or an ERISA Affiliate incurring a liability(ies) or obligation(s) with respect thereto equal to or exceeding $10,000,000; or (j) a Change of Control shall occur. Section 9.02 Primary Remedies. In any such event, and at any time after ---------------- the occurrence of any of the above described events, the Administrative Agent, if directed by the Majority Banks, shall by written notice to the Company (a "Notice of Default") take any or all of the following actions (without prejudice ----------------- to the rights of any Bank to enforce any other rights it may have against the Company, provided that, if an Event of Default specified in Section 9.01(e) or -------- --------------- Section 9.01(f) shall occur, the following shall occur automatically without the - --------------- giving of any Notice of Default): (a) declare the Commitments terminated, whereupon the Commitments shall forthwith terminate immediately and any Commitment Fee and any other owing and unpaid Fee shall forthwith become due and payable without any other notice of any kind; (b) declare the principal of and any accrued and unpaid interest in respect of all Advances, and all obligations owing hereunder, to be, whereupon the same shall become, forthwith due and payable without presentment, demand, notice of demand or of dishonor and non- payment, protest, notice of protest, notice of intent to accelerate, declaration or notice of acceleration or any other notice of any kind (except as herein provided), all of which are hereby waived by the Company; (c) set off any assets or money of the Company or any Guarantor in its or any Bank's possession against the Obligations (and thereafter in accordance with Section 11.06); and (d) ------------- exercise any rights or remedies under any of the Loan Documents or under any applicable state or federal law. Section 9.03 Other Remedies. Upon the occurrence and during the -------------- continuance of any Event of Default, the Administrative Agent may proceed to protect and enforce its and the Banks' rights, either by suit in equity or by action at law or both, whether for the specific performance of any covenant or agreement contained in this Agreement or in any other Loan Document or in aid of the exercise of any power granted in this Agreement or in any other Loan Document; or may proceed to enforce the payment of all amounts owing to the Banks under the Loan Documents and any accrued and unpaid interest thereon in the manner set forth herein or therein; it being intended that no remedy conferred herein or in any of the other Loan Documents is to be exclusive of any other remedy, and each and every remedy contained herein or in any other Loan Document shall be cumulative and shall be in addition to every other remedy given hereunder and under the other Loan Documents or now or hereafter existing at law or in equity or by statute or otherwise. 69 Section 9.04 Cash Collateral. If an Event of Default shall have occurred --------------- and be continuing, the Company shall, if requested by the Administrative Agent or the Majority Banks, pledge to the Administrative Agent as security for the Obligations, pursuant to agreements in form and substance satisfactory to the Administrative Agent, an amount in immediately available funds equal to the then outstanding Letter of Credit Liabilities, such funds to be held in a cash collateral account by the Administrative Agent without any right of withdrawal by the Company. ARTICLE X THE ADMINISTRATIVE AGENT ------------------------ Section 10.01 Authorization and Action. Each Bank hereby irrevocably ------------------------ appoints and authorizes the Administrative Agent to act on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are specifically delegated to or required of the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through its agents and employees. The duties of the Administrative Agent shall be mechanical and administrative in nature; the Administrative Agent shall not have by reason of this Agreement or any other Loan Documents a fiduciary relationship in respect of any Bank; and nothing in this Agreement or any other Loan Document, expressed or implied, is intended to, or shall be so construed as to, impose upon the Administrative Agent any obligations in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein. As to any matters not expressly provided for by this Agreement, the Notes or the other Loan Documents (including enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks, and such instructions shall be binding upon the Banks and all holders of Notes and the Obligations; provided that the Administrative Agent -------- shall not be required to take any action which exposes the Administrative Agent to personal liability and shall not be required or entitled to take any action which is contrary to any of the Loan Documents or applicable law. Section 10.02 Administrative Agent's Reliance. ------------------------------- (a) Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to the Banks for any action taken or omitted to be taken by it or them under or in connection with this Agreement, the Notes or any of the other Loan Documents (i) with the consent or at the request of the Majority Banks or (ii) in the absence of its or their own gross negligence or willful misconduct, it being the express intention of the parties hereto that the Administrative Agent and its directors, officers, agents and employees shall have no liability to the Banks for actions and omissions under this Section resulting from the Administrative Agent's sole ordinary or contributory negligence. (b) Without limitation of the generality of the foregoing, the Administrative Agent: (i) may treat the payee of each Note and the Obligations as the holder thereof until the Administrative Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Administrative Agent; (ii) may consult with legal counsel (including counsel for 70 the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations made in or in connection with this Agreement, any Note or any other Loan Document; (iv) except as otherwise expressly provided herein, shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, any Note or any other Loan Document or to inspect the property (including the books and records) of the Company; (v) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, collectibility, genuineness, sufficiency or value of this Agreement, any Note, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (vi) shall not be responsible to any Bank for the perfection or priority of any Lien securing the Obligations; and (vii) shall incur no liability to the Banks under or in respect of this Agreement, any Note or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopier or cable) reasonably believed by it to be genuine and signed or sent by the proper party or parties. Section 10.03 Administrative Agent and Affiliates; Bank of America and -------------------------------------------------------- Affiliates. Without limiting the right of any other Bank to engage in any - ---------- business transactions with the Company or any of its Affiliates, with respect to their Commitments, the Loans made by them and the Notes issued to them, Bank of America and each other Bank who may become the Administrative Agent shall have the same rights and powers under this Agreement and its Notes as any other Bank and may exercise the same as though it was not the Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include Bank of America and any such other Bank, in their individual capacities. Bank of America, each other Person who becomes the Administrative Agent and their respective Affiliates may be engaged in, or may hereafter engage in, one or more loan, letter of credit, leasing or other financing activity not the subject of this Agreement (collectively, the "Other Financings") with the Company, any ---------------- Subsidiary or any of its Affiliates, or may act as trustee on behalf of, or depositary for, or otherwise engage in other business transactions with the Company, any Subsidiary or any of its Affiliates (all Other Financings and other such business transactions being collectively, the "Other Activities") with no ---------------- responsibility to account therefor to the Banks. Without limiting the rights and remedies of the Banks specifically set forth herein, no other Bank by virtue of being a Bank hereunder shall have any interest in (a) any Other Activities, (b) any present or future guaranty by or for the account of the Company not contemplated or included herein, (c) any present or future offset exercised by the Administrative Agent in respect of any such Other Activities, (d) any present or future property taken as security for any such Other Activities or (e) any property now or hereafter in the possession or control of the Administrative Agent which may be or become security for the Obligations of the Company hereunder and under the Notes by reason of the general description of indebtedness secured, or of property contained in any other agreements, documents or instruments related to such Other Activities; provided, however, -------- ------- that if any payment in respect of such guaranties or such property or the proceeds thereof shall be applied to reduction of the Obligations evidenced hereunder and by the Notes, then each Bank shall be entitled to share in such application according to its pro rata portion of such Obligations. 71 Section 10.04 Banks' Credit Decision. Each Bank acknowledges and agrees ---------------------- that it has, independently and without reliance upon the Administrative Agent or any other Bank and based on the financial statements referred to in Section 5.07 ------------ and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges and agrees that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. Section 10.05 Administrative Agent's Indemnity. -------------------------------- (a) The Administrative Agent shall not be required to take any action hereunder or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document unless indemnified to the Administrative Agent's satisfaction by the Banks against loss, cost, liability and expense. If any indemnity furnished to the Administrative Agent shall become impaired, it may call for additional indemnity and cease to do the acts indemnified against until such additional indemnity is given. In addition, the Banks agree to indemnify the Administrative Agent (to the extent not reimbursed by the Company), ratably according to the respective aggregate principal amounts of the Notes then held by each of them (or if no Notes are at the time outstanding, ratably according to the respective amounts of the Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent under this Agreement, the Notes and the other Loan Documents. Without limitation of the foregoing, each Bank agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement, the Notes and the other Loan Documents to the extent that the Administrative Agent is not reimbursed for such expenses by the Company. The provisions of this Section shall survive the termination of this Agreement, the payment of the Obligations and/or the assignment of any of the Notes. (b) Notwithstanding the foregoing, no Bank shall be liable under this Section to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements due to the Administrative Agent resulting from the Administrative Agent's gross negligence or willful misconduct. Each Bank agrees, however, that it expressly intends, under this Section, to indemnify the Administrative Agent ratably as aforesaid for all such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements arising out of or resulting from the Administrative Agent's sole ordinary or contributory negligence. Section 10.06 Successor Administrative Agent. The Administrative Agent ------------------------------ may resign at any time by giving written notice thereof to the Banks and the Company and may be removed as Administrative Agent under this Agreement, the Notes and the other Loan Documents at any time 72 with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Administrative Agent with the approval of the Company (so long as no Default or Event of Default then exists), which shall not be unreasonably withheld. If no successor Administrative Agent shall have been so appointed by the Majority Banks, and shall have accepted such appointment, within 30 calendar days after the retiring Administrative Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent with the approval of the Company (so long as no Default or Event of Default then exists), which shall not be unreasonably withheld, which shall be a commercial bank organized under the laws of the United States of America or of any state thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder and under the Notes and the other Loan Documents by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement, the Notes and the other Loan Documents. After any retiring Administrative Agent's resignation or removal as Administrative Agent hereunder and under the Notes and the other Loan Documents, the provisions of this Article X shall inure to its --------- benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement, the Notes and the other Loan Documents. Section 10.07 Notice of Default. The Administrative Agent shall not be ----------------- deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent shall have received notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." If the Administrative Agent receives such notice, the Administrative Agent shall give notice thereof to the Banks; provided, however, if such notice is received -------- ------- from a Bank, the Administrative Agent also shall give notice thereof to the Company. The Administrative Agent shall be entitled to take action or refrain from taking action with respect to such Default or Event of Default as provided in Section 10.01 and Section 10.02. ------------- ------------- ARTICLE XI MISCELLANEOUS ------------- Section 11.01 Amendments. No amendment or waiver of any provision of this ---------- Agreement, any Note or any other Loan Document (other than Interest Rate Protection Agreements, amendments and waivers of which are governed separately thereby), nor consent to any departure by the Company herefrom or therefrom, shall in any event be effective unless the same shall be in writing and signed by the Company, as to amendments, and by the Majority Banks in all cases, and then, in any case, such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided no such -------- amendment, waiver or consent shall be effective unless signed by all of the Banks if it would result in (a) increases in the commitment of such Banks, (b) reductions of principal, interest, or fees, (c) extensions of scheduled maturities or times for payment, (d) releases of all or substantially all of the Collateral, (e) releases of the Guarantors or (f) a change to this Section 11.01 ------------- or the definition of Majority Banks; except, with respect to clauses (d) and (e), 73 for releases in connection with permitted asset sales (including Approved Securitizations) where the Administrative Agent may release the affected guaranty, assets or Accounts without Bank approval. Releases of Collateral as part of an asset sale that is not currently permitted by Section 7.02 but which ------------ does not constitute a release of all or substantially all of the Collateral shall require approval of Majority Banks. Further, no provisions of Article III ----------- or Article X or other terms affecting the Administrative Agent or the Issuing --------- Bank may be changed without the consent of said Administrative Agent or the Issuing Bank as appropriate. Section 11.02 Notices. Except with respect to telephone notifications ------- specifically permitted pursuant to Article II, all notices, consents, requests, ---------- approvals, demands and other communications provided for herein shall be in writing (including telecopy communications) and mailed (by certified mail, return receipt requested), telecopied, sent by overnight courier or delivered: (a) If to the Company and the Guarantors: Group Maintenance America Corp. 8 Greenway Plaza Suite 1500 Houston, Texas 77046 Telephone No.: (713) 860-0100 Telecopy No: (713) 626-4766 Attention: Chief Financial Officer (b) If to the Administrative Agent: Bank of America, N.A. 901 Main Street, 14/th/ Floor Dallas, Texas 75202 Telephone No.: (214) 209-9177 Telecopy No: (214) 209-2515 Attention: Theresa Belk or, in the case of any party hereto, such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other parties. (c) If to any Bank, to the address shown on the signature page hereof or specified by such Bank (or the Administrative Agent on behalf of any Bank) to the Company. All communications shall, when mailed, telecopied or delivered, be effective when mailed by certified mail, return receipt requested to any party at its address specified above, or telecopied to any party to the telecopy number set forth above, or delivered personally to any party at its address specified above; provided that communications to the Administrative Agent -------- pursuant to Article II shall not be effective until actually received by the ---------- Administrative Agent, and provided, further, that communications sent by -------- ------- telecopy after 5:00 p.m., Dallas, Texas time, shall be effective on the next succeeding business day. 74 Section 11.03 No Waiver; Remedies. No failure on the part of any Bank or ------------------- the Administrative Agent to exercise, and no delay in exercising, any right hereunder, under any Note or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, or any abandonment or discontinuance of any steps to enforce such right, preclude any other or further exercise thereof or the exercise of any other right. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. The remedies herein are cumulative and not exclusive of any other remedies provided by law, at equity or in any other agreement. Section 11.04 Costs and Expenses. The Company agrees to pay on demand: ------------------ (a) all reasonable out-of-pocket costs and expenses of the Administrative Agent, the Syndication Agent and the Co-Lead Arrangers and Co-Book Managers in connection with the preparation, delivery, sale and syndication of this Agreement, the Notes, the other Loan Documents and the other documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, the Notes and the other Loan Documents, and any modification, supplement or waiver of any of the terms of this Agreement or any other Loan Document, (b) all reasonable out-of-pocket costs and expenses of any Bank including reasonable legal fees and expenses, in connection with the enforcement of this Agreement, the Notes and the other Loan Documents and (c) reasonable costs and expenses incurred in connection with third party professional services reasonably required by the Administrative Agent such as appraisers, environmental consultants, accountants or similar Persons, provided that, prior -------- to any Event of Default hereunder, the Administrative Agent will first obtain the consent of the Company to such expense, which consent shall not be unreasonably withheld. Without prejudice to the survival of any other obligations of the Company hereunder and under the Notes, the obligations of the Company under this Section shall survive the termination of this Agreement or the replacement of the Administrative Agent and each assignment of the Notes. Section 11.05 Release and Indemnity. --------------------- (a) The Company shall and hereby does indemnify the Administrative Agent, the Syndication Agent and the Co-Lead Arrangers and Co-Book Managers and each Bank and each Affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages (including reasonable legal fees and expenses) to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Company of the proceeds of any extension of credit hereunder or any investigation, litigation or other proceeding (including any threatened investigation or proceeding) relating to the foregoing or any of the other Loan Documents, and the Company shall reimburse each Bank and each Affiliate thereof and their respective directors, officers, employees and agents, upon demand for any expenses (including legal fees) reasonably incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified (the "Indemnified ----------- Obligations"). - ----------- 75 (b) Without limiting any provision of this Agreement, it is the express intention of the parties hereto that each Person to be indemnified hereunder shall be indemnified and held harmless against any and all Indemnified Obligations arising out of or resulting from the ordinary sole or contributory negligence of such Person or imposed upon said party under any theory of strict liability. Without prejudice to the survival of any other obligations of the Company hereunder and under the other Loan Documents, the obligations of the Company under this Section shall survive the termination of this Agreement and the other Loan Documents and the payment of the Obligations or the assignment of the Notes. Section 11.06 Right of Setoff. Without limiting the remedies provided for --------------- in Article IX, each Bank is hereby authorized at any time and from time to time, ---------- after acceleration of the Obligations after the occurrence of an Event of Default to the fullest extent permitted by law, to set off and apply any and all deposits held and other indebtedness owing by such Bank, or any branch, subsidiary or Affiliate, to or for the credit or the account of the Company or any Guarantor against any and all the Obligations of the Company or any Guarantor now or hereafter existing under this Agreement and the other Loan Documents and other obligations of the Company or any Guarantor held by such Bank, irrespective of whether or not such Bank shall have made any demand under this Agreement, its Note or the Obligations and although the Obligations may be unmatured. Each Bank agrees promptly to notify the Company or Guarantors as the case may be, after any such set-off and application made by such Bank, provided, -------- that failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank under this Section are in addition to other rights and remedies (including other rights of setoff) which such Bank may have. Section 11.07 Governing Law. This Agreement, all Notes, the other Loan ------------- Documents and all other documents executed in connection herewith shall be deemed to be contracts and agreements executed by the Company and each Bank under the laws of the State of Texas and of the United States of America and for all purposes shall be construed in accordance with, and governed by, the laws of said state and of the United States of America. Without limitation of the foregoing, nothing in this Agreement, or in the Notes or in any other Loan Document shall be deemed to constitute a waiver of any rights which any Bank may have under applicable federal legislation relating to the amount of interest which such Bank may contract for, take, receive or charge in respect of the Loan and the Loan Documents, including any right to take, receive, reserve and charge interest at the rate allowed by the law of the state where any Bank is located. The Administrative Agent, each Bank and the Company further agree that insofar as the provisions of Texas Finance Code, Chapter 303, as amended, are applicable to the determination of the Highest Lawful Rate with respect to the Notes and the Obligations hereunder and under the other Loan Documents, the weekly rate ceiling of such Article, as described in Article 1D.003 of the Texas Credit Title, shall be applicable; provided, however, that to the extent permitted by -------- ------- such Article, the Administrative Agent may from time to time by notice to the Company revise the election of such interest rate ceiling as such ceiling affects the then current or future balances of the Loans. The provisions of the Texas Finance Code, Chapter 346 do not apply to this Agreement, any Note issued hereunder or the other Loan Documents. Section 11.08 Interest. Each provision in this Agreement and each other -------- Loan Document is expressly limited so that in no event whatsoever shall the amount paid, or otherwise agreed to be paid, to the Administrative Agent or any Bank, or charged, contracted for, reserved, taken or 76 received by the Administrative Agent or any Bank, for the use, forbearance or detention of the money to be loaned under this Agreement or any Loan Document or otherwise (including any sums paid as required by any covenant or obligation contained herein or in any other Loan Document which is for the use, forbearance or detention of such money), exceed that amount of money which would cause the effective rate of interest to exceed the Highest Lawful Rate, and all amounts owed under this Agreement and each other Loan Document shall be held to be subject to reduction to the effect that such amounts so paid or agreed to be paid, charged, contracted for, reserved, taken or received which are for the use, forbearance or detention of money under this Agreement or such Loan Document shall in no event exceed that amount of money which would cause the effective rate of interest to exceed the Highest Lawful Rate. Anything in any Note or any other Loan Document to the contrary notwithstanding, the Company shall not be required to pay unearned interest on any Note and the Company shall not be required to pay interest on the Obligations at a rate in excess of the Highest Lawful Rate, and if the effective rate of interest which would otherwise be payable under such Note and such Loan Documents would exceed the Highest Lawful Rate, or if the holder of such Note shall receive any unearned interest or shall receive monies that are deemed to constitute interest which would increase the effective rate of interest payable by the Company under such Note and the other Loan Documents to a rate in excess of the Highest Lawful Rate, then (a) the amount of interest which would otherwise be payable by the Company shall be reduced to the amount allowed under applicable law and (b) any unearned interest paid by the Company or any interest paid by the Company in excess of the Highest Lawful Rate shall in the first instance be credited on the principal of the Obligations of the Company (or if all such Obligations shall have been paid in full, refunded to the Company). It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, reserved, taken, charged or received by any Bank under the Notes and the Obligations and under the other Loan Documents are made for the purpose of determining whether such rate exceeds the Highest Lawful Rate, and shall be made, to the extent permitted by usury laws applicable to such Bank, by amortizing, prorating and spreading in equal parts during the period of the full stated term of the Notes and this Agreement all interest at any time contracted for, charged or received by such Bank in connection therewith. Furthermore, in the event that the maturity of any Note or other obligation is accelerated or in the event of any required or permitted prepayment, then such consideration that constitutes interest under applicable law may never include more than the maximum amount allowed by applicable law and excess interest, if any, provided for in this Agreement, any Note or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be refunded to the Company. Section 11.09 Survival of Representations and Warranties. All ------------------------------------------ representations, warranties and covenants contained herein or made in writing by the Company in connection herewith and the other Loan Documents shall survive the execution and delivery of this Agreement, the Notes and the other Loan Documents and the termination of the Commitments of the Banks and will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed or not, provided that the Commitments of the Banks -------- subject to Section 11.10 shall not inure to the benefit of any successor or assign of the Company. Section 11.10 Successors and Assigns; Participations. -------------------------------------- 77 (a) Subject to the further provisions of this Section 11.10, all covenants, promises and agreements by or on behalf of the Company or the Banks that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns. The Company may not assign or transfer any of its rights or obligations hereunder. (b) Any of the Banks may sell participations to one or more banks, financial institutions or other investors of all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitments (or any of them), the Advances (or any of them) and the Obligations of the Company owing to it and the Notes); provided that the -------- Company shall continue to deal solely and directly with the Administrative Agent and such assigning or selling Bank in connection with such Bank's rights and obligations under this Agreement and the other Loan Documents. Except with respect to cost protections provided to a participant pursuant to this paragraph and the items listed in Section 11.01 hereof, no participant shall be a third ------------- party beneficiary of this Agreement nor shall it be entitled to enforce any rights provided to the Banks against the Company under this Agreement. In the case of participations (but not assignments) (i) the original Bank's obligations under this Agreement (including without limitation, its Commitment to the Company hereunder) shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Bank shall remain the holder of such Loan Documents for all purposes of this Agreement, (iv) the Company, the Administrative Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, (v) such Bank shall continue to be able to agree to any modification or amendment of this Agreement or any waiver hereunder without the consent, approval or vote of any such participant or group of participants, other than modifications, amendments and waivers described in the proviso to Section 11.01, and (vi) except as ------------- contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Bank" hereunder. (c) A Bank may assign to any other Bank or Banks or to any Affiliate of a Bank and, with the prior written consent (which consent shall not be unreasonably withheld), of the Company (so long as no Default or Event of Default then exists) and the Administrative Agent, a Bank may assign to one or more other Eligible Assignees all or a portion of its interests, rights, and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitments (or any of them) and the same or varying portions of the Loans and other Obligations of the Company at the time owing to it and the Notes (or any of them) held by it); provided, however, that (i) each such -------- ------- assignment shall be in a minimum principal amount of not less than $5,000,000, (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance, an Assignment and Acceptance, substantially in the form of Exhibit 11.10(c) hereto, in form and substance ---------------- satisfactory to the Administrative Agent (an "Assignment and Acceptance") and ------------------------- any Note subject to such assignment, (iii) no assignment shall be effective until receipt by the Administrative Agent of a reasonable service fee from the Assignee Bank in respect of said assignment equal to $3,500, (iv) the Assigning Bank, provided it does not assign all of its rights and obligations under this Agreement and the other Loan Documents, shall retain a minimum amount of $5,000,000 of the Commitments following the Assignment and (v) each such assignment is subject to Section 2.17. Upon such execution, delivery and ------------ acceptance, from and after the effective date specified in each Assignment and Acceptance, which effective date (unless otherwise agreed to by the assigning Bank, 78 the Eligible Assignee thereunder and the Administrative Agent) shall be at least five Business Days after the execution thereof, (x) the Eligible Assignee thereunder shall be a party hereto as a "Bank" and to the other Loan Documents and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and under the other Loan Documents and (y) the assignor Bank thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Bank's rights and obligations under this Agreement and the other Loan Documents, such Bank shall cease to be a party hereto). (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) Notwithstanding any other provision herein, any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this section, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Company furnished to such Bank by or on behalf of the Company; provided, however, that -------- ------- prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree in writing for the benefit of the Company to preserve the confidentiality of any confidential information relating to the Company or any of its Subsidiaries received by it from such Bank in a manner consistent with Section 11.11. ------------- Section 11.11 Confidentiality. Each Bank and the Administrative Agent --------------- agrees to keep any information delivered or made available to it by the Company or any of its Subsidiaries, confidential from anyone other than Persons employed or retained by it who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans and who are bound hereby; provided that nothing herein shall prevent any Bank or the Administrative Agent - -------- from disclosing such information (a) to any Affiliate of such Bank (or such Persons employed by such Affiliate) or to any other Bank, (b) pursuant to subpoena or upon the order of any court or administrative agency, (c) upon the request or demand of any regulatory agency or authority having jurisdiction over such Bank, (d) which has been publicly disclosed, (e) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Bank, the Company or its respective Affiliates may be a party, (f) to the extent reasonably required in connection with the exercise of any remedy hereunder, (g) to such Bank's legal counsel and independent auditors and who are bound hereby and (h) to any actual or proposed participant or assignee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section. Each Bank or the Administrative Agent will promptly notify the Company of any information that it is required or requested to deliver pursuant to clause (b) or (c) of this Section and, if the Company is a party to any such litigation, clause (e) of this Section. Section 11.12 Pro Rata Treatment. ------------------ 79 (a) Except for payments in respect of Swingline Advances or as otherwise specifically permitted hereunder, each payment or prepayment of principal, if permitted under this Agreement, and each payment of interest with respect to an Advance shall be made pro rata among the Banks. (b) Each Bank agrees that if, through the exercise of a right of banker's Lien, setoff or claim of any kind against the Company as a result of which the unpaid principal portion of the Notes and the Obligations held by it shall be proportionately less than the unpaid principal portion of the Notes and Obligations held by any other Bank, it shall be deemed to have simultaneously purchased from such other Bank a participation in the Notes and Obligations held by such other Bank, in the amount required to render such amounts proportional; provided, however, that if any such purchase or purchases or adjustments shall - -------- ------- be made pursuant to this Section and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustments restored without interest. Section 11.13 Separability. Should any clause, sentence, paragraph or ------------ Section of this Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that the part or parts of this Agreement so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom and the remainder will have the same force and effectiveness as if such part or parts had never been included herein. Section 11.14 Execution in Counterparts. This Agreement may be executed in ------------------------- any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Any Subsidiary of the Company that executes an Adoption Agreement after the date of this Agreement shall, upon such execution, become a party hereto as a Guarantor. Section 11.15 Interpretation. -------------- (a) In this Agreement, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any gender includes each other gender; (iii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (iv) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually, provided that nothing in this clause is intended to authorize any -------- assignment not otherwise permitted by this Agreement; 80 (v) except as expressly provided to the contrary herein, reference to any agreement, document or instrument (including this Agreement) means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, and reference to any Note or other note includes any Note issued pursuant hereto in extension or renewal thereof and in substitution or replacement therefor; (vi) unless the context indicates otherwise, reference to any Article, Section, Schedule or Exhibit means such Article or Section hereof or such Schedule or Exhibit hereto; (vii) the words "including" (and with correlative meaning "include") means including, without limiting the generality of any description preceding such term; (viii) with respect to the determination of any period of time, except as expressly provided to the contrary, the word "from" means "from and including" and the word "to" means "to but excluding"; and (ix) reference to any law, rule or regulation means such as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time. (b) The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. (c) No provision of this Agreement shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision. (d) In the event of any conflict between the specific provisions of this Agreement and the provisions of any application pertaining to any letter of credit secured by a Loan Document, the terms of this Agreement shall control. Section 11.16 SUBMISSION TO JURISDICTION. -------------------------- (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN DALLAS COUNTY OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE COMPANY AND EACH GUARANTOR FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 11.02 ------------- AND WITH RESPECT TO 81 ANY GUARANTOR, AT THE ADDRESS PROVIDED ON SCHEDULE 5.16 HERETO, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. (b) EACH OF THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. Section 11.17 WAIVER OF JURY TRIAL. EACH OF THE BANKS, THE ADMINISTRATIVE -------------------- AGENT, THE SYNDICATION AGENT, THE DOCUMENTATION AGENT, THE COMPANY AND THE GUARANTORS HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. Section 11.18 Collateral. Each of the Banks represents that it, in good ---------- faith, has not relied on any "margin stock" as "collateral in extending or maintaining credit" hereunder (as such terms in quotes are defined in Regulation U issued by the Board of Governors of the Federal Reserve System). Section 11.19 FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT (INCLUDING ------------------------------ THE SCHEDULES AND EXHIBITS HERETO), THE NOTES AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 82 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. COMPANY: GROUP MAINTENANCE AMERICA CORP. By: /s/ DARREN B. MILLER ________________________ Name: Darren B. Miller Title: Executive Vice President 83 BOSS SUBSIDIARIES ADVENT ELECTRIC CO., INC. AMERICAN AIR COMPANY, INC. ATLANTIC ELECTRIC COMPANY, INC. BARNES IVEY MECHANICAL COMPANY, L.L.C. B&R ELECTRICAL SERVICES, INC. BELTLINE MECHANICAL SERVICES, INC. BRAZOSPORT MANAGEMENT, INC. BUILDING ONE MECHANICAL SERVICES, INC. (TO BE NAMED ENCOMPASS MECHANICAL SERVICES, INC.) BUILDING ONE COMMERCIAL, INC. (F/K/A SPANN BUILDING MAINTENANCE COMPANY, TO BE NAMED ENCOMPASS COMMERCIAL, INC.) BUILDING ONE SERVICE SOLUTIONS, INC. BUYR, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. CONSOLIDATED ELECTRICAL GROUP, INC. CRAMAR ELECTRIC, INC. C.R. HIPP CONSTRUCTION CO., INC. D&P JANITORIAL, INC. DEL-AIR SERVICE COMPANY, INC. D/FW MECHANICAL SERVICES, INC. DIRECT ENGINEERED MAINTENANCE, INC. DIVERSIFIED MANAGEMENT SERVICES, U.S.A., INC. EDG POWER GROUP, INC. ELECTRICAL CONTRACTING, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. FACILITYDIRECT.COM, LLC (F/K/A ALLIANCE SUPPLY CO., LLC) FRED CLARK ELECTRICAL CONTRACTOR, INC. GAMEWELL MECHANICAL, INC. GARFIELD-INDECON ELECTRICAL SERVICES, INC. G.S. FINANCIAL, INC. G.S. GROUP, INC. G.S.I. OF CALIFORNIA, INC. GULF STATES, INC. HYDRO COOLING, INC. INTERSTATE BUILDING SERVICES, LLC IVEY MECHANICAL COMPANY, INC. IVEY MECHANICAL SERVICES, L.L.C. K & A MECHANICAL, INC. THE LEWIS COMPANIES, INC. LEXINGTON/IVEY MECHANICAL COMPANY, LLC MCINTOSH MECHANICAL, INC. MH TECHNOLOGIES, INC. NATIONAL NETWORK SERVICES, INC. OIL CAPITAL ELECTRIC, INC. 84 OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES, By Omni Mechanical Company POTTER ELECTRIC CO., INC. PROCESS DESIGN BUILDERS, LLC PRO WIRE SECURITY SYSTEMS, INC. REGENCY ELECTRIC COMPANY, INC. REGENCY ELECTRIC COMPANY ATLANTA OFFICE REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY SOUTH FLORIDA OFFICE, INC. RIVIERA ELECTRIC CONSTRUCTION CO. RIVIERA ELECTRIC OF CALIFORNIA, INC. ROBINSON MECHANICAL COMPANY SANDERS BROS, INC. SKC ELECTRIC, INC. SKCE, INC. S.L. PAGE CORPORATION SULLIVAN ELECTRIC, INC. TAYLOR-HUNT ELECTRIC, INC. (F/K/A TAYLOR ELECTRIC, INC.) TESTRONICS, INC. TOWN & COUNTRY ELECTRIC, INC. TRI-CITY ELECTRICAL CONTRACTORS, INC. TRI-M BUILDING AUTOMATION SYSTEMS CORP. TRI-M CORPORATION TRI-M ELECTRICAL CONSTRUCTION CORP. TRI-M HOLDING CORP. TSE ACQUISITION CORP. TRI-STATE ACQUISITION CORP. WALKER ENGINEERING, INC. WALTER C. DAVIS & SON, INCORPORATED WATSON ELECTRICAL CONSTRUCTION CO. WILSON ELECTRIC COMPANY, INC. WAYZATA, INC. ZWART, INC. (D/B/A MOUNTAIN VIEW ELECTRIC, INC.) By: /s/ F. T. BECK _______________________________________ Name: F. Traynor Beck Title: Vice President and Assistant Secretary Acting on Behalf of Each of the Above 85 GROUPMAC SUBSIDIARIES AA ADVANCE AIR, INC. AA JARL, INC. A-ABC APPLIANCE, INC. A-ABC SERVICES, INC. A-1 MECHANICAL OF LANSING, INC. AIR CONDITIONING ENGINEERS, INC. AIR CONDITIONING, PLUMBING & HEATING SERVICE CO., INC. AIRCON ENERGY INCORPORATED AIR SYSTEMS, INC. AIRTRON, INC. AIRTRON OF CENTRAL FLORIDA, INC. ALL SERVICE ELECTRIC, INC. ARKANSAS MECHANICAL SERVICES, INC. ATLANTIC INDUSTRIAL CONSTRUCTORS, INC. CALLAHAN ROACH PRODUCTS & PUBLICATIONS, INC. CARDINAL CONTRACTING CORPORATION CENTRAL AIR CONDITIONING CONTRACTORS, INC. CENTRAL CAROLINA AIR CONDITIONING COMPANY CHAPEL ELECTRIC CO. CHARLIE CRAWFORD, INC. CLARK CONVERSE ELECTRIC SERVICE, INC. COLONIAL AIR CONDITIONING COMPANY COMMERCIAL AIR HOLDING COMPANY COMMERCIAL AIR, POWER & CABLE, INC. CONTINENTAL ELECTRICAL CONSTRUCTION CO. COSTA AND RIHL, INC. COSTA & RIHL PLUMBING, INC. COSTNER BROTHERS, INC. DIVCO, INC. DYNALINK CORPORATION ELECTRICAL ASSOCIATES OF DALLAS, INC. EVANS SERVICES, INC. THE FARFIELD COMPANY FERGUSON ELECTRIC CORPORATION GENTZLER ELECTRICAL CONTRACTORS, INC. GILBERT MECHANICAL CONTRACTORS, INC. GREENWAY INVESTMENT CORP. GROUPMAC FACILITY SERVICES, INC. (TO BE NAMED ENCOMPASS FACILITY SERVICES, INC.) GROUPMAC HOLDING CORP. (TO BE NAMED ENCOMPASS HOLDING CORP.), By Airtron, Inc. and Paul E. Smith Co., Inc. GROUPMAC INDIANA, L.L.C. (TO BE NAMED ENCOMPASS INDIANA, L.L.C GROUPMAC MARYLAND CORP. (TO BE NAMED ENCOMPASS MARYLAND CORP.) GROUPMAC TEXAS L.P. (TO BE NAMED ENCOMPASS TEXAS L.P.), By GroupMAC Holding Corp. HPS PLUMBING SERVICES, INC. HALLMARK AIR CONDITIONING, INC. HUNGERFORD MECHANICAL CORPORATION 86 J. D. STEWARD AIR CONDITIONING, INC. K & N PLUMBING, HEATING AND AIR CONDITIONING, INC. LANEY'S, INC. LINFORD SERVICE CO. L.T. MECHANICAL, INC. MACDONALD-MILLER CO., INC. MACDONALD-MILLER INDUSTRIES, INC. MACDONALD-MILLER OF OREGON, INC. MACDONALD-MILLER SERVICE, INC. MASTERS, INC. MECHANICAL INTERIORS, INC. MECHANICAL SERVICES OF ORLANDO, INC. MERRITT ISLAND AIR & HEAT, INC. NEW CONSTRUCTION AIR CONDITIONING, INC. NORON, INC. PACIFIC RIM MECHANICAL CONTRACTORS, INC. PAUL E. SMITH CO., INC. PHOENIX ELECTRIC COMPANY RAY AND CLAUDE GOODWIN, INC. RELIABLE MECHANICAL, INC. ROMANOFF ELECTRIC CORP. SEQUOYAH CORPORATION SIBLEY SERVICES, INCORPORATED SNYDER MECHANICAL SOUTHEAST MECHANICAL SERVICE, INC. STATEWIDE HEATING & AIR CONDITIONING, INC. STEPHEN C. POMEROY, INC. STERLING AIR CONDITIONING, INC. SUN PLUMBING, INC. TEAM MECHANICAL, INC. TOWER ELECTRIC COMPANY TRINITY CONTRACTORS, INC. UNITED ACQUISITION CORP. VALLEY WIDE PLUMBING AND HEATING, INC. VAN'S COMFORTEMP AIR CONDITIONING, INC. VANTAGE MECHANICAL CONTRACTORS, INC. VERMONT MECHANICAL, INC. WADE'S HEATING & COOLING, INC. WIEGOLD & SONS, INC. WILLIS REFRIGERATION, AIR CONDITIONING & HEATING, INC. YALE INCORPORATED By: /s/ DARREN B. MILLER _______________________________ Name: Darren B. Miller Title: Vice President Acting on Behalf of Each of the Above 87 GROUPMAC MANAGEMENT CO. (TO BE NAMED ENCOMPASS MANAGEMENT CO.) By: /s/ DARREN B. MILLER _________________________________ Name: Darren B. Miller Title: Executive Vice President 88 [THIS PAGE INTENTIONALLY LEFT BLANK] 89 ADMINISTRATIVE AGENT/BANK: Revolving Loan Commitment: BANK OF AMERICA, N.A. $50,781,250.00 as Administrative Agent and Individually, as a Bank Tranche A By: /s/ RICHARD L. NICHOLS, JR. Term Loan Commitment ____________________________________ $13,203,125.00 Name: Richard L. Nichols, Jr. Title: Managing Director Tranche B Term Loan Commitment $17,265,625.00 90 SYNDICATION-AGENT/BANK: Revolving Loan Commitment: CHASE BANK OF TEXAS, $50,781,250.00 NATIONAL ASSOCIATION as Syndication Agent and Individually, as a Bank Tranche A Term Loan Commitment $13,203,125.00 By: /s/ JAMES R. DOLPHIN _____________________________________ Name: James R. Dolphin Title: Senior Vice President Tranche B Term Loan Commitment $17,265,625.00 Address for Notice: Chase Bank of Texas 712 Main Street, 5-CBBE-78 Houston, Texas 77002 Telephone No.: (713) 216-5929 Telecopy No.: (713) Attention: Curt Karges, Managing Director With copy to: Gregory Spier, Managing Director Chase Securities Inc. 707 Travis, 8th Floor North Houston, TX 77002 Telephone: 713.216.2354 Telecopy No.: 713.216.2339 e-mail: gregory.spier@chase.com ----------------------- Uzo Arinzeh Chase Securities Inc. 270 Park Avenue, 5th Floor New York, NY 10017 Telephone: 212/270-0366 Telecopy No.: 212/270-1063 e-mail: uzo.arinzeh@chase.com --------------------- Bruce Borden Chase Securities Inc. 270 Park Avenue, 5/th/ Floor New York, NY 10017 Telephone: 212/270-5799 Telecopy No.: 212/270-1063 e-mail: bruce.borden@chase.com ---------------------- 91 DOCUMENTATION AGENT/BANK: Revolving Loan Commitment: FIRST UNION NATIONAL BANK $46,875,000.00 as Documentation Agent and Individually, as a Bank Tranche A Term Loan Commitment By: /s/ DAVID C. HAUGLID $12,187,500.00 ____________________________________ Name: David C. Hauglid Title: Vice President Tranche B Term Loan Commitment $15,937,500.00 Address for Notice: First Union National Bank One First Union Center 301 S. College Street Charlotte, North Carolina 28288-0606 Telephone No.: 704/383-3544 Telecopy No.: 704/374-4793 Attn: David Hauglid e-mail: david.hauglid@funb.com 92 BANKS: Revolving Loan Commitment: ABN-AMRO BANK NV $31,250,000.00 Tranche A Term Loan Commitment By: /s/ LAURIE C. TUZO $8,125,000.00 _________________________________ Name: Laurie C. Tuzo Title: Senior Vice President Tranche B Term Loan Commitment $10,625,000.00 By: /s/ E. R. HOLLINGSWORTH _________________________________ Name: Eric R. Hollingsworth Title: Vice President Address for Notice: ABN AMRO Bank N.V. Three Riverway, Suite 1700 Houston, TX 77056 Telephone No.: 713/964-3360 Telecopy No.: 713/961-1699 Attn: Laurie C. Tuzo, Senior Vice President e-mail: laurie.tuzo@abnamro.com 93 Revolving Loan Commitment: BANK AUSTRIA CREDITANSTALT $9,375,000.00 CORPORATE FINANCE, INC. Tranche A Term Loan Commitment By: /s/ STEPHEN W. HIPP $2,437,500.00 __________________________________ Name: Stephen W. Hipp Title: Senior Associate Tranche B Term Loan Commitment $3,187,500.00 By: /s/ J. G. TAYLOR __________________________________ Name: John G. Taylor Title: Vice President Address for Notice: Bank Austria Creditanstalt Two Ravinia Drive, Suite 1680 Atlanta, GA 30346 Telephone No.: 770/390-1864 Telecopy No.: 770/390-1851 Attn: Thomas G. Pierce, Senior Associate e-mail: tom.pierce@creditanstalt.co.at ------------------------------ With copy to: Hazen Dempster, Troutman Sanders 600 Peachtree Street N.W. Suite 5200 Atlanta, GA 30308 404/885-3000 Phone 404/885-3947 Fax 94 Revolving Loan Commitment: THE GOVERNOR AND COMPANY OF $9,375,000.00 THE BANK OF IRELAND Tranche A Term Loan Commitment By: /s/ BRENDAN McLOUGHLIN $2,437,500.00 __________________________________ Name: Brendan McLoughlin Title: Manager Tranche B Term Loan Commitment $3,187,500.00 By: /s/ MARTINA MAHER __________________________________ Name: Martina Maher Title: Senior Manager Address for Notice: The Governor and Company of The Bank of Ireland La Touche House P.O. Box 3267 International Financial Services Centre Custom House Docks Dublin 1, Republic of Ireland Telephone No.: 353-1-609-3513 Telecopy No.: 353-1-829-0129 Attn: Brendan McLoughlin, Manager e-mail: brendan.mcloughlin@boi.ie 95 Revolving Loan Commitment: THE BANK OF NOVA SCOTIA $31,250,000.00 Tranche A Term Loan Commitment By: /s/ F. C. H. ASHBY $8,125,000.00 ________________________________ Name: F. C. H. Ashby Title: Senior Manager Loan Operations Tranche B Term Loan Commitment $10,625,000.00 By:________________________________ Name:______________________________ Title:_____________________________ Address for Notice: The Bank of Nova Scotia Suite 2700 600 Peachtree Street, N.E. Atlanta, GA 30308 Telephone No.: 404/877-1552 Telecopy No.: 404/888-8998 Attn: Phyllis Walker, Loan Operations Officer e-mail: phyllis_walker@scotiamarkets.com With copy to: Greg George The Bank of Nova Scotia 1100 Louisiana, Suite 3000 Houston, TX 77002 Telephone No.: 713/752-2430 Telecopy No.: 713/759-3446 e-mail: ggeorge@scotiacapital.com 96 Revolving Loan Commitment: BANK ONE, N.A. $31,250,000.00 Tranche A Term Loan Commitment By: /s/ GREG SMOTHERS $8,125,000.00 ___________________________________ Name: Greg Smothers Title: Vice President Tranche B Term Loan Commitment $10,625,000.00 By: /s/ GREG SMOTHERS ___________________________________ Name: Greg Smothers Title: Vice President Address for Notice: Bank One, N.A. Houston, TX 77252-2629 910 Travis Houston, TX 77002-5860 Telephone No.: 713/751-3831 Telecopy No.: 713/751-6199 Attn: Barry Kelly, Managing Director e-mail: barry_kelly@mail.bankone.com ---------------------------- 97 Revolving Loan Commitment: BANKBOSTON, N.A. $21,875,000.00 Tranche A Term Loan Commitment By: /s/ JEFF LYNCH $5,687,500.00 _____________________________________ Name: Jeff Lynch Title: Senior Vice President Tranche B Term Loan Commitment $7,437,500.00 By:_____________________________________ Name:___________________________________ Title:__________________________________ Address for Notice: BankBoston, N.A. 100 Federal Street Boston, MA 02110 Telephone No.: 617/434-3974 Telecopy No.: 617/434-0601 Attn: Jeffrey C. Lynch, Senior Vice President e-mail: jclynch@bkb.com 98 Revolving Loan Commitment: BANKERS TRUST COMPANY $15,625,000.00 Tranche A Term Loan Commitment By: /s/ DAVID J. BELL $4,062,500.00 ___________________________________ Name: David Bell Title: Principal Tranche B Term Loan Commitment $5,312,500.00 By:___________________________________ Name:_________________________________ Title:________________________________ Address for Notice: Bankers Trust Company 130 Liberty Street New York, NY 10006 Telephone No.: 212/250-9048 Telecopy No.: 212/250-7218 Attn: David Bell e-mail: dbell@bt.com 99 Revolving Loan Commitment: CITICORP USA, INC. $21,875,000.00 Tranche A Term Loan Commitment By: /s/ AARON DANNERBERG $5,687,500.00 _________________________________ Name: Aaron Dannerberg Title: Vice President Tranche B Term Loan Commitment $7,437,500.00 By:_________________________________ Name:_______________________________ Title:______________________________ Address for Notice: Citibank/Salomon Smith Barney 390 Greenwich Street, 1st Floor New York, NY 10013 Telephone: 212/723-6638 Telecopy No.: 212/723-8547 Attn: Mark Floyd e-mail: Mark.Floyd@ssmb.com ------------------- 100 Revolving Loan Commitment: COMERICA BANK $9,375,000.00 Tranche A Term Loan Commitment By: /s/ MARK B. GROVER $2,437,500.00 _________________________________ Name: Mark B. Grover Title: Vice President Tranche B Term Loan Commitment $3,187,500.00 By: _________________________________ Name: _________________________________ Title:_________________________________ Address for Notice: Comerica Bank 4100 Spring Valley Road, Suite 400 Dallas, Texas 75244 Telephone No.: 972/361-2545 Telecopy No.: 972/361-2550 Attn: Mark B. Grover, Vice President e-mail: mark_b_grover@comerica.com 101 MANAGING AGENT/LENDER: Revolving Loan Commitment: CREDIT LYONNAIS, $31,250,000.00 New York Branch Tranche A Term Loan Commitment By: /s/ PASCAL POUPELLE $8,125,000.00 _________________________________ Name: Pascal Poupelle Title: Executive Vice President Tranche B Term Loan Commitment $10,625,000.00 By: _________________________________ Name: _________________________________ Title:_________________________________ Address for Notice: CREDIT LYONNAIS Representative Office 2200 Ross Avenue, Suite 4400 West Dallas, Texas 75201 Telephone No.: 214/220-2303 Telecopy No.: 214/220-2323 Attn: Blake Wright e-mail: wright@clamericas.com --------------------- With copy to: Ronald Finn, Esq. Credit Lyonnais 1301 Avenue of the Americas New York, New York 10019 Telephone No.: 212/261-7061 Telecopy No.: 212/459-3187 102 Revolving Loan Commitment: GMAC COMMERCIAL CREDIT LLC $31,250,000.00 Tranche A Term Loan Commitment By: /s/ JOSEPH A. GRIMALDI $8,125,000.00 _________________________________ Name: Joseph A. Grimaldi Title: President Tranche B Term Loan Commitment $10,625,000.00 By: /s/ FRANK IMPERATO _________________________________ Name: Frank Imperato Title: Senior Vice President Address for Notice: GMAC Commercial Credit LLC 1290 Avenue of the Americas New York, New York 10104 Telephone No.: 212/408-7146 Telecopy No.: 212/408-7377 Attn: Jane M. Frangos, Senior Vice President e-mail: jane.frangos@gmaccc.com and Attn: Frank Imperato, Senior Vice President e-mail: frank.imperato@gmaccc.com 103 Revolving Loan Commitment: MERCANTILE BANK $31,250,000.00 NATIONAL ASSOCIATION Tranche A Term Loan Commitment By: /s/ EDWARD A. CHENEY $8,125,000.00 _________________________________ Name: Edward A. Cheney Title: Vice President Tranche B Term Loan Commitment $10,625,000.00 By: _________________________________ Name: _________________________________ Title:_________________________________ Address for Notice: Mercantile Bank National Association 721 Locust, 12/th/ Floor St. Louis, MO 63101 Telephone No.: 314/418-2456 Telecopy No.: 314/418-2203 Attn: Ed Cheny e-mail: edward.a.cheney@mercbcp.com 104 Revolving Loan Commitment: THE MITSUBISHI TRUST $9,375,000.00 AND BANKING CORPORATION Tranche A Term Loan Commitment By: /s/ BEATRICE E. KOSSODO $2,437,500.00 _________________________________ Name: Beatrice E. Kossodo Title: Senior Vice President Tranche B Term Loan Commitment $3,187,500.00 By: _________________________________ Name: _________________________________ Title:_________________________________ Address for Notice: The Mitsubishi Trust and Banking Corporation 520 Madison Avenue, 26/th/ Floor New York, NY 10022 Telephone No.: 212/891-8218 Telecopy No.: 212/644-6825 Fax Attn: Dan Chang, Assistant Vice President e-mail: daniel_c@mtbcny.com 105 Revolving Loan Commitment: NATIONAL CITY BANK $10,937,500.00 OF KENTUCKY Tranche A Term Loan Commitment By: /s/ TOM GURBACH $2,843,750.00 _________________________________ Name: Tom Gurbach Title: Vice President Tranche B Term Loan Commitment $3,718,750.00 By: _________________________________ Name: _________________________________ Title:_________________________________ Address for Notice: National City Bank of Kentucky 101 South 5/th/ St. Louisville, KY 40202 Telephone No.: 502/581-6352 Telecopy No.: 502/581-5122 Attn: Donald Pullen e-mail: don_r_pullen@national-city.com 106 Revolving Loan Commitment: PARIBAS $15,625,000.00 Tranche A Term Loan Commitment By: /s/ SCOTT CLINGAN $4,062,500.00 _________________________________ Name: Scott Clingan Title: Director Tranche B Term Loan Commitment $5,312,500.00 By: /s/ LARRY ROBINSON _________________________________ Name: Larry Robinson Title: Vice President Address for Notice: Paribas 1200 Smith, Suite 3100 Houston, Texas 77002 Telephone No.: 713/982-1105 Telecopy No.: 713/659-5234 Attn: Scott Clingan, Director e-mail: scott_clingan@paribas.com 107 Revolving Loan Commitment: SOVEREIGN BANK $9,375,000.00 Tranche A Term Loan Commitment By: /s/ JOSEPH BECKER $2,437,500.00 _________________________________ Name: Joseph Becker Title: Vice President Tranche B Term Loan Commitment $3,187,500.00 By: _________________________________ Name: _________________________________ Title:_________________________________ Address for Notice: Sovereign Bank 50 Roweswharf Boston, MA 02110 Telephone No.: 617/478-6705 Telecopy No.: 617/478-6799 Attn: Joseph Becker e-mail: jbecker@sovereignbank.com 108 Revolving Loan Commitment: UNION BANK OF CALIFORNIA, N.A. $31,250,000.00 Tranche A Term Loan Commitment By: /s/ I. SCOTT JESSUP $8,125,000.00 _________________________________ Name: I. Scott Jessup Title: Vice President Tranche B Term Loan Commitment $10,625,000.00 By: _________________________________ Name: _________________________________ Title:_________________________________ Address for Notice: Union Bank of California, N.A. 445 South Figueroa Street, 18/th/ Floor Los Angeles, CA 90071 Telephone No.: 213/236-4023 Telecopy No.: 213/236-7814 Attn: Scott Jessup e-mail: scott.jessup@uboc.com 109 EXHIBIT 1.01A TO CREDIT AGREEMENT ADMINISTRATIVE QUESTIONNAIRE PLEASE COMPLETE THE FOLLOWING INFORMATION AND RETURN VIA FAX TO THE ATTENTION OF: ________________: FAX ______________ Administrative Agent: Bank of America, N.A. 901 Main Street, 66th Floor Dallas, Texas 75202 Legal Name of Your Institution To Appear in Documentation: ______________________________ Number of Signature Lines Required: ______________________________ GENERAL INFORMATION - DOMESTIC LENDING OFFICE - --------------------------------------------- Institution Name: ______________________________ Street Address: ______________________________ City, State, Zip Code: ______________________________ GENERAL INFORMATION - EURODOLLAR LENDING OFFICE - ----------------------------------------------- Institution Name: ______________________________ Street Address: ______________________________ City, State, Zip Code: ______________________________ CONTACTS/NOTIFICATION METHODS - ----------------------------- Primary Contact: ______________________________ Street Address: ______________________________ City, State, Zip Code: ______________________________ Phone Number: ______________________________ FAX Number: ______________________________ Back-up Contact: ______________________________ Street Address: ______________________________ City, State, Zip Code: ______________________________ Phone Number: ______________________________ FAX Number: ______________________________ TAX WITHHOLDING [For US Loans only] - ----------------------------------- Non Resident Alien _____ Y _____ N *Please attach Form 4224 or 1001 Tax ID Number ______________ ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC. - -------------------------------------------------------------------- Contact: _________________________ Street Address: ______________________________ City, State, Zip Code: ______________________________ Phone Number: ______________________________ FAX Number: ______________________________ PAYMENT INSTRUCTIONS: - -------------------- Name of Bank where funds ______________________________ are to be transferred: ______________________________ Name of Account, if applicable: ______________________________ Account Number: ______________________________ Additional Information: ______________________________ MAILINGS: - -------- Please specify who should receive financial information: Name: ______________________________ Street Address: ______________________________ City, State, Zip Code: ________________________________ It is very important that all of the above information is accurately filled in --- and returned promptly. If there is someone other than yourself who should receive this questionnaire, please notify me of their name and FAX number and we will FAX them a copy of the questionnaire. If you have any questions, please call ___________ at ________________. EXHIBIT 1.01B TO CREDIT AGREEMENT FORM OF ADOPTION AGREEMENT [Date] Bank of America, N.A., as Administrative Agent 901 Main Street, 66th Floor Dallas, Texas 75202 Attention: __________________ Dear Sirs: Reference is made to the Credit Agreement dated as of February 22, 2000 (the "Credit Agreement"), among Group Maintenance America Corp., after the date ---------------- thereof to be named Encompass Services Corporation, a Texas corporation (the "Company"), the subsidiaries of the Company party thereto, as guarantors, the ------- banks party thereto, Bank of America, N.A., as Administrative Agent for the banks, Chase Bank of Texas, N.A., as syndication agent, and First Union National Bank, as documentation agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. This agreement (this "Adoption Agreement") is executed and delivered ------------------ pursuant to Section 6.09 of the Credit Agreement which provides that any Person that becomes a Subsidiary subsequent to the Execution Date will execute and deliver to the Administrative Agent an Adoption Agreement acknowledging such Person's agreement to be bound by the terms of the Credit Agreement and the applicable Security Documents. In addition, Section 6.09 provides that the Company or its Subsidiary that owns or holds the stock of said new Subsidiary, as the case may be, will execute and deliver to the Administrative Agent the Adoption Agreement acknowledging its agreement to be bound by the terms of the Pledge Agreement with respect to pledging shares of said new Subsidiary and delivering to the Administrative Agent the certificates, if any, evidencing its ownership of such shares of such new Subsidiary. Therefore, for and in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged: (a) the undersigned party, in the case of a Domestic Subsidiary, (i) signing as Guarantor hereby executes this Adoption Agreement to acknowledge it is a Subsidiary and a Guarantor and agrees to be bound and is hereby bound by all of the terms and conditions of the Credit Agreement and the Guaranty contained therein applicable to a Subsidiary or a Guarantor, (ii) signing as Debtor hereby executes this Adoption Agreement to acknowledge it is a Debtor as such term is defined in the Security Agreement and, as such, agrees to be bound and hereby is bound by all of the terms and conditions of the Security Agreement and in connection therewith does hereby grant to the Administrative Agent for the benefit of the Banks a first and prior lien or security interest in all of Debtor's right, title and interest in and to the Collateral (as such term is defined in the Security Agreement) of such Debtor, and (iii) hereby delivers to the Administrative Agent a UCC-1 Financing Statement signed by the Debtor and describing the Collateral of such Debtor subject to the Security Agreement, and (b) the undersigned party (i) signing as Pledgor hereby executes this Adoption Agreement to acknowledge it is a Pledgor as such term is defined in the Pledge Agreement and, as such, agrees to be bound and hereby is bound by all of the terms and conditions of the Pledge Agreement and in connection therewith does hereby pledge to the Administrative Agent for the benefit of the Banks, and grant to the Administrative Agent for the benefit of the Banks, a lien and security interest in Pledgor's right, title and interest in and to, the Pledged Collateral (as such term is defined in the Pledge Agreement), (ii) herewith delivers to the Administrative Agent the certificate or certificates, if any, evidencing (A) all of the Capital Stock owned by the Pledgor in the case of a Domestic Subsidiary, and (B) 66% of the Capital Stock owned by the Pledgor in the case of a Foreign Subsidiary, together with a stock power referencing the issuer of the Capital Stock to which it relates [signed in blank] and (iii) hereby delivers to the Administrative Agent a UCC-1 Financing Statement signed by the Pledgor to the extent necessary or helpful to perfect a security interest in such Capital Stock. Executed effective this ____ day of _____________, ____. GUARANTOR/DEBTOR ______________________________ By: _______________________ Name: _______________________ Title: _______________________ PLEDGOR ______________________________ By: _______________________ Name: _______________________ Title: _______________________ EXHIBIT 1.01C FORM OF APPLICATION FOR LETTER OF CREDIT [See Exhibit 3.02 -- Form of Letter of Credit Request] EXHIBIT 1.01(D) TO CREDIT AGREEMENT FORM OF SHAREHOLDER SUBORDINATED NOTE ------------------------------------- $ Dated: _________________ FOR VALUE RECEIVED, ENCOMPASS SERVICES CORPORATION, a Texas corporation (the Company"), hereby promises to pay to or [its] [his] [her] assigns (the "Payee"), in lawful money of the United States of America in immediately available funds, at ______________________ __________ ________________, the principal sum of __________ DOLLARS, which amount shall be payable on. [The Company promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at a rate per annum equal to ______ such interest to be paid [semi-annually] [annually] on_____________ [and ____________] of each year and at maturity hereof.] This Note is subject to voluntary prepayment, in whole or in part, at the option of the Company, without premium or penalty. This Note is one of the Shareholder Subordinated Notes referred to in the Credit Agreement, dated as of February 22, 2000, among the Company, the lenders from time to time party thereto (the "Banks"), First Union National Bank, as Documentation Agent, Chase Bank of Texas, National Association, as Syndication Agent, and Bank of America, N.A., as Administrative Agent (as so amended and restated and as the same may be further amended, modified, supplemented, extended, restated, refinanced, replaced and/or refunded from time to time, the "Credit Agreement") and shall be subject to the provisions thereof. Unless otherwise defined herein, all capitalized terms used herein or in Annex A attached hereto and defined in the Credit Agreement have the meanings assigned to such terms in the Credit Agreement. Notwithstanding anything to the contrary contained in this Note, the Payee understands and agrees that the Company shall not be required to make, and shall not make any payment of principal or interest on this Note to the extent that such payment is prohibited by, or would give rise to a default or event of default under, the terms of any Senior Indebtedness (as defined in Annex A attached hereto), including, but not limited to, Section 9.01 of the Credit Agreement. This Note, and the Company's obligations hereunder, shall be subordinate and junior to all indebtedness constituting Senior Indebtedness (as defined in Section 1.07 of Annex A attached hereto) on the terms and conditions set forth in Annex A attached hereto, which Annex A is herein incorporated by reference and made a part hereof as if set forth herein in its entirety. The Company hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF TEXAS. ENCOMPASS SERVICES CORPORATION By:___________________________________ Name:_________________________________ Title:________________________________ 2 Section 1.01 Subordination of Liabilities. Encompass Services Corporation (the ---------------------------- "Company"), for itself, its successors and assigns, covenants and agrees, and each holder of the Note to which this Annex A is attached (the "Note") by its acceptance thereof likewise covenants and agrees, that the payment of the principal of, interest on, and all other amounts owing in respect of, the Note (the "Subordinated Indebtedness") is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, to the prior payment in full in cash of all Senior Indebtedness (as defined in Section 1.07 of this Annex A). The provisions of this Annex A shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are hereby made obligees hereunder the some as if their names were written herein as such, and they and/or each of them nay proceed to enforce such provisions. Section 1.02 Company Not to make Payments with Respect to Subordinated --------------------------------------------------------- Indebtedness in Certain Circumstances. - ------------------------------------- (a) Upon the maturity of any Senior Indebtedness (including interest thereon or fees or any other amounts owing in respect thereof), whether at stated maturity, by acceleration or otherwise, all Obligations (as defined in Section 1.07 of this Annex A) owing in respect thereof, in each case to the extent due and owing, shall first be paid in full in cash, before any payment, whether in cash, property, securities or otherwise) is made on account of the Subordinated Indebtedness. (b) Until all Senior Indebtedness has been paid in full in cash and all commitments in respect of such Senior Indebtedness have been terminated, the sum of all payments in respect of the Note (including principal and interest), together with the sum of (i) all payments made under all other Shareholder Subordinated Notes and (ii) all payments made by the Company and its Subsidiaries to repurchase stock of the Company held by employees of the Company and its Subsidiaries shall not exceed at any time that amount permitted to be paid by the Company for such purpose by the terms of the respective issue of Senior Indebtedness. (c) The Company may not, directly or indirectly, make any payment of any Subordinated Indebtedness and may not acquire any Subordinated Indebtedness for cash or property until all Senior Indebtedness has been paid in full in cash if any default or event of default under the Credit Agreement (as defined in Section 1.07 of this Annex A) or any other issue of Senior Indebtedness is then in existence or would result therefrom. Each holder of the Note hereby agrees that, so long as any such default or event of default in respect of any issue of Senior Indebtedness exists, it will not sue for, or otherwise take any action to enforce the Company's obligations to pay, amounts owing in respect of the Note. Each holder of the Note understands and agrees that to the extent that clause (b) of this Section 1.02 reduces the payment of interest and/or principal which would otherwise be payable under the Note but for the limitations set forth in such clause (b), such unpaid amount shall not constitute a payment default under the Note and the holder of the Note may not sue for, or otherwise take action to enforce the Company's obligation to pay such amount, provided that such -------- unpaid principal or interest shall remain an obligation of the Company to the holder of the Note pursuant to the terms of the Note. (d) In the event that notwithstanding the provisions of the preceding subsections (a), (b) and (c) of this Section 1.02, the Company shall make any payment on account of the Subordinated Indebtedness at a time when payment is not permitted by said subsection (a), (b) or (c), such payment shall be held by the holder of the Note, in trust for the benefit of and shall be paid forthwith over and delivered to, the holders of Senior Indebtedness or their representative or the trustee under the indenture or other agreement pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application pro rata to the payment of all Senior 3 Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in cash in accordance with the terms of such Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. Without in any way modifying the provisions of this Annex A or affecting the subordination effected hereby if the hereafter referenced notice is not given, the Company shall give the holder of the Note prompt written notice of any event which would prevent payments under Section 1.02(a), (b) or (c) hereof. Section 1.03 Subordination to Prior Payment of all Senior Indebtedness on ------------------------------------------------------------ Dissolution, Liquidation or Reorganization of Company. Upon any distribution of - ----------------------------------------------------- assets of the Company upon dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise): (a) the holders of all Senior Indebtedness shall first be, entitled to receive payment in full in cash of all Senior Indebtedness (including, without limitation, post-petition interest at the rate (including the default rate) provided in the documentation with respect to the Senior Indebtedness, whether or not such post-petition interest is an allowed claim against the debtor in any bankruptcy or similar proceeding) before the holder of the Note is entitled to receive any payment of any kind or character on account of the Subordinated Indebtedness; (b) any payments or distributions of assets of the Company of any kind or character, whether in cash, property or securities to which the holder of the Note would be entitled except for the provisions of this Annex A, shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or other trustee or agent, directly to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture under which any instruments evidencing any such Senior Indebtedness may have been issued, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing provisions of this Section 1.03, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities shall be received by the holder of the Note on account of Subordinated Indebtedness before a Senior Indebtedness is paid in full in cash, such payment or distribution shall be received and held in trust for and shall be paid over to the holders of the Senior Indebtedness remaining unpaid or unprovided for or their representative or representatives, or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, for application to the payment of such Senior Indebtedness until all such Senior Indebtedness shall have been paid in full in cash, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. Without in any way modifying the provisions of this Annex A or affecting the subordination effected hereby if the hereafter referenced notice is not given, the Company shall give prompt written notice to the holder of the Note of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon assignment for the benefit of creditors or otherwise). Section 1.04 Subrogation. Subject to the prior payment in full in cash of all ----------- Senior Indebtedness, the holder of the Note shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness until all amounts owing on the Note shall be paid in full, and for the purpose of such subrogation no payments or distributions to the holders of the Senior Indebtedness by or on behalf of the 4 Company or by or on behalf of the holder of the Note by virtue of this Annex A which otherwise would have been made to the holder of the Note shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holder of the Note, be deemed to be payment by the Company to or on account of the Senior Indebtedness, it being understood that the provisions of this Annex A are intended solely or the purpose of defining the relative rights of the holder of the Note, on the one hand, and the holders of the Senior Indebtedness, on the other hand. Section 1.05 Obligation of the Company Unconditional. Nothing contained in --------------------------------------- this Annex A or in the Note is intended to or shall impair, as between the Company and the holder of the Note, the obligation of the Company, which is absolute and unconditional, to pay to the holder of the Note the principal of and interest on the Note as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holder of the Note and creditors of the Company other than the holders of the Senior Indebtedness, nor, except as specifically provided herein, shall anything herein or therein prevent the holder of the Note from exercising all remedies otherwise permitted by applicable law upon an event of default under the Note, subject to the rights, if any, under this Annex A of the holders of Senior Indebtedness in respect of cash property, or securities of the Company received upon the exercise of any such remedy. Upon any distribution of assets of the Company referred to in this Annex A, the holder of the Note shall be entitled to rely upon any of order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the liquidating trustee or agent or other person making any distribution to the holder of the Note, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Annex A. Section 1.06 Subordination Rights Not Impaired by Acts or Omissions of Company ----------------------------------------------------------------- or Holders of Senior Indebtedness. No right of any present or future holders of - --------------------------------- any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act in good faith by any such holder, or by any noncompliance by the Company with the terms and provisions of the Note, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. The holders of the Senior Indebtedness may, without in any way affecting the obligations of the holder of the Note with respect hereto, at any time or from time to time and in their absolute discretion, change the manner, place or terms of payment of, change or extend the time of payment of, or renew or alter, any Senior Indebtedness or amend, modify or supplement any agreement or instrument governing or evidencing such Senior Indebtedness or any other document referred to therein or exercise or refrain from exercising any other of their rights under the Senior Indebtedness including, without limitation, the waiver of default thereunder and the release of any collateral securing such Senior Indebtedness, all without notice to or assent from the holder of the Note. Section 1.07 Senior Indebtedness. The term "Senior Indebtedness" means all ------------------- Obligations (as defined below) of (i) the Company under the Credit Agreement, dated February 22, 2000 (as amended and restated, modified, supplemented, extended, refinanced, replaced and/or refunded from time to time, the "Credit Agreement"), among the Company, the lenders from time to time party thereto (the "Banks"), First Union National Bank, as Documentation Agent, Chase Bank of Texas, National Association, as Syndication Agent, and Bank of America, N.A., as Administrative Agent (the "Administrative Agent"), and any renewal, extension, restatement, refinancing or refunding (in whole or in part) thereof and (ii) the Company, in respect of any Interest Rate Protection Agreements or Other Hedging Agreement (as each such term is defined in the Credit Agreement). As used herein, the term "Obligation" means any principal, interest, premium, penalties, fees, expenses, indemnities and other liabilities and obligations 5 payable under the documentation governing any indebtedness (including interest after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the relevant rate provided pursuant to the terms of the respective indebtedness, whether or not such interest is an allowed claim against the debtor in any such proceeding). 6 EXHIBIT 2.02 (a-1) TO CREDIT AGREEMENT FORM OF REVOLVING NOTE Dated: _____________, 2000 FOR VALUE RECEIVED, the undersigned, GROUP MAINTENANCE AMERICA CORP., after the date hereof to be named Encompass Services Corporation, a Texas corporation (the "Company"), HEREBY PROMISES TO PAY to the order of ________________________ ------- (the "Bank") the lesser of (i) the amount of the Bank's Revolving Loan ---- Commitment and (ii) the aggregate unpaid principal amount of the Revolving Loans made by the Bank to the Company pursuant to the Credit Agreement (as defined below) on the dates and in the amounts specified in such Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Revolving Loan from the date of such Revolving Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of February 22, 2000 (as the same may from time to time be amended, modified or supplemented, the "Credit ------ Agreement," the terms defined therein and not otherwise defined herein being - --------- used herein as therein defined), among the Company, the Subsidiaries of the Company party thereto, the Bank and certain other banks that are parties thereto, Bank of America, N.A., as Administrative Agent for the Bank and such other banks, Chase Bank of Texas, National Association, as syndication agent, and First Union National Bank, as documentation agent. Both principal and interest are payable in same day funds in lawful money of the United States of America to Bank of America, N.A., as Administrative Agent, at 901 Main Street, 66/th/ Floor, Dallas, Texas 75202 or at such other place as the Administrative Agent shall designate in writing to the Company. This Revolving Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Revolving Note is one of the Revolving Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The obligations of the Company hereunder are guaranteed by the Guarantors pursuant to Article VIII of the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Revolving Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Revolving Loan being evidenced by this Revolving Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Revolving Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. Except as provided in the Credit Agreement, the Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Revolving Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of Texas and any applicable laws of the United States of America. GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation By: _____________________________________ Name: Darren B. Miller Title: Executive Vice President EXHIBIT 2.02(a-2) TO CREDIT AGREEMENT FORM OF SWINGLINE NOTE Dated:_____________, 2000 FOR VALUE RECEIVED, the undersigned, GROUP MAINTENANCE AMERICA CORP., after the date hereof to be named Encompass Services Corporation, a Texas corporation (the "Company"), HEREBY PROMISES TO PAY to the order of BANK OF AMERICA, N.A. ------- (the "Bank") ON DEMAND, but in any event no later than [seven] days of the ---- making of a Swingline Advance, the aggregate unpaid principal amount of the Swingline Advances made by the Bank to the Company pursuant to the Credit Agreement (as defined below). The Company promises to pay interest on the unpaid principal amount of each Swingline Advance from the date of such Swingline Advance until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of February 22, 2000 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the terms defined therein and not otherwise defined herein ---------------- being used herein as therein defined), among the Company, the Subsidiaries of the Company party thereto, the Bank and certain other banks that are parties thereto, Bank of America, N.A., as Administrative Agent for the Bank and such other banks, Chase Bank of Texas, National Association, as syndication agent, and First Union National Bank, as documentation agent. Both principal and interest are payable in same day funds in lawful money of the United States of America to Bank of America, N.A., as Administrative Agent, at 901 Main Street, 66/th/ Floor, Dallas, Texas 75202 or at such other place as the Administrative Agent shall designate in writing to the Company. This Swingline Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Swingline Note is one of the Swingline Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The obligations of the Company hereunder are guaranteed by the Guarantors pursuant to Article VIII of the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Swingline Advances by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Swingline Advance being evidenced by this Swingline Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Swingline Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. Except as provided in the Credit Agreement, the Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Swingline Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of Texas and any applicable laws of the United States of America. GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation By:__________________________________ Name: Darren B. Miller Title: Executive Vice President EXHIBIT 2.02(b) TO CREDIT AGREEMENT FORM OF TRANCHE A TERM NOTE Dated: ________________, 2000 FOR VALUE RECEIVED, the undersigned, GROUP MAINTENANCE AMERICA CORP., after the date hereof to be named Encompass Services Corporation, a Texas corporation (the "Company"), HEREBY PROMISES TO PAY to the order of ________________________ ------- (the "Bank") the aggregate unpaid principal amount of the Tranche A Term Loans ---- made by the Bank to the Company pursuant to the Credit Agreement (as defined below) on the dates and in the amounts specified in such Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Tranche A Term Loan from the date of such Tranche A Term Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of February 22, 2000 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the terms defined therein and not ---------------- otherwise defined herein being used herein as therein defined), among the Company, the Subsidiaries of the Company party thereto, the Bank and certain other banks that are parties thereto, Bank of America, N.A., as Administrative Agent for the Bank and such other banks, Chase Bank of Texas, National Association, as syndication agent, and First Union National Bank, as documentation agent. Both principal and interest are payable in same day funds in lawful money of the United States of America to Bank of America, N.A., as Administrative Agent, at 901 Main Street, 66/th/ Floor, Dallas, Texas 75202 or at such other place as the Administrative Agent shall designate in writing to the Company. This Tranche A Term Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Tranche A Term Note is one of the Tranche A Term Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The obligations of the Company hereunder are guaranteed by the Guarantors pursuant to Article VIII of the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Tranche A Term Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Tranche A Term Loan being evidenced by this Tranche A Term Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Tranche A Term Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. Except as provided in the Credit Agreement, the Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Tranche A Term Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of Texas and any applicable laws of the United States of America. GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation By: _______________________________________ Name: Darren B. Miller Title: Executive Vice President EXHIBIT 2.02(c) TO CREDIT AGREEMENT FORM OF TRANCHE B TERM NOTE Dated: ______________, 2000 FOR VALUE RECEIVED, the undersigned, GROUP MAINTENANCE AMERICA CORP., after the date hereof to be named Encompass Services Corporation, a Texas corporation (the "Company"), HEREBY PROMISES TO PAY to the order of _______________________ ------- (the "Bank") the aggregate unpaid principal amount of the Tranche B Term Loans ---- made by the Bank to the Company pursuant to the Credit Agreement (as defined below) on the dates and in the amounts specified in such Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Tranche B Term Loan from the date of such Tranche B Term Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of February 22, 2000 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the terms defined therein and not ---------------- otherwise defined herein being used herein as therein defined), among the Company, the Subsidiaries of the Company party thereto, the Bank and certain other banks that are parties thereto, Bank of America, N.A., as Administrative Agent for the Bank and such other banks, Chase Bank of Texas, National Association, as syndication agent, and First Union National Bank, as documentation agent. Both principal and interest are payable in same day funds in lawful money of the United States of America to Bank of America, N.A., as Administrative Agent, at 901 Main Street, 66/th/ Floor, Dallas, Texas 75202 or at such other place as the Administrative Agent shall designate in writing to the Company. This Tranche B Term Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Tranche B Term Note is one of the Tranche B Term Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The obligations of the Company hereunder are guaranteed by the Guarantors pursuant to Article VIII of the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Tranche B Term Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Tranche B Term Loan being evidenced by this Tranche B Term Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Tranche B Term Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. Except as provided in the Credit Agreement, the Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Tranche B Term Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of Texas and any applicable laws of the United States of America. GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation By:________________________________________ Name: Darren B. Miller Title: Executive Vice President EXHIBIT 2.03 TO CREDIT AGREEMENT FORM OF NOTICE OF ADVANCE [Date] Bank of America, N.A., as Administrative Agent for the Banks that are parties to the Credit Agreement referred to below 901 Main Street, 66/th/Floor Dallas, Texas 75202 Attention: ______________________________ Dear Sirs: Reference is made to the Credit Agreement dated as of February 22, 2000 (the "Credit Agreement"), among the Company, the Subsidiaries of the Company ---------------- party thereto, the Banks party thereto and Bank of America, N.A., as Administrative Agent for such Banks. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Company hereby requests an Advance under the Credit Agreement and in that connection sets forth below the information relating to such Advance (the "Proposed Advance") as required by Section 2.03 of the Credit Agreement: - ----------------- ------------ (a) Aggregate Principal Amount of Proposed Advance/1/ $_______________ (b) Business Day of Proposed Advance _______________ (c) Type of Advances/2/ _______________ _________________________ /1/ With respect to any Proposed Eurodollar Rate Advance, not less than $5,000,000.00 and in integral multiples of $1,000,000.00, and with respect to any Proposed Alternate Base Rate Advance, not less than $1,000,000.00 and $500,000.00 multiples thereof. /2/ Alternate Base Rate Advance or Eurodollar Rate Advance. (d) Interest Period and last day thereof/3/ _________________ By each of the delivery of this Notice of Advance and the acceptance of any or all of the Advances made by the Banks in response to this Notice of Advance, the Company shall be deemed to have represented and warranted that the conditions to lending specified in Article IV of the Credit Agreement have been satisfied with respect to the Proposed Advance. Very truly yours, GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation By: ________________________________________ Name: ______________________________________ Title:______________________________________ ____________________________ /3/ Applicable only to a Eurodollar Rate Advance, which shall have a duration of one, two, three or six months, and which shall end not later than the Maturity Date; subject, however, to the limitations contained in the Credit Agreement. EXHIBIT 2.05 TO CREDIT AGREEMENT FORM OF NOTICE OF CONVERSION [Date] Bank of America, N.A., as Administrative Agent for the Banks that are parties to the Credit Agreement referred to below 901 Main Street, 66/th/ Floor Dallas, Texas 75202 Attention: _____________________ Dear Sirs: Reference is made to the Credit Agreement dated as of February 22, 2000 (the "Credit Agreement"), among the Company, the Subsidiaries of the Company ---------------- party thereto, the Banks party thereto and Bank of America, N.A., as Administrative Agent for such Banks. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Company hereby requests that all or part of a prior Advance under the Credit Agreement be converted into another Type and in that connection sets forth the following information: (a) Aggregate Principal Amount of Proposed Conversion $_____________ (b) Date of Proposed Conversion /1/ _____________ (c) Type of Conversion (i.e., from Eurodollar Rate to Alternate Base Rate or vice versa) _____________ ___________________ /1/ Must be a Business Day not less than three (3) Business Days subsequent in the case of conversion into an Eurodollar Rate Advance and one (1) Business Day subsequent in the case of conversion into a Base Rate Advance. (d) Interest Period and last day thereof (if converting to Eurodollar Rate Advance) _____________ The Company GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation By:___________________________________________ Name:_________________________________________ Title:________________________________________ EXHIBIT 3.02 TO CREDIT AGREEMENT FORM OF LETTER OF CREDIT REQUEST Bank of America, N.A., as Issuing Bank Date: ________________ 901 Main Street, 66/th/ Floor Dallas, Texas 75202 Attention: ________________ Reference is made to the Credit Agreement dated effective as of February 22, 2000 (as amended or modified from time to time, the "Credit Agreement") ---------------- among Group Maintenance America Corp., after the date thereof to be named Encompass Services Corporation, certain of its Subsidiaries and Bank of America, N.A., as Administrative Agent for itself and the other Banks named therein. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby gives you notice pursuant to Section 3.02 of the Credit Agreement that it requests that the Issuing Bank issue a Letter of Credit under the Credit Agreement and sets forth below the terms of such Letter of Credit: 1. Name of beneficiary: ____________________________________ 2. Name of account party: ____________________________________ 3. Amount: $ ____________________________________ 4. Expiration date of the Letter of Credit to be issued: _______ 5. Description of the goods, if any: ___________________________ 6. Advising bank, if any: ______________________________________ 7. Options: partial drawings _______________________ permitted are / are not 8. Terms and required documents, if any: _______________________ By delivery of this request for the issuance of a Letter of Credit, the undersigned represents and warrants that the conditions to the issuance thereof specified in the Credit Agreement have been satisfied and that, following the issuance requested herein, the total Letters of Credit and Existing Letters of Credit outstanding do not exceed $50,000,000.00. Very truly yours, GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation By: ______________________________ Name: ______________________________ Title: _____________________________ Security Agreement This Security Agreement (as the same may be amended, amended and restated, modified or supplemented from time to time, this "Agreement") dated as of --------- February 22, 2000 is executed by Group Maintenance America Corp., after the date hereof to be named Encompass Services Corporation, a Texas corporation with an office at 8 Greenway Plaza, Suite 1500, Houston, TX 77046 (the "Company"), the ------- Domestic Subsidiaries (as defined in the Credit Agreement defined below) of the Company signatory hereto now or in the future (collectively with any future Domestic Subsidiaries party to the Credit Agreement and the Company, the "Debtors" and each individually, a "Debtor"), for the benefit of Bank of ------- ------ America, N.A., as Administrative Agent for itself and for the banks under the Credit Agreement, as hereinafter defined (in such capacity, the "Secured ------- Party"). Preliminary Statement Whereas, the Company, the Secured Party, as Administrative Agent, and the banks party thereto entered into that certain Credit Agreement dated as of February 22, 2000 ("Credit Agreement"), relating to the extension of a series of ---------------- loans with a commitment totaling $800,000,000.00 by said banks to the Company; and WHEREAS, it is a condition precedent to the obligation of the Secured Party to make the Loans to the Company under the Credit Agreement that the Company and the Debtors shall execute and deliver this Agreement to the Secured Party; and WHEREAS, the Debtors will each benefit from the execution of the Credit Agreement and wish to execute this Agreement in order to help satisfy such condition precedent and to secure the obligations under the Credit Agreement and letters of credit from time to time issued; NOW THEREFORE, in consideration of the premises and in order to induce the Banks to extend the loans and the Issuing Bank to issue letters of credit pursuant to the terms of the Credit Agreement, the Debtors hereby agree to the following: SECTION 1. Defined Terms. ------------- (a) Each capitalized term used herein and not otherwise defined shall have the meaning for such term as defined in the Credit Agreement and/or a Loan Document. (b) The term "UCC" means the Uniform Commercial Code as in effect on the --- date hereof in the State of Texas; provided that if by mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted pursuant to Section 2 --------- hereof, as well as all other security interests created or assigned as additional security for the Secured Obligations pursuant to the provisions of this Agreement, in any Collateral is governed by the UCC as in effect in a jurisdiction other than Texas, "UCC" means the UCC as in effect in such other --- jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. (c) "Secured Obligations" means obligations, contingent or otherwise, of ------------------- the Company or any Debtor pursuant to any of the Loan Documents, including, without limitation, all sums owing by the Company or any Debtor to the Secured Party under any of the Loan Documents, any obligations outstanding now or in the future, including, but not limited to, any letters of credit issued by the Secured Party or any other Bank and any interest rate swaps, hedges or similar agreements between any Debtor or any of its Subsidiaries and any of the Banks all on a pari passu basis. SECTION 2. Grant of Security. Each Debtor hereby grants to the Secured ----------------- Party a Lien or security interest in, all of such Debtor's right, title and interest in and to the following assets of such Debtor, now owned or hereafter acquired, except as otherwise excluded on Schedule I hereto (the "Collateral"): ---------- ---------- (a) (i) All accounts (as defined in the UCC), and (whether or not included in such definition)(ii) all receivables, accounts receivable, lease receivables, contract rights, chattel paper, drafts, acceptances, instruments, writings evidencing a monetary obligation or a security interest or a lease of goods, general intangibles and other obligations of any kind, now or hereafter existing, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights now or hereafter existing in and to all agreements, leases, and other contracts securing or otherwise relating to any such accounts, lease receivables, chattel paper, drafts, acceptances, instruments, writings evidencing a monetary obligation or a security interest or a lease of goods, general intangibles or obligations (any and all of the foregoing in sub-clause (i) and (ii) being the "Receivables"); ----------- and (b) All inventory (as defined in the UCC) in all of its forms, wherever located, now or hereafter existing and whether acquired by purchase, merger or otherwise, and all raw materials, stores, tools, and work in process therefor, all finished goods, spare parts, service parts, and all materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing or production thereof, including (whether or not included in such UCC definition) goods in which the Debtors have an interest in mass or joint or other interest or right of any kind and goods which are returned to or repossessed by the Debtors, and all accessions thereto and products thereof (any and all of the foregoing being the "Inventory"); and --------- (c) All products and proceeds of any and all of the foregoing Collateral and, to the extent not otherwise included, all payments received in connection with any excluded assets described on Schedule I(B), and all payments under ------------- insurance or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. SECTION 3. Security for Obligations. This Agreement secures, on a first ------------------------ and prior basis except for the Permitted Liens, and other Liens permitted under the Credit Agreement, the prompt and complete payment of the Secured Obligations. SECTION 4. Debtors Remains Liable. Anything herein to the contrary ---------------------- notwithstanding, (a) the Debtors shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein (and subject to any defenses thereto) to perform all of their duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Secured Party of any of the rights hereunder shall not release the Debtors from any of their duties or obligations under the contracts and agreements included in the Collateral, and (c) the Secured Party shall have no obligations or liability under the contracts and agreements included in the Collateral solely by reason of this Agreement, and the Secured Party shall not be obligated to perform any of the obligations or duties of the Debtors thereunder or to take any action to collect or enforce any claim for payment assigned hereunder in each case, solely by reason of this Agreement. SECTION 5. Representations and Warranties. Each Debtor represents and ------------------------------ warrants as follows: (a) Those locations specified on Schedule II-A hereto or such other ------------- locations disclosed to the Secured Party after the date hereof constitute all of the locations at which there is located any Inventory of any Debtors (other than rolling stock or Inventory in transit or Inventory placed at the location of its installation pending installation and payment therefor). The principal place of business and chief executive office of the Company and the office where it keeps its records concerning the Receivables, are located at the address specified in the introductory paragraph to this Agreement or at such other locations disclosed to the Secured Party after the date hereof. Each other Debtor has its chief executive office at the location shown on Schedule II-B hereto or at such ------------- other locations disclosed to the Secured Party after the date hereof. (b) Each Debtor owns the Collateral free and clear of any Lien, except for Permitted Liens, Liens created hereunder, and other Liens permitted under the Credit Agreement. No effective financing statement or other instrument similar in effect evidencing a valid security interest against the Company or any Debtor covering all or any part of the Collateral is on file in any recording office, except for (i) protective filings under true leases, (ii) filings made in connection with Permitted Liens, (iii) Liens permitted under the Credit Agreement, (iv) filings pursuant to this Agreement, (v) filings made with respect to which appropriate termination statements executed by the secured lender thereunder have been delivered or shall be delivered to the Secured Party pursuant to the terms of the Credit Agreement, and (vi) filings which relate to Indebtedness that has been repaid, with respect to which the Debtors shall make commercially reasonable efforts, upon the request of the Secured Party, to obtain termination statements or other appropriate releases. (c) This Agreement has been duly executed and delivered by each Debtor. Upon the filing of financing statements in the locations listed on Schedule III ------------ hereto, the security interests granted herein shall constitute valid and - ------ perfected security interests in substantially all the Collateral, subject only to Permitted Liens and other Liens permitted under the Credit Agreement, to the extent such security interests can be perfected by such filings pursuant to the UCC. (d) No consent of, or notice to, any other Person and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the grant by the Debtors of the Liens granted hereby or for the execution, delivery or performance of this Agreement by the Debtors or (ii) for the perfection of the rights and remedies hereunder, other than the filing of financing statements as provided in (c) above. (e) All information with respect to the Collateral and the obligors under the Receivables set forth in any schedule hereto, certificate or other writing at any time heretofore or hereafter furnished by each Debtor to the Secured Party, taken as a whole, is, to each Debtor's knowledge, true, correct and complete in all material respects as of the date specified therein. SECTION 6. Further Assurances. (a) Each Debtor agrees that from time to ------------------ time, at the expense of the Debtor, each Debtor will promptly execute and deliver all further instruments and documents, and take all further action, that the Secured Party may reasonably request as being necessary or desirable in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Debtor will: (i) if any Receivable shall be evidenced by a promissory note or other instrument, upon the reasonable request of the Secured Party, deliver and pledge to the Secured Party such note or instrument duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to the Secured Party; and (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices as the Secured Party may reasonably request as being necessary or desirable in order to perfect and preserve the security interests granted or purported to be granted hereby. (b) Each Debtor hereby authorizes the Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Debtor, in each case where permitted by law. A carbon, photographic or other reproduction of any financing statement executed by each Debtor covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. Secured Party shall give the Company notice of any financing statements. (c) Each Debtor will furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral as the Secured Party may reasonably request, all in reasonable detail. (d) Each Debtor will promptly notify the Secured Party of any change of its name, corporate structure, federal employer identification number or the address of its principal place of business or chief executive office where its books and records are maintained. (e) Each Debtor shall keep its principal place of business and chief executive office and the office where it keeps its records concerning the Collateral, at the location or locations therefor specified in Section 5(a) or, ------------ upon notice within 30 days after such move, at such other locations in a jurisdiction where all action required by Section 6(a) shall have been or shall ------------ be taken with respect to the Collateral. (f) Except as otherwise provided in this subsection (f), each Debtor shall continue to collect, at its own reasonable expense, all amounts due or to become due such Debtor under the Receivables. In connection with such collections, each Debtor may take (and, upon the occurrence and continuance of an Event of Default and so long as it is continuing and has not been waived at the Secured Party's direction, shall take) such action as such Debtor or the Secured Party may deem necessary or advisable to enforce collection of the Receivables; provided, that the Secured Party shall have the right at any time during the existence of an Event of Default, upon written notice to each Debtor of its intention to do so, to notify the account debtors or obligors under any Receivables of the assignment of such Receivables to the Secured Party and to direct such account debtors or obligors to make payment of all amounts due or to become due to such Debtor thereunder directly to the Secured Party and, upon such notification and at the expense of such Debtor, to enforce collection of any such Receivables, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Debtor might have done. After receipt by the Debtors of the notice from the Secured Party referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including instruments) received by the Debtors in respect of the Receivables shall be received in trust by the Debtors, shall be segregated from other funds of the Debtors and shall be forthwith paid over to the Secured Party in the same form as so received (with any necessary endorsement) to be held as cash collateral and either (A) released to the Debtors so long as no Default or Event of Default shall be continuing or (B) if any Default or Event of Default shall be continuing, applied as provided in Section 12(b), and (ii) the Debtors shall not adjust, settle or compromise ------------- the amount or payment of any Receivable, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon, except with the prior written consent of the Secured Party. (g) The Debtors shall keep substantially all the Inventory (other than such Inventory sold in the ordinary course of business or Inventory in transit or Inventory placed at the location of its installation pending installation and payment therefor) at the places therefor specified in Section 5(a) or, upon ------------ notice within 30 days after such move to the Secured Party, at such other places in jurisdictions where all action required by Section 6(a) shall have been or ------------ shall be taken with respect to such Inventory. (h) The Debtors shall promptly upon request furnish to the Secured Party a statement respecting any material loss or damage to any of the Inventory or any other of the Collateral and will permit the Secured Party to inspect the Collateral upon reasonable notice during normal business hours. SECTION 7. Secured Party Appointed Attorney-in-Fact. Each Debtor hereby ---------------------------------------- irrevocably appoints the Secured Party as the Debtors' attorney-in-fact, with full authority in the place and stead of the Debtors and in the name of the Debtors, from time to time in the Secured Party's sole reasonable discretion after the occurrence of an Event of Default and during the continuance thereof, to take any action and to execute any instrument which the Secured Party may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including: (a) to obtain insurance required to be maintained pursuant to the Credit Agreement, (b) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (c) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (b) above, (d) to file any claims or take any action or institute any proceedings which the Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Secured Party with respect to any of the Collateral, and (e) to sell, transfer, assign, or otherwise deal in or with the Collateral or the proceeds thereof, as provided herein and subject to applicable law, as fully and effectually as if the Secured Party were the absolute owner thereof; provided, that the Secured Party shall give the Debtors not less than ten (10) days' prior written notice of the time and place of any sale or other intended disposition of any of the Collateral, except any Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Debtors agree that such notice constitutes "reasonable notification" within the meaning of (S) 9.504(c) of the UCC. SECTION 8. Secured Party May Perform. If any Debtor fails to perform any ------------------------- agreement contained herein, the Secured Party may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be payable upon demand by such Debtor and if not paid shall bear interest at the Default Rate set forth in the Credit Agreement. SECTION 9. The Secured Party's Duties. The powers conferred on the -------------------------- Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it or any other Party to exercise any such powers. In regard to any Debtor, except for reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, neither the Secured Party nor any other party shall have any duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property. SECTION 10. Remedies. If any Event of Default shall have occurred and be -------- continuing: (a) The Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC and the Secured Party may also (i) require any Debtor to, and each Debtor hereby agrees that it will at its reasonable expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at a place to be designated by the Secured Party, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Secured Party's offices or elsewhere, for cash or on credit, and upon such other terms as may be commercially reasonable. Each Debtor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' prior notice to the Debtors of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification thereof. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) Any cash received by the Secured Party shall be applied to repay the Secured Obligations. Any surplus of such cash or cash proceeds held by the Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to the Debtors or to whomsoever may be lawfully entitled to receive such surplus. SECTION 11. Amendments. No amendment or waiver of any provision of this ---------- Agreement, nor consent to any departure by the Debtors herefrom, shall in any event be effective unless the same shall be in writing and signed by the Secured Party with the requisite consent of the Debtors, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 12. Addresses for Notices. All notices and other communications --------------------- provided for hereunder shall be given in the manner and at the addresses and telecopy numbers as set forth in the Credit Agreement, and shall become effective, as specified in the Credit Agreement. SECTION 13. Termination; Reinstatement. (a) Each Debtor agrees that this -------------------------- Agreement and the Liens granted hereunder shall terminate when, but only when, all Secured Obligations have been fully paid and performed (except for indemnification obligations not yet due) and all Banks' commitments under the Loan Documents have expired or been terminated. At any time thereafter upon the Debtor's request, the Secured Party shall (i) promptly reassign and redeliver, (or cause to be reassigned and redelivered) to the Debtors, or to such Person or Persons as the Debtors shall designate in writing, against receipt, such of the Collateral (if any) as shall not have been sold or otherwise applied by the Secured Party pursuant to the terms hereof and shall still be held by it hereunder and (ii) terminate any financing statements with respect to the Collateral or any part thereof. Any such reassignment shall be without recourse upon, or representation or warranty by, the Secured Party (other than that the Secured Party has not sold, encumbered or otherwise transferred any interest in the Collateral except as provided in this Agreement) and shall be at the sole reasonable cost and expense of the Debtors. (b) This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Secured Party in respect of the Secured Obligations is rescinded or must otherwise be restored or returned by the Secured Party upon the filing of any bankruptcy proceeding by or of the Debtors or upon the appointment of any intervenor or conservator of, or trustee or similar official for, the Debtors or any substantial part of their assets, or otherwise, all as though such payments had not been made. SECTION 14. Waiver of Marshaling. All rights of marshaling of assets of -------------------- the Debtors, including any such right with respect to the Collateral, are hereby waived by the Debtors. SECTION 15. Limitation by Law. All rights, remedies and powers provided ----------------- in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law. SECTION 16. Separability. Should any clause, sentence, paragraph, ------------ subsection or Section of this Agreement be judicially declared to be invalid, unenforceable or void, such declaration will not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that the part or parts of this Agreement so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom by the Secured Party hereto, and the remainder will have the same force and effectiveness as if such stricken part or parts had never been included herein. SECTION 17. No Waiver; Remedies. No failure on the part of the Secured ------------------- Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 18. Partial Release of Security Interest. Upon the request of the ------------------------------------ Debtors in connection with any sale, transfer or other disposition of property or assets permitted hereunder or under any Loan Document, so long as no Event of Default under any of the Loan Documents has occurred and is continuing, the Secured Party shall execute and deliver to the Debtors duly executed releases or partial releases, as applicable, of any security interest it may have in such property or assets, in form and substance reasonably satisfactory to the Secured Party and the applicable Debtor. SECTION 19. Continuing Security Interest. This Agreement shall create a ---------------------------- continuing security interest in the Collateral and shall (a) remain in full force and effect until payment in full of the Secured Obligations, (b) be binding upon each Debtor, its successors and assigns, and (c) inure to the benefit of the Secured Party and its respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), the Secured Party may assign or otherwise transfer all or a portion of its interests, rights and obligations under any Note held by it pursuant to the Credit Agreement or pursuant to any Loan Document. Upon the payment in full of the Secured Obligations, the Liens granted hereby shall terminate and all rights to the Collateral shall revert to the Debtors. Upon any such termination, the Secured Party will, at the Debtors' reasonable expense, promptly execute and deliver to the Debtors such documents as the Debtors shall reasonably request to evidence such termination. Any Subsidiary of the Company that executes an Adoption Agreement after the date of this Agreement shall, upon such execution, become a party hereto as a Debtor. SECTION 20. Survival of Representations and Warranties. All ------------------------------------------ representations and warranties contained in this Agreement or made in writing by or on behalf of the Debtors in connection herewith are true and correct in all material respects when made or deemed made and shall survive the execution and delivery of this Agreement until repayment of the Secured Obligations. Any investigation by the Secured Party shall not diminish in any respect whatsoever its rights to rely on such representations and warranties. SECTION 21. Governing Law; Terms. This Agreement shall be governed by and -------------------- construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular collateral are governed by the laws of a jurisdiction other than the State of Texas. SECTION 22. Inconsistencies. In the event of any irreconcilable --------------- inconsistences between any provision of this Agreement and any provision of the Credit Agreement and/or the Loan Documents, the provisions of this Agreement shall control. SECTION 23. Counterparts. This Agreement may be executed in any number of ------------ counterparts, and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same agreement. SECTION 24. Interpretation. -------------- (a) In this Agreement, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (iii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually, provided that nothing in this clause (iii) is intended to authorize any assignment not otherwise permitted by this Agreement; (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, and reference to any Note includes any Note issued pursuant hereto in extension or renewal thereof and in substitution or replacement therefor; (v) unless the context indicates otherwise, reference to any Section or Schedule means such Section hereof or such Schedule hereto; (vi) the words "including" (and with correlative meaning "include") means including, without limiting the generality of any description preceding such term; (vii) with respect to the determination of any period of time, the word "from" means "from and including" and the word "to" means "to but excluding;" and (viii) reference to any law means such as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time. (b) The Section headings herein are for convenience only and shall not affect the construction hereof. (c) No provision of this Agreement shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision. SECTION 25. Submission to Jurisdiction. (a) ANY LEGAL ACTION OR -------------------------- PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN DALLAS COUNTY OR THE UNITED STATES FOR THE NORTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH DEBTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. EACH DEBTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE DEBTORS IN ANY OTHER JURISDICTION. (b) EACH DEBTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 26. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO THE EXTENT -------------------- PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, LOAN DOCUMENTS, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY BANKING OR FINANCIAL RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY LOAN DOCUMENT, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. SECTION 27. Final Agreement of the Parties. THIS AGREEMENT (INCLUDING THE ------------------------------ SCHEDULES HERETO) AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the Debtors have caused this Agreement to be duly executed and delivered by its officer duly authorized as of the date first above written. COMPANY/DEBTOR: GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation, a Texas corporation By: _________________________________ Name: Darren B. Miller Title: Executive Vice President SUBSIDIARIES/DEBTORS: BOSS SUBSIDIARIES ADVENT ELECTRIC CO., INC. AMERICAN AIR COMPANY, INC. ATLANTIC ELECTRIC COMPANY, INC. BARNES IVEY MECHANICAL COMPANY, L.L.C. B&R ELECTRICAL SERVICES, INC. BELTLINE MECHANICAL SERVICES, INC. BRAZOSPORT MANAGEMENT, INC. BUILDING ONE MECHANICAL SERVICES, INC. (TO BE NAMED ENCOMPASS MECHANICAL SERVICES, INC.) BUILDING ONE COMMERCIAL, INC. (F/K/A SPANN BUILDING MAINTENANCE COMPANY, TO BE NAMED ENCOMPASS COMMERCIAL, INC.) BUILDING ONE SERVICE SOLUTIONS, INC. BUYR, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. CONSOLIDATED ELECTRICAL GROUP, INC. CRAMAR ELECTRIC, INC. C.R. HIPP CONSTRUCTION CO., INC. D&P JANITORIAL, INC. DEL-AIR SERVICE COMPANY, INC. D/FW MECHANICAL SERVICES, INC. DIRECT ENGINEERED MAINTENANCE, INC. DIVERSIFIED MANAGEMENT SERVICES, U.S.A., INC. EDG POWER GROUP, INC. ELECTRICAL CONTRACTING, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. FACILITYDIRECT.COM, LLC (F/K/A ALLIANCE SUPPLY CO., LLC) FRED CLARK ELECTRICAL CONTRACTOR, INC. GAMEWELL MECHANICAL, INC. GARFIELD-INDECON ELECTRICAL SERVICES, INC. G.S. FINANCIAL, INC. G.S. GROUP, INC. G.S.I. OF CALIFORNIA, INC. GULF STATES, INC. HYDRO COOLING, INC. INTERSTATE BUILDING SERVICES, LLC IVEY MECHANICAL COMPANY, INC. IVEY MECHANICAL SERVICES, L.L.C. K & A MECHANICAL, INC. THE LEWIS COMPANIES, INC. LEXINGTON/IVEY MECHANICAL COMPANY, LLC MCINTOSH MECHANICAL, INC. MH TECHNOLOGIES, INC. NATIONAL NETWORK SERVICES, INC. OIL CAPITAL ELECTRIC, INC. OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES, By Omni Mechanical Company POTTER ELECTRIC CO., INC. PROCESS DESIGN BUILDERS, LLC PRO WIRE SECURITY SYSTEMS, INC. REGENCY ELECTRIC COMPANY, INC. REGENCY ELECTRIC COMPANY ATLANTA OFFICE REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY SOUTH FLORIDA OFFICE, INC. RIVIERA ELECTRIC CONSTRUCTION CO. RIVIERA ELECTRIC OF CALIFORNIA, INC. ROBINSON MECHANICAL COMPANY SANDERS BROS., INC. SKC ELECTRIC, INC. SKCE, INC. S.L. PAGE CORPORATION SULLIVAN ELECTRIC, INC. TAYLOR-HUNT ELECTRIC, INC. (F/K/A TAYLOR ELECTRIC, INC.) TESTRONICS, INC. TOWN & COUNTRY ELECTRIC, INC. TRI-CITY ELECTRICAL CONTRACTORS, INC. TRI-M BUILDING AUTOMATION SYSTEMS CORP. TRI-M CORPORATION TRI-M ELECTRICAL CONSTRUCTION CORP. TRI-M HOLDING CORP. TSE ACQUISITION CORP. TRI-STATE ACQUISITION CORP. WALKER ENGINEERING, INC. WALTER C. DAVIS & SON, INCORPORATED WATSON ELECTRICAL CONSTRUCTION CO. WILSON ELECTRIC COMPANY, INC. WAYZATA, INC. ZWART, INC. (D/B/A MOUNTAIN VIEW ELECTRIC, INC.) By:____________________________________ Name: F. Traynor Beck Title: Vice President and Assistant Secretary Acting on Behalf of Each of the Above GROUPMAC SUBSIDIARIES AA ADVANCE AIR, INC. AA JARL, INC. A-ABC APPLIANCE, INC. A-ABC SERVICES, INC. A-1 MECHANICAL OF LANSING, INC. AIR CONDITIONING ENGINEERS, INC. AIR CONDITIONING, PLUMBING & HEATING SERVICE CO., INC. AIRCON ENERGY INCORPORATED AIR SYSTEMS, INC. AIRTRON, INC. AIRTRON OF CENTRAL FLORIDA, INC. ALL SERVICE ELECTRIC, INC. ARKANSAS MECHANICAL SERVICES, INC. ATLANTIC INDUSTRIAL CONSTRUCTORS, INC. CALLAHAN ROACH PRODUCTS & PUBLICATIONS, INC. CARDINAL CONTRACTING CORPORATION CENTRAL AIR CONDITIONING CONTRACTORS, INC. CENTRAL CAROLINA AIR CONDITIONING COMPANY CHAPEL ELECTRIC CO. CHARLIE CRAWFORD, INC. CLARK CONVERSE ELECTRIC SERVICE, INC. COLONIAL AIR CONDITIONING COMPANY COMMERCIAL AIR HOLDING COMPANY COMMERCIAL AIR, POWER & CABLE, INC. CONTINENTAL ELECTRICAL CONSTRUCTION CO. COSTA AND RIHL, INC. COSTA & RIHL PLUMBING, INC. COSTNER BROTHERS, INC. DIVCO, INC. DYNALINK CORPORATION ELECTRICAL ASSOCIATES OF DALLAS, INC. EVANS SERVICES, INC. THE FARFIELD COMPANY FERGUSON ELECTRIC CORPORATION GENTZLER ELECTRICAL CONTRACTORS, INC. GILBERT MECHANICAL CONTRACTORS, INC. GREENWAY INVESTMENT CORP. GROUPMAC FACILITY SERVICES, INC. (TO BE NAMED ENCOMPASS FACILITY SERVICES, INC.) GROUPMAC HOLDING CORP. (TO BE NAMED ENCOMPASS HOLDING CORP.) By Airtron, Inc. and Paul E. Smith Co., Inc. GROUPMAC INDIANA, L.L.C. (TO BE NAMED ENCOMPASS INDIANA, L.L.C.) GROUPMAC MARYLAND CORP. (TO BE NAMED ENCOMPASS MARYLAND CORP.) GROUPMAC TEXAS L.P. (TO BE NAMED ENCOMPASS TEXAS L.P.), By GroupMAC Holding Corp. HPS PLUMBING SERVICES, INC. HALLMARK AIR CONDITIONING, INC. HUNGERFORD MECHANICAL CORPORATION J. D. STEWARD AIR CONDITIONING, INC. K & N PLUMBING, HEATING AND AIR CONDITIONING, INC. LANEY'S, INC. LINFORD SERVICE CO. L.T. MECHANICAL, INC. MACDONALD-MILLER CO., INC. MACDONALD-MILLER INDUSTRIES, INC. MACDONALD-MILLER OF OREGON, INC. MACDONALD-MILLER SERVICE, INC. MASTERS, INC. MECHANICAL INTERIORS, INC. MECHANICAL SERVICES OF ORLANDO, INC. MERRITT ISLAND AIR & HEAT, INC. NEW CONSTRUCTION AIR CONDITIONING, INC. NORON, INC. PACIFIC RIM MECHANICAL CONTRACTORS, INC. PAUL E. SMITH CO., INC. PHOENIX ELECTRIC COMPANY RAY AND CLAUDE GOODWIN, INC. RELIABLE MECHANICAL, INC. ROMANOFF ELECTRIC CORP. SEQUOYAH CORPORATION SIBLEY SERVICES, INCORPORATED SNYDER MECHANICAL SOUTHEAST MECHANICAL SERVICE, INC. STATEWIDE HEATING & AIR CONDITIONING, INC. STEPHEN C. POMEROY, INC. STERLING AIR CONDITIONING, INC. SUN PLUMBING, INC. TEAM MECHANICAL, INC. TOWER ELECTRIC COMPANY TRINITY CONTRACTORS, INC. UNITED ACQUISITION CORP. VALLEY WIDE PLUMBING AND HEATING, INC. VAN'S COMFORTEMP AIR CONDITIONING, INC. VANTAGE MECHANICAL CONTRACTORS, INC. VERMONT MECHANICAL, INC. WADE'S HEATING & COOLING, INC. WIEGOLD & SONS, INC. WILLIS REFRIGERATION, AIR CONDITIONING & HEATING, INC. YALE INCORPORATED By:_____________________________________ Name: Darren B. Miller Title: Vice President Acting on Behalf of Each of the Above GROUPMAC MANAGEMENT CO. TO BE NAMED ENCOMPASS MANAGEMENT CO. By:_____________________________________ Name: Darren B. Miller Title: Executive Vice President ADMINISTRATIVE AGENT/SECURED PARTY: BANK OF AMERICA, N.A., as Administrative Agent for the Banks By: ____________________________________ Name: Title: Schedule I Excluded Assets Excluded Assets means and refers to (A) that portion of the Debtor's personal property which, if included in the Collateral, would violate, be prohibited by, or constitute a default under any agreement, contract, document, or law or would require any consent which has not yet been obtained and (B) Receivables due from any residential customer of any Debtor incurred in connection with the installation of any heating, ventilation or air conditioning equipment not in excess of $6,000,000.00 at any time and including any note receivable in connection therewith; provided any and all proceeds from such excluded assets shall not be excluded assets and shall be Collateral and subject to all of the terms and conditions of this Agreement. Schedule II-A Locations of Inventory 54 SECURITY AGREEMENT SCHEDULE II-A -------------------------------- SCHEDULE OF INVENTORY AND Equipment Locations ------------------- PART A
Name of Subsidiary Address - -------------------------------------------- --------------------------------------------------- A-1 Mechanical of Lansing, Inc. 615 S. Waverly Road, Lansing, Michigan 48917 AA Advance Air, Inc. 1920 NW 32nd Street, Pompano Beach, FL 33064 A-ABC Appliance, Inc. 8 Greenway Plaza, Ste 1500, Houston, TX 77046 A-ABC Services, Inc. 14001 Distribution Way, Dallas, TX 75234 AA JARL, Inc.(dba Jarrell Plumbing) 6920 Winton, Houston, TX 77021 Air Conditioning Engineers, Inc. 5250 Auburn Road, Utica Michigan 48317 Air Conditioning, Plumbing & Heating Service Co., Inc. 4350 Race Street, Denver, CO 80216 Aircon Energy Incorporated 135 Gray Street, Longmont, CO 80501 Air Systems, Inc. 4234 N. Freeway Blvd., #100, Sacramento, CA 95834 Airtron, Inc. 381 Stockton Street, San Jose, CA 95126 7813 North Dixie Drive, Dayton, OH 45414 210 Douglas Road, East Oldsmark, FL 3467 515 Elmwood Avenue, Indianapolis, IN 46203 1655 South West Street, Wichita, KS 67214 3657 O'Hare Road, Erlanger, KY 40213 3103 Fern Valley Dr., #104, Louisville, KY 40213 4885 Neo Parkway, Cleveland, OH 44128 1360 McKinley Ave., Columbus, OH 43222 3050 Plainfield Road, Dayton, OH 45432 520 Commercial Drive, Fairfield, OH 45014 513 Thompson Lane, Austin, TX 78742 208 S. International Rd., Garland, TX 75042 3250 Bingle Road, Houston, TX 77055 3319 Clear Springs, TX 78233 Airtron of Central Florida, Inc. 210 Douglas Road, East Oldsmar, FL 34677 All Service Electric, Inc. 1556 Whitlock Avenue, Jacksonville, FL 32211 Arkansas Mechanical Services, Inc. 2201 Lincoln Road, N. Little Rock, AR 72115 4500 Oakleys Lane, N. Little Rock, AR 72115 803 Harkrider, Ste. 8, Conway, AR 72032 Atlantic Industrial Constructors, Inc. 4500 Oakleys Lane, Richmond, VA 23231 Callahan Roach Products & Publications, Inc. 8955 E. Nichols, Ste 200, Englewood, CO 80112 Cardinal Contracting Corporation 2300 S. Tibbs, Indianapolis, IN 46241 1251 Georgetown Road, Lexington, KY 40511 Central Air Conditioning Contractors, Inc. 9195 Red Branch Road, Columbia, MD 21045 Central Carolina Air Conditioning Company 1800 Fairfax Road, Greensboro, NC 27407-4124
Chapel Electric Co. 320 Haled St., Winston Salem, NC 27127 Charlie Crawford, Inc. 207 E. Sixth, Dayton, OH 45402 Clark Converse Electric Service, Inc. 1309 Pennsylvania, So. Houston, TX 77587-4042 Colonial Air Conditioning Company 3783 Gantz Road, Grove City, OH 43123 Commercial Air Holding Company 4 Northwood Drive, Bloomfield, CT 06002 Commercial Air, Power & Cable, Inc. 12100 Baltimore Avenue, Beltsville, MD 20705 Continental Electrical Construction Co. 12100 Baltimore Avenue, Beltsville, MD 20705 5900 Howard St., Skokie, IL 60077 Costa and Rihl, Inc. 930 Pyott Road, Crystal Lake, IL 60014 Costa & Rihl Plumbing, Inc. 3900 Church Road, Mt. Laurel, NJ 08054 Costner Brothers, Inc. 3900 Church Road, Mt. Laurel, NJ 08054 Divco, Inc. 3175 Lesslie Highway, Rock Hill, SC 29730 Dynalink Corporation 715 Madelia Street, Spokane, WA 99220 Electrical Associates of Dallas, Inc. 5201 Richmond Rd, Bedford Heights, OH 44146 Evans Services, Inc. 3730 Marquis Dr., Garland, TX 75024 The Farfield Company 2406 Valleydale Road, Birmingham, AL 35244 312 E. Meadow Valley Road, Lititz, PA 17543 1675 East Ayre St., Newport, DE 19804 195 Hempt Road, Mechanicsburg, PA 17055 Ferguson Electric Corporation 7264 Penn Drive, Allentown, PA 18106 Gentzler Electrical Contractors, Inc. 1410 Ford Street, Colorado Springs, CO 80915 10510 Markison, Dallas, TX 75238 Gilbert Mechanical Contractors, Inc. 4924 Boyd Blvd., Unit #5, Rowlett, TX 75088 4451 West 76th Street, Minneapolis, MN 55435 Greenway Investment Corp. 11596 K-Tel Drive, Minnetonka, MN 55343 GroupMAC Facility Services, Inc. 1105 N. Market Square, Wilmington, DE 19801 GroupMAC Holding Corp. 7717 Detroit SW, Seattle, WA 98106-1903 GroupMAC Indiana, L.L.C. 8 Greenway Plaza, Ste. 1500, Houston, TX 77046 GroupMAC Management Co. 5150 Elmwood, Indianapolis, IN 46203 GroupMAC Maryland Corp. 8 Greenway Plaza, Ste. 1500, Houston, TX 77046 GroupMAC Texas L.P. 6251 Ammendale Road, Beltsville, MD 20705 HPS Plumbing Services, Inc. 8 Greenway Plaza, Suite 1500, Houston, TX 77046 Hallmark Air Conditioning, Inc. 401 34th Street, Bakersfield, CA 93301 Hungerford Mechanical Corporation 4517 Southerland, Houston, TX 77092 J. D. Steward Air Conditioning, Inc. 3800 Deepwater Terminal Road, Richmond, VA 23234 K & N Plumbing, Heating and Air 655 Elkton Drive, Colorado Springs, CO 80907 Conditioning, Inc. 2706 W. Pioneer Parkway, Arlington, TX 76013 L.T. Mechanical, Inc. 1502-A Chisolm Trail Rd., Round Rock 78681 Laney's, Inc. 5940 General Commerce Drive, Charlotte, NC 28213-0246 Linford Service Co. 55 South 27th Street, Fargo, ND 58103 2850 Poplar Street, Oakland, CA 94608 1460 South Carlos Ave., Ontario, CA 91761 11828 Rancho Bernardo Rd., #123-302, San Diego, CA 92128 121 Industrial Road #7, Belmont, CA 94002
56
MacDonald-Miller Co., Inc. 431 N. Buchanan Circle #13, Pacheco, CA 94553 MacDonald-Miller Industries, Inc. 4637 Chabot Drive #310, Pleasanton, CA 94588 MacDonald-Miller of Oregon, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 MacDonald-Miller Service, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 1240 SE 12th Avenue, Portland, OR 97214 7717 Detroit SW, Seattle, WA 98106-1903
Masters, Inc. 7891 Beechcraft, Gaithersburg, MD 20879 97-C N. Langley Road, Glen Burnie, MD 21060 Mechanical Interiors, Inc. 256 Regal Row, Dallas, TX 75247 2007 Rutland, Austin, TX 78758 Mechanical Services of Orlando, Inc. 9440 Sidney Hayes Road, Orlando, FL 32824 Merritt Island Air & Heat, Inc. 625 Cypress Street, Merritt Island, FL 32952 680 Azalea, Merritt Island, FL 32952 615 Cypress St., Merritt Island, FL 32952 New Construction Air Conditioning, Inc. 1900 Cedar Street, Holt, Michigan 48842 Noron, Inc. 5465 Enterprise, Toledo, OH 43612 Pacific Rim Mechanical Contractors, Inc. 7655 Convoy Court, San Diego, CA 92111 2031 E. Cerritos Ave., Suite 7-C, Anaheim, CA 92806 Paul E. Smith Co., Inc. 8171 West 10th Street, Indianapolis, IN 46214 Phoenix Electric Company 7379 S.W. Tech Center Drive, Tigard, OR 97223 Ray and Claude Goodwin, Inc. 1033 S. Edgewood, Jacksonville, Florida 32205 Reliable Mechanical, Inc. 13035 Middletown Industrial Blvd., Louisville, KY 40223 Romanoff Electric Corp. 5055 Enterprise Blvd., Toledo, OH 43612 Sequoyah Corporation 720 Eighth Avenue, Kirkland, WA 98033-5649 Sibley Services, Incorporated 925 Industry Drive, Kirkland, WA 98033 Snyder Mechanical 1892 Lynnbrook, Memphis, Tennessee 38116 Southeast Mechanical Service, Inc. 1250 Lamoille Highway #104, Elko, NV 89803 Statewide Heating & Air Conditioning, Inc. 15951 Southwest 41st St., Suite 100, Davie, FL 33331 Stephen C. Pomeroy, Inc. 808 Purser Drive, Raleigh, NC 27603 Sterling Air Conditioning, Inc. 3131 SW 13th Drive, Deerfield Beach, FL 33442 Sun Plumbing, Inc. 1331 East Broadway, Pearland, Texas 77581 Team Mechanical, Inc. 20610 H&H Road, Houston, TX 77073 Tower Electric Company 6935 Vicki Circle, Melbourne, Florida 32902-0549 Trinity Contractors, Inc. 151 No. 600 West, Kaysville, UT 84037 11170 Lee Highway, Fairfax, VA 22030 561 Simmons Drive, Trussville, AL 35173 3455 North Main, Paris, TX 75460 United Acquisition Corp. (dba United 5072 Shirley Dr., Tyler, TX 75708 Service Alliance) P.O. Box 6278, Arlington, TX 76005 Valley Wide Plumbing and Heating, Inc. 8955 East Nichols, Suite 200, Englewood, Colorado 80112 Van's Comfortemp Air Conditioning, Inc. Vantage Mechanical Contractors, Inc. Vermont Mechanical, Inc. 431 Metcalf, Avon, Colorado 81620 135 W. Congress, Delray Beach, FL 33445 12901-1 Metro Parkway, Fort Meyers, FL 33912 Wade's Heating & Cooling, Inc. 4050 Williston Road, S. Burlington, VT 05495 Wiegold & Sons, Inc. 12 Robinson Road, Bow, NH 03304 64 Gonyeau Rd., Milton, VT 05468 12901-1 Metro Parkway, Fort Meyers, FL 33912 2255 J&C Blvd., Pine Ridge Industrial Park, Naples, FL 34109 Willis Refrigeration, Air Conditioning & Heating, Inc. 885 Ohio Pike, Cincinnati, Ohio 45245 Yale Incorporated 9649 Girard Avenue South, Minneapolis, MN 55431
58 Security Agreement Schedule II-A -------------------------------- PART B SCHEDULE OF INVENTORY AND Equipment Locations ------------------- INVENTORY: NONE EQUIPMENT: SEE BELOW ADVENT ELECTRIC CO., INC. 5901 Walden Drive Knoxville, TN 37919-6348 AMERICAN AIR COMPANY, INC. 7533 Avenue 304 Visalia, CA 93291 ATLANTIC ELECTRIC COMPANY, INC. 7320 Cross County Road Charleston, SC 29423-1347 38C Sheridan Park Circle Beaufort, SC 29910 B&R ELECTRICAL SERVICES, INC. 502 McCormick Drive Suite M Glen Burnie, MD 21061 BUILDING ONE MECHANICAL SERVICES, INC. 514 N. Wells Street Kosiusko, MS 39090 872 Sparta Court Lexington, Kentucky 7400 East Arapahoe Road, Suite 75 Englewood, Colorado 151 Bodman Place, Suite 400 Red Bank, New Jersey 1052 Grand Avenue, Suite E Arroyo Grande, California 93420 8300 West 95th Street Hickory Hills, Illinois 8620 South 300 West, Site #8 Sandy, Utah 2500 Longley Lane, Unit 2043 Reno, Nevada 950 Shrewsbury Avenue, Unit No. 5029 Tinton Falls, New Jersey BUILDING ONE SERVICE SOLUTIONS, INC. DIVERSIFIED MANAGEMENT SERVICES, U.S.A., INC. FACILITYDIRECT.COM, LLC 45600 Terminal Drive Dulles, VA 20166 INTERSTATE BUILDING SERVICES, LLC 421 Harvard Street Manchester, New Hampshire 03101 D&P JANITORIAL, INC. DIRECT ENGINEERED MAINTENANCE, INC. 577 Warren Avenue East Providence, RI 02914 BUYR, INC. Suite 210 110 Cheshire Lane Minnetonka, MN 55305-1061 C.R. HIPP CONSTRUCTION CO., INC. 3537 Dorchester Road N. Charleston, SC 29405 CONSOLIDATED ELECTRICAL GROUP, INC. 8730 Bourgade Lenexa, KS 66219 DEL-AIR SERVICE COMPANY, INC. 135 Chicamauga Avenue Knoxville, TN 37917 D/FW MECHANICAL SERVICES, INC. 11170 Ables Lane P.O. Box 59822 Dallas, TX 75229 60 ELECTRICAL CONTRACTING, INC. 500 Corporate Drive Escondido, CA 92029 G.S. GROUP, INC. BRAZOSPORT MANAGEMENT, INC. TESTRONICS, INC. G.S. FINANCIAL, INC. 6711 East Hwy 332 Freeport, TX 77541 GULF STATES, INC. 6711 East Hwy 332 Freeport, TX 77541 238 Cahaba Valley Parkway N. Pelham, Alabama 35124 P.O. Box 692 Gails Ferry, CT 06355 G.S.I. OF CALIFORNIA, INC. 6711 East Hwy 332 Freeport, TX 77541 3400 E. 2nd Street Benicia, CA 94510 1503 Loveridge Rd. Pittsburgh, CA 94565 GAMEWELL MECHANICAL, INC. 727 Bendix Drive Salisbury, NC 28146 GARFIELD-INDECON ELECTRICAL SERVICES, INC. 5301 Lester Road Cincinnati, OH 1103-c Lyons Road Dayton, Ohio IVEY MECHANICAL COMPANY, INC. 514 N. Wells Street Kosciusko, MS 39090 420 Twin Elms Court Nashville, Tennessee 4285 Alalex Road Montgomery, Alabama K & A MECHANICAL, INC. 5940 Bingle Houston, TX 77092 LEXINGTON/IVEY MECHANICAL COMPANY, LLC 1063 Manchester Street Lexington, KY 40509 BARNES IVEY MECHANICAL COMPANY, L.L.C. P. O. Box B Fayetteville, NC 28302 BELTLINE MECHANICAL SERVICES, INC. 3008 West Story Road Irving, TX 75038 IVEY MECHANICAL SERVICES, L.L.C. 514 N. Wells Street Kosciusko, MS 39090 MH TECHNOLOGIES, INC. 1201 Prince Street Houston, TX 77008 MCINTOSH MECHANICAL, INC. 879 South Guignard Drive Sumter, SC 29151 ZWART, INC. (D/B/A MOUNTAIN VIEW ELECTRIC, INC.) 6350 Nautilus Drive Boulder, CO 80301 62 NATIONAL NETWORK SERVICES, INC. 2452 S. Trenton Way Denver, CO 80231 1407 North Cleveland, Sioux Falls, South Dakota 302 Shelley Street Springfield, Oregon 5653 West Las Positas Boulevard, Unit 202 Pleasanton, California OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES (50% INTEREST) 12718 East 55th Street Tulsa, OK 74146 POTTER ELECTRIC CO., INC. 7150 Placid Street Las Vegas, NV 89119 REGENCY ELECTRIC COMPANY, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. 6601 Southpoint Drive North Jacksonville, FL 32216 REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. 2883 Mendenhall Road S. Suite 3 Memphis, TN 38115 REGENCY ELECTRIC COMPANY SOUTH FLORIDA OFFICE, INC. 3800 Park Central Blvd. North Suite 3810 Pompano Beach, FL 33064 REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. 5031A West W.T. Harris Blvd. Charlotte, NC 28269 REGENCY ELECTRIC COMPANY ATLANTA OFFICE 1000 Cobb Place Blvd. Atlanta, GA 30144 RIVIERA ELECTRIC CONSTRUCTION CO. 2107 West College Avenue Englewood, CO 80110 RIVIERA ELECTRIC OF CALIFORNIA, INC. 2905 East Ricker Way Anaheim, CA 92806 ROBINSON MECHANICAL COMPANY 5541 Central Avenue Boulder, CO 80301 S.L. PAGE CORPORATION 10879 Metro Parkway Fort Myers, FL 33912 HYDRO COOLING, INC. 5760 Shirley Street Naples, FL SANDERS BROS., INC. PROCESS DESIGN BUILDERS, LLC (50% INTEREST) 1709 Old Georgia Highway Gaffney, SC 29341 SKC ELECTRIC, INC. 14335 West 97th Terrace Lenexa, KS 66215 4939 East US Hwy 60 Rogersville, MO 65742 1339 E. Prathersville Rd. Columbia, MO 65202 1235 S. Meade Wichita, KS 67211 CRAMAR ELECTRIC, INC. SKCE, Inc. Pro Wire Security Systems, Inc. 14335 West 97th Terrace Lenexa, KS 66215 64 Building One Commercial, Inc. (F/K/A SPANN BUILDING MAINTENANCE COMPANY) 2035 Olive Street St. Louis, MO 63103 100 Galleria Parkway Suite 1070 Atlanta, GA 30339 120 Summit Parkway Building Birmingham, Alabama 458 Pebble Creek, Suite 1-C Madison, Mississippi 1705 Douglas Street Omaha, Nebraska 250 South Wacker Drive The Penthouse Chicago, Illinois 429 West Muhammad Ali Boulevard, Suite 610 Louisville, Kentucky 85 East Gay Street Columbus, Ohio 22 East Washington Street, Suite 605 Indianapolis, Indiana 46204 2001 Holmgren Way Green Bay, WI 54307-3157 216 East Stephenson, Freeport, Illinois SULLIVAN ELECTRIC, INC. 7100 Cockrill Bend Blvd. Nashville, TN 37209 TAYLOR-HUNT ELECTRIC, INC. 1476 South Major Street Salt Lake City, UT 84115 2420 South 2570 West Salt Lake City, Utah 84119 THE LEWIS COMPANIES, INC. OIL CAPITAL ELECTRIC, INC. 12718 East 55th Street Tulsa, OK 74146 2727 North St. Mary San Antonio, TX ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. 12718 East 55th Street Tulsa, OK 74146 FRED CLARK ELECTRICAL CONTRACTOR, INC. 12718 East 55th Street Tulsa, OK 74146 1430 N. Flores, #100 San Antonio, TX 78212 OMNI MECHANICAL SERVICES (50% INTEREST) 12718 East 55th Street Tulsa, OK 74146 5918 S. 1029 E Ave. Tulsa, OK 74134 EDG POWER GROUP, INC. 12718 East 55th Street Tulsa, OK 74146 4608 S. Barnett Rd. Suite 600 Tulsa, OK 74146 TOWN & COUNTRY ELECTRIC, INC. 2662 American Drive Appleton, WI 54915 66 TRI-CITY ELECTRICAL CONTRACTORS, INC. 430 West Drive Altamonte Springs, FL 32714 5910 Hartford Street Tampa, FL 33619 12296 Matterhorn Road Ft. Myers, FL 33913 1001 Jupiter Park Suite 113 Jupiter, FL 33458 TRI-M HOLDING CORP. TRI-M CORPORATION TRI-M BUILDING AUTOMATION SYSTEMS CORP. 204 Gale Lane Kennet Square, PA 19348 TRI-M ELECTRICAL CONSTRUCTION CORP. 204 Gale Lane Kennet Square, PA 19348 7584 Morris Court Allentown, PA TSE ACQUISITION CORP. 4820 West University Las Vegas, NV 89103 TRI-STATE ACQUISITION CORP. 442 West Bonita Avenue San Dimas, CA 91773 WALKER ENGINEERING, INC. 10999 Petal Street Dallas, TX 75238 WALTER C. DAVIS & SON, INCORPORATED 7908 Kincannon Place Newington, VA 22122 WATSON ELECTRICAL CONSTRUCTION CO. 490 Ward Boulevard Wilson, NC 27895 WILSON ELECTRIC COMPANY, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. 15475 North Greenway-Hayden Loop Scottsdale, AZ 85260 WAYZATA, INC. 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 SCHEDULE II-B Chief Executive Office Locations of Debtors SECURITY AGREEMENT SCHEDULE II-B -------------------------------- PART A LIST OF CHIEF EXECUTIVE OFFICES -------------------------------
Name of Subsidiary Address - -------------------------------------------- --------------------------------------------------- A-1 Mechanical of Lansing, Inc. 615 S. Waverly Road, Lansing, Michigan 48917 AA Advance Air, Inc. 1920 NW 32nd Street, Pompano Beach, FL 33064 A-ABC Appliance, Inc. 8 Greenway Plaza, Ste 1500, Houston, TX 77046 A-ABC Services, Inc. 14001 Distribution Way, Dallas, TX 75234 AA JARL, Inc.(dba Jarrell Plumbing) 6920 Winton, Houston, TX 77021 Air Conditioning Engineers, Inc. 5250 Auburn Road, Utica Michigan 48317 Air Conditioning, Plumbing & Heating Service Co., Inc. 4350 Race Street, Denver, CO 80216 Aircon Energy Incorporated 4234 N. Freeway Blvd., #100, Sacramento, CA 95834 Air Systems, Inc. 381 Stockton Street, San Jose, CA 95126 Airtron, Inc. 7813 North Dixie Drive, Dayton, OH 45414 Airtron of Central Florida, Inc. 210 Douglas Road, East Oldsmar, FL 34677 All Service Electric, Inc. 1556 Whitlock Avenue, Jacksonville, FL 32211 Arkansas Mechanical Services, Inc. 2201 Lincoln Road, N. Little Rock, AR 72115 Atlantic Industrial Constructors, Inc. 4500 Oakleys Lane, Richmond, VA 23231 Callahan Roach Products & Publications, Inc. 8955 E. Nichols, Ste 200, Englewood, CO 80112 Cardinal Contracting Corporation 2300 S. Tibbs, Indianapolis, IN 46241 Central Air Conditioning Contractors, Inc. 9195 Red Branch Road, Columbia, MD 21045 Central Carolina Air Conditioning Company 1800 Fairfax Road, Greensboro, NC 27407-4124 Chapel Electric Co. 207 E. Sixth, Dayton, OH 45402 Charlie Crawford, Inc. 1309 Pennsylvania, So. Houston, TX 77587-4042 Clark Converse Electric Service, Inc. 3783 Gantz Road, Grove City, OH 43123 Colonial Air Conditioning Company 4 Northwood Drive, Bloomfield, CT 06002 Commercial Air Holding Company 12100 Baltimore Avenue, Beltsville, MD 20705 Commercial Air, Power & Cable, Inc. 12100 Baltimore Avenue, Beltsville, MD 20705 Continental Electrical Construction Co. 5834 W. Howard, Skokie, IL 60077 Costa and Rihl, Inc. 3900 Church Road, Mt. Laurel, NJ 08054 Costa & Rihl Plumbing, Inc. 3900 Church Road, Mt. Laurel, NJ 08054 Costner Brothers, Inc. 3175 Lesslie Highway, Rock Hill, SC 29730 Divco, Inc. 715 Madelia Street, Spokane, WA 99220 Dynalink Corporation 5201 Richmond Rd, Bedford Heights, OH 44146 Electrical Associates of Dallas, Inc. 3730 Marquis Dr., Garland, TX 75024 Evans Services, Inc. 2406 Valleydale Road, Birmingham, AL 35244 The Farfield Company 312 E. Meadow Valley Road, Lititz, PA 17543
46
Ferguson Electric Corporation 1410 Ford Street, Colorado Springs, CO 80915 Gentzler Electrical Contractors, Inc. 10510 Markison, Dallas, TX 75238 Gilbert Mechanical Contractors, Inc. 4451 West 76th Street, Minneapolis, MN 55435 Greenway Investment Corp. 1105 N. Market Square, Wilmington, DE 19801 GroupMAC Facility Services, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 GroupMAC Holding Corp. 8 Greenway Plaza, Ste. 1500, Houston, TX 77046 GroupMAC Indiana, L.L.C. 5150 Elmwood, Indianapolis, IN 46203 GroupMAC Management Co. 8 Greenway Plaza, Ste. 1500, Houston, TX 77046 GroupMAC Maryland Corp. 6251 Ammendale Road, Beltsville, MD 20705 GroupMAC Texas L.P. 8 Greenway Plaza, Suite 1500, Houston, TX 77046 HPS Plumbing Services, Inc. 401 34th Street, Bakersfield, CA 93301 Hallmark Air Conditioning, Inc. 4517 Southerland, Houston, TX 77092 Hungerford Mechanical Corporation 3800 Deepwater Terminal Road, Richmond, VA 23234 J. D. Steward Air Conditioning, Inc. 655 Elkton Drive, Colorado Springs, CO 80907 K & N Plumbing, Heating and Air Conditioning, Inc. 2706 W. Pioneer Parkway, Arlington, TX 76013 Laney's, Inc. 55 South 27th Street, Fargo, ND 58103 Linford Service Co. 2850 Poplar Street, Oakland, CA 94608 L.T. Mechanical, Inc. 5940 General Commerce Drive, Charlotte, NC 28213-0246 MacDonald-Miller Co., Inc. 7717 Detroit SW, Seattle, WA 98106-1903 MacDonald-Miller Industries, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 MacDonald-Miller of Oregon, Inc. 1240 SE 12th Avenue, Portland, OR 97214
MacDonald-Miller Service, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 Masters, Inc. 7891 Beechcraft, Gaithersburg, MD 20879 Mechanical Interiors, Inc. 256 Regal Row, Dallas, TX 75247 Mechanical Services of Orlando, Inc. 9440 Sidney Hayes Road, Orlando, FL 32824 Merritt Island Air & Heat, Inc. 625 Cypress Street, Merritt Island, FL 32952 New Construction Air Conditioning, Inc. 1900 Cedar Street,. Holt, Michigan 48842 Noron, Inc. 5465 Enterprise, Toledo, OH 43612 Pacific Rim Mechanical Contractors, Inc. 7655 Convoy Court, San Diego, CA 92111 Paul E. Smith Co., Inc. 8171 West 10th Street, Indianapolis, IN 46214 Phoenix Electric Company 7379 S.W. Tech Center Drive, Tigard, OR 97223 Ray and Claude Goodwin, Inc. 1033 S. Edgewood, Jacksonville, Florida 32205 Reliable Mechanical, Inc. 13035 Middletown Industrial Blvd., Louisville, KY 40223 Romanoff Electric Corp. 5055 Enterprise Blvd., Toledo, OH 43612 Sequoyah Corporation 720 Eighth Avenue, Kirkland, WA 98033-5649 Sibley Services, Incorporated 1892 Lynnbrook, Memphis, Tennessee 38116 Snyder Mechanical 1250 Lamoille Highway #104, Elko, NV 89803 Southeast Mechanical Service, Inc. 15951 Southwest 41st St., Suite 100, Davie, FL 33331 Statewide Heating & Air Conditioning, Inc. 808 Purser Drive, Raleigh, NC 27603 Stephen C. Pomeroy, Inc. 3131 SW 13th Drive, Deerfield Beach, FL 33442 Sterling Air Conditioning, Inc. 1331 East Broadway, Pearland, Texas 77581 Sun Plumbing, Inc. 6935 Vicki Circle, Melbourne, Florida 32902-0549 Team Mechanical, Inc. 151 No. 600 West, Kaysville, UT 84037 Tower Electric Company 11170 Lee Highway, Fairfax, VA 22030 Trinity Contractors, Inc. 2425 Dillard Street, Grand Prairie, TX 76005 United Acquisition Corp. (dba United Service Alliance) 8955 East Nichols, Suite 200, Englewood, Colorado 80112 Valley Wide Plumbing and Heating, Inc. 431 Metcalf, Avon, Colorado 81620 Van's Comfortemp Air Conditioning, Inc. 135 W. Congress, Delray Beach, FL 33445 Vantage Mechanical Contractors, Inc. 8 Greenway Plaza, Suite 1500, Houston, Texas 77046 Vermont Mechanical, Inc. 4050 Williston Road, S. Burlington, VT 05495 Wade's Heating & Cooling, Inc. 12901-1 Metro Parkway, Fort Meyers, FL 33912 Wiegold & Sons, Inc. 2255 J&C Blvd., Pine Ridge Industrial Park, Naples, FL 34109 Willis Refrigeration, Air Conditioning & Heating, Inc. 885 Ohio Pike, Cincinnati, Ohio 45245 Yale Incorporated 9649 Girard Avenue South, Minneapolis, MN 55431
48 Security Agreement Schedule II-B -------------------------------- Part B LIST OF CHIEF EXECUTIVE OFFICES ------------------------------- ADVENT ELECTRIC CO., INC. 5901 Walden Drive Knoxville, TN 37919-6348 AMERICAN AIR COMPANY, INC. 7533 Avenue 304 Visalia, CA 93291 ATLANTIC ELECTRIC COMPANY, INC. 7320 Cross County Road Charleston, SC 29423-1347 B&R ELECTRICAL SERVICES, INC. 502 McCormick Drive Suite M Glen Burnie, MD 21061 BUILDING ONE MECHANICAL SERVICES, INC. 514 N. Wells Street Kosiusko, MS 39090 BUILDING ONE SERVICE SOLUTIONS, INC. DIVERSIFIED MANAGEMENT SERVICES, U.S.A., INC. FACILITYDIRECT.COM, LLC 45600 Terminal Drive Dulles, VA 20166 INTERSTATE BUILDING SERVICES, LLC 300 Bedford Street, Unit C Manchester, NH 03101 D&P JANITORIAL, INC. DIRECT ENGINEERED MAINTENANCE, INC. 577 Warren Avenue East Providence, RI 02914 BUYR, INC. Suite 210 110 Cheshire Lane Minnetonka, MN 55305-1061 C.R. HIPP CONSTRUCTION CO., INC. 3537 Dorchester Road N. Charleston, SC 294 CONSOLIDATED ELECTRICAL GROUP, INC. 8730 Bourgade Lenexa, KS 66219 DEL-AIR SERVICE COMPANY, INC. 135 Chicamauga Avenue Knoxville, TN 37917 D/FW MECHANICAL SERVICES, INC. 11170 Ables Lane P.O. Box 59822 Dallas, TX 75229 ELECTRICAL CONTRACTING, INC. 500 Corporate Drive Escondido, CA 92029 G.S. GROUP, INC. BRAZOSPORT MANAGEMENT, INC. TESTRONICS, INC. GULF STATES, INC. G.S. FINANCIAL, INC. G.S.I. OF CALIFORNIA, INC. 6711 East Hwy 332 Freeport, TX 77541 GAMEWELL MECHANICAL, INC. 727 Bendix Drive Salisbury, NC 28146 GARFIELD-INDECON ELECTRICAL SERVICES, INC. 5301 Lester Road Cincinnati, OH IVEY MECHANICAL COMPANY, INC. 514 N. Wells Street Kosciusko, MS 39090 K & A MECHANICAL, INC. 5940 Bingle Houston, TX 77092 LEXINGTON/IVEY MECHANICAL COMPANY, LLC 1063 Manchester Street Lexington, KY 40509 50 BARNES IVEY MECHANICAL COMPANY, L.L.C. P. O. Box B Fayetteville, NC 28302 BELTLINE MECHANICAL SERVICES, INC. 3008 West Story Road Irving, TX 75038 IVEY MECHANICAL SERVICES, L.L.C. 514 N. Wells Street Kosciusko, MS 39090 MH TECHNOLOGIES, INC. 1201 Prince Street Houston, TX 77008 MCINTOSH MECHANICAL, INC. 879 South Guignard Drive Sumter, SC 29151 ZWART, INC. (D/B/A MOUNTAIN VIEW ELECTRIC, INC.) 6350 Nautilus Drive Boulder, CO 80301 NATIONAL NETWORK SERVICES, INC. 2452 S. Trenton Way Denver, CO 80231 OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES (50% INTEREST) 12718 East 55th Street Tulsa, OK 74146 POTTER ELECTRIC CO., INC. 7150 Placid Street Las Vegas, NV 89119 REGENCY ELECTRIC COMPANY, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. 6601 Southpoint Drive North Jacksonville, FL 32216 REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. 2883 Mendenhall Road S. Suite 3 Memphis, TN 38115 REGENCY ELECTRIC COMPANY SOUTH FLORIDA OFFICE, INC. 3800 Park Central Blvd. N Suite 3810 Pompano Beach, FL 33064 REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. 5031A West W.T. Harris Blvd. Charlotte, NC 28269 REGENCY ELECTRIC COMPANY ATLANTA OFFICE 1000 Cobb Place Blvd. Atlanta, GA 30144 RIVIERA ELECTRIC CONSTRUCTION CO. 2107 West College Avenue Englewood, CO 80110 RIVIERA ELECTRIC OF CALIFORNIA, INC. 2905 East Ricker Way Anaheim, CA 92806 ROBINSON MECHANICAL COMPANY 5541 Central Avenue Boulder, CO 80301 S.L. PAGE CORPORATION HYDRO COOLING, INC. 10879 Metro Parkway Fort Myers, FL 33912 SANDERS BROS., INC. PROCESS DESIGN BUILDERS, LLC (50% INTEREST) 1709 Old Georgia Highway Gaffney, SC 29341 SKC ELECTRIC, INC. CRAMAR ELECTRIC, INC. SKCE, INC. PRO WIRE SECURITY SYSTEMS, INC. 14335 West 97th Terrace Lenexa, KS 66215 BUILDING ONE COMMERCIAL, INC. (F/K/A SPANN BUILDING MAINTENANCE COMPANY) 2035 Olive Street St. Louis, MO 63103 52 SULLIVAN ELECTRIC, INC. 7100 Cockrill Bend Blvd. Nashville, TN 37209 TAYLOR-HUNT ELECTRIC, INC. 1476 South Major Street Salt Lake City, UT 84115 THE LEWIS COMPANIES, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. FRED CLARK ELECTRICAL CONTRACTOR, INC. OIL CAPITAL ELECTRIC, INC. OMNI MECHANICAL SERVICES (50% INTEREST) EDG POWER GROUP, INC. 12718 East 55th Street Tulsa, OK 74146 TOWN & COUNTRY ELECTRIC, INC. 2662 American Drive Appleton, WI 54915 TRI-CITY ELECTRICAL CONTRACTORS, INC. 430 West Drive Altamonte Springs, FL 32714 TRI-M HOLDING CORP. TRI-M CORPORATION TRI-M ELECTRICAL CONSTRUCTION CORP. TRI-M BUILDING AUTOMATION SYSTEMS CORP. 204 Gale Lane Kennet Square, PA 19348 TSE ACQUISITION CORP. 4820 West University Las Vegas, NV 89103 Tri-State Acquisition Corp. 442 West Bonita Avenue San Dimas, CA 91773 WALKER ENGINEERING, INC. 10999 Petal Street Dallas, TX 75238 WALTER C. DAVIS & SON, INCORPORATED 7908 Kincannon Place Newington, VA 22122 WATSON ELECTRICAL CONSTRUCTION CO. 490 Ward Boulevard Wilson, NC 27895 WILSON ELECTRIC COMPANY, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. 15475 North Greenway-Hayden Loop Scottsdale, AZ 85260 WAYZATA, INC. 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 Schedule III UCC Filings 68 SECURITY AGREEMENT SCHEDULE III ------------------------------- UCC Filings Locations PART A
DEBTOR NAME JURISDICTION A-1 Mechanical of Lansing, Inc. Michigan Secretary of State AA Advance Air, Inc. Florida Secretary of State AA JARL, Inc. Delaware Secretary of State AA JARL, Inc. Texas Secretary of State A-ABC Appliance, Inc. Texas Secretary of State A-ABC Services, Inc. Delaware Secretary of State A-ABC Services, Inc. Texas Secretary of State Air Conditioning Engineers, Inc. Michigan Secretary of State Air Conditioning, Plumbing & Heating Service Colorado Secretary of State Co., Inc. Air Systems, Inc. California Secretary of State Aircon Energy Incorporated California Secretary of State Airtron, Inc. Delaware Secretary of State Airtron, Inc. Florida Secretary of State Airtron, Inc. Indiana Secretary of State Airtron, Inc. Kansas Secretary of State Airtron, Inc. Kentucky Secretary of State Airtron, Inc. Ohio Secretary of State Airtron, Inc. Cuyahoga County, Ohio Airtron, Inc. Franklin County, Ohio Airtron, Inc. Montgomery County, Ohio Airtron, Inc. Butler County, Ohio Airtron, Inc. Texas Secretary of State Airtron of Central Florida, Inc. Florida Secretary of State Airtron of Central Florida, Inc. Ohio Secretary of State Airtron of Central Florida, Inc. Montgomery County, Ohio All Service Electric, Inc. Florida Secretary of State Arkansas Mechanical Services, Inc. Arkansas Secretary of State Arkansas Mechanical Services, Inc. Faulkner County, Arkansas Arkansas Mechanical Services, Inc. Pulaski County, Arkansas Atlantic Industrial Constructors, Inc. Virginia Secretary of State Atlantic Industrial Constructors, Inc. City of Richmond, Virginia Callahan Roach Products & Publications, Inc. Colorado Secretary of State Cardinal Contracting Corporation Indiana Secretary of State Cardinal Contracting Corporation Kentucky Secretary of State Cardinal Contracting Corporation Fayette Co., KY
Central Air Conditioning Contractors, Inc. Delaware Secretary of State Central Air Conditioning Contractors, Inc. Maryland Secretary of State Central Carolina Air Conditioning Company North Carolina Secretary of State Central Carolina Air Conditioning Company Forsyth County, North Carolina Central Carolina Air Conditioning Company Guilford County, North Carolina Chapel Electric Co. Ohio Secretary of State Chapel Electric Co. Montgomery County, Ohio Charlie Crawford, Inc. Delaware Secretary of State Charlie Crawford, Inc. Texas Secretary of State Clark Converse Electric Service, Inc. Ohio Secretary of State Clark Converse Electric Service, Inc. Franklin County, Ohio Colonial Air Conditioning Company Delaware Secretary of State Colonial Air Conditioning Company Connecticut Secretary of State Commercial Air Holding Company Maryland Secretary of State Commercial Air, Power & Cable, Inc. Maryland Secretary of State Continental Electrical Construction Co. Delaware Secretary of State Continental Electrical Construction Co. Illinois Secretary of State Costa and Rihl, Inc. New Jersey Secretary of State Costa & Rihl Plumbing, Inc. New Jersey Secretary of State Costner Brothers, Inc. South Carolina Secretary of State Divco, Inc. Washington Secretary of State Dynalink Corporation Ohio Secretary of State Dynalink Corporation Cuyahoga County, Ohio Electrical Associates of Dallas, Inc. Texas Secretary of State Encompass Facility Services, Inc. Delaware Secretary of State Encompass Facility Services, Inc. Washington Secretary of State Encompass Holding Corp. Delaware Secretary of State Encompass Holding Corp. Texas Secretary of State Encompass Indiana, L.L.C. Indiana Secretary of State Encompass Texas L.P. Texas Secretary of State Encompass Management Co. Delaware Secretary of State Encompass Management Co. Texas Secretary of State Encompass Maryland Corp. Delaware Secretary of State Encompass Maryland Corp. Maryland Secretary of State Evans Services, Inc. Alabama Secretary of State The Farfield Company Delaware Secretary of State The Farfield Company Pennsylvania Secretary of State The Farfield Company Cumberland County, PA The Farfield Company Lancaster County, PA The Farfield Company Lehigh County, PA Ferguson Electric Corporation Delaware Secretary of State Ferguson Electric Corporation Colorado Secretary of State Gentzler Electrical Contractors, Inc. Delaware Secretary of State
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Gentzler Electrical Contractors, Inc. Texas Secretary of State Gilbert Mechanical Contractors, Inc. Minnesota Secretary of State Greenway Investment Corp. Delaware Secretary of State GroupMAC Facility Services, Inc. Delaware Secretary of State GroupMAC Facility Services, Inc. Washington Secretary of State GroupMAC Holding Corp. Delaware Secretary of State GroupMAC Holding Corp. Texas Secretary of State GroupMAC Indiana, L.L.C. Indiana Secretary of State GroupMAC Management Co. Delaware Secretary of State GroupMAC Management Co. Texas Secretary of State GroupMAC Maryland Corp. Delaware Secretary of State GroupMAC Maryland Corp. Maryland Secretary of State GroupMAC Texas L.P. Texas Secretary of State Hallmark Air Conditioning, Inc. Delaware Secretary of State Hallmark Air Conditioning, Inc. Texas Secretary of State HPS Plumbing Services, Inc. California Secretary of State Hungerford Mechanical Corporation Virginia Secretary of State Hungerford Mechanical Corporation City of Richmond, Virginia Hungerford Mechanical Corporation Colorado Secretary of State J. D. Steward Air Conditioning, Inc. Colorado Secretary of State J. D. Steward Air Conditioning, Inc. Texas Secretary of State K & N Plumbing, Heating and Air Conditioning, Delaware Secretary of State Inc. K & N Plumbing, Heating and Air Conditioning, Texas Secretary of State Inc. K & N Plumbing, Heating and Air Conditioning, North Dakota Secretary of State Inc. L.T. Mechanical, Inc. Delaware Secretary of State L.T. Mechanical, Inc. North Carolina Secretary of State L.T. Mechanical, Inc. Mecklenburg County, North Carolina Laney's, Inc. Delaware Secretary of State Laney's, Inc. North Dakota Secretary of State Laney's, Inc. California Secretary of State Linford Service Co. California Secretary of State Linford Service Co. Washington Secretary of State MacDonald-Miller Co., Inc. Washington Secretary of State MacDonald-Miller Industries, Inc. Washington Secretary of State MacDonald-Miller of Oregon, Inc. Delaware Secretary of State MacDonald-Miller of Oregon, Inc. Oregon Secretary of State MacDonald-Miller Service, Inc. Washington Secretary of State MacDonald-Miller Service, Inc. Maryland Secretary of State Masters, Inc. Maryland Secretary of State Mechanical Interiors, Inc. Delaware Secretary of State Mechanical Interiors, Inc. Texas Secretary of State Mechanical Services of Orlando, Inc. Florida Secretary of State Merritt Island Air & Heat, Inc. Delaware Secretary of State
Merritt Island Air & Heat, Inc. Florida Secretary of State New Construction Air Conditioning, Inc. Michigan Secretary of State Noron, Inc. Ohio Secretary of State Noron, Inc. Lucas County, Ohio Pacific Rim Mechanical Contractors, Inc. California Secretary of State Paul E. Smith Co., Inc. Indiana Secretary of State Phoenix Electric Company Delaware Secretary of State Phoenix Electric Company Oregon Secretary of State Ray and Claude Goodwin, Inc. Florida Secretary of State Reliable Mechanical, Inc. Delaware Secretary of State Reliable Mechanical, Inc. Kentucky Secretary of State Reliable Mechanical, Inc. Jefferson County, Kentucky Romanoff Electric Corp. Ohio Secretary of State Romanoff Electric Corp. Lucas County, Ohio Sequoyah Corporation Washington Secretary of State Sibley Services, Incorporated Tennessee Secretary of State Snyder Mechanical Nevada Secretary of State Southeast Mechanical Service, Inc. Florida Secretary of State Statewide Heating & Air Conditioning, Inc. Delaware Secretary of State Statewide Heating & Air Conditioning, Inc. North Carolina Secretary of State Statewide Heating & Air Conditioning, Inc. Wake County, North Carolina Stephen C. Pomeroy, Inc. Delaware Secretary of State Stephen C. Pomeroy, Inc. Florida Secretary of State Sterling Air Conditioning, Inc. Delaware Secretary of State Sterling Air Conditioning, Inc. Texas Secretary of State Sun Plumbing, Inc. Florida Secretary of State Team Mechanical, Inc. Utah Secretary of State Tower Electric Company Delaware Secretary of State Tower Electric Company Virginia Secretary of State Tower Electric Company Fairfax County, VA Trinity Contractors, Inc. Delaware Secretary of State Trinity Contractors, Inc. Alabama Secretary of State Trinity Contractors, Inc. Texas Secretary of State United Acquisition Corp. Iowa Secretary of State United Acquisition Corp. Colorado Secretary of State Valley Wide Plumbing and Heating, Inc. Colorado Secretary of State Van's Comfortemp Air Conditioning, Inc. Florida Secretary of State Vantage Mechanical Contractors, Inc. Maryland Secretary of State Vantage Mechanical Contractors, Inc. Virginia Secretary of State Vantage Mechanical Contractors, Inc. Fairfax County, VA Vermont Mechanical, Inc. Delaware Secretary of State Vermont Mechanical, Inc. New Hampshire Secretary of State Vermont Mechanical, Inc. Vermont Secretary of State Wade's Heating & Cooling, Inc. Florida Secretary of State
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Wade's Heating & Cooling, Inc. Texas Secretary of State Wiegold & Sons, Inc. Florida Secretary of State Willis Refrigeration, Air Conditioning & Ohio Secretary of State Heating, Inc. Willis Refrigeration, Air Conditioning & Clermont County, Ohio Heating, Inc. Yale Incorporated Minnesota Secretary of State
SECURITY AGREEMENT SCHEDULE III ------------------------------- UCC Filings Locations PART B
DEBTOR NAME JURISDICTION Advent Electric Co., Inc. Tennessee Secretary of State American Air Company, Inc. California Secretary of State Atlantic Electric Company, Inc. South Carolina Secretary of State B&R Electrical Services, Inc. Maryland Secretary of State Barnes Ivey Mechanical Company, L.L.C. Texas Secretary of State Barnes Ivey Mechanical Company, L.L.C. North Carolina Secretary of State Barnes Ivey Mechanical Company, L.L.C. Cumberland County, North Carolina Beltline Mechanical Services, Inc. Texas Secretary of State Brazosport Management, Inc. Texas Secretary of State Building One Commercial, Inc. Alabama Secretary of State Building One Commercial, Inc. Cobb County, GA Building One Commercial, Inc. Illinois Secretary of State Building One Commercial, Inc. Indiana Secretary of State Building One Commercial, Inc. Kentucky Secretary of State Building One Commercial, Inc. Jefferson County, KY Building One Commercial, Inc. Mississippi Secretary of State Building One Commercial, Inc. Madison County, Mississippi Building One Commercial, Inc. Missouri Secretary of State Building One Commercial, Inc. St. Louis City, Missouri Building One Commercial, Inc. Nebraska Secretary of State Building One Commercial, Inc. Ohio Secretary of State Building One Commercial, Inc. Franklin Co., OH Building One Commercial, Inc. Wisconsin Secretary of State Building One Mechanical Services, Inc. California Secretary of State Building One Mechanical Services, Inc. Colorado Secretary of State Building One Mechanical Services, Inc. Delaware Secretary of State Building One Mechanical Services, Inc. Illinois Secretary of State Building One Mechanical Services, Inc. Kentucky Secretary of State Building One Mechanical Services, Inc. Fayette County, Kentucky Building One Mechanical Services, Inc. Mississippi Secretary of State Building One Mechanical Services, Inc. Attala County, Mississippi Building One Mechanical Services, Inc. Nevada Secretary of State Building One Mechanical Services, Inc. New Jersey Secretary of State Building One Mechanical Services, Inc. Utah Secretary of State Building One Service Solutions, Inc. Delaware Secretary of State Building One Service Solutions, Inc. Virginia Secretary of State
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Building One Service Solutions, Inc. Loudoun County, Virginia BUYR, Inc. Delaware Secretary of State BUYR, Inc. District of Columbia BUYR, Inc. Minnesota Secretary of State Chambers Electronic Communications, Inc. Arizona Secretary of State Consolidated Electrical Group, Inc. Delaware Secretary of State Consolidated Electrical Group, Inc. Kansas Secretary of State C.R. Hipp Construction Co., Inc. South Carolina Secretary of State Cramar Electric, Inc. Kansas Secretary of State Cramar Electric, Inc. Missouri Secretary of State Cramar Electric, Inc. Boone County, Missouri D & P Janitorial, Inc. Rhode Island Secretary of State D/FW Mechanical Services, Inc. Texas Secretary of State Del-Air Service Company, Inc. Tennessee Secretary of State Direct Engineered Maintenance, Inc. Rhode Island Secretary of State Diversified Management Services, U.S.A., Inc. Virginia Secretary of State Diversified Management Services, U.S.A., Inc. Loudoun County, Virginia EDG Power Group, Inc. Oklahoma County, Oklahoma Electrical Contracting, Inc. California Secretary of State Electrical Design & Construction, Inc. Oklahoma County, Oklahoma Encompass Commercial, Inc. Alabama Secretary of State Encompass Commercial, Inc. Cobb County, GA Encompass Commercial, Inc. Illinois Secretary of State Encompass Commercial, Inc. Indiana Secretary of State Encompass Commercial, Inc. Kentucky Secretary of State Encompass Commercial, Inc. Jefferson County, KY Encompass Commercial, Inc. Mississippi Secretary of State Encompass Commercial, Inc. Madison County, Mississippi Encompass Commercial, Inc. Missouri Secretary of State Encompass Commercial, Inc. St. Louis City, Missouri Encompass Commercial, Inc. Nebraska Secretary of State Encompass Commercial, Inc. Ohio Secretary of State Encompass Commercial, Inc. Franklin Co., OH Encompass Commercial, Inc. Wisconsin Secretary of State Encompass Mechanical Services, Inc. California Secretary of State Encompass Mechanical Services, Inc. Colorado Secretary of State Encompass Mechanical Services, Inc. Delaware Secretary of State Encompass Mechanical Services, Inc. Illinois Secretary of State Encompass Mechanical Services, Inc. Kentucky Secretary of State Encompass Mechanical Services, Inc. Fayette County, Kentucky Encompass Mechanical Services, Inc. Mississippi Secretary of State Encompass Mechanical Services, Inc. Attala County, Mississippi Encompass Mechanical Services, Inc. Nevada Secretary of State Encompass Mechanical Services, Inc. New Jersey Secretary of State
Encompass Mechanical Services, Inc. Utah Secretary of State Encompass Service Solutions, Inc. Virginia Secretary of State Encompass Service Solutions, Inc. Loudoun County, Virginia Engineering Design Group, Inc. Oklahoma County, Oklahoma FacilityDirect.com, LLC Virginia Secretary of State FacilityDirect.com, LLC Loudoun County, Virginia Fred Clark Electrical Contractor, Inc. Oklahoma County, Oklahoma Fred Clark Electrical Contractor, Inc. Texas Secretary of State Gamewell Mechanical, Inc. North Carolina Secretary of State Gamewell Mechanical, Inc. Rowan County, North Carolina Garfield-Indecon Electrical Services, Inc. Ohio Secretary of State Garfield-Indecon Electrical Services, Inc. Hamilton County, Ohio Garfield-Indecon Electrical Services, Inc. Montgomery County, Ohio G.S. Group, Inc. Nevada Secretary of State G.S. Group, Inc. Texas Secretary of State G.S. Financial, Inc. Nevada Secretary of State G.S. Financial, Inc. Texas Secretary of State G.S.I. of California, Inc. California Secretary of State G.S.I. of California, Inc. Texas Secretary of State Gulf States, Inc. Alabama Secretary of State Gulf States, Inc. Connecticut Secretary of State Gulf States, Inc. Texas Secretary of State Hunt Electric, Inc. Utah Secretary of State Hydro Cooling, Inc. Florida Secretary of State Interstate Building Services, LLC Virginia Secretary of State Interstate Building Services, LLC New Hampshire Secretary of State Interstate Building Services, LLC Loudoun County, Virginia Ivey Mechanical Company, Inc. Alabama Secretary of State Ivey Mechanical Company, Inc. Mississippi Secretary of State Ivey Mechanical Company, Inc. Attala County, Mississippi Ivey Mechanical Company, Inc. Tennessee Secretary of State Ivey Mechanical Services, L.L.C. Texas Secretary of State Ivey Mechanical Services, L.L.C. Mississippi Secretary of State Ivey Mechanical Services, L.L.C. Attala County, Mississippi K & A Mechanical, Inc. Texas Secretary of State The Lewis Companies, Inc. Oklahoma County, Oklahoma The Lewis Companies, Inc. Texas Secretary of State Lexington/Ivey Mechanical Company, LLC Kentucky Secretary of State Lexington/Ivey Mechanical Company, LLC Fayette County, Kentucky McIntosh Mechanical, Inc. South Carolina Secretary of State MH Technologies, Inc. Texas Secretary of State National Network Services, Inc. California Secretary of State National Network Services, Inc. Colorado Secretary of State National Network Services, Inc. Delaware Secretary of State
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National Network Services, Inc. Oregon Secretary of State National Network Services, Inc. South Dakota Secretary of State Oil Capital Electric, Inc. Oklahoma County, Oklahoma Omni Mechanical Services Oklahoma County, Oklahoma Omni Mechanical Company Oklahoma County, Oklahoma Potter Electric Co., Inc. Nevada Secretary of State Process Design Builders, LLC South Carolina Secretary of State Pro Wire Security Systems, Inc. Kansas Secretary of State Pro Wire Security Systems, Inc. Missouri Secretary of State Pro Wire Security Systems, Inc. Boone County, Missouri Regency Electric Company, Inc. Florida Secretary of State Regency Electric Company Atlanta Office Cobb County, GA Regency Electric Company Charlotte Office, North Carolina Secretary of State Inc. Regency Electric Company Charlotte Office, Mecklenburg County, North Carolina Inc. Regency Electric Company Jacksonville Office, Florida Secretary of State Inc. Regency Electric Company Memphis Office, Inc. Tennessee Secretary of State Regency Electric Company Orlando Office, Inc. Florida Secretary of State Regency Electric Company Projects Group, Inc. Florida Secretary of State Regency Electric Company South Florida Florida Secretary of State Office, Inc Riviera Electric Construction Co. Colorado Secretary of State Riviera Electric of California, Inc. California Secretary of State Robinson Mechanical Company Colorado Secretary of State Sanders Bros., Inc. South Carolina Secretary of State SKC Electric, Inc. Kansas Secretary of State SKC Electric, Inc. Missouri Secretary of State SKC Electric, Inc. Boone County, MO SKCE, Inc. Kansas Secretary of State SKCE, Inc. Missouri Secretary of State SKCE, Inc. Boone County, Missouri S.L. Page Corporation Florida Secretary of State Sullivan Electric, Inc. Tennessee Secretary of State Taylor Electric, Inc. Utah Secretary of State Taylor-Hunt Electric, Inc. Utah Secretary of State Testronics, Inc. Texas Secretary of State Town & Country Electric, Inc. Wisconsin Secretary of State Tri-City Electrical Contractors, Inc. Florida Secretary of State tri-M Building Automation Systems Corp. Pennsylvania Secretary of State tri-M Building Automation Systems Corp. Chester County, Pennsylvania tri-M Corporation Pennsylvania Secretary of State
tri-M Corporation Chester County, Pennsylvania tri-M Electrical Construction Corp. Pennsylvania Secretary of State tri-M Electrical Construction Corp. Chester County, Pennsylvania Tri-M Holding Corporation Pennsylvania Secretary of State Tri-M Holding Corporation Chester County, Pennsylvania Tri-State Acquisition Corp. California Secretary of State TSE Acquisition Corp. Nevada Secretary of State Walker Engineering, Inc. Texas Secretary of State Walter C. Davis & Son, Incorporated Virginia Secretary of State Walter C. Davis & Son, Incorporated Fairfax County, Virginia Watson Electrical Construction Co. North Carolina Secretary of State Watson Electrical Construction Co. Wilson County, North Carolina Wayzata, Inc. Delaware Secretary of State Wayzata, Inc. Texas Secretary of State Wilson Electric Company, Inc. Arizona Secretary of State Zwart, Inc. Colorado Secretary of State Zwart, Inc. New Jersey Secretary of State
Exhibit 4.01(d)(ii) TO CREDIT AGREEMENT Pledge Agreement This Pledge Agreement (as the same may be amended, amended and restated, modified, or supplemented from time to time, this "Agreement") dated --------- as of February 22, 2000 is executed by Group Maintenance America Corp., after the date hereof to be named Encompass Services Corporation, a Texas corporation with an office at 8 Greenway Plaza, Suite 1500, Houston, TX 77046 (the "Company"), the Domestic Subsidiaries of the Company signatory hereto now or in ------- the future (such Domestic Subsidiaries with the Company, collectively the "Pledgors" and individually, a "Pledgor") in favor of Bank of America, N.A., a -------- ------- national banking association with its principal offices in Dallas, Dallas County, Texas, as Administrative Agent for itself and for the banks under the Credit Agreement, as hereinafter defined (in such capacity, the "Secured ------- Party"). - ----- PRELIMINARY STATEMENTS Whereas, the Pledgors own the Capital Stock (the "Pledged Shares") of -------------- stock described in Schedule I attached hereto and issued by the Persons named ---------- therein; and Whereas, the Company, certain Subsidiaries of the Company, the Secured Party, as Administrative Agent, and the banks party thereto have entered into that one certain Credit Agreement dated as of February 22, 2000, relating to the extension of a series of loans with a commitment totaling $800,000,000.00 by said banks to the Company; and Whereas, each of the Pledgors will benefit, directly or indirectly, from the execution of this Pledge Agreement and the granting of a security interest in the "Pledged Collateral" (hereinafter defined) in which each Pledgor, respectively, has any right, title, or interest as security for all of the "Secured Obligations" (hereinafter defined); and Whereas, it is a condition precedent to the obligation of the Banks to make Loans to the Company under the Credit Agreement that the Pledgors shall execute and deliver this Agreement to the Secured Party; and Whereas, the Pledgors desire to execute this Agreement in order to satisfy such condition precedent and to secure the obligations under the Credit Agreement and letters of credit from time to time issued. Now Therefore, in consideration of the foregoing premises and in order to induce the Banks to extend the loans and issue letters of credit pursuant to the terms of the Credit Agreement, the Pledgors hereby agree to the following: SECTION 1. Defined Terms and Related Matters. --------------------------------- (a) Each capitalized term used herein (including, without limitation, in the introductory paragraph and recitals hereof) and not defined herein shall have the meaning assigned to such term in the Credit Agreement and/or a Loan Document. (b) "Pledged Shares" means one hundred percent (100%) of the Capital -------------- Stock of each Pledgor in any Domestic Subsidiaries and sixty-six percent (66%) of Capital Stock of each Pledgor in any Foreign Subsidiaries, whether certificated or uncertificated, as set forth on Schedule I hereto. ---------- (c) "UCC" means the Uniform Commercial Code as in effect on the date --- hereof in the State of Texas; provided that if by mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted pursuant to Section 2 hereof, as well as all other security --------- interests created or assigned as additional security for the Secured Obligations pursuant to the provisions of this Agreement, in any Collateral is governed by the UCC as in effect in a jurisdiction other than Texas, "UCC" means the UCC as --- in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. (d) "Secured Obligations" means all obligations, contingent or ------------------- otherwise, of the Company or any Pledgor pursuant to any of the Loan Documents, including, without limitation, all sums owing by the Company or any Pledgor to the Secured Party under any of the Loan Documents, and any obligations outstanding now or in the future, including, but not limited to, any letters of credit issued by the Administrative Agent or any other Bank and any interest rate swaps, hedges or similar agreements between any Pledgor or any of its Subsidiaries and any of the Banks all on a pari passu basis. SECTION 2. Pledges. The Pledgors hereby pledge to the Secured Party ------- and grant to the Secured Party, a Lien and security interest in the following collateral (collectively, the "Pledged Collateral") as set forth below: ------------------ (i) The Pledged Shares and the certificates or agreements, if any, representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Shares; (ii) All additional Capital Stock of any issuer of any Pledged Shares of such stock from time to time acquired by any Pledgor that constitutes "Pledged Shares", and the certificates representing such additional shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares; and (iii) All proceeds of any of the foregoing. The inclusion of proceeds in this Agreement does not authorize the Pledgors to sell, dispose of or otherwise use the Pledged Collateral in any manner not specifically authorized hereby. SECTION 3. Security for Obligations. This Agreement secures on a ------------------------ first and prior basis, except for the Permitted Liens and other Liens not prohibited under the Credit Agreement, the prompt and complete payment and performance of the Secured Obligations. SECTION 4. Delivery of Pledged Collateral. All certificates, if any, ------------------------------ representing or evidencing the Pledged Collateral shall be delivered to and held by the Secured Party and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment specifying the certificate and the issuer to which it relates, in blank, all in form and substance satisfactory to the Secured Party. With respect to any Pledged Collateral in which any Pledgor has any right, title or interest and that constitutes an uncertificated security, such Pledgor will cause the issuer thereof (i) to register the Secured Party as the registered owner or lien holder of such security, (ii) to agree in writing with such Pledgor and the Secured Party that such Pledgor will comply with instructions with respect to such security originated by the Secured Party without further consent of such Pledgor, such agreement to be in form and substance satisfactory to the Secured Party, or (iii) take other action necessary or appropriate to attach and perfect the Secured Party's security interest in accordance with applicable law to the Secured Party's satisfaction. SECTION 5. Representations and Warranties. Each of the Pledgors ------------------------------ represents and warrants as follows: (a) The principal place of business and chief executive office of the Company and the office where it keeps its records concerning the Pledged Collateral are located at the address specified in the introductory paragraph to this Agreement or at such other locations disclosed to the Secured Party after the date hereof. Each other Pledgor has its chief executive office at the location shown on Schedule II hereto or at such other locations as disclosed to ----------- the Secured Party after the date hereof. (b) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. (c) The Pledgors are the legal and beneficial owners of the Pledged Shares free and clear of any Lien, security interest, option or other charge or encumbrance except for the Permitted Liens and other Liens not prohibited under the Credit Agreement. (d) The actions taken under Section 4 pursuant to this Agreement and --------- the filing of financing statements, if applicable, creates a valid and perfected first priority security interest in the Pledged Shares (subject only to Permitted Liens and other Liens not prohibited under the Credit Agreement), securing the payment of the Secured Obligations. (e) No authorization, approval, or other action by, and no notice to or filing with, any governmental authority is required either (i) for the pledge by the Pledgors of the Pledged Shares pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Pledgors or (ii) for the exercise by the Secured Party of the voting or other rights provided for in this Agreement (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally and except for filings or other actions described herein relating to the attachment and perfection of a security interest). (f) All Capital Stock in any Domestic Subsidiary is pledged to the Secured Party hereunder. (g) Sixty-six percent of all shares of stock in any Foreign Subsidiary are pledged to the Secured Party hereunder. (h) The Subsidiaries listed on Schedule 5.16 of the Credit Agreement ------------- are all of the Subsidiaries of the Company as of the Execution Date and the address given for such Subsidiaries is the correct mailing address as of the Execution Date. SECTION 6. Further Assurances. (a) Each Pledgor agrees that from ------------------ time to time, at the reasonable expense of the Pledgor, each Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that the Secured Party may reasonably request as being necessary or desirable, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. Without limiting the generality of the foregoing, each Pledgor will execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices as the Secured Party may reasonably request as being necessary or desirable in order to perfect and preserve the security interests granted or purported to be granted hereby. (b) Each Pledgor hereby authorizes the Secured Party for the benefit of itself and the Banks to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Pledged Collateral without the signature of such Pledgor, in each case where permitted by law. A carbon, photographic or other reproduction of any financing statement executed by each Pledgor covering the Pledged Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. The Secured Party shall provide the Company with copies of all financing statements that it files. (c) Each Pledgor will furnish to the Secured Party from time to time statements and schedules further identifying and describing the Pledged Collateral as the Secured Party may reasonably request, all in reasonable detail. (d) Each Pledgor will promptly notify the Secured Party of any change of its name, corporate structure, federal employer identification number or the address of its principal place of business or chief executive office where its books and records are maintained. (e) Each Pledgor shall keep its principal place of business and chief executive office and the office where it keeps its records concerning the Pledged Collateral at the location or locations therefor specified in Section ------- 5(a) or, upon prompt written notice after such move, to the Secured Party, at - ---- such other locations in a jurisdiction where all action required by this Section ------- 6(a) shall have been taken with respect to the Pledged Collateral. Each Pledgor - ---- will hold and preserve such records and will upon reasonable notice permit representatives of the Secured Party at any time during normal business hours to inspect and make abstracts from such records. SECTION 7. Voting Rights. (a) So long as no Event of Default shall ------------- have occurred and be continuing, the Pledgors shall be entitled to exercise any and all voting and other rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Credit Agreement, or any Loan Documents. (b) Upon the occurrence and during the continuance of an Event of Default, upon notice by the Administrative Agent, all rights of the Pledgors to exercise the voting rights which they would otherwise be entitled to exercise pursuant to Section 7(a) hereof shall cease for so long as such Event of Default ------------ shall continue, and the Secured Party shall thereupon have the sole right to exercise such voting rights. SECTION 8. Dividends. If dividends or other distributions with --------- respect to the Pledged Collateral are received by the Pledgors in violation of the terms of the Loan Documents, such dividends shall be received in trust for the benefit of the Secured Party for itself and for the benefit of the Banks, shall be segregated from other funds of the Pledgors and shall be forthwith paid over to the Secured Party as Pledged Collateral in the same form as so received. SECTION 9. Transfers and Other Liens; Additional Shares. (a) The -------------------------------------------- Pledgors shall not: (i) sell, assign (by agreement, operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral, except for transfers not prohibited by the Credit Agreement or (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for the Permitted Liens and other Liens not prohibited by the Credit Agreement. (b) The Pledgors agree that they will (i) cause the Persons that issued the Capital Stock that constitute the Pledged Shares not to issue any Capital Stock in addition to, or in substitution for, the Pledged Shares, except to the Pledgor and (ii) pledge to the Secured Party hereunder, immediately upon such acquisition (directly or indirectly) thereof, any and all additional Capital Stock of such Person constituting Pledged Shares. (c) Notwithstanding the foregoing or any other provision hereof, any Subsidiary may be merged with or liquidate into any other Subsidiary whose Capital Stock has been pledged pursuant hereto or pursuant to any Adoption Agreement or other Security Document or with the Company, except that no Domestic Subsidiary shall be permitted to merge or liquidate into a Foreign Subsidiary. SECTION 10. Secured Party Appointed Attorney-in-Fact. The Pledgors ---------------------------------------- hereby irrevocably appoint the Secured Party for the benefit of itself and for the benefit of the Banks as the Pledgors' attorney-in-fact, with full authority in the place and stead of the Pledgors and in the name of the Pledgors, from time to time in the Secured Party's sole reasonable discretion after the occurrence of an Event of Default and during the continuance thereof, to take any action and to execute any instrument which the Secured Party may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all certificates made payable to the Pledgors representing any dividend or other distribution in respect of the Pledged Collateral or any part thereof. Upon the occurrence and during the continuance of an Event of Default, the Secured Party shall have the right, in its sole discretion and without notice to the Pledgors, to transfer to or to register in the name of the Secured Party or any of its nominees, for the benefit of itself and the Banks, any or all of the Pledged Collateral. SECTION 11. Secured Party May Perform. If any Pledgor fails to ------------------------- perform any agreement contained herein, the Secured Party may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Secured Party incurred in connection therewith shall be payable upon demand by such Pledgor and if not paid shall bear interest at the Default Rate set forth in the Credit Agreement. SECTION 12. The Secured Party's Duties. The powers conferred on the -------------------------- Secured Party hereunder are solely to protect its interest and the interests of Banks in the Pledged Collateral and shall not impose any duty upon it to exercise any such powers. In regard to any Pledgor, except for reasonable care in the custody of any Pledged Collateral in its possession and the accounting for moneys actually received by it hereunder, neither the Secured Party nor any other party shall have any duty as to any Pledged Collateral or as to the taking of any reasonably necessary steps to preserve rights against prior parties or any other rights pertaining to any Pledged Collateral. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property, it being understood that the Secured Party shall not have any responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters or (b) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. SECTION 13. Remedies upon Default. If any Event of Default shall --------------------- have occurred and be continuing: (a) The Secured Party for itself and for the benefit of the Banks may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Pledged Collateral), and the Secured Party may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Secured Party's offices or elsewhere, for cash, or for future delivery, and upon such other terms as are commercially reasonable. Each Pledgor agrees that, to the extent notice of sale shall be required by applicable law, at least ten (10) days' notice to the Pledgors of the time and place of any public sale or of the time after which any private sale is to be made shall constitute reasonable notification thereof. The Secured Party shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) Any cash received by the Secured Party shall be applied to repay the Secured Obligations. Any surplus of such cash or cash proceeds held by the Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to the Pledgors or to whomsoever may be lawfully entitled to receive such surplus. (c) In connection with the sale of any Pledged Collateral, the Secured Party is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by the Secured Party to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state laws and regulations, -------------- and no sale so made in good faith by the Secured Party shall be deemed not to be "commercially reasonable" because so made. (d) All rights and remedies of the Secured Party expressed herein are in addition to all other rights and remedies possessed by the Secured Party under the Credit Agreement and any other agreement or instrument relating to the Obligations. SECTION 14. Additional Provisions Concerning Sales of Pledged ------------------------------------------------- Collateral. (a) The Pledgors recognize that the Secured Party may be unable to - ---------- effect a public sale of any or all of the Pledged Collateral by reason of certain prohibitions contained in the laws of any jurisdiction outside the United States or in the Securities Act and applicable state securities laws, but may instead be compelled to resort to one or more private sales thereof to a restricted group of purchasers who shall be obligated to agree, among other things, to acquire such Pledged Collateral for their own account for investment and not with a view to the distribution or resale thereof. The Pledgors acknowledge and agree that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agree that any such private sale shall, to the extent permitted by law, be deemed to have been made in a commercially reasonable manner. The Secured Party shall not be under any obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit the Pledgors to register such securities under the laws of any jurisdiction outside the United States, under the Securities Act or under any applicable state securities laws, even if the Pledgors would agree to do so. (b) The Pledgors further agree to do or cause or be done, to the extent that the Pledgors may legally do so, all such other acts and things as may be necessary to make such sales or resales of any portion or all of the Pledged Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental authorities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Pledgors' expense; provided, however, that the Pledgors shall not be obligated to register such securities under the laws of any jurisdiction including, without limitation, under the Securities Act. The Pledgors further agree that a breach of any of the covenants contained in this Section shall cause irreparable injury to the Secured Party, and that the Secured Party has no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section shall be specifically enforceable against the Pledgors, and, to the fullest extent permitted by law, the Pledgors hereby waive and agree not to assert as a defense against an action for specific performance of such covenants that (i) the Pledgors' failure to perform such covenants shall not cause irreparable injury to the Secured Party or the Banks or (ii) the Secured Party for itself and on behalf of the Banks has an adequate remedy at law in respect of such breach. SECTION 15. Indemnity and Expenses. (a) The Pledgors hereby agree to ---------------------- indemnify the Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from enforcement of this Agreement, except claims, losses or liabilities, if any, resulting from the Secured Party's gross negligence or willful misconduct. SUBJECT TO THE FOREGOING, IT IS THE EXPRESS INTENTION OF THE PLEDGORS THAT THE SECURED PARTY SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DEFICIENCIES, JUDGMENTS OR EXPENSES ARISING OUT OF OR RESULTING FROM THE ORDINARY CONTRIBUTORY OR ORDINARY CONCURRENT NEGLIGENCE OF ANY SUCH PERSON. (b) The Pledgors shall, upon demand, but subject to the terms of the Credit Agreement, pay to the Secured Party the amount of any and all reasonable expenses, including the reasonable fees and expenses of the such party's counsel and of its experts, that the Secured Party may incur in connection with (i) administration of this Agreement, (ii) the evaluation, appraisal, custody or preservation of, or sale of, collection from, or other realization upon any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Secured Party for itself and for the benefit of the Banks hereunder or (iv) the failure by the Pledgors to perform or observe any of the provisions of this Agreement. Each Pledgor agrees to pay interest on any sums payable to the Secured Party hereunder that are not paid when due at a rate per annum equal to the Default Rate set forth in the Credit Agreement. SECTION 16. Amendments, Etc. No amendment or waiver of any provision --------------- of this Agreement, nor consent to any departure by the Pledgors herefrom, shall in any event be effective unless the same shall be in writing and signed by the Secured Party with the requisite consent of all other Banks, if applicable, and the Pledgors, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose of which given. SECTION 17. Addresses for Notices. All notices and other --------------------- communications to any Pledgor provided for hereunder shall be given in the manner and at the addresses and telecopy numbers as set forth for the Company in the Credit Agreement, and shall become effective as specified in the Credit Agreement and/or Loan Documents. SECTION 18. Waiver of Marshaling. All rights of marshaling of assets -------------------- of the Pledgors, including any such right with respect to the Pledged Collateral, are hereby waived by the Pledgors. SECTION 19. Limitation by Law. All rights, remedies and powers ----------------- provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they shall not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law. SECTION 20. Severability. Should any clause, sentence, paragraph, ------------ subsection or Section of this Agreement be judicially declared to be invalid, unenforceable or void, such decision shall not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that the part or parts of this Agreement so held to be invalid or unenforceable shall be deemed to have been stricken herefrom by the parties hereto, and the remainder of this Agreement shall have the same force and effectiveness as if such stricken part or parts had never been included herein. SECTION 21. Termination; Reinstatement. (a) Each Pledgor agrees -------------------------- that this Agreement and the Liens granted hereunder shall terminate when, but only when, all Secured Obligations have been fully and finally paid (except for indemnification obligations not yet due) and performed and all Banks' Commitments under the Credit Agreement and/or Loan Documents have expired or been terminated. (b) Upon the sale or transfer by any Pledgor of any Pledged Collateral that is permitted under the Credit Agreement to any Person that is not a Pledgor, or, upon the effectiveness of any release of the Liens granted hereunder in any Pledged Collateral pursuant to Section 11.01 of the Credit Agreement, the Lien granted in such Pledged Collateral shall be automatically released. (c) In connection with any release under paragraphs (a) or (b) above, upon the Pledgor's request, the Secured Party shall (i) promptly reassign and redeliver (or cause to be reassigned and redelivered) to the Pledgors, or to such Person or Persons as the Pledgors shall designate in writing, against receipt, such released Pledged Collateral (if any) as shall not have been sold or otherwise applied by the Secured Party for the benefit of itself or the Banks pursuant to the terms hereof and shall still be held by it hereunder, and (ii) terminate any financing statements with respect to the Pledged Collateral or any part thereof. Any such reassignment shall be without recourse upon, or representation or warranty by the Secured Party (other than that the Secured Party for the benefit of itself and the Banks has not sold, encumbered or otherwise transferred any interest in the Collateral except as provided in this Agreement) and shall be at the sole reasonable cost and expense of the Pledgors. (d) This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Secured Party or any other of the Banks in respect of the Secured Obligations is rescinded or must otherwise be restored or returned by the Secured Party or such other Banks upon the filing of any bankruptcy proceeding by or of the Pledgors or upon the appointment of any intervenor or conservator of, or trustee or similar official for, the Pledgors or any substantial part of their assets, or otherwise, all as though such payments had not been made. SECTION 22. No Waiver; Remedies. No failure on the part of the ------------------- Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by applicable law. SECTION 23. Continuing Security Interest; Transfer of the Notes. --------------------------------------------------- This Agreement creates a continuing security interest in the Pledged Collateral and shall (a) remain in full force and effect until the full and final payment and performance of the Secured Obligations (except for indemnification obligations not yet due) and the Commitments of the Banks have been terminated, (b) be binding upon each Pledgor, its successors and assigns and (c) inure to the benefit of the Secured Party for the benefit of itself and the Banks and their respective permitted successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any of the Banks may assign or otherwise transfer all or a portion of its interests, rights and obligations in the Pledged Collateral held by it pursuant to the Credit Agreement, or pursuant to any Loan Document, to any other Person in accordance with the terms of the Credit Agreement, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Secured Party for itself and for the benefit of the Banks herein or otherwise. Upon the termination of the Secured Obligations, the Liens granted hereby in accordance with the foregoing shall revert to Pledgors, and the Secured Party will, at the Pledgors' sole cost and expense, promptly execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination. Any Subsidiary of the Company that executes a counterpart of an Adoption Agreement after the date of this Agreement shall, upon such execution, become a party hereto as a Pledgor. SECTION 24. Security Interest Absolute. All rights of the Secured -------------------------- Party for itself and for the benefit of Banks and security interests hereunder, and all obligations of the Pledgors hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Credit Agreement, any of the Notes, or any other Loan Document; (b) any change in the time, manner or place or payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any of the Notes, or any other Loan Documents; (c) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any guaranty for all or any of the Secured Obligations; or (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Pledgors or any other third party. SECTION 25. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND ------------- CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS. SECTION 26. Inconsistencies. In the event of any irreconcilable --------------- inconsistences between any provision of this Security Agreement and any provision of the Credit Agreement and/or the Loan Documents, the provisions of this Agreement shall control. SECTION 27. Counterparts. This Agreement may be executed in any ------------ number of counterparts, and by different parties hereto in separate counterparts either in original form or by telecopy, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same agreement. SECTION 28. Interpretation. -------------- (a) In this Security Agreement, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Security Agreement as a whole and not to any particular Article, Section or other subdivision; (iii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Security Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually, provided that nothing in this clause (iii) is intended to authorize any assignment not otherwise permitted by this Security Agreement; (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, and reference to any Note includes any Note issued pursuant hereto in extension or renewal thereof and in substitution or replacement therefor; (v) unless the context indicates otherwise, reference to any Article, Section, Schedule or Exhibit means such Article or Section hereof or such Schedule or Exhibit hereto; (vi) the words "including" (and with correlative meaning "include") means including, without limiting the generality of any description preceding such term; (vii) with respect to the determination of any period of time, the word "from" means "from and including" and the word "to" means "to but excluding"; and (viii) reference to any law means such as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time. (b) The Section headings herein are for convenience only and shall not affect the construction hereof. (c) No provision of this Security Agreement shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision. SECTION 29. Submission to Jurisdiction. (a) ANY LEGAL ACTION OR -------------------------- PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN DALLAS COUNTY OR THE UNITED STATES FOR THE NORTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PLEDGOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. EACH PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN TRANSACTION DOCUMENTS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE SECURED PARTY OR ANY OF THE PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGORS IN ANY OTHER JURISDICTION. (b) EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 30. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO THE -------------------- EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, LOAN DOCUMENTS, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY BANKING OR FINANCIAL RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY LOAN DOCUMENT, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. SECTION 31. Final Agreement of the Parties. THIS AGREEMENT ------------------------------ (INCLUDING THE SCHEDULES HERETO), AND THE OTHER LOAN DOCUMENTS, CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the Pledgors have caused this Agreement to be duly executed and delivered as of the date first above written. COMPANY / PLEDGOR: GROUP MAINTENANCE AMERICA CORP., to be named Encompass Services Corporation, a Texas corporation By: _______________________________ Name: Darren B. Miller Title: Executive Vice President SUBSIDIARIES/ PLEDGORS : BOSS SUBSIDIARIES ADVENT ELECTRIC CO., INC. AMERICAN AIR COMPANY, INC. ATLANTIC ELECTRIC COMPANY, INC. BARNES IVEY MECHANICAL COMPANY, L.L.C. B&R ELECTRICAL SERVICES, INC. BELTLINE MECHANICAL SERVICES, INC. BRAZOSPORT MANAGEMENT, INC. BUILDING ONE MECHANICAL SERVICES, INC. (TO BE NAMED ENCOMPASS MECHANICAL SERVICES, INC.) BUILDING ONE COMMERCIAL, INC. (F/K/A SPANN BUILDING MAINTENANCE COMPANY, TO BE NAMED ENCOMPASS COMMERCIAL, INC.) BUILDING ONE SERVICE SOLUTIONS, INC. BUYR, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. CONSOLIDATED ELECTRICAL GROUP, INC. CRAMAR ELECTRIC, INC. C.R. HIPP CONSTRUCTION CO., INC. D&P JANITORIAL, INC. DEL-AIR SERVICE COMPANY, INC. D/FW MECHANICAL SERVICES, INC. DIRECT ENGINEERED MAINTENANCE, INC. DIVERSIFIED MANAGEMENT SERVICES, U.S.A., INC. EDG POWER GROUP, INC. ELECTRICAL CONTRACTING, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. FACILITYDIRECT.COM, LLC (F/K/A ALLIANCE SUPPLY CO., LLC) FRED CLARK ELECTRICAL CONTRACTOR, INC. GAMEWELL MECHANICAL, INC. GARFIELD-INDECON ELECTRICAL SERVICES, INC. G.S. FINANCIAL, INC. G.S. GROUP, INC. G.S.I. OF CALIFORNIA, INC. GULF STATES, INC. HYDRO COOLING, INC. INTERSTATE BUILDING SERVICES, LLC IVEY MECHANICAL COMPANY, INC. IVEY MECHANICAL SERVICES, L.L.C. K & A MECHANICAL, INC. THE LEWIS COMPANIES, INC. LEXINGTON/IVEY MECHANICAL COMPANY, LLC MCINTOSH MECHANICAL, INC. MH TECHNOLOGIES, INC. NATIONAL NETWORK SERVICES, INC. OIL CAPITAL ELECTRIC, INC. OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES, By Omni Mechanical Company POTTER ELECTRIC CO., INC. PROCESS DESIGN BUILDERS, LLC PRO WIRE SECURITY SYSTEMS, INC. REGENCY ELECTRIC COMPANY, INC. REGENCY ELECTRIC COMPANY ATLANTA OFFICE REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY SOUTH FLORIDA OFFICE, INC. RIVIERA ELECTRIC CONSTRUCTION CO. RIVIERA ELECTRIC OF CALIFORNIA, INC. ROBINSON MECHANICAL COMPANY SANDERS BROS., INC. SKC ELECTRIC, INC. SKCE, INC. S.L. PAGE CORPORATION SULLIVAN ELECTRIC, INC. TAYLOR-HUNT ELECTRIC, INC. (F/K/A TAYLOR ELECTRIC, INC.) TESTRONICS, INC. TOWN & COUNTRY ELECTRIC, INC. TRI-CITY ELECTRICAL CONTRACTORS, INC. TRI-M BUILDING AUTOMATION SYSTEMS CORP. TRI-M CORPORATION TRI-M ELECTRICAL CONSTRUCTION CORP. TRI-M HOLDING CORP. TSE ACQUISITION CORP. TRI-STATE ACQUISITION CORP. WALKER ENGINEERING, INC. WALTER C. DAVIS & SON, INCORPORATED WATSON ELECTRICAL CONSTRUCTION CO. WILSON ELECTRIC COMPANY, INC. WAYZATA, INC. ZWART, INC. (D/B/A MOUNTAIN VIEW ELECTRIC, INC.) By:_______________________________ Name: F. Traynor Beck Title: Vice President and Assistant Secretary Acting on Behalf of Each of the Above GROUPMAC SUBSIDIARIES AA ADVANCE AIR, INC. AA JARL, INC. A-ABC APPLIANCE, INC. A-ABC SERVICES, INC. A-1 MECHANICAL OF LANSING, INC. AIR CONDITIONING ENGINEERS, INC. AIR CONDITIONING, PLUMBING & HEATING SERVICE CO., INC. AIRCON ENERGY INCORPORATED AIR SYSTEMS, INC. AIRTRON, INC. AIRTRON OF CENTRAL FLORIDA, INC. ALL SERVICE ELECTRIC, INC. ARKANSAS MECHANICAL SERVICES, INC. ATLANTIC INDUSTRIAL CONSTRUCTORS, INC. CALLAHAN ROACH PRODUCTS & PUBLICATIONS, INC. CARDINAL CONTRACTING CORPORATION CENTRAL AIR CONDITIONING CONTRACTORS, INC. CENTRAL CAROLINA AIR CONDITIONING COMPANY CHAPEL ELECTRIC CO. CHARLIE CRAWFORD, INC. CLARK CONVERSE ELECTRIC SERVICE, INC. COLONIAL AIR CONDITIONING COMPANY COMMERCIAL AIR HOLDING COMPANY COMMERCIAL AIR, POWER & CABLE, INC. CONTINENTAL ELECTRICAL CONSTRUCTION CO. COSTA AND RIHL, INC. COSTA & RIHL PLUMBING, INC. COSTNER BROTHERS, INC. DIVCO, INC. DYNALINK CORPORATION ELECTRICAL ASSOCIATES OF DALLAS, INC. EVANS SERVICES, INC. THE FARFIELD COMPANY FERGUSON ELECTRIC CORPORATION GENTZLER ELECTRICAL CONTRACTORS, INC. GILBERT MECHANICAL CONTRACTORS, INC. GREENWAY INVESTMENT CORP. GROUPMAC FACILITY SERVICES, INC. (TO BE NAMED ENCOMPASS FACILITY SERVICES, INC.) GROUPMAC HOLDING CORP. (TO BE NAMED ENCOMPASS HOLDING CORP.), By Airtron, Inc. and Paul E. Smith Co., Inc. GROUPMAC INDIANA, L.L.C. (TO BE NAMED ENCOMPASS INDIANA, L.L.C.) GROUPMAC MARYLAND CORP. (TO BE NAMED ENCOMPASS MARYLAND CORP.) GROUPMAC TEXAS L.P. (TO BE NAMED ENCOMPASS TEXAS L.P.), By GroupMAC Holding Corp. HPS PLUMBING SERVICES, INC. HALLMARK AIR CONDITIONING, INC. HUNGERFORD MECHANICAL CORPORATION J. D. STEWARD AIR CONDITIONING, INC. K & N PLUMBING, HEATING AND AIR CONDITIONING, INC. LANEY'S, INC. LINFORD SERVICE CO. L.T. MECHANICAL, INC. MACDONALD-MILLER CO., INC. MACDONALD-MILLER INDUSTRIES, INC. MACDONALD-MILLER OF OREGON, INC. MACDONALD-MILLER SERVICE, INC. MASTERS, INC. MECHANICAL INTERIORS, INC. MECHANICAL SERVICES OF ORLANDO, INC. MERRITT ISLAND AIR & HEAT, INC. NEW CONSTRUCTION AIR CONDITIONING, INC. NORON, INC. PACIFIC RIM MECHANICAL CONTRACTORS, INC. PAUL E. SMITH CO., INC. PHOENIX ELECTRIC COMPANY RAY AND CLAUDE GOODWIN, INC. RELIABLE MECHANICAL, INC. ROMANOFF ELECTRIC CORP. SEQUOYAH CORPORATION SIBLEY SERVICES, INCORPORATED SNYDER MECHANICAL SOUTHEAST MECHANICAL SERVICE, INC. STATEWIDE HEATING & AIR CONDITIONING, INC. STEPHEN C. POMEROY, INC. STERLING AIR CONDITIONING, INC. SUN PLUMBING, INC. TEAM MECHANICAL, INC. TOWER ELECTRIC COMPANY TRINITY CONTRACTORS, INC. UNITED ACQUISITION CORP. VALLEY WIDE PLUMBING AND HEATING, INC. VAN'S COMFORTEMP AIR CONDITIONING, INC. VANTAGE MECHANICAL CONTRACTORS, INC. VERMONT MECHANICAL, INC. WADE'S HEATING & COOLING, INC. WIEGOLD & SONS, INC. WILLIS REFRIGERATION, AIR CONDITIONING & HEATING, INC. YALE INCORPORATED By:_______________________________ Name: Darren B. Miller Title: Vice President Acting on Behalf of Each of the Above GROUPMAC MANAGEMENT CO. TO BE NAMED ENCOMPASS MANAGEMENT CO. By:_______________________________ Name: Darren B. Miller Title: Executive Vice President ADMINISTRATIVE AGENT / SECURED PARTY: BANK OF AMERICA, N.A., Administrative Agent for the Banks By: _____________________________ Name: Title: Schedule I Pledged Shares 16 PLEDGE AGREEMENT SCHEDULE I PART A PLEDGED SHARES
Percentage Stock Number Issuing Company and of Shares Certificate of Owner/Pledgor of Stock State of Incorporation Pledged No. Shares ---------------------- ---------------------- ------------ ----------- -------- Group Maintenance America A-1 Mechanical of Lansing, 100% A001 1,000 Corp., a Texas Inc. (Michigan) corporation Group Maintenance America AA Advance Air, Inc. 100% A001 1,000 Corp., a Texas (Florida) corporation Group Maintenance America A-ABC Appliance, Inc. 100% A001 1,000 Corp., a Texas (Texas) corporation GroupMAC Holding Corp., a A-ABC Services, Inc. 100% A001 1,000 Delaware corporation (Delaware) Group Maintenance America AA JARL, Inc. 100% A001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America Air Conditioning 100% A001 1,000 Corp., a Texas Engineers, Inc. (Michigan) corporation Group Maintenance America Air Conditioning, Plumbing 100% A001 1,000 Corp., a Texas & Heating Service Co., corporation Inc. (Colorado) Group Maintenance America Aircon Energy Incorporated 100% A001 1,000 Corp., a Texas (California) corporation Pacific Rim Mechanical Air Systems, Inc. 100% A001 1,000 Contractors, Inc., a (California) California corporation Group Maintenance America Airtron, Inc. (Delaware) 100% 236 1,000 Corp., a Texas corporation Airtron, Inc., a Delaware Airtron of Central 100% 1 100 corporation Florida, Inc. (Florida) Group Maintenance America All Service Electric, Inc. 100% A001 1,000 Corp., a Texas (Florida) corporation
Group Maintenance America Arkansas Mechanical 100% A001 1,000 Corp., a Texas Services, Inc. (Arkansas) corporation Group Maintenance America Atlantic Industrial 100% A001 1,000 Corp., a Texas Constructors, Inc. corporation (Virginia) Group Maintenance America Callahan Roach Products & 100% A001 1,000 Corp., a Texas Publications, Inc. corporation (Colorado) Group Maintenance America Cardinal Contracting 100% 8 542.553 Corp., a Texas Corporation (Indiana) corporation Group Maintenance America Central Air Conditioning 100% A001 1,000 Corp., a Texas Contractors, Inc. corporation (Delaware) Group Maintenance America Central Carolina Air 100% A001 1,000 Corp., a Texas Conditioning Company corporation (North Carolina) Group Maintenance America Chapel Electric Co. (Ohio) 100% A001 3,800 Corp., a Texas corporation GroupMAC Holding Corp., a Charlie Crawford, Inc. 100% A001 1,000 Delaware corporation (Delaware) Group Maintenance America Clark Converse Electric 100% A001 100 Corp., a Texas Service, Inc. (Ohio) corporation Group Maintenance America Colonial Air Conditioning 100% A001 1,000 Corp., a Texas Company (Delaware) corporation Group Maintenance America Commercial Air Holding 100% A001 1,000 Corp., a Texas Company (Maryland) corporation Commercial Air Holding Commercial Air, Power & 100% A001 100,000 Company, a Maryland Cable, Inc. (Maryland) corporation Group Maintenance America Continental Electrical 100% A001 1,000 Corp., a Texas Construction Co. (Delaware) corporation Group Maintenance America Costa and Rihl, Inc. 100% 12 50 Corp., a Texas (New Jersey) corporation Costa and Rihl, Inc., a Costa & Rihl Plumbing, 90% 1 90 Class A New Jersey corporation Inc. (New Jersey)
18 Group Maintenance America Costner Brothers, Inc. 100% 3 2,000 Corp., a Texas (South Carolina) corporation Group Maintenance America Divco, Inc. 100% A001 1,000 Corp., a Texas (Washington) corporation Group Maintenance America Dynalink Corporation 100% 118 281.52 Corp., a Texas (Ohio) corporation GroupMAC Holding Corp., a Electrical Associates of 100% 005 1,001 Delaware corporation Dallas, Inc. (Texas) Group Maintenance America Evans Services, Inc. 100% A001 1,000 Corp., a Texas (Alabama) corporation Group Maintenance America The Farfield Company 100% A001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America Ferguson Electric 100% A001 1,000 Corp., a Texas Corporation corporation (Delaware) Group Maintenance America Gentzler Electrical 100% A001 1,000 Corp., a Texas Contractors, Inc. corporation (Delaware) Group Maintenance America Gilbert Mechanical 100% A001 1,000 Corp., a Texas Contractors, Inc. corporation (Minnesota) Group Maintenance America Greenway Investment Corp. 100% 001 1,000 Corp., a Texas (Delaware) corporation MacDonald-Miller GroupMAC Facility 100% 001 1,000 Industries, Inc., a Services, Inc. (Delaware) Washington corp. Group Maintenance America GroupMAC Holding Corp. 100% 001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America GroupMAC Management Co. 100% 001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America GroupMAC Maryland Corp. 100% 001 1,000 Corp., a Texas (Delaware) corporation GroupMAC Holding Corp., a Hallmark Air Conditioning, 100% A001 1,000 Delaware corporation Inc. (Delaware)
Group Maintenance America HPS Plumbing Services, 100% A001 1,000 Corp., a Texas Inc. (California) corporation Group Maintenance America Hungerford Mechanical 100% A001 1,000 Corp., a Texas Corporation (Virginia) corporation Group Maintenance America J. D. Steward Air 100% A001 1,000 Corp., a Texas Conditioning, Inc. corporation (Colorado) GroupMAC Holding Corp., a K & N Plumbing, Heating 100% A001 1,000 Delaware corporation and Air Conditioning, Inc. (Delaware) Group Maintenance America Laney's, Inc. (Delaware) 100% A001 1,000 Corp., a Texas corporation Group Maintenance America Linford Service Co. 100% A001 1,000 Corp., a Texas (California) corporation Group Maintenance America L.T. Mechanical, Inc. 100% A001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America MacDonald-Miller 100% A001 1,000 Corp., a Texas Industries, Inc. corporation (Washington) MacDonald-Miller MacDonald-Miller Service, 100% 1 500 Industries, Inc., a Inc. (Washington) Washington corp. MacDonald-Miller MacDonald-Miller Co., Inc. 100% 1 30,070 Industries, Inc., a (Washington) Washington corp. MacDonald-Miller MacDonald-Miller Co., Inc. 100% 2 36,764 Industries, Inc., a (Washington) Washington corp. MacDonald-Miller MacDonald-Miller Co., Inc. 100% 3 36,764 Industries, Inc., a (Washington) Washington corp. MacDonald-Miller MacDonald-Miller of 100% A001 1,000 Industries, Inc., a Oregon, Inc. (Delaware) Washington corp. Group Maintenance America Masters, Inc. 100% A001 1,000 Corp., a Texas (Maryland) corporation Group Maintenance America Mechanical Interiors, Inc. 100% A001 1,000 Corp., a Texas (Delaware) corporation
20 Group Maintenance America Mechanical Services of 100% 5 35 Corp., a Texas Orlando, Inc. (Florida) corporation Group Maintenance America Merritt Island Air & Heat, 100% A001 1,000 Corp., a Texas Inc. (Delaware) corporation Group Maintenance America New Construction Air 100% A001 1,000 Corp., a Texas Conditioning, Inc. corporation (Michigan) Group Maintenance America Noron, Inc. 100% A001 850 Corp., a Texas (Ohio) corporation Group Maintenance America Pacific Rim Mechanical 100% A001; B001 21,764; Corp., a Texas Contractors, Inc. 262 corporation (California) Group Maintenance America Paul E. Smith Co., Inc. 100% 6 550 Corp., a Texas (Indiana) corporation Group Maintenance America Phoenix Electric Company 100% A001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America Ray and Claude Goodwin, 100% A001 1,000 Corp., a Texas Inc. (Florida) corporation Group Maintenance America Reliable Mechanical, Inc. 100% A001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America Romanoff Electric Corp. 100% A001 100 Corp., a Texas (Ohio) corporation Group Maintenance America Sequoyah Corporation 100% 005 10,000 Corp., a Texas (Washington) corporation Group Maintenance America Sibley Services, 100% 49 396 Corp., a Texas Incorporated corporation (Tennessee) Group Maintenance America Snyder Mechanical 100% 001 1,200 Corp., a Texas corporation Group Maintenance America Southeast Mechanical 100% A001; 1,000; Corp., a Texas Services, Inc. (Florida) B001 1,000 corporation Group Maintenance America Statewide Heating & Air 100% A001 1,000 Corp., a Texas Conditioning, Inc. corporation (Delaware)
Group Maintenance America Stephen C. Pomeroy, Inc. 100% A001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America Sterling Air Conditioning, 100% A001 1,000 Corp., a Texas Inc. corporation (Delaware) Group Maintenance America Sun Plumbing, Inc. 100% A001 1,000 Corp., a Texas (Florida) corporation Group Maintenance America Team Mechanical, Inc. 100% A001 1,000 Corp., a Texas (Utah) corporation Group Maintenance America Tower Electric Company 100% A001 1,000 Corp., a Texas (Delaware) corporation GroupMAC Holding Corp., a Trinity Contractors, Inc. 100% A001 32,216.035 Delaware corporation (Delaware) Group Maintenance America United Acquisition Corp. 100% 001 1,000 Corp., a Texas (Iowa) corporation Group Maintenance America Valley Wide Plumbing and 100% A001 1,000 Corp., a Texas Heating, Inc. (Colorado) corporation Group Maintenance America Van's Comfortemp Air 100% A001 1,000 Corp., a Texas Conditioning, Inc. corporation (Florida) Group Maintenance America Vantage Mechanical 100% 001 30 Corp., a Texas Contractors, Inc. corporation (Maryland) Group Maintenance America Vermont Mechanical, Inc. 100% A001 1,000 Corp., a Texas (Delaware) corporation Group Maintenance America Wade's Heating & Cooling, 100% A001 1,000 Corp., a Texas Inc. (Florida) corporation Group Maintenance America Wiegold & Sons, Inc. 100% A001 1,000 Corp., a Texas (Florida) corporation Group Maintenance America Willis Refrigeration, Air 100% A001 1,000 Corp., a Texas Conditioning & Heating, corporation Inc. (Ohio) Group Maintenance America Yale Incorporated 100% A001 1,000 Corp., a Texas (Minnesota) corporation
Pledge Agreement Schedule I --------------------------- PART B PLEDGED SHARES BUILDING ONE SERVICES CORPORATION AND ITS SUBSIDIARIES
NUMBER OF CERTIFICATE PERCENTAGE NAME OF OWNER/PLEDGOR NAME OF ISSUING ENTITY TYPE OF SHARES SHARES NO. (%) OWNED - ------------------------- --------------------------- -------------- --------- ----------- -------------- Building One Services Advent Electric Co., Inc. Common 100 2 100 Corporation (fka Advent Acquisition Corp.) Building One Services American Air Company, Inc. Common 100 1 100 Corporation Building One Services Atlantic Electric Company, Common 100 1 100 Corporation Inc. (fka Atlantic Acquisition Corp.) Building One Services B & R Electrical Services, Common 100 10 100 Corporation Inc. Building One Services Building One Mechanical Common 100 1 100 Corporation Services, Inc. Building One Services BUYR, Inc. Common 100 1 100 Corporation Building One Services C.R. Hipp Construction Common 100 7 100 Corporation Co., Inc. Building One Services Consolidated Electrical Common 100 1 100 Corporation Group, Inc. Building One Services Del-Air Service Company, Common 100 2 100 Corporation Inc. Building One Services D/FW Mechanical Services, Common 100 1 100 Corporation Inc. Building One Services Electrical Contracting, Common 100 1 100 Corporation Inc. (fka ECI Acquisition Corp.) Building One Services Gamewell Mechanical, Inc. Common 100 1 100 Corporation (fka Gamewell Acquisition Corp.) Building One Services Garfield-Indecon Common 100 1 100 Corporation (fka Electrical Services, Inc. Consolidation Capital (fka CCC5 Acquisition Co.) Corporation) Building One Services K & A Mechanical, Inc.(fka Common 100,000 1 100 Corporation K&A Acquisition Corp.) Building One Services MH Technologies, Inc. Common 10,000 10 100 Corporation
24 Building One Services McIntosh Mechanical, Inc. Common 100 1 100 Corporation (fka (fka McIntosh Acquisition Consolidation Capital Corp.) Corporation) Building One Services, Zwart, Inc. (d/b/a Common 100 11 100 Inc. Mountain View Electric, Inc.) Building One Services National Network Services, Common 100 1 100 Corporation Inc. Building One Services Omni Mechanical Company Common 1,000 004 100 Corporation Building One Services Potter Electric Co., Inc. Common 1,000 12 100 Corporation Building One Services Riviera Electric Common 100 1 100 Corporation (fka Construction Co.(fka CCC3 Consolidation Capital Acquisition Co.) Corporation) Building One Services Riviera Electric of Common 100 1 100 Corporation (fka California, Inc. Consolidation Capital (fka CCC15 Acquisition Co.) Corporation) Building One Services Robinson Mechanical Company Common 100 B-050 100 Corporation (fka Consolidation Capital Corporation) Building One Services Building One Commercial, Common 1,000 17 100 Corporation (fka Inc. (fka Spann Building Consolidation Capital Maintenance Company) Corporation) Building One Services Sullivan Electric, Inc. Common 100 1 100 Corporation (fka Sullivan Acquisition Corp.) Building One Services Taylor-Hunt Electric, Inc. Common 100 2 100 Corporation (fka Taylor Electric, Inc.) Building One Services Town & Country Electric, Common 100 1 100 Corporation (fka Inc. Consolidation Capital (fka CCC7 Acquisition Co.) Corporation) Building One Services Tri-City Electrical Common 100 1 100 Corporation (fka Contractors, Inc. Consolidation Capital (fka CCC6 Acquisition Co.) Corporation) Building One Services Tri-State Acquisition Corp. Common 100 1 100 Corporation Building One Services TSE Acquisition Corp. Common 100 1 100 Corporation Building One Services Walker Engineering, Inc. Common 100 2 100 Corporation Building One Services Watson Electrical Common 100 1 100 Corporation (fka Construction Co. Consolidation Capital (fka WECC Acquisition Corporation) Corp.) Building One Services Walter C. Davis & Son, Common 100 1 100 Corporation Incorporated (fka WCD Acquisition Corp.) Building One Services Wayzata, Inc. Common 1 1,000 100 Corporation
G.S. GROUP, INC. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE Name of Owner/Pledgor NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services G.S. Group, Inc. Common 100 1 100 Corporation (fka (f/k/a CCC Acquiring Consolidation Capital Co. No. 11) Corporation) G.S. Group, Inc. G.S. Financial, Inc. Common 25,000 002 100 G.S. Group, Inc. G.S.I. of California, Common 5,000 002 100 Inc. G.S. Group, Inc. Testronics, Inc. Common 1,000 002 100 G.S. Group, Inc. Gulf States, Inc. Class A; 862,272; 398; 100 Class B 324,033 169 G.S. Group, Inc. Brazosport Management, Common 1,000 2 100 Inc.
26 IVEY MECHANICAL COMPANY, INC. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE Name of Owner/Pledgor NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services Ivey Mechanical Common 100 2 100 Corporation (fka Company, Inc. Consolidation Capital Corporation) Ivey Mechanical Company, Beltline Mechanical Common 100 1 100 Inc. Services, Inc. (fka Beltline Acquisition Corp) Ivey Mechanical Company, Lexington/Ivey n/a n/a n/a 100 Inc. Mechanical Company, LLC Ivey Mechanical Company Ivey Mechanical Units 1,000 1 100 Services, LLC Ivey Mechanical Company, Barnes Ivey Mechanical n/a n/a n/a 100 Inc. Company, L.L.C.
REGENCY ELECTRIC COMPANY, INC. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE Name of Owner/Pledgor NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services Regency Electric Common 100 2 100 Corporation (fka Company, Inc. Consolidation Capital (fka RECI Acquisition Corporation) Corp.) Regency Electric Regency Electric Company Common 1,000 16 100 Company, Inc. Jacksonville Office, Inc. Regency Electric Regency Electric Company Common 1,000 10 100 Company, Inc. Orlando Office, Inc. Regency Electric Regency Electric Company Common 1,000 14 100 Company, Inc. Atlanta Office, Inc. Regency Electric Regency Electric Company Common 1,000 2 100 Company, Inc. Projects Group, Inc. (fka Regency Electric Co. Projects Group, Inc.) Regency Electric Regency Electric Company Common 1,000 2 100 Company, Inc. Charlotte Office, Inc. Regency Electric Regency Electric Company Common 1,000 1 100 Company, Inc. South Florida, Inc. Regency Electric Regency Electric Company Common 1,000 1 100 Company, Inc. Memphis Office, Inc.
28 SKC ELECTRIC, INC. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE Name of Owner/Pledgor NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services SKC Electric, Inc. Common 1,000 1 100 Corporation (fka Consolidated Capital Corporation) SKC Electric, Inc. Cramar Electric, Inc. Common 1,000 2 100 SKC Electric, Inc. SKCE, Inc. Common 1,000 3 100 SKC Electric, Inc. Pro Wire Security Common 10 2 100 Systems, Inc.
THE LEWIS COMPANIES, INC. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE Name of Owner/Pledgor NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services The Lewis Companies, Common 50,000 101 100 Corporation (fka Inc. Consolidation Capital (fka ROBO Acquisition Corporation) Corporation) The Lewis Companies, Inc. Oil Capital Electric, Common 1,140 5 100 Inc. The Lewis Companies, Inc. Engineering Design Common 784,699 97 93* Group, Inc. *will be 100% prior to closing The Lewis Companies, Inc. Electrical Design & Common 1,000 2 100 Construction, Inc. The Lewis Companies, Inc. Fred Clark Electrical Common 1,000 1 100 Contractor, Inc. [Partnership: 50% owned by Omni Mechanical Services n/a n/a n/a n/a The Lewis Companies, Inc./ 50% owned by Omni Mechanical Corporation] The Lewis Companies, Inc. EDG Power Group, Inc. Common 10,000 1 100
30 TRI-M HOLDING CORP. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE Name of Owner/Pledgor NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services Tri-M Holding Corp. Common 100 2 100 Corporation (fka (fka TRI-M Consolidation Capital Acquisition Corp.) Corporation) Tri-M Holding Corp. tri-M Corporation Common 5,000 1 100 Tri-M Holding Corp. tri-M Corporation Common 5,000 2 100 Tri-M Holding Corp. tri-M Electrical Common 5,000 1 100 Construction Corp. (fka Tri-M Electrical Contractors, Inc.) Tri-M Holding Corp. tri-M Electrical Common 5,000 2 100 Construction Corp. (fka Tri-M Electrical Contractors, Inc.) Tri-M Holding Corp. tri-M Building Common 5,000 1 100 Automation Systems Corp. Tri-M Holding Corp. tri-M Building Common 5,000 2 100 Automation Systems Corp.
WILSON ELECTRIC COMPANY, INC. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE Name of Owner/Pledgor NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services Wilson Electric Company, Common 100 1 100 Corporation (fka Inc. Consolidation Capital (fka CCC8 Acquisition Co.) Corporation) Wilson Electric Company, Chambers Electronic Common 100 1 100 Inc. Communications, Inc. (fka Chambers Acquisition Corp.)
32 BUILDING ONE SERVICE SOLUTIONS, INC. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE Name of Owner/Pledgor NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services Building One Service Common 100 2 100 Corporation (fka Solutions, Inc. Consolidation Capital (fka Service Management Corporation) USA Inc.) Building One Service Diversified Management Common 200 2 100 Solutions, Inc. Services USA, Inc. (fka Service Management USA, Inc.) Building One Service FacilityDirect.com, LLC n/a n/a n/a 100 Solutions, Inc. (fka Alliance Supply Co., LLC) Building One Service Interstate Building n/a n/a n/a 100 Solutions, Inc. Services, LLC Building One Service D & P Janitorial, Inc. Common 100 2 100 Solutions, Inc. Building One Service Direct Engineered Common 51 4 100 Solutions, Inc. Maintenance Systems, Inc.
SANDERS BROS., INC. AND ITS SUBSIDIARIES
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE NAME OF OWNER/PLEDGOR NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services Sanders Bros., Inc. Common 100 69 100 Corporation Sanders Bros., Inc. Process Design n/a n/a n/a 50 Builders, LLC
34 S.L. PAGE CORPORATION AND ITS SUBSIDIARY
TYPE OF NUMBER OF CERTIFICATE PERCENTAGE NAME OF OWNER/PLEDGOR NAME OF ISSUING ENTITY SHARES SHARES NO. (%) OWNED - --------------------------- ----------------------- ------ -------- ---------- ----------- Building One Services S.L. Page Corporation Common 100 17 100 Corporation S.L. Page Corporation Hydro Cooling, Inc. Common 100 6 100
Schedule II Chief Executive Office Locations of Other Pledgors 36 PLEDGE AGREEMENT SCHEDULE II ---------------------------- Part A List of Chief Executive Offices
Name of Subsidiary Address - -------------------------------------------- --------------------------------------------------- A-1 Mechanical of Lansing, Inc. 615 S. Waverly Road, Lansing, Michigan 48917 AA Advance Air, Inc. 1920 NW 32nd Street, Pompano Beach, FL 33064 A-ABC Appliance, Inc. 8 Greenway Plaza, Ste 1500, Houston, TX 77046 A-ABC Services, Inc. 14001 Distribution Way, Dallas, TX 75234 AA JARL, Inc.(dba Jarrell Plumbing) 6920 Winton, Houston, TX 77021 Air Conditioning Engineers, Inc. 5250 Auburn Road, Utica Michigan 48317 Air Conditioning, Plumbing & Heating Service Co., Inc. 4350 Race Street, Denver, CO 80216 Aircon Energy Incorporated 4234 N. Freeway Blvd., #100, Sacramento, CA 95834 Air Systems, Inc. 381 Stockton Street, San Jose, CA 95126 Airtron, Inc. 7813 North Dixie Drive, Dayton, OH 45414 Airtron of Central Florida, Inc. 210 Douglas Road, East Oldsmar, FL 34677 All Service Electric, Inc. 1556 Whitlock Avenue, Jacksonville, FL 32211 Arkansas Mechanical Services, Inc. 2201 Lincoln Road, N. Little Rock, AR 72115 Atlantic Industrial Constructors, Inc. 4500 Oakleys Lane, Richmond, VA 23231 Callahan Roach Products & Publications, Inc. 8955 E. Nichols, Ste 200, Englewood, CO 80112 Cardinal Contracting Corporation 2300 S. Tibbs, Indianapolis, IN 46241 Central Air Conditioning Contractors, Inc. 9195 Red Branch Road, Columbia, MD 21045 Central Carolina Air Conditioning Company 1800 Fairfax Road, Greensboro, NC 27407-4124 Chapel Electric Co. 207 E. Sixth, Dayton, OH 45402 Charlie Crawford, Inc. 1309 Pennsylvania, So. Houston, TX 77587-4042 Clark Converse Electric Service, Inc. 3783 Gantz Road, Grove City, OH 43123 Colonial Air Conditioning Company 4 Northwood Drive, Bloomfield, CT 06002 Commercial Air Holding Company 12100 Baltimore Avenue, Beltsville, MD 20705 Commercial Air, Power & Cable, Inc. 12100 Baltimore Avenue, Beltsville, MD 20705 Continental Electrical Construction Co. 5834 W. Howard, Skokie, IL 60077 Costa and Rihl, Inc. 3900 Church Road, Mt. Laurel, NJ 08054 Costa & Rihl Plumbing, Inc. 3900 Church Road, Mt. Laurel, NJ 08054 Costner Brothers, Inc. 3175 Lesslie Highway, Rock Hill, SC 29730 Divco, Inc. 715 Madelia Street, Spokane, WA 99220 Dynalink Corporation 5201 Richmond Rd, Bedford Heights, OH 44146 Electrical Associates of Dallas, Inc. 3730 Marquis Dr., Garland, TX 75024 Evans Services, Inc. 2406 Valleydale Road, Birmingham, AL 35244 The Farfield Company 312 E. Meadow Valley Road, Lititz, PA 17543 Ferguson Electric Corporation 1410 Ford Street, Colorado Springs, CO 80915 Gentzler Electrical Contractors, Inc. 10510 Markison, Dallas, TX 75238 Gilbert Mechanical Contractors, Inc. 4451 West 76th Street, Minneapolis, MN 55435 Greenway Investment Corp. 1105 N. Market Square, Wilmington, DE 19801 GroupMAC Facility Services, Inc. 7717 Detroit SW, Seattle, WA 98106-1903
GroupMAC Holding Corp. 8 Greenway Plaza, Ste. 1500, Houston, TX 77046 GroupMAC Indiana, L.L.C. 5150 Elmwood, Indianapolis, IN 46203 GroupMAC Management Co. 8 Greenway Plaza, Ste. 1500, Houston, TX 77046 GroupMAC Maryland Corp. 6251 Ammendale Road, Beltsville, MD 20705 GroupMAC Texas L.P. 8 Greenway Plaza, Suite 1500, Houston, TX 77046 HPS Plumbing Services, Inc. 401 34th Street, Bakersfield, CA 93301 Hallmark Air Conditioning, Inc. 4517 Southerland, Houston, TX 77092 Hungerford Mechanical Corporation 3800 Deepwater Terminal Road, Richmond, VA 23234 J. D. Steward Air Conditioning, Inc. 655 Elkton Drive, Colorado Springs, CO 80907 K & N Plumbing, Heating and Air Conditioning, Inc. 2706 W. Pioneer Parkway, Arlington, TX 76013 Laney's, Inc. 55 South 27th Street, Fargo, ND 58103 Linford Service Co. 2850 Poplar Street, Oakland, CA 94608 L.T. Mechanical, Inc. 5940 General Commerce Drive, Charlotte, NC 28213-0246 MacDonald-Miller Co., Inc. 7717 Detroit SW, Seattle, WA 98106-1903 MacDonald-Miller Industries, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 MacDonald-Miller of Oregon, Inc. 1240 SE 12th Avenue, Portland, OR 97214
38
MacDonald-Miller Service, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 Masters, Inc. 7891 Beechcraft, Gaithersburg, MD 20879 Mechanical Interiors, Inc. 256 Regal Row, Dallas, TX 75247 Mechanical Services of Orlando, Inc. 9440 Sidney Hayes Road, Orlando, FL 32824 Merritt Island Air & Heat, Inc. 625 Cypress Street, Merritt Island, FL 32952 New Construction Air Conditioning, Inc. 1900 Cedar Street,. Holt, Michigan 48842 Noron, Inc. 5465 Enterprise, Toledo, OH 43612 Pacific Rim Mechanical Contractors, Inc. 7655 Convoy Court, San Diego, CA 92111 Paul E. Smith Co., Inc. 8171 West 10th Street, Indianapolis, IN 46214 Phoenix Electric Company 7379 S.W. Tech Center Drive, Tigard, OR 97223 Ray and Claude Goodwin, Inc. 1033 S. Edgewood, Jacksonville, Florida 32205 Reliable Mechanical, Inc. 13035 Middletown Industrial Blvd., Louisville, KY 40223 Romanoff Electric Corp. 5055 Enterprise Blvd., Toledo, OH 43612 Sequoyah Corporation 720 Eighth Avenue, Kirkland, WA 98033-5649 Sibley Services, Incorporated 1892 Lynnbrook, Memphis, Tennessee 38116 Snyder Mechanical 1250 Lamoille Highway #104, Elko, NV 89803 Southeast Mechanical Service, Inc. 15951 Southwest 41st St., Suite 100, Davie, FL 33331 Statewide Heating & Air Conditioning, Inc. 808 Purser Drive, Raleigh, NC 27603 Stephen C. Pomeroy, Inc. 3131 SW 13th Drive, Deerfield Beach, FL 33442 Sterling Air Conditioning, Inc. 1331 East Broadway, Pearland, Texas 77581 Sun Plumbing, Inc. 6935 Vicki Circle, Melbourne, Florida 32902-0549 Team Mechanical, Inc. 151 No. 600 West, Kaysville, UT 84037 Tower Electric Company 11170 Lee Highway, Fairfax, VA 22030 Trinity Contractors, Inc. 2425 Dillard Street, Grand Prairie, TX 76005 United Acquisition Corp. (dba United Service Alliance) 8955 East Nichols, Suite 200, Englewood, Colorado 80112 Valley Wide Plumbing and Heating, Inc. 431 Metcalf, Avon, Colorado 81620 Van's Comfortemp Air Conditioning, Inc. 135 W. Congress, Delray Beach, FL 33445 Vantage Mechanical Contractors, Inc. 8 Greenway Plaza, Suite 1500, Houston, Texas 77046 Vermont Mechanical, Inc. 4050 Williston Road, S. Burlington, VT 05495 Wade's Heating & Cooling, Inc. 12901-1 Metro Parkway, Fort Meyers, FL 33912 Wiegold & Sons, Inc. 2255 J&C Blvd., Pine Ridge Industrial Park, Naples, FL 34109 Willis Refrigeration, Air Conditioning & Heating, Inc. 885 Ohio Pike, Cincinnati, Ohio 45245 Yale Incorporated 9649 Girard Avenue South, Minneapolis, MN 55431
PLEDGE AGREEMENT SCHEDULE II ---------------------------- Part B List of Chief Executive Offices ------------------------------- ADVENT ELECTRIC CO., INC. 5901 Walden Drive Knoxville, TN 37919-6348 AMERICAN AIR COMPANY, INC. 7533 Avenue 304 Visalia, CA 93291 ATLANTIC ELECTRIC COMPANY, INC. 7320 Cross County Road Charleston, SC 29423-1347 B&R ELECTRICAL SERVICES, INC. 502 McCormick Drive Suite M Glen Burnie, MD 21061 BUILDING ONE MECHANICAL SERVICES, INC. 514 N. Wells Street Kosiusko, MS 39090 BUILDING ONE SERVICE SOLUTIONS, INC. DIVERSIFIED MANAGEMENT SERVICES, U.S.A., INC. FACILITYDIRECT.COM, LLC 45600 Terminal Drive Dulles, VA 20166 INTERSTATE BUILDING SERVICES, LLC 300 Bedford Street, Unit C Manchester, NH 03101 D&P JANITORIAL, INC. DIRECT ENGINEERED MAINTENANCE, INC. 577 Warren Avenue East Providence, RI 02914 BUYR, INC. Suite 210 110 Cheshire Lane Minnetonka, MN 55305-1061 40 C.R. HIPP CONSTRUCTION CO., INC. 3537 Dorchester Road N. Charleston, SC 294 CONSOLIDATED ELECTRICAL GROUP, INC. 8730 Bourgade Lenexa, KS 66219 DEL-AIR SERVICE COMPANY, INC. 135 Chicamauga Avenue Knoxville, TN 37917 D/FW MECHANICAL SERVICES, INC. 11170 Ables Lane P.O. Box 59822 Dallas, TX 75229 ELECTRICAL CONTRACTING, INC. 500 Corporate Drive Escondido, CA 92029 G.S. GROUP, INC. BRAZOSPORT MANAGEMENT, INC. TESTRONICS, INC. GULF STATES, INC. G.S. FINANCIAL, INC. G.S.I. OF CALIFORNIA, INC. 6711 East Hwy 332 Freeport, TX 77541 GAMEWELL MECHANICAL, INC. 727 Bendix Drive Salisbury, NC 28146 GARFIELD-INDECON ELECTRICAL SERVICES, INC. 5301 Lester Road Cincinnati, OH IVEY MECHANICAL COMPANY, INC. 514 N. Wells Street Kosciusko, MS 39090 K & A MECHANICAL, INC. 5940 Bingle Houston, TX 77092 LEXINGTON/IVEY MECHANICAL COMPANY, LLC 1063 Manchester Street Lexington, KY 40509 BARNES IVEY MECHANICAL COMPANY, L.L.C. P. O. Box B Fayetteville, NC 28302 BELTLINE MECHANICAL SERVICES, INC. 3008 West Story Road Irving, TX 75038 IVEY MECHANICAL SERVICES, L.L.C. 514 N. Wells Street Kosciusko, MS 39090 MH TECHNOLOGIES, INC. 1201 Prince Street Houston, TX 77008 MCINTOSH MECHANICAL, INC. 879 South Guignard Drive Sumter, SC 29151 ZWART, INC. (D/B/A MOUNTAIN VIEW ELECTRIC, INC.) 6350 Nautilus Drive Boulder, CO 80301 NATIONAL NETWORK SERVICES, INC. 2452 S. Trenton Way Denver, CO 80231 OMNI MECHANICAL COMPANY OMNI MECHANICAL SERVICES (50% INTEREST) 12718 East 55th Street Tulsa, OK 74146 POTTER ELECTRIC CO., INC. 7150 Placid Street Las Vegas, NV 89119 REGENCY ELECTRIC COMPANY, INC. REGENCY ELECTRIC COMPANY JACKSONVILLE OFFICE, INC. REGENCY ELECTRIC COMPANY PROJECTS GROUP, INC. REGENCY ELECTRIC COMPANY ORLANDO OFFICE, INC. 6601 Southpoint Drive North Jacksonville, FL 32216 42 REGENCY ELECTRIC COMPANY MEMPHIS OFFICE, INC. 2883 Mendenhall Road S. Suite 3 Memphis, TN 38115 REGENCY ELECTRIC COMPANY SOUTH FLORIDA OFFICE, INC. 3800 Park Central Blvd. N Suite 3810 Pompano Beach, FL 33064 REGENCY ELECTRIC COMPANY CHARLOTTE OFFICE, INC. 5031A West W.T. Harris Blvd. Charlotte, NC 28269 REGENCY ELECTRIC COMPANY ATLANTA OFFICE 1000 Cobb Place Blvd. Atlanta, GA 30144 RIVIERA ELECTRIC CONSTRUCTION CO. 2107 West College Avenue Englewood, CO 80110 RIVIERA ELECTRIC OF CALIFORNIA, INC. 2905 East Ricker Way Anaheim, CA 92806 ROBINSON MECHANICAL COMPANY 5541 Central Avenue Boulder, CO 80301 S.L. PAGE CORPORATION HYDRO COOLING, INC. 10879 Metro Parkway Fort Myers, FL 33912 SANDERS BROS., INC. PROCESS DESIGN BUILDERS, LLC (50% INTEREST) 1709 Old Georgia Highway Gaffney, SC 29341 SKC ELECTRIC, INC. CRAMAR ELECTRIC, INC. SKCE, INC. PRO WIRE SECURITY SYSTEMS, INC. 14335 West 97th Terrace Lenexa, KS 66215 BUILDING ONE COMMERCIAL, INC. (F/K/A SPANN BUILDING MAINTENANCE COMPANY) 2035 Olive Street St. Louis, MO 63103 SULLIVAN ELECTRIC, INC. 7100 Cockrill Bend Blvd. Nashville, TN 37209 TAYLOR-HUNT ELECTRIC, INC. 1476 South Major Street Salt Lake City, UT 84115 THE LEWIS COMPANIES, INC. ELECTRICAL DESIGN & CONSTRUCTION, INC. ENGINEERING DESIGN GROUP, INC. FRED CLARK ELECTRICAL CONTRACTOR, INC. OIL CAPITAL ELECTRIC, INC. OMNI MECHANICAL SERVICES (50% INTEREST) EDG POWER GROUP, INC. 12718 East 55th Street Tulsa, OK 74146 TOWN & COUNTRY ELECTRIC, INC. 2662 American Drive Appleton, WI 54915 Tri-CITY ELECTRICAL CONTRACTORS, INC. 430 West Drive Altamonte Springs, FL 32714 Tri-M HOLDING CORP. tri-M CORPORATION tri-M ELECTRICAL CONSTRUCTION CORP. tri-M BUILDING AUTOMATION SYSTEMS CORP. 204 Gale Lane Kennet Square, PA 19348 TSE ACQUISITION CORP. 4820 West University Las Vegas, NV 89103 Tri-STATE ACQUISITION CORP. 442 West Bonita Avenue San Dimas, CA 91773 44 WALKER ENGINEERING, INC. 10999 Petal Street Dallas, TX 75238 WALTER C. DAVIS & SON, INCORPORATED 7908 Kincannon Place Newington, VA 22122 WATSON ELECTRICAL CONSTRUCTION CO. 490 Ward Boulevard Wilson, NC 27895 WILSON ELECTRIC COMPANY, INC. CHAMBERS ELECTRONIC COMMUNICATIONS, INC. 15475 North Greenway-Hayden Loop Scottsdale, AZ 85260 WAYZATA, INC. 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 Exhibit 4.01(h)(i) Form of Opinion of Company's Counsel - Bracewell & Patterson [LETTERHEAD OF BRACEWELL & PATTERSON APPEARS HERE] 711 Louisiana Street, Suite 2900 Houston, Texas 77002-2781 Phone: 713.223.2900 Fax: 713.221.1212 February 22, 2000 To (i) each of the Banks party to the Credit Agreement dated as of February 22, 2000 among Group Maintenance America Corp., a Teas corporation (the "Borrower"), such Banks, Bank of America, N.A., as Administrative Agent, Chase Bank of Texas, National Association, as Syndication Agent, First Union National Bank, as Documentation Agent and others ("Credit Agreement"), and (ii) such Administrative Agent, such Syndication Agent and such Documentation Agent (the "Agents") Ladies and Gentlemen: We have acted as counsel to Group Maintenance America Corp., a Texas corporation (the "Borrower") and certain Subsidiaries of the Borrower in connection with the Credit Agreement. As used herein, (i) the term "Subsidiary Obligors" means the Subsidiaries of the Borrower party to the Credit Agreement and (ii) the term "Debtors" means the Borrower and each Subsidiary Obligor. This opinion is the opinion referred to in Section 4.01(h)(i) of the Credit Agreement. Capitalized terms used herein and defined in the Credit Agreement but not defined herein are used herein as therein defined. In connection with this opinion, we have examined copies of the following documents (the "Documents"): (i) a counterpart of the Credit Agreement executed by the Borrower; (ii) the 20 notes dated February 22, 2000, each substantially in the form of Exhibit 2.02 (a-1) to the Credit Agreement, one executed by the Borrower for each Bank committed to make Revolving Loans (the "Revolving Notes"); (iii) the 20 notes dated February 22, 2000, each substantially in the form of Exhibit 2.02(b) to the Credit Agreement, one executed by the Borrower for each Bank committed to make Tranche A Term Loans (the "Tranche A Term Notes"); (iv) the 20 notes dated February 22, 2000, each substantially in the form of Exhibit 2.02(c) to the Credit Agreement, one executed by the Borrower for each Bank committed to make Tranche B Term Loans (the "Tranche B Term Notes"); (v) the note dated February 22, 2000 in substantially the form of Exhibit 2.02(a-2) to the Credit Agreement executed by the Borrower payable to Bank of America (the "Swingline Note"); (vi) the Security Agreement dated as of February 22, 2000, executed by the Borrower and the Subsidiary Obligors party thereto (the "Security Agreement"); (vii) the Pledge Agreement dated as of February 22, 2000, executed by the Borrower and the Subsidiary Obligors party thereto (the "Pledgors") (the "Pledge"); (viii) the Merger Agreement; (ix) the Investors' Rights Agreement; and (x) the Subscription Agreement. We have also examined originals or copies of such records and documents as we have deemed necessary and relevant for purposes of this opinion. In addition, we have relied on certificates or comparable documents of an officer of the Borrower and various Subsidiary Obligors and of an officer of Building One Services Corporation as to certain matters of fact relating to this opinion and have made such investigations of law as we have deemed necessary and relevant as a basis for this opinion. We have assumed (a) the genuineness of all signatures (including, without limitation, those of the Borrower and each Subsidiary Obligor), (b) the authenticity of all documents and records submitted to us as originals, (c) the conformity to original documents and records of all documents and records submitted to us as copies and (d) the truthfulness of all statements of fact contained therein. The Credit Agreement, the Revolving Notes, the Tranche A Term Notes, the Tranche B Term Notes, the Swingline Note, the Subscription Agreement, the Security Agreement, the Pledge, the Merger Agreement and the Investors' Rights Agreement are collectively referred to as the "Borrower Documents". The Credit Agreement and the Security Agreement are collectively referred to as the "Subsidiary Obligor Documents". Based on the foregoing and subject to the limitations and assumptions set forth in this opinion, and having due regard for such legal considerations as we deem relevant (including, without limitation, any relevant Texas and federal usury laws), we are of the opinion that: 1. Each of the Borrower Documents constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. 2. Each of the Subsidiary Obligor Documents constitutes the legal, valid and binding obligation of each Subsidiary Obligor, enforceable against each Subsidiary Obligor in accordance with its terms. 3. The Pledge constitutes the legal, valid and binding obligation of each of the Pledgors, enforceable against each of the Pledgors in accordance with its terms. -2- 4. The Security Agreement creates a security interest in the Borrower's and each Subsidiary Obligors' respective right, title and interest in the Collateral (as defined in the Security Agreement) to the extent that a security interest in such Collateral can be created under the Texas Business and Commerce Code ("UCC"). The form of the financing statement attached as Exhibit A hereto is in proper form for filing with the Office of the Secretary of State of Texas, assuming completion thereof with the correct name and mailing address of a Debtor and due execution thereof by such Debtor. To the extent the UCC is applicable to the creation and perfection of a security interest in such Collateral and except for any such Collateral the perfection of a security interest in which cannot be obtained by the filing pursuant to the UCC of a financing statement with the Office of the Secretary of State of Texas, upon the filing, pursuant to the provisions of the UCC, of a financing statement in the form attached as Exhibit A hereto, completed with the correct name and mailing address of a Debtor and duly executed by such Debtor, the security interests referred to in the first sentence of this paragraph 4 in such Debtor's respective right, title and interest in such Collateral will be perfected. To the extent the UCC is applicable to the perfection of a security interest created by the Pledge in certificated securities in registered form described in the Pledge, perfection of such security interest in such securities may be accomplished by delivery to the secured party, and the secured party taking possession, in the State of Texas of the security certificates representing such securities pursuant to the Pledge. 5. The pledge of Capital Stock of the Subsidiary Obligors pursuant to the Pledge does not violate any federal or Texas securities law, and registration of any such Capital Stock under the Securities Act of 1933, as amended, or any Texas securities laws is not required by such pledge. 6. The making of the initial Loans on the Effective Date and the application of the proceeds thereof by the Borrower do not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. 7. The choice of Texas and United States law to govern the Credit Agreement, the Revolving Notes, the Tranche A Term Notes, the Tranche B Term Notes, the Swingline Note, the Security Agreement and the Pledge is a valid choice of law under the laws of the State of Texas. 8. The Merger has become effective. 9. The principal of and interest on Loans made on the date hereof pursuant to the Credit Agreement and Revolving Loans made pursuant to the Credit Agreement constitute "Senior Debt" as defined in the BOSC Senior Subordinated Notes Indenture, except to the extent that such principal or interest is held by a Subsidiary (as that term is defined in the BOSC Senior Subordinated Notes Indenture) of the Company or any shareholder (other than the Banks), director, officer or employee of the Company or any such Subsidiary. The foregoing opinion is, with your concurrence, predicated on and qualified in its entirety by the following: (a) We are members of the Bar of the State of Texas. The foregoing opinion is based on and is limited to the law of the State of Texas and applicable federal law of the United States. We render no opinion with respect to the law of any other jurisdiction nor do we express any opinion with respect to the antifraud provisions of any federal or state laws. In this regard, we call to your attention the provisions of the Investors' Rights Agreement, the Subscription Agreement and the Merger Agreement which provide that -3- those agreements shall be governed by the law of the State of New York or Delaware, as the case may be. (b) No opinion is expressed as to the creation, existence, perfection or priority of any Lien except as expressly stated in paragraph 4 above. Furthermore, we express no opinion as to (i) goods not located in Texas, (ii) goods which are installed in or affixed to, or become a part of a product or mass with, goods which are not items of collateral; (iii) any collateral which consists of fixtures, crops, timber, minerals and the like or accounts or general intangibles resulting from the sale thereof or letters of credit; (iv) any collateral that is not reasonably identified in the description of collateral set forth in the relevant Documents; (v) any collateral in which the Person purporting to grant a security interest does not have "rights" within the meaning of (S) 9.203(a)(3) of the UCC; or (vi) perfection by filing with respect to any collateral in the form of accounts, general intangibles, mobile goods or investment property owned by a Person that is not located (within the meaning of the UCC) in Texas. (c) Our opinion is subject to the effect of applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, preference, liquidation, conservatorship or other similar law affecting creditor's rights generally. (d) The enforceability of the Documents is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), and we express no opinion as to the availability of specific performance or any other equitable remedy. (e) We express no opinion as to the legality, validity, binding effect or enforceability of any provision in the Documents (i) purporting to restrict access to courts or to legal or equitable remedies; (ii) purporting to establish evidentiary standards; (iii) purporting to grant a right of set-off of moneys, securities and other properties of Persons other than the Person granting such right; (iv) providing for enforceability of any assignment of leases or rents prior to the time that the lienholder obtains possession of the property covered by any real property security document through foreclosure or appointment of a receiver for the property covered thereby, or takes some action which is judicially deemed to be the equivalent thereof; (v) purporting to irrevocably appoint any Person as attorney-in-fact; (vi) purporting to permit any Person to sell or otherwise dispose of any collateral except in compliance with applicable law; (vii) purporting to establish standards for the care of collateral in a secured party's possession other than as provided in (S) 9.207 of the UCC; (viii) purporting to indemnify, defend or hold harmless any Person; (ix) purporting to affect any right to trial by jury, venue or jurisdiction; or (x) pertaining to subrogation rights, delay or omission of enforcement of rights or remedies, severability or marshaling of assets. (f) We express no opinion as to any provision of the Documents insofar as it provides that any Person purchasing a participation from a Bank pursuant thereto may exercise set-off or similar rights with respect to such participation. (g) We express no opinion as to the adequacy or accuracy of any description of real or personal property, and we have assumed that such descriptions are adequate and accurate. We express no opinion as to title or ownership of any property. (h) We express no opinion as to the legality, validity, binding effect or enforceability of any waiver under the Documents, or any consent thereunder, relating to the rights of any party, or duties owing to them, which exist as a matter of law except to the extent such party may legally so waive or consent and has so waived and consented. -4- (i) We have assumed, as to each Person (including, without limitation, the Borrower, each Pledgor and each Guarantor) shown as being a party to any of the Documents or any of the financing statements referred to in paragraph 4 above (the "Financing Statements"), (i) that such Person is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized, (ii) that each of the Documents and Financing Statements to which such Person is shown as a party has been duly authorized, executed and delivered by such Person, (iii) that such Person has the requisite power and authority to execute, deliver and perform its obligations under the Documents (and, where relevant, the the Financing Statements) and will perform such obligations in compliance with all laws and regulations applicable to it, (iv) that there are neither suits, actions or proceedings pending against such Person nor judicial or administrative orders, judgments, or decrees binding on such Person that affect the legality, validity, binding effect or enforceability of the Documents (or, where relevant, the Financing Statements) to which such Person is a party, (v) that no consent, license, approval or authorization of, or filing or registration with, any governmental authority is required for the valid execution, delivery and performance of the Documents and Financing Statements, and (vi) that the execution, delivery and performance of the Documents and Financing Statements by such Person do not violate (1) any provision of any law or regulation, (2) any order, judgment, writ, injunction, award or decree of any court, arbitrator, or governmental authority, (3) the charter of bylaws of such Person, or (4) any indenture, lease or other agreement to which such Person is a party or by which such Person or any of its assets is bound. Furthermore, we have assumed, as to each Person (other than the Borrower and each Subsidiary Obligor) that each of the Documents to which such Person is shown as a party constitutes the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, subject to the type of qualifications regarding enforceability as are set forth in this opinion. We have also assumed (i) that each Bank will make each Loan for its own account in the ordinary course of its commercial lending business and not with a view to, or for sale in connection with, any distribution of the Notes and that no Bank is participating in any such distribution and (ii) that the representation set forth in Section 11.18 is true and correct as to each Bank. (j) We have assumed that the Agents and the Banks will comply with each usury savings clause in the Documents and that neither any of the Agents nor any of the Banks has taken, reserved, charged or received interest, or drill take, reserve, charge or receive interest, except as provided in the Loan Documents. We express no opinion as to the effect of the law of any jurisdiction other than the State of Texas wherein any Bank or Agent may be located or wherein enforcement of the Documents may be sought which limits the rates of interest legally chargeable or collectible. (k) Our opinion is subject to the qualification that certain remedial provisions of the Documents are or may be unenforceable in whole or in part, but such possible unenforceability of such remedial provisions will not render any Document inadequate for enforcing payment of the indebtedness that is evidenced by such Document and for the practical realization of the principal rights and benefits afforded by such Document. (1) In the case of property which becomes collateral after the date hereof, (S) 552 of the Bankruptcy Code limits the extent to which property acquired by a debtor after the commencement of a case under the Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before the commencement of such case. (m) We express no opinion as to the choice of law provisions in the Investors' Rights Agreement, the Subscription Agreement and the Merger Agreement or any choice of law provision insofar as it may -5- relate to any matter referred to in (S) 8.110 or (S) 9.103 of the UCC or any financing statement. Furthermore, our opinion is subject to the effect of 12 U.S.C. (S) 85. (n) Insofar as any Document covers personal property, we call your attention to (S) 9.311 of the UCC which states that a debtor's rights in collateral may be voluntarily or involuntarily transferred (by way of sale, creation of a security interest, attachment, levy, garnishment or other judicial process) notwithstanding a provision in the security agreement prohibiting any transfer or making the transfer constitute a default. Our opinion is subject to the operation of (S) 9.311 of the UCC. (o) This opinion is given only as of the date hereof, and we have no obligation to report to you or any other Person any fact or circumstance that may hereafter come to our attention or any change in law. Without limiting the generality of the foregoing, you are advised that filing of continuation statements may be required to maintain perfection of security interests, and perfection of security interests may terminate if the debtor changes its name, identity, corporate structure or the jurisdiction of its chief executive office or the collateral is moved to a new jurisdiction. As to any collateral as to which possession is required for the perfection of a security interest, a perfected security interest will not continue (with certain exceptions) if possession is not maintained. Continuation of perfection of a security interest in proceeds is limited to the extent set forth in the UCC. (p) We have assumed that (i) value has been given within the meaning of (S) 9.203(a)(2) of the UCC and (ii) financing statements have been or will be properly filed in the proper offices in the relevant jurisdictions for perfection of the security interests in all collateral pursuant to the provisions of local law in effect in the relevant jurisdictions. This opinion (i) is to be delivered only to you and your assignees permitted under the Documents, solely in your capacities identified as addressees of this opinion, and only in connection with the transactions described above, (ii) does not extend to you or your assignees when acting in any other capacity or to any other Person without our prior express written consent, and (iii) may not be quoted, circulated, or published, in whole or in part, or furnished to any other Person (other than to independent auditors and attorneys, participants or transferees, regulators or government agencies, or pursuant to a court order, subpoena or other legal process) without our prior express written consent. Very truly yours, /s/ Bracewell & Patterson, L.L.P. --------------------------------- Bracewell & Patterson, L.L.P. -6- Exhibit A FINANCING STATEMENT THIS FINANCING STATEMENT IS PRESENTED TO A FILING OFFICER FOR FILING PURSUANT TO THE UNIFORM COMMERCIAL CODE - ------------------------------------------------------------------------------- DEBTOR'S NAME AND ADDRESS: Tax ID Number: - ------------------------------------------------------------------------------- SECURED PARTY'S NAME AND ADDRESS: - ------------------------------------------------------------------------------- FOR FILING OFFICER: - ------------------------------------------------------------------------------- COLLATERAL: This financing statement covers all of Debtor's right, title and interest in and to the following assets of Debtor, now owned or hereafter acquired, except as otherwise excluded on Schedule I hereto (hereinafter defined as "Collateral") (capitalized terms used herein shall have those meanings as described on Exhibit A hereto): All of Debtor's Receivables, Inventory, Pledged Collateral, and Proceeds thereof. DEBTOR: By: -------------------------- Name: ------------------------ Title: ----------------------- FINANCING STATEMENT - Page 1 EXHIBIT A TO UCC-1 FINANCING STATEMENT Definitions Each capitalized term used herein and not defined herein, shall have the meaning assigned to such term in the Credit Agreement. "Collateral" means all of Debtor's right, title and interest in and to Receivables, Inventory, Pledged Collateral, and Proceeds thereof, now owned or hereafter acquired, except as otherwise excluded on Schedule I hereto. "Credit Agreement" means that certain Credit Agreement executed by Group Maintenance America Corp. (to be named Encompass Services Corporation) (the "Company"), and the Domestic Subsidiaries of the Company, the banks party thereto and Bank of America, N.A., as administrative agent for itself and such banks. "Inventory" means all inventory (as defined in the UCC) in all of its forms, wherever located, now or hereafter existing and whether acquired by purchase, merger or otherwise, and all raw materials, stores, tools, and work in process therefor, all finished goods, spare parts, service parts, and all materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing or production thereof, including (whether or not included in such UCC definition) goods in which the Debtor has an interest in mass or joint or other interest or right of any kind and goods which are returned to or repossessed by the Debtor, and all accessions thereto and products thereof. "Pledged Collateral" means: (i) The Pledged Shares and the certificates or agreements, if any, representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Shares; (ii) All additional capital stock of any issuer of any Pledged Shares of such stock from time to time acquired by Debtor that constitutes "Pledged Shares", and the certificates representing such additional shares, and all dividends, cash, instruments and other properly from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such shares; and (iii) All Proceeds of any of the foregoing. "Receivables" means (i) all accounts (as defined in the UCC), and (whether or not included in such definition) (ii) all receivables, accounts receivable, lease receivables, contract rights, chattel FINANCING STATEMENT - Page 2 paper, drafts, acceptances, instruments, writings evidencing a monetary obligation or a security interest or a lease of goods, general intangibles and other obligations of any kind, now or hereafter existing, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights now or hereafter existing in and to all agreements, leases, and other contracts securing or otherwise relating to any such accounts, lease receivables, chattel paper, drafts, acceptances, instruments, writings evidencing a monetary obligation or a security interest or a lease of goods, general intangibles or obligations. "Pledged Shares" means one hundred percent (100%) of the capital stock of Debtor in any domestic subsidiaries and sixty-six percent (66%) of the capital stock of Debtor in any foreign subsidiaries, whether certificated or uncertificated. "Proceeds" means all products and proceeds of any and all of the Collateral and, to the extent not otherwise included, all payments received in connection with any excluded assets described on Schedule I, and all payments under insurance or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the Collateral. "UCC" means the Uniform Commercial Code as in effect on the date hereof in the State of Texas; provided that if by mandatory provisions of law, the perfection or the effect of perfection or non-perfection of any security interests in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than Texas, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. FINANCING STATEMENT - Page 3 SCHEDULE I TO FINANCING STATEMENT Excluded Assets Excluded Assets means and refers to (A) that portion of the Debtor's personal property which, if included in the Collateral, would violate, be prohibited by, or constitute a default under any agreement, contract, document, or law or would require any consent which has not yet been obtained and (B) Receivables due from any residential customer of any Debtor incurred in connection with the installation of any heating, ventilation or air conditioning equipment not in excess of $6,000,000.00 at any time and including any note receivable in connection therewith; provided any and all proceeds from such excluded assets shall not be excluded assets and shall be Collateral and subject to all of the terms and conditions of this Agreement. FINANCING STATEMENT - Page 4 ENCOMPASS SERVICES CORPORATION (formerly named Group Maintenance America Corp.) Certificate of Executive Vice President and Chief Financial Officer I, Darren B. Miller, the Executive Vice President and Chief Financial Officer of Encompass Services Corporation (formerly named Group Maintenance America Corp.), a Texas corporation (the "Company"), do hereby certify on behalf of the Company as follows: 1. I have read the provisions of the Indenture, dated as of April 30, 1999, as supplemented and amended to date (the "Indenture"), among Building One Services Corporation, IBJ Whitehall Bank & Trust Company, as Trustee, and the Guarantors named therein, including Section 4.04 thereof and the definitions relating thereto; 2. I have made such investigation, computation or examination as is necessary to enable me to express an informed opinion as to whether the Company has performed and observed all of the terms, provisions and conditions of the Indenture; 3. the incurrence of all indebtedness borrowed on the date hereof pursuant to the Credit Agreement, dated as of February 22, 2000 (the "Credit Agreement"), among the Company, the subsidiaries named therein as guarantors, Bank of America, N.A., as Administrative Agent, and others, does not result in a breach of, or constitute a default under, Section 4.04 of the Indenture; and 4. the incurrence on the date hereof of the entire committed amount of the Revolving Loans under the Credit Agreement would not violate, result in a breach of, or constitute a default under, Section 4.04 of the Indenture. IN WITNESS WHEREOF, I have hereunto signed my name this 22nd day of February, 2000. /s/ Darren B. Miller ---------------------------- Darren B. Miller Executive Vice President and Chief Financial Officer Exhibit 4.01(h)(ii) Form of Opinion of Company's Counsel - Randolph W. Bryant [GROUPMAC LOGO APPEARS HERE] 8 Greenway Plaza Suite 1500 Houston. Texas 77046 Ph 713-860-0100 Randolph W. Bryant Fx 713-626-4766 Senior Vice President, General 888-626-4984 Counsel and Secretary email service@groupmac.com February 22, 2000 To the Banks and the Agents referred to below: c/o Bank of America, N.A. 901 Main Street, 14th Floor Dallas, Texas 75202 Ladies and Gentlemen: As Senior Vice President and General Counsel of Group Maintenance America Corp., a Texas corporation (the "Company"), I have acted as counsel for the Company and its subsidiaries in connection with the Credit Agreement (the "Credit Agreement") dated as of February 22, 2000, among the Company, the subsidiaries of the Company party thereto (the "Subsidiaries"), the banks party thereto (the "Banks"), Chase Bank of Texas, National Association, as Syndication Agent (the "Syndication Agent"), First Union National Bank, as Documentation Agent (the "Documentation Agent"), and Bank of America, N.A., as Administrative Agent (the "Administrative Agent" and, together with the Syndication Agent and the Documentation Agent, the "Agents"). This opinion is being delivered to you pursuant to Section 4.01(h) of the Credit Agreement. Unless otherwise defined herein, capitalized terms used herein have the definitions set forth in the Credit Agreement. I am familiar with the corporate proceedings of the Company and its Subsidiaries (the Company and such Subsidiaries are herein collectively referred to as the "GroupMAC Entities") relating to the authorization of the Transaction Documents and the Third Supplemental Indenture dated as of February 22, 2000 among BOSC, the Company, the subsidiaries of BOSC and the Company named therein, and IBJ Whitehall Bank & Trust Company (the "Supplemental Indenture"). In connection with the Credit Agreement, I have examined such statutes, corporate records and other instruments and documents as I have deemed necessary to examine for the purposes of this opinion. Based upon the foregoing and having regard to the legal considerations that I deem relevant, I am of the opinion that: February 22, 2000 Page 2 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Texas and has all requisite corporate power and authority to execute and deliver the Transaction Documents and the Supplemental Indenture (collectively, the "GroupMAC Documents") to which it is a party and to perform its obligations thereunder and to engage in its business as presently conducted and as proposed to be conducted. 2. Except as described in Schedule 1 hereto, each Subsidiary (other than GroupMAC Indiana, L.L.C. and GroupMAC Texas L.P.) is a corporation duly incorporated, validly existing and in good standing under the jurisdiction of its incorporation and has all requisite corporate power and authority to execute and deliver the GroupMAC Documents to which it is a party and to perform its obligations thereunder. 3. GroupMAC Indiana, L.L.C. is a limited liability company validly existing and in good standing under the laws of the State of Indiana and has all requisite power and authority to execute and deliver the GroupMAC Documents to which it is a party. 4. GroupMAC Texas L.P. is a limited partnership validly existing and in good standing under the laws of the State of Texas and has all requisite power and authority to execute and deliver the GroupMAC Documents to which it is a party. The general partner of GroupMAC Texas L.P. is GroupMAC Holding Corp. and its limited partner is Greenway Investment Corp., both of which are wholly-owned Subsidiaries of the Company. 5. Each of the Company, GroupMAC Management Co. and GroupMAC Holding Corp. is qualified as a foreign corporation in each jurisdiction in which the character of its business or its ownership of property requires such qualification except where the failure to be so qualified would not have a material adverse effect on the business or financial condition of the Company and its Subsidiaries, taken as a whole. 6. Each of the GroupMAC Entities has duly authorized, by all necessary corporate or other entity action on its part, its execution, delivery and performance of the GroupMAC Documents to which it is a party and the consummation of the transactions contemplated therein. 7. Each of the GroupMAC Entities has executed and delivered the GroupMAC Documents to which it is a party. 8. The execution and delivery by each GroupMAC Entity of the GroupMAC Documents to which it is a party, and the performance of its obligations thereunder, (i) do not violate (A) any provision of any existing law or regulation applicable to the GroupMAC Entities, (B) any order, judgment, writ, injunction, award or decree, known to me after due inquiry, of any court, arbitrator, or governmental authority applicable to the GroupMAC February 22, 2000 Page 3 Entities, (C) the charter or by-laws or other organizational documents of any GroupMAC Entity, or (D) any material indenture, material lease or other material agreement, known to me after due inquiry, to which any GroupMAC Entity is a party or by which any GroupMAC Entity or any of its assets is bound, and (ii) do not result in, or require, the creation or imposition of any lien on any property, assets or revenues of any GroupMAC Entity pursuant to the provisions of any such indenture, lease or other agreement, except for liens created by, or required to be created by, any of the Loan Documents. 9. No consent, license, approval or authorization of, or filing or registration with, any governmental authority, which has not been obtained or made, is required for the valid execution and delivery by each GroupMAC Entity of the GroupMAC Documents to which it is a party or the performance by it of its obligations thereunder. 10. To the best of my knowledge, there is no litigation, investigation or administrative proceeding of or before any court, arbitrator or governmental authority pending or threatened against any GroupMAC Entity (i) with respect to the Loan Documents or (ii) that, in my reasonable judgment, would have a material adverse effect on the business or financial condition of the Company and its Subsidiaries, taken as a whole. 11. The Company is not an "investment company" as defined in the Investment Company Act of 1940 or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. 12. The Company is not a "holding company" or a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. I am a member of the State Bar of Texas, and the opinions expressed herein are based upon and are limited exclusively to the laws of the State of Texas, the General Corporation Law of the State of Delaware and the federal laws of the United States of America. For purposes of this opinion I have assumed, with your permission, that the laws of any state other than the laws of Texas and the corporate laws of Delaware applicable to the matters addressed herein are identical to the laws of the State of Texas. This opinion is provided solely for your benefit and the respective successors and assigns of each of you and may not be relied upon by, or disclosed to, any other persons. Very truly yours, /s/ Randolph W. Bryant SCHEDULE 1 1. Electrical Associates of Dallas, Inc. ("EAD") is not in good standing with the Texas Comptroller of Public Accounts. The Company has not been able to determine the reason for this status, but it believes that Electrical Associates of Dallas probably owes some amount of interest to the State of Texas concerning an amended tax return filed as a result of a federal audit. 2. Costner Brothers, Inc. is not in good standing with the State of South Carolina because of the alleged failure to file a required tax return. The South Carolina tax authorities have caused dissolution papers to be filed in that state. Representatives of the Company have discussed this matter with the South Carolina tax authorities, who were under the erroneous belief that a return was required for the tax period ending February 28, 1999. Although this situation was due to a mistake by the South Carolina tax authorities, the proper authorities cannot correct the mistake immediately, and the Company does not expect to be able to obtain a good standing certificate for Costner Brothers, Inc. until sometime in March 2000. 3. Four subsidiaries of the Company incorporated in Maryland (Commercial Air Holding Company, Commercial Air, Power & Cable, Inc., Masters, Inc. and Vantage Mechanical Contractors, Inc.) have apparently failed to file required personal property tax returns in that jurisdiction and therefor are not in good standing in that state. Exhibit 4.01(h)(iii) Form of Opinion of BOSC's Counsel - Morgan Lewis & Bockius LLP 1701 MARKET STREET [MORGAN, LEWIS & BOCKIUS LLP LETTERHEAD APPEARS HERE] PHILADELPHIA, PA 19103-2921 215-963-5000 FAX 215-963-5299 February 22, 2000 To the Administrative Agent and each of the Banks from time to time party to the Credit Agreement referred to below Ladies and Gentlemen: Pursuant to an Agreement and Plan of Merger dated as of November 2, 1999, as amended (the "Merger Agreement"), between Croup Maintenance America Corp., a Texas corporation (the "Texas Company" or the "Surviving Corporation") and Building One Services Corporation, a Delaware corporation (the "Delaware Company"), the Delaware Company will merge with and into the Texas Company and the separate corporate existence of the Delaware Company shall thereupon cease, with the Texas Company being the surviving corporation of the merger (the "Merger"). In connection with the transactions contemplated by the Merger Agreement, the Surviving Corporation is entering into a Credit Agreement (the "Credit Agreement") dated as of the Closing Date among the Surviving Corporation, the subsidiaries of the Surviving Corporation listed on the signature pages thereto, the banks and other financial institutions listed on the signature pages thereto under the caption "Banks", Chase Bank of Texas, National Association, individually as a Bank and as Syndication Agent, First Union National Bank, individually as a Bank and as Documentation Agent, and Bank of America, NA., individually as a Bank and as Administrative Agent for the other Banks. Defined terms used herein and not otherwise defined shall have the meanings ascribed to such term in the Merger Agreement. We have acted as special counsel to the Delaware Company in connection with the Merger and in that connection you have requested this opinion. In connection with this opinion, we have examined copies of the Merger Agreement and following documents (collectively referred to herein as "Loan Documents"): (i) a counterpart of the Credit Agreement executed by the Surviving Corporation; (ii) the form of Revolving Note attached as Exhibit 2.02(a-1) to the Credit Agreement; (iii) the form of Swingline Note attached as Exhibit 2.02(a-2) to the Credit Agreement; To the Administrative Agent and each of the Banks from time to time party to the Credit Agreement February 22, 2000 Page 2 (iv) the form of Tranche A Term Note attached as Exhibit 2.02(b) to the Credit Agreement; (v) the form of Tranche B Term Note attached as Exhibit 2.02(c) to the Credit Agreement; (vi) the Security Agreement dated as of February 22, 2000, executed by the Surviving Corporation and the subsidiaries of the Surviving Corporation party thereto; and (vii) the Pledge Agreement dated as of February 22, 2000, executed by the Surviving Corporation and the subsidiaries of the Surviving Corporation party thereto. We have also examined originals or copies, certified or otherwise authenticated to our satisfaction, of such records, certificates and documents as were deemed relevant and necessaryin our judgment to render the opinions expressed below. We also have examined and relied upon such other documents, instruments and certificates of public officials and made such other investigations of fact and law as we have deemed necessary. We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. As to certain matters of fact material to this opinion, we have, where such facts were not independently known to us, relied with your consent upon the representations and warranties made by the Delaware Company in the Merger Agreement, upon the representations and warranties of the Texas Company in the Credit Agreement and upon representations and warranties contained in certificates of officers of the Delaware Company and the Texas Company. Based upon the foregoing, and subject to the qualifications, assumptions and other limitations stated herein, it is our opinion that: The execution and delivery by the Delaware Company of the Merger Agreement and the other documents and agreements to which it is a party that are contemplated thereby do not and the consummation of the transactions contemplated thereunder and under the Loan Documents To the Administrative Agent and each of the Banks from time to time party to the Credit Agreement February 22, 2000 Page 3 will not (a) violate or constitute a default under the Indenture dated April 30, 1999, by and among the Delaware Company, as Issuer, the Guarantors named therein and IBJ Whitehall Bank 8t Trust Company, as Trustee, related to the Delaware Company's 10 1/2% Senior Subordinated Notes due 2009 (the "Indenture"). In particular, the Merger and the consummation of the other transactions contemplated thereby will not constitute a "Change of Control" as such term is defined in the Indenture. The opinions expressed in the foregoing paragraph (the "Opinion Paragraph") are subject in all respects to the following further qualifications, assumptions and other limitations: a. We express no opinion as to compliance by the Surviving Corporation, upon consummation of the Merger and the other transactions contemplated by the Merger Agreement and by the Loan Documents, of the covenants set forth in Article four (other than Sections 4.04 and 4.15) of the Indenture. b. With respect to our opinion set out above in the Opinion Paragraph as it relates to Section 4.04 of the Indenture, we have relied op an officer's certificate from each of the Delaware Company and the Texas Company, copies of which are attached hereto, that (1) with respect to the Delaware Company prior to the Merger, no Default or Event of Default (as defined in the Indenture) has occurred and is continuing on the date of the Closing, (2) with respect to the Surviving Corporation following the Merger, no Default or Event of Default will occur as a consequence of the incurrence of Indebtedness (as defined in the Indenture) in connection with the consummation of the transactions contemplated by the Loan Documents, and (3) after giving effect to the incurrence of Indebtedness (as defined in the Indenture) on the date of Closing in connection with the transactions contemplated by the Merger Agreement and the Loan Documents, the Consolidated Fixed Charge Coverage Ratio (as defined in the Indenture) of the Surviving Corporation will be GREATER THAN 2.25 TO 1.0. c. With respect to our opinion set out above in the Opinion Paragraph as it relates to or is dependent upon Article Five of the Indenture: (i) in respect of the conclusions called for under clause (a)(i)(2)(x) of Section 5.01 therein, we have assumed that the Surviving Corporation is a corporation organized and validly existing under the laws of the State of Texas; (ii) in respect of the matters required under clause (a)(i)(2)(y) of Section 5.01 of the Indenture, we have assumed that a supplemental indenture, To the Administrative Agent and each of the Banks from time to time party to the Credit Agreement February 22, 2000 Page 4 in the form contemplated by such clause, has been duly authorized, executed and delivered by the Surviving Corporation; (iii) we have assumed the satisfaction of the conditions set forth in clauses (a)(ii) and (a)(iii) of Section 5.01 of the Indenture; and (iv) based on the officer's certificate and opinion of counsel contemplated by clause (a)(iv) of Section 5.01 of the Indenture, copies of which are attached hereto, we have assumed the satisfaction of the condition set forth in such clause. d. We have based our opinion set forth in the last sentence of the Opinion Paragraph above on the assumption that the term "Affiliate" as used in the indenture has the same meaning as such term has been defined and interpreted under Rule 405 of the Securities Act of 1933, as amended. The opinions expressed herein are limited to matters governed by the laws of the Commonwealth of Pennsylvania, the State of New York and the Delaware General Corporation Law and the federal laws of the United States of America. To the extent that any opinion herein relates to matters governed by any laws other than the laws to which the opinions expressed herein are limited, we have assumed that such laws are the same as the laws of the Commonwealth of Pennsylvania in all relevant respects. This opinion letter is furnished solely for your benefit in connection with matters relating to the Credit Agreement and may not be used or relied upon by any other person or for any other purpose without our prior written consent. This opinion is given as of the date hereof and we have no obligation to advise you of any change after the date hereof pertaining to any matter referred to herein. Very truly yours, /s/ Morgan, Lewis & Bockius LLP Officer's Certificate of the Delaware Company contemplated by Paragraph (b). BUILDING ONE SERVICES CORPORATION OFFICERS' CERTIFICATE Reference is herein made to the Indenture, dated as of April 30, 1999, as supplemented from time to time, among Building One Services Corporation, a Delaware corporation (the "Company"). IBJ Whitehall Bank & Trust Company, as trustee and the guarantors named therein (the "Indenture") relating to the offering by the Company of 10 1/2% Senior Subordinated Notes Due 2009 (the "Securities"). Reference is also made to the Agreement and Plan of Merger dated November 2, 1999, as amended, between the Company and Group Maintenance America Corp., a Texas corporation ("GroupMac") in which the Company has agreed to merge with and into GroupMac (the "Merger") and a supplement to the Indenture dated as of February 22, 2000 in which GroupMac has agreed to assume and GroupMac's wholly-owned subsidiaries have agreed to guarantee the Company's obligations under the Securities on the terms and conditions set forth in the Indenture (the "Supplemental Indenture"). Intending that the certifications set forth below be relied on by Morgan, Lewis & Bockius LLP ("MLB") in connection with a legal opinion of such law firm to be delivered on the date hereof to certain banks that are parties to a Credit Agreement with GroupMac dated hereof, the undersigned hereby certifies that: 1. No Default or Event of Default (as defined in the Indenture) has occurred and is continuing on the date hereof. IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the 22nd day of February, 2000. /s/ Timothy C. Clayton ----------------------------------- Timothy C. Clayton Executive Vice President, Chief Financial Officer & Treasurer Officer's Certificate of the Texas Company contemplated by Paragraph (b). GROUP MAINTENANCE AMERICA CORP. OFFICERS' CERTIFICATE Reference is herein made to the Indenture, dated as of April 30, 1999, as supplemented from time to time, among Building One Services Corporation, a Delaware corporation ("BOSC"), IBJ Whitehall Bank & Trust Company, as trustee and the guarantors named therein (the "Indenture") relating to the offering by BOSC of 10 1/2% Senior Subordinated Notes Due 2009 (the "Securities"). Reference is also made to the Agreement and Plan of Merger dated November 2, 1999, as amended, between BOSC and Group Maintenance America Corp., a Texas corporation ("GroupMac") in which BOSC has agreed to merge with and into GroupMac (the "Merger") and a supplement to the Indenture dated as of February 22, 2000 in which GroupMac has agreed to assume and GroupMac's wholly-owned subsidiaries have agreed to guarantee BOSC's obligations under the Securities on the terms and conditions set forth in the Indenture (the "Supplemental Indenture"). Intending that the certifications set forth below be relied on by Morgan, Lewis & Bockius LLP ("MLB") in connection with a legal opinion of such law firm to be delivered on the date hereof to certain banks that are parties to a Credit Agreement with GroupMac dated as of the date hereof, the undersigned hereby certifies that: 1. Assuming that no Default or Event of Default (as defined in the Indenture) has occurred and is continuing on the date hereof, no Default or Event of Default (as defined in the Indenture) will occur following consummation of the Merger and the incurrence of Indebtedness (as defined in the Indenture) pursuant to the Credit Agreement. 2. After the Merger and after giving effect to the incurrence of Indebtedness (as defined in the Indenture) pursuant to the Credit Agreement, the Consolidated Fixed Charge Coverage Ratio (as defined in the Indenture) of GroupMac will be greater than 2.25 to 1.0. IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the 22nd day of February, 2000. /s/ Darren B. Miller --------------------------- Darren B. Miller Executive Vice President and Chief Financial Officer Officer's Certificate contemplated by Paragraph (c)(iv). OFFICER'S CERTIFICATE Reference is herein made to the Indenture, dated as of April 30, 1999, as supplemented from time to time, among Building One Services Corporation, a Delaware corporation (the "Company"). The Bank of New York, as successor to IBJ Whitehall Bank & Trust Company, as trustee and the guarantors named therein (the "Indenture") relating to the offering by the Company of 10 1/2% Senior Subordinated Notes Due 2009 (the "Securities"). Reference is also made to the Agreement and Plan of Merger dated November 2, 1999, as amended, between the Company and Group Maintenance America Corp., a Texas corporation ("GroupMac") in which the Company has agreed to merge with and into GroupMac (the "Merger") and a supplement to the Indenture dated February 22, 2000 in which GroupMac has agreed to assume and GroupMac's wholly-owned subsidiaries have agreed to guarantee the Company's obligations under the Securities on the terms and conditions set forth in the Indenture (the "Supplemental Indenture"). This Certificate is being furnished pursuant to Section 5.01 of the Indenture. The undersigned hereby certify that: 1. All conditions precedent in Section 5.01 of the Indenture have been complied with. 2. The Supplemental Indenture complies with the provisions of Section 9.01 of the Indenture. 3. The Merger complies with the applicable provisions of the Indenture. IN WITNESS WHEREOF, the undersigned have executed this Certificate as of the 22nd day of February, 2000. /s/ F. Traynor Beck ----------------------------------- F. Traynor Beck Executive Vice President, General Counsel & Secretary /s/ Timothy C. Clayton ----------------------------------- Timothy C. Clayton Executive Vice President Chief Financial Officer & Treasurer Opinion of counsel contemplated by Paragraph (c)(iv). [BUILDING ONE LETTERHEAD APPEARS HERE] February 22, 2000 The Bank of New York, as successor to IBJ Whitehall Bank & Trust Company One State Street New York, New York 10004 Attn: Corporate Trust Department Re: Building One Services Corporation 10 1/2% Senior Subordinated Notes Due 2009 Ladies and Gentlemen: I have acted as counsel to Building One Services Corporation, a Delaware corporation (the "Company"), in connection with the merger between the Company and Group Maintenance America Corp., a Texas corporation ("GroupMac"), pursuant to the Agreement and Plan of Merger, effective February 22, 2000, whereby the Company shall be merged with and into GroupMac (the "Merger") and the resulting assumption by GroupMac, by supplement ("Supplemental Indenture") to the Indenture of the Company's obligations under the Securities on the terms set forth in the Indenture, dated as of April 30, 1999, as supplemented from time to time, among the Company, as issuer, the Guarantors named therein and the Trustee (the "Indenture") in relation to the issuance by the Company of up to $400,000,000 of the Company's 10 1/2% Senior Subordinated Notes due 2009. This opinion is furnished to you pursuant to Sections 5.01 and 13.04 of the Indenture. In accordance with the requirements of Sections 5.01 and 13.04 of the Indenture and in connection with giving the opinions set forth herein, I advise you as follows: In connection with the rendering of this opinion, (1) I have read and am familiar with the covenants and conditions of the Indenture relating to delivery of an opinion of counsel with respect to the Merger and in respect to the execution and delivery of the Supplemental Indenture wherein GroupMac shall assume the obligations of the Company under the Indenture and that such Merger and Supplemental Indenture comply with the applicable provisions of the Indenture and that all conditions precedent in the Indenture relating to such transactions have been satisfied; (2) I have reviewed and examined various records of the Company and made an investigation of the conditions or covenants in the Indenture relating to the Merger and the Supplemental Indenture; and (3) I have made such examinations and investigations as are necessary to enable me to express an informed opinion as to the matters set forth herein. The Bank of New York, as successor to IBJ Whitehall Bank & Trust Company February 22, 2000 Page 2 Based upon the foregoing, it is my opinion that the Merger and Supplemental Indenture comply with the provisions of the Indenture and that all conditions precedent, if any, provided for in the Indenture relating to the Merger have been met. This opinion is limited to the general corporate laws of the State of Delaware and I do not express any opinion concerning any law other than the general corporate laws of the State of Delaware and the federal laws of the United States of America. No opinion is expressed herein with respect to any provisions of the Indenture that purport to specify certain governing laws, the jurisdictions in which legal proceedings may be instituted or methods of resolving disputes. In addition, no opinion is expressed herein as to any of the topics listed under Section 19 "Specific Legal Issues" of the Third-Party Legal Opinion Report, published in 1991 by the Section of Business Law of the American Bar Association. This opinion is rendered to you solely for your benefit in connection with the Merger and the Supplemental Indenture. This opinion may not be relied upon by any other person or by you for any other purpose without my prior written consent. This opinion is rendered on and as of the date hereof, and I have no obligation to, and shall not, update this opinion for events and information that may come to my attention in the future. Very truly yours, /s/ F. Traynor Beck - --------------------------- F. Traynor Beck Executive Vice President General Counsel & Secretary OFFICER'S CERTIFICATE OF BUILDING ONE SERVICES CORPORATION February 22, 2000 Bracewell & Patterson, L.L.P. 2900 South Tower Pennzoil Place Houston, Texas Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103-2921 Ladies and Gentlemen: In connection with the opinions to be delivered regarding the material federal income tax consequences of the proposed merger (the "Merger") between Group Maintenance America Corp., a Texas corporation (the "Texas Company"), and Building One Services Corporation, a Delaware corporation (the "Delaware Company") pursuant to the Agreement and Plan of Merger, as amended (the "Agreement"), dated as of November 2, 1999 between the Texas Company and the Delaware Company, the undersigned officer of the Delaware Company hereby certifies and represents as to the Delaware Company that the facts relating to the Agreement and as described in the Joint Proxy Statement/Prospectus of the Texas Company and the Delaware Company (the "Joint Proxy Statement") included in the registration statement of the Texas Company (the "Registration Statement") dated December 27, 1999 are true, correct and complete in all respects as of the date hereof and will be true, correct and complete in all respects at the effective time of the Merger and that: 1. The facts relating to the contemplated merger of the Delaware Company with and into the Texas Company (the "Merger") as described in the Joint Proxy Statement and in Section 1 of the Agreement are true, accurate and complete in all material respects insofar as they relate to the Delaware Company and/or any person related to the Delaware Company. 2. The Merger will be consummated in accordance with the terms of the Agreement and none of the material conditions to the Delaware Company's performance of its obligations under the Agreement will be waived or modified and the exchange of Preferred Stock will be consummated in accordance with the Subscription and Exchange Agreement dated November 2, 1999 between the Texas Company and BOSS II, LLC. 3. The fair market value of the Texas Company stock and other consideration received by each Delaware Company shareholder will be approximately equal to the fair market value of the Delaware Company stock surrendered in the exchange. 4. The liabilities of the Delaware Company assumed by the Texas Company and the liabilities to which the transferred assets of the Delaware Company are subject were not incurred by the Delaware Company in connection with the Merger. 5. Except as set forth in Sections 7.4 and 5.10 of the Agreement, The Texas Company, the Delaware Company, and the stockholders of the Delaware Company will pay their respective expenses, if any, incurred in connection with the transaction. 6. There is no intercorporate indebtedness existing between the Delaware Company and the Texas Company that was issued, acquired, or will be settled at a discount. 7. The Delaware Company is not an investment company as defined in section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code. 8. The Delaware Company is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of section 368(a)(3)(A) of the Internal Revenue Code. 9. The fair market value of the assets of the Delaware Company transferred to the Texas Company will equal or exceed the sum of the liabilities assumed by the Texas Company plus the amount of liabilities, if any, to which the transferred assets are subject. 10. The payment of cash in lieu of fractional shares of Texas Company stock is solely for the purpose of avoiding the expense and inconvenience to the Texas Company of issuing fractional shares and does not represent separately bargained-for consideration. The total cash consideration that will be paid in the transaction to the Delaware Company stockholders instead of issuing fractional shares of Texas Company stock will not exceed one percent of the total consideration that will be issued in the transaction to the Delaware Company stockholders in exchange for their shares of Delaware Company stock. The fractional share interests of each Delaware Company stockholder will be aggregated, and no Delaware Company stockholder will receive cash in an amount greater to or greater than the value of one full share of Texas Company stock. 11. None of the compensation received by any stockholder-employees of the Delaware Company will be separate consideration for, or allocable to, any of their shares of Delaware Company stock; none of the shares of Texas Company stock received by any such stockholder-employees will be separate consideration for, or allocable to, any employment agreement; and the compensation paid to any such stockholder-employees will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm's-length for similar services. 12. The ratio of exchange of Delaware Company stock for Texas Company stock was agreed upon as the result of arm's length negotiations between the respective managements of the Texas Company and the Delaware Company. 13. The Delaware Company and its subsidiaries will not take, and the Delaware Company is not aware of any plan or intention of Delaware Company stockholders to take any position on any federal, state, or local income or franchise tax return, or take any other tax reporting position, that is inconsistent with the treatment of the Merger as a reorganization within the meaning of Section 368(a) of the Code unless otherwise required by a final determination under Section 1313(a)(1) of the Code or by comparable provisions or state or local income or franchise tax law. 14. Neither the Delaware Company nor any of its subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualified for tax free treatment under Section 355 of the Code (a) in the two years prior to the date of the Agreement or (b) in a distribution that could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with the Merger. We understand that Bracewell & Patterson, L.L.P. and Morgan, Lewis & Bockius LLP will rely on this letter in rendering their respective opinions as to the material federal income tax consequences of the Merger and we will promptly and timely inform them if, after signing this letter, we have reason to believe that any of the facts described in the Agreement, the Joint Proxy Statement or the Registration Statement or any of the representations made in this letter are untrue, incorrect or incomplete in any respect. Truthfully yours, By: /s/ F. Traynor Beck ------------------------------------ Title: EVP and General Counsel --------------------------------- Building One Services Corporation 1701 Market Street [MORGAN, LEWIS & BROCKIUS LETTERHEAD APPEARS HERE] Philadelphia, PA 19103-2921 215-963-5000 Fax: 215-963-5299 February 22, 2000 Building One Services 110 Cheshire Lane Minnetonka, Minnesota 55305 Dear Ladies and Gentlemen: Pursuant to an Agreement and Plan of Merger dated as of November 2, 1999 (the "Agreement") between Group Maintenance America Corp., a Texas corporation (the "Texas Company") and Building One Services Corporation, a Delaware corporation (the "Delaware Company" and together with the Texas Company, the "Companies"), the Delaware Company will merge with and into the Texas Company and the separate corporate existence of the Delaware Company shall thereupon cease, with the Texas Company being the surviving corporation of the merger (the "Merger"). Defined terms used herein and not otherwise defined shall have the meanings ascribed to such term in the Agreement. We have acted as counsel to the Delaware Company in connection with the Merger and in that connection you have requested our opinion regarding the material federal income tax consequences of the Merger to holders of shares of the Texas and Delaware Companies' Common Stock and to the Companies. Our opinion only addresses the federal income tax consequences of the Merger to holders of Delaware Company Common Stock that hold their shares as capital assets and does not address all aspects of federal income taxation that may be important to such holders in light of their particular circumstances. Further, our opinion does not address all aspects of federal income taxation that may be applicable to certain holders subject to special rules, such as: (i) holders who are not United States persons; (ii) financial institutions; (iii) tax-exempt organizations; (iv) insurance companies; (v) dealers or brokers in securities; (vi) holders who held their Delaware Company or Texas Company stock as part of a hedge, appreciated financial position, straddle, or conversion transaction; or (vii) holders who acquired their Delaware Company or Texas Company stock pursuant to the exercise of employee stock options or otherwise as compensation. In rendering our opinion, we have examined the Agreement, the registration Statement of the Texas Company ("the Registration Statement"), the joint proxy statement/prospectus of the Companies ("the Proxy Statement"), certain factual representations contained in Officer's Certificates of the Delaware Company and the Texas Company dated as of today's date which have been delivered to us for purposes of this opinion (the "Officer's Certificates") and such other documents and corporate records as we have deemed necessary or appropriate for purposes of this opinion. In addition, we have [LOGO OF MORGAN, LEWIS & BOCKIUS LLP] Building One Services February 22, 2000 Page 2 assumed: (i) the Merger will be consummated in the manner contemplated in the Registration Statement and the Proxy Statement and in accordance with the provisions of the Agreement, (ii) the statements concerning the Merger and related transactions set forth in the Registration Statement and the Proxy Statement are accurate and complete, (iii) the representations in the Officer's Certificates dated as of today's date are accurate and complete and will be accurate and complete as of the effective time of the merger, and (iv) any representations in the Officer's Certificates that are qualified by the phrases "to the best knowledge," "has no knowledge," or similar phrases are, in each case, correct without such qualification. Under current law, and on the basis and subject to (i) the accuracy of the statements and representations contained in the materials referred to above assumptions and (ii) our considerations of such other matters as we have deemed necessary, our opinion of the material federal income tax consequences to holders of Texas and Delaware Company Common Stock and the Companies is as follows: (A) The merger of the Delaware Company with and into the Texas Company will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, (the "Code"), and the Texas Company and the Delaware Company will each be a party to the reorganization within the meaning of Section 368(b) of the Code; (B) no gain or loss will be recognized for federal income tax purposes by the Texas Company, the Delaware Company, holders of Texas Company Common Stock, or holders of Delaware Company Common Stock as a result of the Merger, except with respect to cash received in lieu of fractional shares by holders of Delaware Company Common Stock and with respect to cash received by holders of Texas Company Common Stock as a result of the exchange of their shares pursuant to the Exchange Agreement. (C) the aggregate tax basis of shares the Texas Company Common Stock received by a holder of the Delaware Company Common Stock in the Merger will be the same as such holder's aggregate tax basis of the Delaware Company Common Stock surrendered in the Merger, reduced by any such tax basis allocable to fractional shares of the Texas Company Common Stock for which cash is received in lieu of such fractional share; (D) the holding period of Texas Company Common Stock received by former Delaware Company shareholders in the Merger will include the period during which such shareholder held the Delaware Company Common Stock exchanged in the Merger if such shareholder held such Delaware Company Common Stock as a capital asset; and [LOGO OF MORGAN, LEWIS & BOCKIUS LLP APPEARS HERE] Building One Services February 22, 2000 Page 3 (E) a holder of Delaware Company Common Stock who receives cash in lieu of fractional shares of the Texas Company Common Stock in the Merger will recognize gain or loss measured by the difference between the amount of cash received and the portion of such holder's aggregate tax basis allocable to such fractional share. Any such gain or loss generally will be capital gain or loss if the Delaware Company Common Stock surrendered in the Merger was held as a capital asset, and will be long-term capital gain or loss if such Delaware Company Common Stock has been held for more than one year as of the date of the closing of the Merger. You have not requested, and we do not express, an opinion concerning any other tax consequences of the Merger. Our opinion expresses our views only as to the U.S. federal income tax laws in effect as of the date hereof. It represents our best legal judgment as to the matters addressed in our opinion, but is not binding on the Internal Revenue Service or the courts. Accordingly, no assurance can be given that our opinion will be respected by the Internal Revenue Service or, if contested, would be sustained by a court. Furthermore, the authorities upon which we rely are subject to change either prospectively or retroactively, and any change in such authorities or variation or difference in the facts from those on which we rely and assume as correct, as set forth above, might affect the conclusion stated. This opinion is expressed as of the date hereof, and we are under no obligation to supplement or revise our opinion to reflect any changes (including changes that have retroactive effect) (i) in applicable law, or (ii) in any information, document, corporate record, covenant, statement, representation, or assumption stated therein that becomes untrue or incorrect. Our opinion is not to be used, circulated, quoted or otherwise referred to for any purpose without our express written permission. Very truly yours, /s/ Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP Exhibit 4.01(h)(iii) Form of Opinion of BOSC's Counsel -- F. Traynor Beck [BUILDING ONE LETTERHEAD APPEARS HERE] February 22, 2000 To the Administrative Agent and each of the Banks from time to time party to the Credit Agreement referred to below Ladies and Gentlemen: I am general counsel to Building One Services Corporation, a Delaware corporation ("BOSS"), BOSS and Group Maintenance America, Corp., a Texas corporation (the "Company") are parties to an Agreement and Plan of Merger (as amended, the "Merger Agreement") dated as of November 2, 1999, pursuant to which BOSS will be merged with and into the Company with the Company as the surviving corporation. In connection with the transactions contemplated by the Merger Agreement, the Company will enter into a Credit Agreement (the "Credit Agreement") dated as of February 22, 2000 among the Company, the Subsidiaries of the Company listed on the signature pages thereto (including the subsidiaries of BOSS (the "BOSS Subsidiaries," and, together with BOSS, the "BOSS Parties"), the banks and other financial institutions listed on the signature pages thereto under the caption "Banks", Chase Bank of Texas, National Association, individually as a Bank and as Syndication Agent, First Union National Bank, individually as a Bank and as Documentation Agent, and Bank of America, N.A., individually as a Bank and as Administrative Agent for the other Banks. This opinion is delivered to you pursuant to Section 4.01(h) of the Credit Agreement. Capitalized terms used herein but not defined herein shall have the meanings set forth in the Credit Agreement. In acting as counsel for the BOSS Parties, I have examined originals or counterparts of the Merger Agreement, the Credit Agreement and the transaction documents contemplated thereby (collectively, the "Transaction Documents"). In addition, I have examined originals or copies, certified or otherwise authenticated to my satisfaction, of such records, certificates and documents as were deemed relevant and necessary in my judgment to render the opinions expressed below. I also have examined and relied upon such other documents, instruments and certificates of public officials and made such other investigations of fact and law as I have deemed necessary. I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies and the authenticity of the originals of such latter documents. As to certain matters of fact material to this opinion, I have, where such facts were not independently known to me, relied with your consent upon the representations and warranties To the Administrative Agent and each of the Banks from time to time party to the Credit Agreement Page 2 February 22, 2000 made by the BOSS Parties in the Transaction Documents and in certificates of officers of the BOSS Parties. Based upon the foregoing, and subject to the qualifications and limitations stated herein, it is my opinion that: 1. Except as set forth on Exhibit A hereto, each of the BOSS Parties is validly existing and in good standing under the laws of its state of incorporation or organization. 2. The execution, delivery and performance by each of the BOSS Parties of the Transaction Documents to which it is a party are within the power and authority of such BOSS Party, and have been duly authorized by all necessary action on the part of such BOSS Party. 3. Each Merger Transaction Document to which a BOSS Party is a party has been duly executed and delivered by such BOSS Party. 4. The execution and delivery of the Transaction Documents by the BOSS Parties does not and the consummation of the transactions contemplated thereunder will not (a) conflict with, violate, result in a breach of or require any consent under, any provision of the Articles or Certificate of Incorporation or organization, By-laws or equivalent organizational document of any ofthe BOSS Parties or (b) to my knowledge, violate or constitute a default under any agreement, document or instrument to which any of the BOSS Parties is a party or by which any of it or its properties are bound except for such violations as would not have a Material Adverse Effect. 5. To the best of my knowledge, there is no litigation, investigation or administrative proceeding of or before any court, arbitrator or governmental authority pending or threatened against any BOSS Party with respect to the Transaction Documents. I am a member of the bar of the Commonwealth of Pennsylvania. The opinions expressed herein are limited to matters governed by the laws of the Commonwealth of Pennsylvania, the -2- To the Administrative Agent and each of the Banks from time to time party to the Credit Agreement Page 3 February 22, 2000 Delaware General Corporation Law and the federal laws of the United States of America. To the extent that any opinion herein relates to matters governed by any laws other than the laws to which the opinions expressed herein are limited, I have assumed that such laws are the same as the laws of the Commonwealth of Pennsylvania in all relevant respects. This opinion letter is furnished solely for your benefit in connection with matters relating to the Credit Agreement and may not be used or relied upon by any other person or for any other purpose without my prior written consent. This opinion is given as of the date hereof and I have no obligation to advise you of any change after the date hereof pertaining to any matter referred to herein. Very truly yours, /s/ F. Traynor Beck OPINION OF COUNSEL February ___, 2000 EXHIBIT A No legal opinion is being given in connection with the good standing status of the following entities: *Electrical Contracting, Inc. A California Corporation **Lexington/Ivey Mechanical Company, LLC A Kentucky Limited Liability Company **Diversified Management Services U.S.A., Inc. A Virginia Corporation *D&P Janitorial, Inc. A Rhode Island Corporation ***Potter Electric, Inc. A Nevada Corporation ***Regency Electric Company Charlotte Office, Inc. A North Carolina Corporation *Direct Engineered Maintenance Systems, Inc. A Rhode Island Corporation *Wayzata, Inc. A Delaware Corporation * Awaiting response to good standing inquiry ** Involuntarily dissolved - Reinstatement ordered *** Filing of state documents necessary - In progress EXHIBIT 11.10(c) TO CREDIT AGREEMENT FORM OF ASSIGNMENT AND ACCEPTANCE Dated ___________, 2000 Reference is made to the Credit Agreement dated as of February 22, 2000 (the "Credit Agreement"), among Group Maintenance America Corp., after the date ---------------- thereof to be named Encompass Services Corporation, a Texas corporation (the "Company"), certain Subsidiaries of the Company, as Guarantors, the Banks party ------- thereto, Bank of America, N.A., as Administrative Agent for such Banks, Chase Bank of Texas, National Association, as syndication agent, and ________________, as documentation Agent. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. ________________________ (the "Assignor") and _________________ (the -------- "Assignee") agree as follows: -------- 1. The Assignor hereby sells and assigns to the Assignee (without recourse to the Assignor), and the Assignee hereby purchases and assumes from the Assignor, the following percentage interests (the "Percentage Interests") in -------------------- and to the Assignor's rights and obligations under the Credit Agreement as of the Assignment Date (as defined below), including, without limitation, (i) the Percentage Interest in the Commitment of the Assignor on the Assignment Date for the specified type of Loan, (ii) the Percentage Interest in each of the specified type of Loans owing to the Assignor outstanding on the Assignment Date, (iii) the Percentage Interest in all unpaid interest with respect to such Loans and all commitment fees due to Assignor in its capacity as a Bank accrued to the Assignment Date, with respect of such Loans, and (iv) the Percentage Interests in any Notes held by the Assignor.
- ----------------------------------------------------------------------------------------------------- Revolving Loans Tranche A Term Loans Tranche B Term Loans - ----------------------------------------------------------------------------------------------------- Percentage Interest ________% _________% _________% - -----------------------------------------------------------------------------------------------------
2. The Assignor (a) represents that as of the date hereof its Commitment for all Loans (without giving effect to assignments thereof which have not yet become effective) is [$_______________], and the outstanding balance of its Loans (unreduced by any assignments thereof which have not yet become effective) is [$_______________], broken down as follows:
- --------------------------------------------------------------------------------------------------- Revolving Loans Tranche A Term Loans Tranche B Term Loans - --------------------------------------------------------------------------------------------------- Commitment $________ $____________ $_________ - --------------------------------------------------------------------------------------------------- Outstanding Balance $__________ $__________ $________ - ---------------------------------------------------------------------------------------------------
-1- (b) makes no representation or warranty and assumes no responsibility with respect to any statements, covenants, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any party to the Credit Agreement or the performance or observance by any party to the Credit Agreement of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; [and] (d) attaches the Notes issued to Assignor and requests that the Administrative Agent exchange such Notes for a new Notes executed by the Company and payable to the Assignee in a principal amounts as follows:
- ------------------------------------------------------------------------------------------------- Revolving Note Tranche A Term Note Tranche B Term Note - ------------------------------------------------------------------------------------------------- Assignor $________ $________ $________ - ------------------------------------------------------------------------------------------------- Assignee $________ $________ $________ - -------------------------------------------------------------------------------------------------
3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.07 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) confirms that it is an Eligible Assignee; (v) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank; (vii) agrees that it will comply with Section 11.1 of the Credit Agreement with respect to information furnished to it by the Company, the Administrative Agent or the Assignor; (viii) confirms that it has delivered a completed Administrative Questionnaire to the Administrative Agent; and (ix) attaches to this Assignment and Acceptance the Prescribed Forms. 4. The effective date for this Assignment and Acceptance shall be _____________ (the "Assignment Date"). Following the execution of this --------------- Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent pursuant to Section 11.10 of the Credit Agreement. 5. Upon such acceptance and recording, from and after the Assignment Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and (ii) the Assignor shall, -2- to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Notwithstanding anything to the contrary contained in the Credit Agreement, the Company shall be required to reimburse the Administrative Agent, the Assignor or the Assignee for any costs and expenses (including attorneys' fees) incurred by such Person in connection with this Assignment and Acceptance. 7. Upon such acceptance and recording, from and after the Assignment Date, the Administrative Agent shall make all payments in respect of the interest(s) assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Assignment Date by the Administrative Agent or with respect to the making of this assignment directly between themselves. 8. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Texas. [NAME OF ASSIGNOR], By: ________________________________ Name: ______________________________ Title: _____________________________ [NAME OF ASSIGNEE], By: ________________________________ Name: ______________________________ Title: _____________________________ -3- Consented and Agreed to as of the date first above written. BANK OF AMERICA, N.A., as Administrative Agent By: ________________________________ Name: ______________________________ Title: _____________________________ GROUP MAINTENANCE AMERICA CORP., To be named Encompass Services Corporation By: ________________________________ Name: ______________________________ Title: _____________________________ -4- Credit Agreement Schedule 1.01 - Management Participants Part A 1. J. Patrick Millinor, Jr. 2. Joseph M. Ivey 3. Donald L. Luke 4. Chester J. Jachimiec 5. Darren B. Miller 6. Alfred R. Roach, Jr. 7. William P. Love, Jr. 8. Michael Sullivan 9. Patrick L. McMahon 10. Robert Tyler 11. Thomas Rosato 12. Randolph W. Bryant 13. Daniel W. Kipp 14. Jeanne Buchanan 15. Steven C. Ronilo 16. Keith Kirk Credit Agreement Schedule 1.01 - Management Participants Part B 1. Joseph Ivey 2. William P. Love, Jr. 3. Michael Sullivan 4. Jude Reyes 5. Vincent Eades Schedule 3.01 - Existing Letters of Credit Part A 1. Letter of Credit issued by Chase Bank of Texas, NA, dated April 23, 1999 for $20,000 to The Travelers Insurance Company. (I-284502). 1. Letter of Credit issued by Chase Bank of Texas, NA, dated July 28, 1999, for $1,799,000 to Continental Casualty Company. (D-291131). 1. Letter of Credit issued by Chase Bank of Texas, NA, dated July 28, 1999, for $1,241,000 to Continental Casualty Company. (D-291130). 1. Letter of Credit issued by Chase Bank of Texas, NA, dated July 12, 1999, for $10,000 to the Construction Industry Recoveries Fund (Florida). (D-290565). 1. Letter of Credit issued by Chase Bank of Texas, NA, dated December 11, 1998, for $100,000 to the Pennsylvania Manufacturers' Association Insurance Company. (I-284505). 1. Letter of Credit issued by Chase Bank of Texas, NA, dated December 11, 1998, for $20,000 to The Travelers Insurance Company. (I-470080). Schedule 3.01 - Existing Letters of Credit Part B
Letter of Credit Beneficiary Initial Amount Issuance Date Expiry Date - ---------------- ------------- ---------------- -------------- ------------- Standby #S-13051 Lloyds TSB Bank PLC $1,548,480.00 8/4/99 4/7/00 Standby #S-13075 Liberty Mutual $ 275,000.00 11/1/99 4/30/00 Insurance Company Standby #S-13109 McDevitt Street $ 200,000.00 9/23/00 9/23/00 Bovis, Inc.
Credit Agreement Schedule 5.04 - Loan Agreements PART A 1. Credit Agreement dated as of May 25, 1999, among the Company, Chase Bank of Texas, National Association, as Agent, and the Banks named therein. 1. Loan Agreement dated August 9, 1999 between the Company and Cananwill, Inc.; interest - 5.66%; maturity - June 1, 2000. 1. Subordinated Notes dated November 13, 1998 between the Company and the former shareholders of Trinity Contractors, Inc.; interest - 6%; maturity - November 30, 2003. 1. Subordinated Notes dated January 14, 1999 between the Company and the former shareholders of Pacific Rim Mechanical Contractors, Inc.; interest - 6%; maturity - December 31, 2003. 1. Subordinated Notes dated July 12, 1999 between the Company and the former shareholders of Mechanical Services of Orlando, Inc.; interest - 7.5%; maturity- July 15, 2004. 1. Senior Subordinated Notes dated January 22, 1999; interest - 9.75%; maturity - January 15, 2009. 1. Indenture, 10 1/2% Senior Subordinated Notes due 2009, dated as of April 30, 1999, between Building One Services Corporation, as Issuer, and IBJ Whitehall Bank & Trust Company, as Trustee. Credit Agreement Schedule 5.04 - Loan Agreements PART B 1. Credit Agreement among Building One Services Corporation, various lending institutions, Goldman Sachs Credit Partners L.P., as Documentation Agent, Solomon Smith Barney Inc., as Syndication Agent and Bankers Trust Company, as Administrative Agent, dated as of April 30, 1999. To be paid off at the closing. 2. Indenture, 7 1/2% Convertible Junior Subordinated Debentures Due 2012, dated as of April 30, 1999, between Building One Services Corporation, as Issuer, and United States Trust Company of New York, as Trustee. To be rolled and converted to preferred stock. 3. Indenture, 10 1/2% Senior Subordinated Notes due 2009, dated as of April 30, 1999, between Building One Services Corporation, as Issuer, and IBJ Whitehall Bank & Trust Company, as Trustee. CREDIT AGREEMENT SCHEDULE 5.06 - LITIGATION PART A None Credit Agreement Schedule 5.06 - Litigation PART B None CREDIT AGREEMENT SCHEDULE 5.13 - EXCEPTIONS TO ENVIRONMENTAL MATTERS PART A 1. Airtron, Inc. has been named as a potentially responsible party at the Powell Road Superfund Site in Huber Heights, Ohio. Airtron, Inc. has an indemnification agreement from Atlantic Richfield Company for any liability of Airtron, Inc. related to this site. 2. Airtron, Inc. has responded to a Request for Information from U.S. EPA Region II concerning the Scientific Chemical Superfund Site in Carlstadt, New Jersey on February 2, 1995. No further communications have been received by Airtron, Inc. concerning that site. CREDIT AGREEMENT SCHEDULE 5.13 - EXCEPTIONS TO ENVIRONMENTAL MATTERS PART B None. CREDIT AGREEMENT SCHEDULE 5.16 - SUBSIDIARIES PART A
Name of Subsidiary Address - -------------------------- --------- A-1 Mechanical of Lansing, Inc. 615 S. Waverly Road, Lansing, Michigan 48917 AA Advance Air, Inc. 1920 NW 32nd Street, Pompano Beach, FL 33064 A-ABC Appliance, Inc. 8 Greenway Plaza, Ste 1500, Houston, TX 77046 A-ABC Services, Inc. 14001 Distribution Way, Dallas, TX 75234 AA JARL, Inc.(dba Jarrell Plumbing) 6920 Winton, Houston, TX 77021 Air Conditioning Engineers, Inc. 5250 Auburn Road, Utica Michigan 48317 Air Conditioning, Plumbing & Heating Service Co., Inc. 4350 Race Street, Denver, CO 80216 Aircon Energy Incorporated 4234 N. Freeway Blvd., #100, Sacramento, CA 95834 Air Systems, Inc. 381 Stockton Street, San Jose, CA 95126 Airtron, Inc. 7813 North Dixie Drive, Dayton, OH 45414 Airtron of Central Florida, Inc. 210 Douglas Road, East Oldsmar, FL 34677 All Service Electric, Inc. 1556 Whitlock Avenue, Jacksonville, FL 32211 Arkansas Mechanical Services, Inc. 2201 Lincoln Road, N. Little Rock, AR 72115 Atlantic Industrial Constructors, Inc. 4500 Oakleys Lane, Richmond, VA 23231 Callahan Roach Products & Publications, Inc. 8955 E. Nichols, Ste 200, Englewood, CO 80112 Cardinal Contracting Corporation 2300 S. Tibbs, Indianapolis, IN 46241 Central Air Conditioning Contractors, Inc. 9195 Red Branch Road, Columbia, MD 21045 Central Carolina Air Conditioning Company 1800 Fairfax Road, Greensboro, NC 27407-4124 Chapel Electric Co. 207 E. Sixth, Dayton, OH 45402 Charlie Crawford, Inc. 1309 Pennsylvania, So. Houston, TX 77587-4042 Clark Converse Electric Service, Inc. 3783 Gantz Road, Grove City, OH 43123 Colonial Air Conditioning Company 4 Northwood Drive, Bloomfield, CT 06002 Commercial Air Holding Company 12100 Baltimore Avenue, Beltsville, MD 20705 Commercial Air, Power & Cable, Inc. 12100 Baltimore Avenue, Beltsville, MD 20705 Continental Electrical Construction Co. 5834 W. Howard, Skokie, IL 60077 Costa and Rihl, Inc. 3900 Church Road, Mt. Laurel, NJ 08054 Costa & Rihl Plumbing, Inc. 3900 Church Road, Mt. Laurel, NJ 08054 Costner Brothers, Inc. 3175 Lesslie Highway, Rock Hill, SC 29730 Divco, Inc. 715 Madelia Street, Spokane, WA 99220 Dynalink Corporation 5201 Richmond Rd, Bedford Heights, OH 44146 Electrical Associates of Dallas, Inc. 3730 Marquis Dr., Garland, TX 75024 Evans Services, Inc. 2406 Valleydale Road, Birmingham, AL 35244 The Farfield Company 312 E. Meadow Valley Road, Lititz, PA 17543 Ferguson Electric Corporation 1410 Ford Street, Colorado Springs, CO 80915 Gentzler Electrical Contractors, Inc. 10510 Markison, Dallas, TX 75238 Gilbert Mechanical Contractors, Inc. 4451 West 76th Street, Minneapolis, MN 55435 Greenway Investment Corp. 1105 N. Market Square, Wilmington, DE 19801 GroupMAC Facility Services, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 GroupMAC Holding Corp. 8 Greenway Plaza, Ste. 1500, Houston, TX 77046 GroupMAC Indiana, L.L.C. 5150 Elmwood, Indianapolis, IN 46203 GroupMAC Management Co. 8 Greenway Plaza, Ste. 1500, Houston, TX 77046 GroupMAC Maryland Corp. 6251 Ammendale Road, Beltsville, MD 20705 GroupMAC Texas L.P. 8 Greenway Plaza, Suite 1500, Houston, TX 77046 HPS Plumbing Services, Inc. 401 34th Street, Bakersfield, CA 93301 Hallmark Air Conditioning, Inc. 4517 Southerland, Houston, TX 77092 Hungerford Mechanical Corporation 3800 Deepwater Terminal Road, Richmond, VA 23234
J. D. Steward Air Conditioning, Inc. 655 Elkton Drive, Colorado Springs, CO 80907 K & N Plumbing, Heating and Air Conditioning, Inc. 2706 W. Pioneer Parkway, Arlington, TX 76013 Laney's, Inc. 55 South 27th Street, Fargo, ND 58103 Linford Service Co. 2850 Poplar Street, Oakland, CA 94608 L.T. Mechanical, Inc. 5940 General Commerce Drive, Charlotte, NC 28213-0246 MacDonald-Miller Co., Inc. 7717 Detroit SW, Seattle, WA 98106-1903 MacDonald-Miller Industries, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 MacDonald-Miller of Oregon, Inc. 1240 SE 12th Avenue, Portland, OR 97214 MacDonald-Miller Service, Inc. 7717 Detroit SW, Seattle, WA 98106-1903 Masters, Inc. 7891 Beechcraft, Gaithersburg, MD 20879 Mechanical Interiors, Inc. 256 Regal Row, Dallas, TX 75247 Mechanical Services of Orlando, Inc. 9440 Sidney Hayes Road, Orlando, FL 32824 Merritt Island Air & Heat, Inc. 625 Cypress Street, Merritt Island, FL 32952 New Construction Air Conditioning, Inc. 1900 Cedar Street,. Holt, Michigan 48842 Noron, Inc. 5465 Enterprise, Toledo, OH 43612 Pacific Rim Mechanical Contractors, Inc. 7655 Convoy Court, San Diego, CA 92111 Paul E. Smith Co., Inc. 8171 West 10th Street, Indianapolis, IN 46214 Phoenix Electric Company 7379 S.W. Tech Center Drive, Tigard, OR 97223 Ray and Claude Goodwin, Inc. 1033 S. Edgewood, Jacksonville, Florida 32205 Reliable Mechanical, Inc. 13035 Middletown Industrial Blvd., Louisville, KY 40223 Romanoff Electric Corp. 5055 Enterprise Blvd., Toledo, OH 43612 Sequoyah Corporation 720 Eighth Avenue, Kirkland, WA 98033-5649 Sibley Services, Incorporated 1892 Lynnbrook, Memphis, Tennessee 38116 Snyder Mechanical 1250 Lamoille Highway #104, Elko, NV 89803 Southeast Mechanical Service, Inc. 15951 Southwest 41st St., Suite 100, Davie, FL 33331 Statewide Heating & Air Conditioning, Inc. 808 Purser Drive, Raleigh, NC 27603 Stephen C. Pomeroy, Inc. 3131 SW 13th Drive, Deerfield Beach, FL 33442 Sterling Air Conditioning, Inc. 1331 East Broadway, Pearland, Texas 77581 Sun Plumbing, Inc. 6935 Vicki Circle, Melbourne, Florida 32902-0549 Team Mechanical, Inc. 151 No. 600 West, Kaysville, UT 84037 Tower Electric Company 11170 Lee Highway, Fairfax, VA 22030 Trinity Contractors, Inc. 2425 Dillard Street, Grand Prairie, TX 76005 United Acquisition Corp. (dba United Service 8955 East Nichols, Suite 200, Englewood, Colorado 80112 Alliance) Valley Wide Plumbing and Heating, Inc. 431 Metcalf, Avon, Colorado 81620 Van's Comfortemp Air Conditioning, Inc. 135 W. Congress, Delray Beach, FL 33445 Vantage Mechanical Contractors, Inc. 12901-1 Metro Parkway, Fort Meyers, FL 33912 Vermont Mechanical, Inc. 4050 Williston Road, S. Burlington, VT 05495 Wade's Heating & Cooling, Inc. 12901-1 Metro Parkway, Fort Meyers, FL 33912 Wiegold & Sons, Inc. 2255 J&C Blvd., Pine Ridge Industrial Park, Naples, FL 34109 Willis Refrigeration, Air Conditioning & Heating, Inc. 885 Ohio Pike, Cincinnati, Ohio 45245 Yale Incorporated 9649 Girard Avenue South, Minneapolis, MN 55431
Credit Agreement Schedule 5.16 - Subsidiaries PART B
Name of Subsidiary Address -------------------- --------- Advent Electric Co., Inc. 5901 Walden Drive, Knoxville, TN 37919-6348 American Air Company, Inc. 7533 Avenue 304, Visalia, CA 93291 Atlantic Electric Company, Inc. 7320 Cross County Road, Charleston, SC 29423-1347 38C Sheridan Park Circle, Beaufort, SC 29910 B&R Electrical Services, Inc. 502 McCormick Drive, Suite M, Glen Burnie, MD 21061 Building One Mechanical Services, Inc. 514 N. Wells, Street, Kosiusko, MS 39090 872 Sparta Court, Lexington, KY 7400 East Arapahoe Road, Suite 75, Englewood, CO 151 Bodman Place, Suite 400, Red Bank, NJ 1052 Grand Avenue, Suite E, Arroyo Grande, CA 93420 8300 West 95th Street, Hickory Hills, IL 8620 South 300 West, Site #8, Sandy UT 2500 Longley Lane, Unit 2043, Reno, NV 950 Shrewsbury Avenue, Unit No. 5029, Tinton Falls, NJ Building One Service Solutions, Inc. 45600 Terminal Drive, Dulles, VA 20166 . Diversified Management Services, U.S.A., Inc. 45600 Terminal Drive, Dulles, VA 20166 . FacilityDirect.com, LLC (f/k/a Alliance Supply Co., 45600 Terminal Drive, Dulles, VA 20166 LLC) . Interstate Building Services, LLC 421 Harvard Street, Manchester, NH 03101 . D&P Janitorial, Inc. 577 Warren Avenue, East Providence, RI 02914 . Direct Engineered Maintenance, Inc. 577 Warren Avenue, East Providence, RI 02914 BUYR, Inc. 110 Cheshire Lane, Suite 110, Minnetonka, MN 55305 C.R. Hipp Construction Co., Inc. 3537 Dorchester Road, N. Charleston, SC 29405 Consolidated Electrical Group, Inc. 8730 Bourgade, Lenexa, KS 66219 Del-Air Service Company, Inc. 135 Chicagauga Avenue, Knoxville, TN 37917 D/FW Mechanical Services, Inc. 11170 Ables Lane, Dallas, TX 75229 Electrical Contracting, Inc. 500 Corporate Drive, Escondidio, CA 92029 Gamewell Mechanical, Inc. 727 Bendix Drive, Salisbury, NC 28146 Garfield-Indecon Electrical Services, Inc. 5301 Lester Road, Cincinnati, OH 1103-c Lyons Road, Dayton, OH G.S. Group, Inc. 6711 East Hwy. 332, Freeport, TX 77541 . Brazosport Management, Inc. 6711 East Hwy. 332, Freeport, TX 77541 . G.S. Financial, Inc. 6711 East Hwy. 332, Freeport, TX 77541
2 . G.S.I. of California, Inc. 6711 East Hwy. 332, Freeport, TX 77541 3400 E. 2nd Street, Benicia, CA 94510 1503 Loveridge Rd., Pittsburgh, CA 94565 . Gulf States, Inc. 6711 East Hwy. 332, Freeport, TX 77541 238 Cahaba Valley Parkway, N. Pelham, AL 35124 . Testronics, Inc. 6711 East Hwy. 332, Freeport, TX 77541 Ivey Mechanical Company, Inc. 514 N. Wells Street, Kosciusko, MS 39090 420 Twin Elms Court, Nashville, TN 4285 Alalex Road, Montgomery, AL . Barnes Ivey Mechanical Company, L.L.C. P.O. Box B, Fayetteville, NC 28302 . Beltline Mechanical Services, Inc. 3008 West Story Road, Irving, TX 75308 . Ivey Mechanical Services, L.L.C. 514 N. Wells Street, Kosciusko, MS 39090 . Lexington/Ivey Mechanical Company, LLC 1063 Manchester Street, Lexington, KY 40509 K & A Mechanical, Inc. 5940 Bingle, Houston, TX 77092 McIntosh Mechanical, Inc. 879 South Guignard Drive, Sumter, SC 29151 MH Technologies, Inc. 1201 Prince Street, Houston, TX 77008 Zwart, Inc. d/b/a Mountain View Electric, Inc. 6350 Nautilus Drive, Boulder, CO 80301 National Network Services, Inc. 2452 S. Trenton Way, Denver, CO 80231 1407 North Cleveland, Sioux Falls, SD 302 Shelley Street, Springfield, OR 5653 West Las Positas Boulevard, Unit 202, Pleasanton, CA Omni Mechanical Company 12718 East 55th Street, Tulsa OK 74146 . Omni Mechanical Services 12718 East 55th Street, Tulsa OK 74146 Potter Electric Co., Inc. 7150 Placid Street, Las Vegas, NV 89119 Regency Electric Company, Inc. 6601 Southpoint Drive North, Jacksonville, FL 32216 . Regency Electric Company Atlanta Office 1000 Cobb Place Blvd., Atlanta, GA 30144 . Regency Electric Company Charlotte Office, Inc. 5031A West W.T. Harris, Blvd., Charlotte, NC 28269 . Regency Electric Company Jacksonville 6601 Southpoint Drive North, Jacksonville, FL 32216 . Regency Electric Company Memphis Office, Inc. 2883 Mendenhall Road S., Suite 3, Memphis, TN 38115 . Regency Electric Company Orlando Office, Inc. 6601 Southpoint Drive North, Jacksonville, FL 32216 . Regency Electric Company Projects Group, Inc. 6601 Southpoint Drive North, Jacksonville, FL 32216 . Regency Electric Company South Florida Office, Inc. 3800 Park Central Blvd., North, Ste. 3810, Pompano Beach, FL 33064 Riviera Electric Construction Co. 2107 West College Avenue, Englewood, CO 80110 Riviera Electric of California, Inc. 2905 East Ricker Way, Anaheim, CA Robinson Mechanical Company 5541 Central Avenue, Boulder, CO 80301 S.L. Page Corporation 10879 Metro Parkway, Fort Myers, FL 33912 . Hydro Cooling, Inc. 5760 Shirley Street, Naples, FL
3 Sanders Bros., Inc. 1709 Old Georgia Highway, Gaffney, SC 29341 . Process Design Builders, LLC (50% interest) 1709 Old Georgia Highway, Gaffney, SC 29341 SKC Electric, Inc. 14335 West 97th Terrace, Lenexa, KS 66215 4939 East US Hwy 60, Rogersville, MO 65742 1339 E. Prathersville Rd., Columbia, MO 65202 1235 S. Meade, Wichita, KS 67211 . Cramar Electric, Inc. 14335 West 97th Terrace, Lenexa, KS 66215 . Pro Wire Security Systems, Inc. 14335 West 97th Terrace, Lenexa, KS 66215 . SKCE, Inc. 14335 West 97th Terrace, Lenexa, KS 66215 Building One Commercial, Inc. 2035 Olive Street, St. Louis, MO 63103 (f/k/a Spann Building Maintenance Company) 100 Galleria Parkway, Suite 1070, Atlanta, GA 30339 120 Summit Parkway Building, Birmingham, AL 458 Pebble Creek, Suite 1-C, Madison, MS 1705 Douglas Street, Omaha, NE 250 South Wacker Drive, The Penthouse, Chicago, IL 429 West Muhammad Ali Boulevard, Suite 610, Louisville, KY 85 East Gay Street, Columbus, OH 22 East Washington Street, Suite 605, Indianapolis, IN 46204 2001 Holmgren Way, Green Bay, WI 54307 216 East Stephenson, Freeport, IL Sullivan Electric, Inc. 7100 Cockrill Bend Blvd., Nashville, TN 37209 Taylor-Hunt Electric, Inc. 1476 South Major Street, Salt Lake City, UT 84115 2420 South 2570 West, Salt Lake City, UT 84119 The Lewis Companies, Inc. 12718 East 55th Street, Tulsa, OK 74146 2727 North St. Mary, San Antonio, TX . Electrical Design & Construction, Inc. 12718 East 55th Street, Tulsa, OK 74146 . Engineering Design Group, Inc. 12718 East 55th Street, Tulsa, OK 74146 . Fred Clark Electrical Contractor, Inc. 12718 East 55th Street, Tulsa, OK 74146 1430 N. Flores, #100, San Antonio, TX 78212 . Oil Capital Electric, Inc. 12718 East 55th Street, Tulsa, OK 74146 . Omni Mechanical Services 12718 East 55th Street, Tulsa, OK 74146 5918 S. 1029 E Ave., Tulsa, OK 74134 . EDG Power Group, Inc. 12718 East 55th Street, Tulsa, OK 74146 4608 S. Barnett Rd., Suite 600, Tulsa, OK 74146 Town & Country Electric, Inc. 2662 American Drive, Appleton, WI 54915 Tri-City Electrical Contractors, Inc. 430 West Drive, Altamonte Springs, FL 32714 5910 Hartford Street, Tampa, FL 33619 12296 Matterhorn Road, Ft. Myers, FL 33913 1001 Jupiter Park, Suite 113, Jupiter, FL 33458 Tri-M Holding Corp. . 204 Gale Lane, Kennet Square, PA 19348 . tri-M Corporation . 204 Gale Lane, Kennet Square, PA 19348 . tri-M Building Automation Systems Corp. . 204 Gale Lane, Kennet Square, PA 19348 . tri-M Electrical Construction Corp. 204 Gale Lane, Kennet Square, PA 19348 7548 Morris Court, Allentown, PA
4 Tri-State Acquisition Corp. 442 West Bonita Avenue, San Dimas, CA 91773 TSE Acquisition Corp. 4820 West University, Las Vegas, NV 89103 Walker Engineering, Inc. 10999 Petal Street, Dallas, TX 75238 Walter C. Davis & Son, Incorporated 7908 Kincannon Place, Newington, VA 22122 Watson Electrical Construction Co. 490 Ward Boulevard, Wilson, NC 27895 Wayzata, Inc. 8 Greenway Plaza, Suite 1500, Houston, TX 77046 Wilson Electric Company, Inc. . 15475 North Greenway-Hayden Loop, Scottsdale, AZ 85260 . Chambers Electronic Communications, Inc. . 15475 North Greenway-Hayden Loop, Scottsdale, AZ 85260
6 Credit Agreement Schedule 6.03 - Insurance Policies PART A
POLICY INSURER LIMIT DEDUCTIBLE PREMIUM ============================================================================================================================== WC/EL CNA Statutory/$1 Mil *$250,000 General Liability CNA $1 Mil/$2 Mil *$100,000 $50 Mil Policy Agg Auto Liability CNA $ 1,000,000 *$100,000 Liability $1,000 Collision/Comp Primary Umbrella CNA $50,000,000 $ 10,000 Total Premium for these coverages including a fixed claim service fee $3,026,786 *Deductibles are subject to the "Plan Maximum Losses" of $5,368,000 Excess Liability Zurich $50,000,000 Nil $ 60,000 Excess Liability Cigna $50,000,000 Nil $ 33,750 Excess Liability Gulf $50,000,000 Nil $ 25,000 Property/Inland Marine Winterthur Per TIV & Sublimits Various $ 401,749 Foreign Package Reliance $ 1,000,000 $5,000 Auto SIR $2,500 Min. Earned $1,000 EBL Non-Owned Aviation USAIG $ 5,000,000 NIL $ 8,500 Professional/Pollution CNA $10,000,000 $50,000 SIR $ 206,908 EPL Executive Risk $10,000,000 $100,000 $ 138,000 D & O Executive Risk $10,000,000 $ 75,000 $350,000 3 year Excess D & O Reliance $ 5,000,000 Nil $110,000 3 year Excess D & O Reliance $ 5,000,000 Nil $50,107 21 months Fiduciary Chubb $ 7,000,000 $10,000 Indemnity $ 32,300 Crime Great American $ 5,000,000 $ 50,000 $50,000 3 year
Credit Agreement Schedule 6.03 - Insurance Policies Part B BOSC maintains a comprehensive property and casualty insurance program designed to protect it and all of its subsidiary companies from such losses as usually insured by companies in similar industries. These insurance coverages include Workers Compensation insurance, which provides statutory benefits owed injured workers under the various state workers compensation laws; Comprehensive General Liability coverage, Comprehensive Automobile Liability coverage and Employers Liability coverage, each subject to a $100,000,000 umbrella limit; Contractor's Pollution Liability and Professional Liability, subject to a combined $25,000,000 limit; and Crime Insurance (including Fidelity) subject to a $5,000,000 limit. The Insurance program also includes coverage for loss to physical property and equipment owned by BOSC or its subsidiaries, or non-owned property and equipment which BOSC or its subsidiaries are required to insure by way of a lease, rental agreement or other similar contract. Such coverage is subject to the following catastrophic loss limits: $50,000,000 Buildings; $15,000,000 Contents; $12,000,000 Extra Expense; $20,000,000 Contractor's Equipment; and $10,000,000 Equipment & Materials being installed at a project site. The above coverages and limits are subject to actual policy wording, deductibles, limitations, coverage extensions and exclusions, all of which are no more restrictive than those of similar companies in the industry. 8 Credit Agreement Schedule 7.02 - Consolidation, Merger or Sale of Assets Part A None. Credit Agreement Schedule 7.02 - Consolidation, Merger or Sale of Assets Part B None. 10 CREDIT AGREEMENT SCHEDULE 7.03(B) - INDEBTEDNESS PART A
DEBTOR LENDER AMOUNT ------ ------ ------ Costa and Rihl, Inc. Holman Ford Mt. Laurel 13,250 Rice and Holman Ford 29,500 First Class Financing 33,200 Advanta Business Services Corp. 9,350 Chapel Elecric Co. GE Capital 4,000 Group Maintenance America Corp. Shareholders of Trinity Contractors Inc. 36,668 Group Maintenance America Corp. Shareholders of Mechanical Services of Orlando, Inc. 2,500,000 Group Maintenance America Corp. Shareholders of Pacific Rim Mechanical Contractors, Inc. 1,613,117 Group Maintenance America Corp. Cananwill, Inc. 255,103 Ray and Claude Goodwin, Inc. CIT Group 85,711 Sibley Services, Incorporated Jerry Sibley 45,175 HPS Plumbing Services, Inc. GMAC 52,025 Gentzler Electrical Contractors, Inc. GMAC 46,386 Air Systems, Inc. Wells Fargo Equipment Finance 350,240 Statewide Heating & Air Conditioning, Inc. Ford Credit/Central Carolina Bank/First City Bank 36,276 Sequoyah Corporation Glesby Marks Leasing 197,644 Dynalink Corporation GMAC 17,019 Merrit Island Air & Heat, Inc. GMAC 12,042 ---------- TOTAL $5,336,706 ----------
CREDIT AGREEMENT SCHEDULE 7.03(B) - INDEBTEDNESS PART B DESCRIPTION INCLUDED IN FORM 10Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 Other Secured Debt @ $6,733,000 SCHEDULE OF DEBT INCREASES FOR SUBSIDIARIES FROM OCTOBER 1, 1999 TO FEBRUARY 11, 2000 Walker Engineering, Inc. $ 113,030 Chambers Electronic Communications, Inc. $ 23,941 INCREASES DUE TO ACQUISITIONS MH Technologies, Inc. $ 184,002 Tri-State Acquisition Corp. $ 178,100 Walter C. Davis & Son, Incorporated $ 54,814 C.R. Hipp Construction Co., Inc. $ 153,142 S.L. Page Corporation $ 281,045 $ 988,074 ---------- LETTERS OF CREDIT OUTSTANDING Lloyds TSB Bank S-13051 [Engineering Design Group, Inc.; expires 4/7/00] $1,548,480 Liberty Mutual Co S-13075 [Regency Electric Company, Inc.; expires 4/30/00] $ 275,000 McDevitt Street Bovis Inc. S-13109 [Expires 9/23/00] $ 200,000 $2,023,480 ---------- TOTAL @ $9,744,554 ---------- 12 CREDIT AGREEMENT SCHEDULE 7.04(A) - EXISTING LIENS PART A 1. Airtron--Assignment of Certificate of Deposit, NO. 2171630105, for $167,000, of National City Bank, to Ohio Bureau of Workers' Compensation, dated June 23, 1996 (Certificate of Deposit, which was Credit Agreement Scheduled to mature on June 23, 1996, was renewed until June 23, 1998) 2. Airtron-Section 634.405 deposit with the Florida Department of Insurance of $100,000 for Airtron of Central Florida, Inc., and retains unencumbered assets of at least $200,000 (the Company maintains a certificate of deposit in its name but unencumbered in any way to meet this requirement)(warranty work - service contracts) 3. See attached schedule. CREDIT AGREEMENT SCHEDULE 7.04(A) - EXISTING LIENS PART B Liens securing equipment Indebtedness disclosed on Schedule 7.03(b), Part B. Upon request of the Administrative Agent, the Company shall provide, in reasonable detail, a breakdown of the Liens securing the Indebtedness disclosed on Schedule 7.03(b), Part B, within 90 days of the Effective Date or such longer date as the Administrative Agent may permit. Liens against Building One Service Solutions, Inc. in favor of Crestar Bank in the aggregate principal amount of $2,200,000 secured by the accounts receivable and equipment of Building One Service Solutions, Inc.; to be paid-off the within 45 days of the Effective Date. 14 CREDIT AGREEMENT SCHEDULE 7.05(B) - INVESTMENTS PART A 1. The Company's investment in the Subsidiaries listed in Credit Agreement Schedule 5.16 CREDIT AGREEMENT SCHEDULE 7.05(B) - INVESTMENTS PART B 1. BOSC owns 44,864 shares of the Common Stock of Bank of America. 1. BOSC's investment in its Subsidiaries listed in Credit Agreement Schedule 5.16. EX-10.17 12 INVESTORS' RIGHTS AGREEMENT EXHIBIT 10.17 ================================================================================ INVESTORS' RIGHTS AGREEMENT DATED FEBRUARY 22, 2000 BETWEEN GROUP MAINTENANCE AMERICA CORP. AND BOSS II, LLC ================================================================================ TABLE OF CONTENTS ----------------- Page ---- SECTION 1. DEFINITIONS........................ 1 SECTION 2. RIGHTS TO SUBSCRIBE FOR SECURITIES. 7 SECTION 3. BOARD OF DIRECTORS................. 8 SECTION 4. INFORMATION RIGHTS; COVENANTS...... 11 SECTION 5. DEMAND REGISTRATION................ 13 SECTION 6. PIGGYBACK REGISTRATION............. 15 SECTION 7. S-3 REGISTRATIONS.................. 15 SECTION 8. EXPENSES........................... 16 SECTION 9. PREPARATION AND FILING............. 16 SECTION 10. INDEMNIFICATION.................... 19 SECTION 11. UNDERWRITING AGREEMENT............. 21 SECTION 12. INFORMATION BY HOLDERS............. 21 SECTION 13. EXCHANGE ACT COMPLIANCE............ 21 SECTION 14. NO CONFLICT OF RIGHTS.............. 22 SECTION 15. PROTECTIVE PROVISIONS.............. 22 SECTION 16. STANDSTILL......................... 25 SECTION 17. VOTING AGREEMENT................... 25 SECTION 18. MISCELLANEOUS...................... 26 INVESTOR'S RIGHTS AGREEMENT dated as of February 22, 2000, between GROUP MAINTENANCE AMERICA CORP., a Texas corporation (the "Company"), and BOSS II, LLC, a Delaware limited liability company (the "Investor"). The Investor currently holds the Convertible Preferred Stock, which is initially convertible into _________ shares of Common Stock. The parties hereto deem it to be in their best interests to set forth their rights and obligations in connection with public offerings, sales of shares of Common Stock and certain other matters. Accordingly, the parties agree as follows: SECTION 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: "Accountants" has the meaning assigned to such term in Section 4(b)(iii). "Affiliate" has the meaning assigned to such term in the Subscription Agreement. "Board" means the Board of Directors of the Company. "Business" shall mean the provision of all manner of facilities services to the owners, lessees or operators of industrial, commercial, institutional and residential plants, buildings, homes and other facilities and the properties related thereto (collectively, "Facilities"), including, without limitation (i) design, engineering, construction, project management, repair, replacement, maintenance and service, performance contracting, energy management and aggregation and project financing of all of the mechanical (heating, ventilation, air conditioning; plumbing and piping; appliance repair; fire suppression systems) and electrical (internal and external wiring; generators and UPS systems; voice and data systems; fire and life safety systems; temperature control, building automation and energy management) systems, (ii) rigging, millwright and other industrial services, (iii) janitorial, specialty cleaning and other services for the repair, maintenance and upkeep of Facilities, including, without limitation, the provision of onsite maintenance and support personnel and the outsourcing of the Facilities management function by an owner, lessee or operator of any Facilities. "Capital Expenditure" means any expenditure by the Company and its Subsidiaries for the acquisition, construction, or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which should be capitalized under generally accepted accounting principles on a consolidated balance sheet of the Company and its Subsidiaries; provided, however, this definition shall not include any acquisition of a business. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Closing" has the meaning assigned to such term in the Subscription Agreement. "Closing Date" has the meaning assigned to such term in the Subscription Agreement. "Commission" means the United States Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. "Common Stock" means the Common Stock, par value $.001 per share, of the Company. "Common Stock Equivalent" means one share of Common Stock or the right to acquire, whether or not immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant, convertible security or other instrument or agreement, in each case, as adjusted to account for any stock splits, reverse stock splits, stock dividends or other similar event. "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes of such Person and Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses), (B) Consolidated Interest Expense and (C) depreciation and amortization less any out of the ordinary course non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP. "Consolidated Indebtedness" means with respect to any Person, as of the date of determination, the aggregate amount of all Indebtedness of such Person and its Subsidiaries on a consolidated basis included on the face of the balance sheet of such Person (determined in accordance with GAAP) plus any Indebtedness included on the face of the balance sheet of any other Person (determined in accordance with GAAP) as to which such Person and/or any of its Subsidiaries has created a guarantee or other contingent obligation (to the extent of such guarantee or other contingent obligation). "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication (i) the aggregate of the interest expense of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (a) any amortization of debt discount and amortization or write-off of deferred financing costs (including the amortization of costs relating to interest rate caps or other similar agreements, but excluding any write-off of debt discount or deferred financing costs resulting from the Merger or any related financing), (b) the net costs required by GAAP to be recorded as interest expense for Interest Swap Obligations, and (c) the interest portion of any deferred payment obligation; and (ii) the interest component of Capitalized Lease -2- Obligations paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP, minus interest income for such period. "Consolidated Leverage Ratio" means, with respect to any Person, the ratio of Consolidated Indebtedness of such Person on the date of the transaction giving rise to the need to calculate the Consolidated Leverage Ratio (the "Transaction Date") to Consolidated EBITDA of such Person for the four full fiscal quarters (the "Four Quarter Period") most recently ending on or prior to the Transaction Date for which quarterly consolidated financial statements of the Company and its Subsidiaries have been distributed to Investor. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Indebtedness" shall be calculated after giving effect on a pro forma basis, including appropriate adjustments determined in accordance with Article XI of Regulation S-X promulgated by the Commission, for the period of such calculation for any asset sales or asset acquisitions (including, without limitation, any asset acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person who becomes a Subsidiary as a result of the asset acquisition) incurring, assuming or otherwise being liable for acquired Indebtedness and also including any Consolidated EBITDA attributable to the assets which are the subject of the asset acquisition but excluding the Consolidated EBITDA attributable to the assets which are the subject of the asset sale) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such asset sale or asset acquisition (including the incurrence, assumption or liability for any such acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (a) out of the ordinary course after-tax gains or losses from asset sales or abandonments or reserves relating thereto, (b) after-tax items classified as extraordinary or nonrecurring gains or losses, (c) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Subsidiary of the referent Person, (d) the net income (but not loss) of any Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is prohibited by a contract, operation of law or otherwise, (e) the net income of any Person, other than a Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a wholly owned Subsidiary of the referent Person by such Person, (f) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets, and (g) after tax charges associated with consummating the Merger and related financing. "Conversion Shares" means the shares of Common Stock issuable upon conversion of the Convertible Preferred Stock. -3- "Convertible Preferred Stock" means the Company's 7.25% convertible preferred stock, $.001 par value share, governed by the Statement of Designations. "Credit Agreement" means the Credit Agreement dated as of February 22, 2000 between the Corporation and Bank of America, N.A., as it may be amended from time to time, other than amendments to the size of the facility. "Election Notice" has the meaning assigned to such term in Section 15(c). "Equity-Linked Plan" shall mean a benefit or compensation plan in which benefits or awards are denominated or payable in capital stock of the Company, valued in whole or in part by reference to, or otherwise based on, the value of such capital stock. "Event of Non-Compliance" means the occurrence of any of the following: (i) any material, intentional breach by the Company of this Agreement or the Subscription Agreement; (ii) the occurrence of a payment default, or any other default giving rise to a right of acceleration, under any Indebtedness of the Company that has an aggregate principal amount outstanding, as of the date of such default or acceleration, in excess of $10,000,000 (after giving effect to any notice or cure period relating to such Indebtedness); or (iii) the Company or any of its material Subsidiaries shall (A) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law, (B) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (C) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for any such Person or for any substantial part of its property or assets, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors, (F) fail generally to pay its debts as they become due or (G) take any corporate or shareholder action in furtherance of any of the foregoing; or (iv) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (A) relief in respect of the Company or any of its material Subsidiaries, or of any substantial part of their respective property or assets, under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law, (B) the appointment of a receiver, trustee, custodian, sequestrator or similar official for any such Person or for any substantial part of its property or (C) the winding-up or liquidation of any such Person, and such proceeding, petition or order shall continue unstayed and in effect for a period of 60 consecutive days. -4- "Exchange Act" means the Securities Exchange Act of 1934, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Excluded Stock" means (i) shares of Common Stock issuable upon exercise of any warrants or options of the Company outstanding on the Closing Date or issued under the Company's incentive plans approved by the Board, (ii) shares of Common Stock issued pursuant to the conversion of the Convertible Preferred Stock, (iii) shares of Common Stock issued as consideration pursuant to any acquisition of any business, (iv) shares of Convertible Preferred Stock issued as dividends to the Investors, (v) shares issued pursuant to earn out arrangements in definitive, binding agreements in existence on the date hereof relating to acquisitions by the Company and (vi) Securities issued in an underwritten public offering that is registered under the Securities Act. "Fair Market Value" has the meaning assigned to such term in the Statement of Designations. "GAAP" means United States generally accepted accounting principles. "Indebtedness" has the meaning assigned to such term in the Statement of Designations. "Information" has the meaning assigned to such term in Section 9(i). "Inspectors" has the meaning assigned to such term in Section 9(i). "Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investor" means BOSS II, LLC. "Liquidation" has the meaning assigned to such term in the Statement of Designations. "Maturity Date" has the meaning assigned to such term in the Statement of Designations. "Merger" has the meaning assigned to such term in the Subscription Agreement. "NASDAQ" means the automated quotation system of the NASD. "Notice of Acceptance" has the meaning assigned to such term in Section 2(b). -5- "NYSE" means the New York Stock Exchange. "Offer" has the meaning assigned to such term in Section 2(a). "Offer Period" has the meaning assigned to such term in Section 2(a). "Offered Securities" means (A) shares of Common Stock, (B) any other equity security of the Company, (C) any debt security of the Company which by its terms is convertible into or exchangeable for any equity security of the Company or has any equity participation rights, (D) any security of the Company that is a combination of debt and equity or (E) any option, warrant or other right to subscribe for, purchase or otherwise acquire any equity security or any such debt security of the Company, in each case other than Excluded Stock. "Other Shares" means at any time those shares of Common Stock that do not constitute Primary Shares. "Person" shall be construed broadly and shall include, without limitation, an individual, a partnership, an investment fund, a limited liability corporation, a corporation, an association, a joint stock corporation, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Preferred Directors" has the meaning assigned to such term in Section 3(c). "Primary Shares" means at any time the authorized but unissued shares of Common Stock or shares of Common Stock held by the Company in its treasury. "Proposed Transaction" has the meaning assigned to such term in Section 15(c). "Purchase Price" has the meaning assigned to such term in Section 15(c). "Recapitalization" means, with respect to any Person, any transaction, other than a merger, consolidation, amalgamation or sale of all or substantially all of the assets of such Person, in which holders of any class of securities of such Person receive in exchange therefor some other security of such Person or any other issuer and/or cash, other than the issuance of cash or securities in accordance with the terms of the securities to be exchanged or Section 8(b)(v) of the Statement of Designations. "Records" has the meaning assigned to such term in Section 9(i). "Refused Securities" has the meaning assigned to such term in Section 2(d). "Representatives" has the meaning assigned to such term in Section 4(a). "Restricted Shares" means at any time the shares of Common Stock held by the Investor. "Retained Shares" has the meaning assigned to such term in Section 15(c). -6- "Rule 144" means Rule 144 promulgated under the Securities Act or any successor rule thereto or any complementary rule thereto. "Securities" means "securities" as defined in Section 2(1) of the Securities Act and includes capital stock or other equity interests or any options, warrants or other securities that are directly or indirectly convertible into, or exercisable or exchangeable for, capital stock or other equity interests. Whenever a reference herein to Securities is referring to any derivative Securities, the rights of Investor shall apply to such derivative Securities and all underlying Securities directly or indirectly issuable upon conversion, exchange or exercise of such derivative Securities. "Securities Act" means the Securities Act of 1933, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Selling Holder" shall have the meaning assigned to such term in Section 9(b). "Selling Holders' Counsel" shall have the meaning assigned to such term in Section 9(b). "Subscription Agreement" means the Subscription and Exchange Agreement dated as of the date hereof between the Company and the Investor, as the same may be amended or modified. "Statement of Designations" means the Statement of Designations setting forth the preferences, limitations and relative rights of the Convertible Preferred Stock. "Subsidiary" has the meaning assigned to such term in the Statement of Designations. "Trigger Event" shall have the meaning assigned to such term in Section 3(h). "Voting Stock" of a Person means any class or all classes of capital stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. SECTION 2. RIGHTS TO SUBSCRIBE FOR SECURITIES. (a) For so long as Investor and its Affiliates hold in the aggregate Common Stock Equivalents representing at least 25% of the Conversion Shares issuable upon conversion of the Convertible Preferred Stock acquired by the Investor on the Closing Date, the Company shall not, prior to the Maturity Date (assuming full payment and performance by the Company of all of its obligations as of such date; if the Company has not fully paid and performed all of its obligations as of such date, the Company's obligations under this section shall survive until such obligations have been satisfied), issue, sell, or agree to issue or sell, any Offered Securities for cash unless the Company shall have first offered to sell the Offered Securities to the Investor, at a price and on such other terms as shall have been specified by the Company in writing delivered -7- to the Investor (the "Offer"), which Offer by its terms shall remain open for a period of 10 business days from the date it is delivered to the Investor (the "Offer Period"). (b) Notice of the Investor's intention to accept an Offer shall be evidenced by a writing signed by the Investor and delivered to the Company prior to the end of the Offer Period (the "Notice of Acceptance"). Within 20 days after receipt by the Company of such Notice of Acceptance, the Company shall sell and the Investor shall purchase the Offered Securities in respect of which the Notice of Acceptance was delivered, upon the terms and conditions of the Offer. (c) In the event the Company materially amends the terms of the Offer at any time, the Offer Period shall be extended for a period of not less than 10 business days (or 48 hours if the amendment relates solely to the price of the Offer or the number of shares to be sold in the Offer). (d) In the event that the Notice of Acceptance is not given by the Investor, the Company shall have 90 days from the expiration of the Offer Period to sell all of such Offered Securities (the "Refused Securities") to any other Person(s), but only upon financial terms (e.g., price, interest rate, dividend rate) at least as favorable to the Company in every respect as those set forth in the Offer, and otherwise on general terms and conditions that are no more favorable, in the aggregate, to such other Person(s) or less favorable, in the aggregate, to the Company than those set forth in the Offer, provided, however, that in the event that the Company sells all such Offered Securities to any other Person(s), the Investor shall have the right to purchase the proportionate number of such Offered Securities that represents its then ownership percentage of the total outstanding Common Stock of the Company, determined in accordance with Rule 13d-3 under the Exchange Act. (e) Any Offered Securities not purchased by the Investor or any other Person(s) in accordance with Sections 2(b) and 2(d) may not be sold or otherwise disposed of until they are again offered to the Investor under the procedures specified in this Section 2. (f) The provisions of this Section 2 shall terminate on the first date on which the Investor and its Affiliates fail to satisfy the Common Stock Equivalents ownership requirements set forth in paragraph (a), such termination to be effective with respect to the first Offer after such date. SECTION 3. BOARD OF DIRECTORS. (a) Investor shall be entitled to designate individuals for election to the Board as follows until the Maturity Date (assuming full payment and performance by the Company of all of its obligations as of such date; if the Company has not fully paid and performed all of its obligations as of such date, the Company's obligations under this section shall survive until such obligations have been satisfied): (i) For so long as Investor and its Affiliates hold in the aggregate Common Stock Equivalents representing at least 50% of the number of Conversion Shares issuable upon conversion of the Convertible Preferred Stock issued on the Closing Date, the -8- Investor shall be entitled to designate a number of individuals for election to the Board equal to the greater of 3 directors or the number of directors that represents 30% of the Board, rounded up to the nearest whole director; (ii) For so long as Investor and its Affiliates hold in the aggregate Common Stock Equivalents representing at least 25% of the number of Conversion Shares issuable upon conversion of the Convertible Preferred Stock issued on the Closing Date, the Investor shall be entitled to designate a number of individuals for election to the Board equal to the number of directors that represents 22% of the Board, rounded up to the nearest whole director; and (iii) For so long as Investor and its Affiliates hold in the aggregate Common Stock Equivalents representing at least 12.5% of the number of Conversion Shares issuable upon conversion of the Convertible Preferred Stock issued on the Closing Date, the Investor shall be entitled to designate a number of individuals for election to the Board equal to the number of directors that represents 15% of the Board, rounded up to the nearest whole director. (b) In the event the number of directors the Investor is entitled to designate decreases in accordance with paragraph (a) above, then the number of directors the Investor is entitled to designate pursuant to paragraph (a) shall not thereafter be increased, irrespective of any subsequent acquisition of Common Stock Equivalents by the Investor or its Affiliates. In determining the number of directors the Investor shall be entitled to designate pursuant to paragraph (a) above, the Investor shall be deemed to hold each Common Stock Equivalent that is held of record by the Investor or any of its Affiliates, or, as to which the Investor or any of its Affiliates retains the entire economic interest. (c) Except as set forth in (c)(i) and (c)(ii) below, each committee of the Board shall include directors designated by the Investor pursuant to the provisions set forth above, (each, a "Preferred Director"), in the same proportion, rounded up to the nearest whole director, as such representatives comprise the Board. The Company shall provide each Preferred Director serving on any committee of the Board with appropriate notice at least 48 hours prior to any meeting of any committee that such person serves on: (i) The Executive Committee shall be comprised of five members as follows: two Preferred Directors designated by the Investor (or, if the Investor is only entitled to designate one director to the Board, then only one Preferred Director), the Chairman of the Board of Directors, the Chief Executive Officer of the Company and one independent director to be selected by the Board of Directors. The Preferred Directors designated by the Investor pursuant to this Section 3(c)(i) shall not be removed by subsequent action of the Board; and (ii) The Acquisitions Committee shall be comprised of one Preferred Director designated by the Investor, the Chairman of the Board of Directors and the Chief Executive Officer. The Preferred Director designated by the Investor pursuant to this Section 3(c)(ii) shall not be removed by subsequent action of the Board. -9- (d) If the persons designated by the Investor as set forth in Section 3(a) above are not elected to the Board for any reason and the Investor owns at least 25% of the shares of Common Stock that it owns on the Closing Date (assuming the conversion of all the Convertible Preferred Stock), then the Investor shall have the right to designate one representative to serve as an observer at each meeting of the Board and each committee thereof. The Company shall provide such observer with copies of all actions taken by written consent of the Board or any committee thereof, advance notice of such meeting as if such observer were a director and copies of all materials that are distributed to the Board (in each case as if such observer was a director), provided, however, all such information and materials shall be subject to a mutually agreeable confidentiality agreement. The Company shall reimburse the observer for all out- of-pocket expenses incurred in connection with attending any meetings of the Board. (e) For so long as the Investor owns 5% or more of the Common Stock of the Company outstanding (assuming the conversion of all the Convertible Preferred Stock), then the Investor shall be entitled to designate one member to the Board; provided, however, that the right provided in this Section 3(e) shall not be in addition to the rights provided in Section 3(a) above. (f) The Company shall cause its bylaws to provide, at all times from and after the Closing Date in which the Investor has the right to designate a director, that meetings of the Board or any committee thereof may be conducted by teleconference. (g) The Company shall deliver a notice to the Investors if an Event of Non-Compliance shall occur or is reasonably likely to occur. Such notice shall set forth in reasonable detail a description of the Event of Non-Compliance. (h) Prior to the earlier of the Maturity Date (assuming full payment and performance by the Company of all of its obligations as of such date; it being understood that if the Company has not fully paid and performed all of its obligations as of such date, the Company's obligations under this Section 3 shall survive until such obligations have been satisfied) and the date on which Sections 15(a) and 15(b) hereof have ceased to have any effect, if the Investor concludes, either as a result of a notice delivered by the Company pursuant to Section 3(g), or otherwise, that an Event of Non-Compliance has occurred or is reasonably likely to occur, the Investor shall deliver a notice to the Company to such effect. If an Event of Non-Compliance shall occur and shall be continuing at the end of the one week period following delivery by the Investor of the notice referred to in the preceding sentence (each, a "Trigger Event"), the Investor shall have the special right to designate that number of individuals to the Board that, when combined with the Preferred Directors, will constitute a majority of the Board. The Company agrees to take all necessary and desirable action within its control in connection with and in furtherance of the execution of such special right. Such special right shall continue until such time as there is no longer a Trigger Event in existence, at which time such special right shall terminate, subject to revesting upon the subsequent occurrence and continuation of any Trigger Event. After designees of the Investor represent a majority of the Board, the directors of the Company shall use commercially reasonable efforts promptly to cure the condition that constituted the Event of Non-Compliance. After the expiration of such Trigger Event, the term of office of such newly elected directors shall automatically cease and the number of directors constituting the entire Board shall be reduced accordingly. -10- (i) Whenever the Investor shall have the right to designate one or more directors of the Board pursuant to this Section 3, the Company shall, to the extent permitted by applicable law (a) increase as required the number of directors constituting the entire Board, (b) fill the vacancies created by such expansion with designees who are approved by the Company, which approval will not be unreasonably withheld and (c) submit the name of each such designee to the shareholders of the Company (together with a recommendation of his or her election) at each meeting of the shareholders at which directors are elected and which is held during the period which the Investor is entitled to designate one or more directors. The Company shall take such actions as shall be within its control and reasonably necessary to effectuate the provisions of this Section 3, including, if required, the calling of a special or annual meeting of the shareholders of the Company to fill vacancies created by any increase in the size of the entire Board. (j) Notwithstanding any provision of this Agreement to the contrary, the rights of the Investor to designate Board members pursuant to this Section 3 shall in no event be operative at any time when the holders of the Convertible Preferred Stock shall have rights to elect directors pursuant to the Statement of Designations. SECTION 4. INFORMATION RIGHTS; COVENANTS. (a) Access to Records. The Company shall, and shall cause each Subsidiary to, afford to the Investor, the Affiliates of the Investor and each of their respective officers, employees, advisors, counsel and other authorized representatives (collectively with the Affiliates of the Investor, the "Representatives"), during normal business hours, at their expense, reasonable access, upon reasonable advance notice, to all of the books, records and properties of the Company and such Subsidiary and all officers and employees of the Company and such Subsidiary. The Investor shall use its best efforts to maintain the confidentiality of any information designated by the Company as confidential or proprietary; provided, however, that the foregoing shall in no way limit or otherwise restrict the ability of the Investor or any of its Representatives to disclose any such information concerning the Company and each Subsidiary which it may be required to disclose (i) to its partners or limited partners to the extent required to satisfy its fiduciary obligations to such Persons, provided such Persons agree in writing to be bound by the provisions of this Section, or (ii) otherwise pursuant to or as required by law. (b) Financial Reports. The Company shall furnish the Investor with the following: (i) Monthly Reports. As soon as available, but not later than 30 days after the end of each fiscal month, a consolidated balance sheet of the Company as of the end of such period and consolidated statements of income of the Company for such period and for the period commencing at the end of the previous fiscal year and ending with the end of such period, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, and including comparisons for income statements to the budget or business plan all prepared in -11- accordance with generally accepted accounting principles consistently applied (except for the absence of footnotes and year-end adjustments); (ii) Quarterly Reports. As soon as available, but not later than 50 days after the end of each quarterly accounting period, (A) a consolidated balance sheet of the Company as of the end of such period and consolidated statements of income and cash flows for such quarterly accounting period and/or for the period commencing at the end of the previous fiscal year and ending with the end of such period, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, and including comparisons to the budget or business plan for the income statement only, all prepared in accordance with GAAP consistently applied and (B) a report by management of the Company in a format consistent with Form 10-Q of the operating and financial highlights of the Company and its Subsidiaries for such period; (iii) Annual Audit. As soon as available, but not later than 100 days after the end of each fiscal year of the Company, audited consolidated financial statements of the Company, which shall include statements of income, cash flows and changes in shareholders' equity for such fiscal year and a balance sheet as of the last day thereof, each prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by the report of a "Big 5" firm of independent certified public accountants selected by the Board (the "Accountants"). The Company and its Subsidiaries shall maintain a system of accounting sufficient to enable its Accountants to render the report referred to in this Section 4; and (iv) Miscellaneous. Promptly upon becoming available, the Company shall provide to the Investor: (A) copies of all financial statements, reports, press releases, notices, proxy statements and other documents sent by the Company or its Subsidiaries to its investors generally or released to the public and copies of all regular and periodic reports, if any, filed by the Company or its Subsidiaries with the Securities and Exchange Commission, any securities exchange or the NYSE; (B) notification in writing of any litigation or governmental proceeding in which it or any of its Subsidiaries is involved and which could reasonably be expected to, materially and adversely affect the Company or any of its material Subsidiaries; (C) notification in writing of the existence of any default under any material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of their assets are bound; (D) upon request, copies of all reports prepared for or delivered to the management of the Company or its Subsidiaries by its accountants; -12- (E) upon request, any other routinely collected financial or other information available to management of the Company or its subsidiaries (including, without limitation, routinely collected statistical data); and (F) The provisions of this Section 4 shall terminate upon the earlier to occur of the twelfth anniversary of the Closing Date and the date on which the Investor shall no longer be entitled to elect any directors pursuant to Section 3(a) of this Agreement. SECTION 5. DEMAND REGISTRATION. (a) If the Company shall be requested by holders of at least 20% of the total number of outstanding Restricted Shares (assuming conversion of all shares of Convertible Preferred Stock) to effect a registration under the Securities Act of all or a portion of Restricted Shares with an aggregate Fair Market Value as of the date of such request equal to at least $25,000,000, or, if the Restricted Shares have an aggregate Fair Market Value of less than $25,000,000, all of the remaining Restricted Shares, in accordance with this Section, then the Company shall promptly give written notice of such proposed registration to all holders of Restricted Shares and shall offer to include in such proposed registration any Restricted Shares requested to be included in such proposed registration by such holders who respond in writing to the Company's notice within 15 days after delivery of such notice (which response shall specify the number of Restricted Shares proposed to be included in such registration and the intended method of distribution, which may be pursuant to a shelf registration). If a registration pursuant to Section 7 hereof is available, the holders of Restricted Shares shall utilize such registration instead of making a request pursuant to this Section 5, unless the holders of Restricted Shares reasonably determine that it is advantageous to such holders of Restricted Shares to make a request under this Section 5. The Company shall promptly use its best efforts to effect such registration on an appropriate form under the Securities Act of the Restricted Shares which the Company has been so requested to register; provided, however, that the Company shall not be obligated to effect any registration under the Securities Act except in accordance with the following provisions: (i) the Company shall not be obligated to file more than four registration statements in total pursuant to this Section, subject to paragraph (c) below; (ii) the Company shall not be obligated to file any registration statement during any period in which (A) any other registration statement (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Primary Shares are to be or were sold has been filed and not withdrawn or has been declared effective within the prior 90 days or (B) the Company has determined in good faith that the filing of a registration statement would require the disclosure of material information that the Company has a bona fide business purpose for preserving as confidential, such filing to be delayed until the date which is 90 days after such request for registration pursuant to this Section 5(a); provided that the Company may only so delay the filing or effectiveness of a registration statement pursuant to this Section 5(a)(ii)(B) on one occasion during any twelve-month period; and -13- (iii) with respect to the registration pursuant to this Section, the Company may include in such registration any Primary Shares or Other Shares; provided, however, that if the managing underwriter advises the Company in writing that the inclusion of all Restricted Shares, Primary Shares and Other Shares proposed to be included in such registration would interfere with the successful marketing (including pricing) of all such securities, then the number of Restricted Shares, Primary Shares and Other Shares proposed to be included in such registration shall be included in the following order: (A) First, the Restricted Shares, pro rata based upon the number of Restricted Shares owned by each holder at the time of such registration; (B) Second, the Primary Shares; and (C) Third, the Other Shares. (b) The holders of Restricted Shares requesting a registration pursuant to this Section may, in the notice delivered pursuant to paragraph (a) above, elect that such registration cover an underwritten offering. Upon such election, such holders shall select one or more nationally recognized firms of investment banks to act as the managing underwriters and shall select any additional investment banks to be used in connection with such offering, provided that such investment banks must be reasonably satisfactory to the Company. The Company shall, together with all holders proposing to sell Restricted Shares in such offering, enter into a customary underwriting agreement with such underwriters. (c) A requested registration under this Section may be rescinded by written notice to the Company by the Persons holding a majority of the Restricted Shares to be included in such registration with the following consequences: (i) If such registration statement is rescinded prior to the filing date, such rescinded registration shall not count as a registration statement initiated pursuant to this Section for purposes of paragraph (a) above; (ii) If such registration statement is rescinded after the filing date but prior to its effective date, such rescinded registration shall not count as a registration statement initiated pursuant to this Section for purposes of paragraph (a) above if the participating holders (x) have reimbursed the Company for all out-of-pocket expenses incurred by the Company in connection with such rescinded registration or (y) (1) reasonably believed that the registration statement contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein not misleading, (2) notified the Company of such fact and requested that the Company correct such alleged misstatement or omission and (3) the Company has refused to correct such alleged misstatement or omission; and (iii) A registration that becomes effective shall not count as a registration statement initiated pursuant to this Section for purposes of paragraph (a) above unless the participating holders are able to sell at least 80% of the Restricted Shares sought to be included in such registration statement. -14- SECTION 6. PIGGYBACK REGISTRATION. If at any time the Company proposes for any reason to register Primary Shares or Other Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto, it shall promptly give written notice to the holders of Restricted Shares of its intention to so register the Primary Shares or Other Shares and, upon the written request, given within 15 days after delivery of any such notice by the Company, of any holders of Restricted Shares to include in such registration Restricted Shares held by such holders (which request shall specify the number of Restricted Shares proposed to be included in such registration), the Company shall use its best efforts to cause all such Restricted Shares to be included in such registration on the same terms and conditions as the securities otherwise being sold in such registration; provided, however, that if the managing underwriter advises the Company that the inclusion of all Restricted Shares or Other Shares proposed to be included in such registration would interfere with the successful marketing (including pricing) of the Primary Shares proposed to be registered by the Company, then the number of Primary Shares, Restricted Shares and Other Shares proposed to be included in such registration shall be included in the following order: (a) first, the Primary Shares; (b) second, Other Shares entitled to registration pursuant to the Registration Rights Agreements set forth on Annex A; (c) third, Restricted Shares, pro rata based upon the number of Restricted Shares owned by each holder at the time of such registration; and (d) fourth, the Other Shares (other than those shares of Common Stock which are not subject to any registration rights agreement), pro rata based upon the number of shares of Common Stock (based upon Common Stock Equivalents) owned by each such seller at the time of such registration. SECTION 7. S-3 REGISTRATIONS. If at any time (i) the Persons holding at least 20% of the total number of outstanding Restricted Shares (assuming conversion of all shares of Convertible Preferred Stock) request that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all or a portion of Restricted Shares with an aggregate Fair Market Value as of the date of such request equal to at least $25,000,000, or, if the aggregate Restricted Shares have an aggregate Fair Market Value of less than $25,000,000, all of the remaining Restricted Shares and (ii) the Company is a registrant entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its best efforts to register under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of shares of Restricted Shares specified in such notice. Whenever the Company is required by this Section 7 to use its best efforts to effect the registration of Restricted Shares, each of the procedures and requirements of Section 5 (including but not limited to the requirement that the Company notify all holders of Restricted Shares from whom notice has not been received and provide them with the opportunity to participate in the -15- offering) shall apply to such registration. Notwithstanding anything to the contrary contained herein, no request may be made under this Section 7 within three months after the effective date of a registration statement filed by the Company covering a firm commitment underwritten public offering in which the holders of Restricted Shares shall have been entitled to join pursuant to Section 5 or 6 in which there shall have been effectively registered all Restricted Shares as to which registration shall have been requested. There is no limitation on the number of registrations pursuant to this Section 7 that the Company is obligated to effect. SECTION 8. EXPENSES. The Company shall bear the expense of any registrations effected pursuant to Sections 5, 6 and 7 including, without limitation, all registration and filing fees (including all expenses incident to filing with the NYSE), fees and expenses of complying with securities and blue sky laws, printing expenses, and fees and expenses of the Company's counsel and accountants, and the fees and expenses of the Selling Holders' Counsel (as defined below), but excluding any underwriters' or brokers' discounts or commissions, transfer taxes (to the extent that such taxes are required by law to be paid by the Selling Holders) and the fees of any counsel to any Selling Holder, other than the Selling Holders' Counsel (it being understood that the fees and expenses of any underwriter and such underwriter's counsel shall be the responsibility of such underwriter). SECTION 9. PREPARATION AND FILING. If and whenever the Company is under an obligation pursuant to the provisions of this Agreement to use its best efforts to effect the registration of any Restricted Shares, the Company shall, as expeditiously as practicable: (a) with respect to a registration under Sections 5, 6 and 7, use its best efforts to cause a registration statement that registers such Restricted Shares to become and remain effective for a period of 180 days or until all of such Restricted Shares have been disposed of (if earlier); (b) furnish, at least five business days before filing a registration statement that registers such Restricted Shares, a prospectus relating thereto or any amendments or supplements relating to such a registration statement or prospectus, to each holder of Restricted Shares, to any counsel to any seller of Restricted Shares (the "Selling Holder") and to one counsel selected by the holders of a majority of such Restricted Shares (the "Selling Holders' Counsel"), copies of all such documents proposed to be filed (it being understood that such five-business-day period need not apply to successive drafts of the same document proposed to be filed so long as such successive drafts are supplied to such counsel in advance of the proposed filing by a period of time that is customary and reasonable under the circumstances); (c) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for at least the periods set forth in Section 9(a) or until all of such Restricted Shares have been disposed of (if earlier) and to comply with the -16- provisions of the Securities Act with respect to the sale or other disposition of such Restricted Shares; (d) notify in writing any counsel to any Selling Holder and the Selling Holders' Counsel promptly (i) of the receipt by the Company of any notification with respect to any comments by the Commission with respect to such registration statement or prospectus or any amendment or supplement thereto or any request by the Commission for the amending or supplementing thereof or for additional information with respect thereto, (ii) of the receipt by the Company of any notification with respect to the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or prospectus or any amendment or supplement thereto or the initiation or threatening of any proceeding for that purpose and (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of such Restricted Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purposes; (e) use its best efforts to register or qualify such Restricted Shares under such other securities or blue sky laws of such jurisdictions as any seller of Restricted Shares reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller of Restricted Shares to consummate the disposition in such jurisdictions of the Restricted Shares owned by such seller; provided, however, that the Company will not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required so to do but for this paragraph (e); (f) furnish to each seller of such Restricted Shares such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such seller of Restricted Shares may reasonably request in order to facilitate the public sale or other disposition of such Restricted Shares; (g) use its best efforts to cause such Restricted Shares to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the seller or sellers thereof to consummate the disposition of such Restricted Shares; (h) notify on a timely basis each seller of such Restricted Shares at any time when a prospectus relating to such Restricted Shares is required to be delivered under the Securities Act within the appropriate period mentioned in paragraph (a) of this Section, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and, at the request of such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the offerees of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; -17- (i) make available for inspection by any counsel to any Selling Holder and the Selling Holders' Counsel or any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such underwriter (collectively, the "Inspectors"), all pertinent financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information (together with the Records, the "Information") reasonably requested by any such Inspector in connection with such registration statement. Any of the Information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be disclosed by the Inspectors unless (i) the disclosure of such Information is necessary to avoid or correct a misstatement or omission in the registration statement, (ii) the release of such Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) such Information has been made generally available to the public. The seller of Restricted Shares agrees that it will, upon learning that disclosure of such Information is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Information deemed confidential; (j) in the case of an underwritten offering, use its best efforts to obtain from its independent certified public accountants "comfort" letters in customary form and at customary times and covering matters of the type customarily covered by comfort letters; (k) in the case of an underwritten offering, use its best efforts to obtain from its counsel an opinion or opinions in customary form; (l) provide a transfer agent and registrar (which may be the same entity and which may not be the Company) for such Restricted Shares; (m) issue to any underwriter to which any seller of Restricted Shares may sell shares in such offering certificates evidencing such Restricted Shares; provided, however, that the Company shall have the right to approve any such underwriter with such approval not to be unreasonably withheld; (n) list such Restricted Shares on any national securities exchange on which any shares of the Common Stock are listed or on NASDAQ if then included, or if the Common Stock is not listed on a national securities exchange, use its best efforts to qualify such Restricted Shares for inclusion on such national securities exchange or NASDAQ as the holders of a majority of such Restricted Shares shall request; (o) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and make available to its securityholders, as soon as reasonably practicable, earnings statements (which need not be audited) covering a period of 12 months beginning within three months after the effective date of the registration statement, which earnings statements shall satisfy the provisions of Section 11(a) of the Securities Act; and -18- (p) use its best efforts to take all other steps necessary to effect the registration of such Restricted Shares contemplated hereby. SECTION 10. INDEMNIFICATION. (a) In connection with any registration of any Restricted Shares under the Securities Act pursuant to this Agreement, the Company shall indemnify and hold harmless the seller of such Restricted Shares, its officers and directors, each underwriter, broker or any other person acting on behalf of such seller and each other person, if any, who controls any of the foregoing persons within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, (or actions in respect thereof) to which any of the foregoing persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the registration statement under which such Restricted Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein or otherwise filed with the Commission, any amendment or supplement thereto or any document incident to registration or qualification of any Restricted Shares, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such seller, such officer or director, such underwriter, such broker or such other person acting on behalf of such seller and each such controlling person for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in said registration statement, preliminary prospectus, final prospectus, amendment, supplement or document incident to registration or qualification of any Restricted Shares in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller or underwriter specifically for use in the preparation thereof; provided, further, that with respect to any preliminary prospectus, the foregoing indemnity shall not inure to the benefit of (a) any underwriter or, in the case of a registration statement filed with respect to an offering which is not an underwritten offering, any Selling Holder, from whom the person asserting any losses, claims, damages and liabilities and judgments purchased Restricted Shares or (b) any person controlling such underwriter or Selling Holder, if (i) a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was required by law to have been delivered by such underwriter or Selling Holder (as applicable), (ii) the prospectus had not been sent or given by or on behalf of such underwriter or Selling Holder (as applicable) to such person with or prior to a written confirmation of the sale of the Restricted Shares to such person, (iii) the prospectus (as so amended and supplemented) would have cured the defect giving rise to such loss, claim, damage, liability or judgment and (iv) such failure to deliver the prospectus (as so amended and supplemented) was not the result of noncompliance by the Company with Section 9(f) hereof. (b) In connection with any registration of Restricted Shares under the Securities Act pursuant to this Agreement, each seller of Restricted Shares shall indemnify and hold harmless (in the same manner and to the same extent as set forth in the preceding paragraph of -19- this Section) the Company, each director of the Company, each officer of the Company, each underwriter, broker or other person acting on behalf of such seller, each person who controls any of the foregoing persons within the meaning of the Securities Act and each other seller of Restricted Shares under such registration statement with respect to any statement or omission from such registration statement, any preliminary prospectus or final prospectus contained therein or otherwise filed with the Commission, any amendment or supplement thereto or any document incident to registration or qualification of any Restricted Shares, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company or such underwriter through an instrument duly executed by such seller specifically for use in connection with the preparation of such registration statement, preliminary prospectus, final prospectus, amendment, supplement or document; provided, however, that the obligation to indemnify will be several, not joint and several, among such sellers of Restricted Shares, and the maximum amount of liability in respect of such indemnification shall be in proportion to and limited to, in the case of each seller of Restricted Shares, an amount equal to the net proceeds actually received by such seller from the sale of Restricted Shares effected pursuant to such registration. (c) The indemnification required by this Section 10 will be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred, subject to prompt refund in the event any such payments are determined not to have been due and owing hereunder. (d) Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this Section, such indemnified party will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action (it being understood that no delay in delivering or failure to deliver such notice shall relieve the indemnifying persons from any liability or obligation hereunder unless (and then solely to the extent that) the indemnifying person is prejudiced by such delay and/or failure). In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof; provided, however, that if any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are additional to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party and such indemnifying party shall reimburse such indemnified party and any person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity agreement provided in this Section. (e) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or -20- any officer, director or controlling person of such indemnified party and will survive the transfer of securities. (f) If the indemnification provided for in this Section 10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such loss, claim, damage or liability as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the sellers of Restricted Shares agree that it would not be just and equitable if contributions pursuant to this paragraph were determined by pro rata allocation or by any other method of allocation which did not take into account the equitable considerations referred to herein. The amount paid or payable to an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to above shall be deemed to include, subject to the limitation set forth in the fourth paragraph of this Section 10, any legal or other expenses reasonably incurred in connection with investigating or defending the same. Notwithstanding the foregoing, in no event shall the amount contributed by a seller of Restricted Shares exceed the aggregate net offering proceeds received by such seller from the sale of its Restricted Shares. SECTION 11. UNDERWRITING AGREEMENT. Notwithstanding the provisions of Sections 9 and 10, to the extent that the Company and the holders selling Restricted Shares in a proposed registration shall enter into an underwriting or similar agreement, which agreement contains provisions covering one or more issues addressed in such Sections, the provisions contained in such Sections addressing such issue or issues shall be superseded with respect to such registration by such other agreement. SECTION 12. INFORMATION BY HOLDERS. The holders selling Restricted Shares in a proposed registration shall furnish to the Company such written information regarding such holder and the distribution proposed by such holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. SECTION 13. EXCHANGE ACT COMPLIANCE. The Company shall comply with all of the reporting requirements of the Exchange Act and with all other public information reporting requirements of the Commission -21- which are conditions to the availability of Rule 144 for the sale of the Common Stock. The Company shall cooperate with the Investor in supplying such information as may be necessary for such Investor to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of Rule 144. SECTION 14. NO CONFLICT OF RIGHTS. The Company represents and warrants to the Investors that the registration rights granted to the Investors hereby do not conflict with any other registration rights granted by the Company. The Company shall not, after the date hereof, grant any registration rights which conflict with the registration rights granted hereby; provided, however, that such prohibition shall not apply to the assumption by the Company of any registration right obligations of Building One Services Corporation. SECTION 15. PROTECTIVE PROVISIONS. (a) Until the Maturity Date (assuming full payment and performance by the Company of all of its obligations as of such date, if the Company has not fully paid and performed all of its obligations as of such date, it being understood that the Company's obligations under this section shall survive until such obligations have been satisfied), and so long as (X) if the Convertible Preferred Stock has been converted into shares of Common Stock after the receipt by the holders of notice of the Company's intention to redeem the Convertible Preferred Stock pursuant to the Statement of Designations, then for two years from the date of such conversion, provided that, the Investor and its Affiliates hold in the aggregate Common Stock Equivalents representing at least 25% of the Conversion Shares issuable upon conversion of the Convertible Preferred Stock issued on the Closing Date, or (Y) the Investor and its Affiliates hold in the aggregate at least 25% of the shares of Convertible Preferred Stock issued on the Closing Date, the Company shall not, and shall not permit any Subsidiary, without the prior written consent of the Investor, to take any of the following actions; provided, however, that nothing in this Section 15 shall prohibit any transaction between or among the Company and one or more wholly-owned Subsidiaries or between or among wholly-owned Subsidiaries: (i) merge, consolidate or amalgamate with any person or entity, or sell all or substantially all of the assets of the Company or such Subsidiary (other than in connection with an acquisition or disposition of any business or assets for which the consent of the Investor is not required under clauses (vi) or (vii) below), unless prior to the consummation of such merger, consolidation, amalgamation or sale, the Company has paid the amount provided for in Section 15(c) below; (ii) enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate unless such transaction is (i) in the ordinary course of business of the Company and its Subsidiaries, and (ii) upon fair and reasonable terms no less favorable to the Company and its Subsidiaries than they would obtain in a comparable arm's length transaction with a Person which is not an Affiliate; -22- (iii) engage in any business other than the Business; (iv) effect, approve or authorize any Liquidation, or any Recapitalization (other than any Liquidation or Recapitalization of any wholly-owned Subsidiary); (v) amend, supplement or waive any of the terms or conditions of any agreement between the Company and a shareholder of the Company with respect to the retention by the shareholder of shares of the Company's capital stock unless such amendment waiver or restatement pertains to an agreement with a non-employee of the Company and involves less than 10,000 shares of Common Stock (adjusted for stock splits, stock dividends and similar events after the date hereof); (vi) dispose of any business or asset, (whether by merger, consolidation, sale of stock, share exchange or otherwise) in a single transaction or a series of related transactions with an aggregate value in such transaction or series of related transactions (including all assumed debt, all cash payments, and the fair market value of all securities or other property issued as consideration) in excess of 2.5% of the total assets of the Company; (vii) acquire any business or assets (whether by merger, consolidation, share exchange or otherwise) in a single transaction or a series of related transactions with an aggregate value in such transaction or series of related transactions (including all assumed debt, all cash payments, and the fair market value of all securities or other property issued as consideration) in excess of 2.0% of total assets of the Company; (viii) hire or fire, or amend the employment terms of the Chairman of the Board or the Chief Executive Officer of the Company (or the top two executive officers of the Company, if different), other than amendments to the benefits to which such executives are entitled resulting solely from an amendment to any benefit plan or program in which employees of the Company participate generally; (ix) through any transaction or series of related transactions incur or refinance any Indebtedness; except that the Company and any of its Subsidiaries may incur or refinance any (x) Indebtedness under the Credit Agreement so long as at the time such Indebtedness is incurred and after giving effect to the incurrence thereof, the Consolidated Leverage Ratio of the Company is less than 4.0 to 1.0; (y) any other Indebtedness so long as at the time such Indebtedness is incurred and after giving effect to the incurrence thereof, the aggregate outstanding amount of all such Indebtedness shall not exceed 2 1/2% of the total assets of the Company; or (z) Indebtedness incurred to repurchase or redeem the Convertible Preferred Stock; (x) make any single Capital Expenditure exceeding $10,000,000, or make aggregate Capital Expenditures for the Company and its Subsidiaries in any year exceeding 1.75% of the aggregate consolidated net revenues, as reflected in a budget approved by the Board for such fiscal year; -23- (xi) create or acquire any interest in any Subsidiary other than a wholly- owned Subsidiary unless, after giving effect to such acquisition, the Company's aggregate investment in non-wholly owned Subsidiaries does not exceed 1% of the Company's consolidated total assets as of the end of the last fiscal quarter; (xii) adopt or amend any Equity-Linked Plan or make any bonus payment to any (i) employee of the Company or (ii) any President of any Subsidiary in excess of $250,000 (except pursuant to the terms of the arrangements in effect on the Closing Date); or (xiii) agree or otherwise commit to take any of the actions set forth above. (b) Until the Maturity Date (assuming full payment and performance by the Company of all of its obligations as of such date, if the Company has not fully paid and performed all of its obligations as of such date, it being understood that the Company's obligations under this Section shall survive until such obligations have been satisfied) in the event the Convertible Preferred Stock has been converted into shares of Common Stock after the receipt by the holders of notice of the Company's intention to redeem the Convertible Preferred Stock pursuant to the Statement of Designations and two years has elapsed since the date of such conversion, for so long as the Investor and its Affiliates hold in the aggregate at least 10% of the outstanding Common Stock of the Company, the Company shall not, and shall not permit any Subsidiary, without the prior written consent of the Investor to take any of the following actions provided, however, that nothing in this Section 15 shall prohibit any transaction between the Company and one or more wholly owned Subsidiaries between or among wholly owned Subsidiaries: (i) merge, consolidate or amalgamate with any person or entity, or sell all or substantially all of the assets of the Company or such Subsidiary (other than in connection with an acquisition or disposition of any business or assets for which the consent of the Investor is not required under clauses 15(a)(vi) or (vii) above, unless prior to the consummation of such merger, consolidation, amalgamation or sale, the Company has paid the amount provided for in Section 15(c) below; (ii) enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate unless such transaction is (i) in the ordinary course of business of the Company and its Subsidiaries, and (ii) upon fair and reasonable terms no less favorable to the Company and its Subsidiaries than they would obtain in a comparable arm's length transaction with a Person which is not an Affiliate; (iii) effect, approve or authorize any Liquidation (other than a Liquidation or Recapitalization of a wholly-owned Subsidiary); (iv) hire or fire, or amend the employment terms of the Chairman of the Board or the Chief Executive Officer of the Company (or the top two executive officers of the Company, if different), other than amendments to the benefits to which such -24- executives are entitled resulting solely from an amendment to any benefit plan or program in which employees of the Company participate generally; or (v) agree or otherwise commit to take any of the actions set forth above. (c) If the Company requests that the Investor consent to a merger, consolidation or amalgamation described in Section 15(a)(i) or 15(b)(i) (a "Proposed Transaction") and the Investor fails to consent to such Proposed Transaction within 15 days after delivery of such request, then the Company may consummate the Proposed Transaction without the consent of the Investor, provided the Company purchases from the Investor all of (i) the shares of Convertible Preferred Stock and (ii) the shares of Common Stock of the Company received upon conversion thereof, in each case that are held by the Investor as of the date of the Election Notice (as defined below)((i) and (ii) together the "Retained Shares"), on the terms specified herein. In the event the Company elects to exercise the right of repurchase set forth herein, it shall deliver written notice to the Investor (an "Election Notice") no less than 20 days prior to the date of consummation of the Proposed Transaction. The purchase price of the Retained Shares shall be a sum (the "Purchase Price") that would provide to the Investor a 25% annual rate of return compounded quarterly, on the Original Cost of the shares of Convertible Preferred Stock represented by the Retained Shares, such return to be calculated from the Closing Date through the date of consummation of the Proposed Transaction. The Investor shall and shall cause all of its Affiliates to vote all their shares of capital stock of the Company (or to execute one or more written consents) in favor of any Proposed Transaction as to which it has received an Election Notice. The closing of the purchase of the Retained Shares pursuant to this Section 15(c) shall take place on the date of consummation of the Proposed Transaction at which time the Company shall pay to the Investor the Purchase Price, and the Investor shall deliver or cause to be delivered to the Company certificates representing the Retained Shares. SECTION 16. STANDSTILL. Except pursuant to Section 2 hereof, prior to the second anniversary of the Closing Date, the Investor shall not purchase or agree to purchase or otherwise acquire beneficial ownership of additional shares of Common Stock, other than by conversion of the Convertible Preferred Stock in accordance with the terms of the Statement of Designations or by exercise of its warrants to purchase shares of common stock of Building One Services Corporation, if after giving effect to such proposed purchase, the Investor and its Affiliates would own in the aggregate Common Stock Equivalents equal to greater than 30% of the outstanding Voting Stock of the Company on such date. SECTION 17. VOTING AGREEMENT. The Investor agrees to vote all shares of capital stock held by the Investor (by proxy or in person) in favor of the slate of directors recommended by the Board to the shareholders at the annual shareholders' meetings of the Company to be held in 2000 and 2001 and to cause all other Affiliates of the Investor to vote their shares of capital stock of the Company in such manner. The Investor and its Affiliates shall not enter into any agreement or arrangement that confers on any Person, other than an Affiliate of the Investor, the right to vote -25- (or execute written consents with respect to) any shares of Convertible Preferred Stock or Conversion Shares, while such securities are owned by the Investor or its Affiliates. SECTION 18. MISCELLANEOUS. (a) Restrictive Legends. (i) Each certificate for Restricted Shares (unless otherwise permitted by the provisions of Section 18(a) (ii)) shall include a legend in substantially the following form: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON VOTING, TRANSFER AND OTHER MATTERS AS SET FORTH IN THE INVESTOR'S RIGHTS AGREEMENT DATED AS OF FEBRUARY 22, 2000;" (ii) Subject to Section 18(a)(iii), any holders of Restricted Shares registered pursuant to the Securities Act and qualified under applicable state securities laws may exchange certificates representing such Restricted Shares on transfer for new certificates that shall not bear the legend set forth in paragraph (i) of this Section 18(a); (iii) Compliance with Securities Laws. Upon any proposed transfer of Restricted Shares, the Company shall register the transfer of such Restricted Shares on the stock transfer books of the Company if the Company shall have received (A) to the extent required to ensure compliance with the Securities Act, an opinion of counsel reasonably satisfactory to the Company, to the effect that the proposed transfer of Restricted Shares may be effected without registration under the Securities Act, (B) representation letters in form and substance reasonably satisfactory to the Company to ensure compliance with the provisions of the Securities Act and (C) the agreement of the transferee to comply with the provisions of Section 16 and 17 of this Agreement. Each certificate evidencing Restricted Shares transferred as above provided shall bear the legend set forth in Section 18(a)(i), except that such certificate shall not bear such legend if neither such legend nor the restrictions on transfer in Section 18(a) are required in order to ensure compliance with the provisions of the Securities Act. (b) Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, void or otherwise unenforceable provisions shall be null and void. It is the intent of the parties, however, that any invalid, void or otherwise unenforceable provisions be automatically replaced by other -26- provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable to the fullest extent permitted by law. (c) Entire Agreement. This Agreement, together with the Subscription Agreement, contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior arrangements or understandings with respect hereto. (d) Successors and Assigns. This Agreement shall bind and inure to the benefit of the Company and the Investor and their respective successors and permitted assigns; provided, however, that each such person or entity shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement whereupon such person or entity shall have the benefits of, and shall be subject to the restrictions contained in, this Agreement with respect to such Restricted Shares, including the provisions of Section 16 and 17; provided, further, that the Investor shall not be entitled to assign its rights under Sections 2, 3, 4 or 15 without the consent of the Company other than to an Affiliate of the Investor. (e) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. The failure of any Investor to execute this Agreement does not make it invalid as against any other Investor. (f) Remedies. The Investor shall have all rights and remedies reserved for such Investor pursuant to this Agreement and the Articles of Incorporation and the By-laws of the Company, as amended, and all rights and remedies which such Investor has been granted at any time under any other agreement or contract and all of the rights which such holder has under any law or equity. Any person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. (i) The parties hereto agree that if any parties seek to resolve any dispute arising under this Agreement pursuant to a legal proceeding, the prevailing parties to such proceeding shall be entitled to receive reasonable fees and expenses (including reasonable attorneys' fees and expenses) incurred in connection with such proceedings. (ii) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved person will be irreparably damaged and will not have an adequate remedy at law. Any such person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. (g) Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument and shall be -27- deemed to have been duly given when delivered in person, by telecopy, by nationally-recognized overnight courier, or by first class registered or certified mail, postage prepaid, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by the addressee to the addressor: (i) if to the Company, to: Group Maintenance America Corp. 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 Phone: (713) 860-0100 Fax: (713) 626-4766 Attention: Chief Executive Officer with copies to: Bracewell & Patterson 711 Louisiana, Suite 2900 Houston, Texas 77002 Phone: (713) 223-2900 Fax: (713) 221-1212 Attention: John L. Bland, Esq. (ii) and, if to the Investor, to: BOSS II, LLC c/o Apollo Management, L.P. 1301 Avenue of the Americas, 38th Floor New York, New York 10019 Phone: (212) 515-3201 Fax: (212) 515-3262 Attention: Andrew Africk with copies to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 24th Floor New York, New York 10112 Phone: (212) 408-2400 Fax: (212) 728-5950 Attention: John M. Scott, Esq. All such notices, requests, consents and other communications shall be deemed to have been delivered when received, or if received after the close of business, on the next business day. (h) Governing Law; Jurisdiction; Venue; Process. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard -28- to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of New York. Any legal action in a proceeding brought in accordance with this Section shall be brought in the courts of the State of New York or of the United States District Court for the Southern District of New York, and by execution and delivery of this Agreement, the parties hereby irrevocably accept for themselves and in respect of their property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. The parties hereby irrevocably waive any objection which they may now or hereafter have to laying of venue of any actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to above and hereby further irrevocably waive and agree, not to plead or claim in any such court that any such action or proceeding has been brought in an inconvenient forum. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without necessity for service by any other means provided by statute or rule of court. (i) Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. (j) Modifications; Amendments; Waivers. The terms and provisions of this Agreement may not be modified, amended or waived, except pursuant to a writing signed by the Company and the Investor, provided, however, Sections 10 through 14 may be amended pursuant to a writing signed by the Company and the holders of a majority of the Restricted Shares . (k) Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. (l) Waiver. No course of dealing between the Company and the Investor or any delay in exercising any rights hereunder will operate as a waiver of any rights of any party to this Agreement. The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. (m) Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. -29- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. GROUP MAINTENANCE AMERICA CORP. By: /s/ DARREN B. MILLER ---------------------------------- Name: Darren B. Miller Title: Chief Financial Officer BOSS II, LLC By: /s/ ANDREW AFRICK ---------------------------------- Name: Andrew Africk Title: Manager EX-10.18 13 WARRANT AGREEMENT EXHIBIT 10.18 WARRANT AGREEMENT dated as of November 25, 1997 between Consolidation Capital Corporation, a Delaware corporation (the "Company"), and Friedman, Billings, Ramsey & Co., Inc. (hereinafter referred to as the "Representative"). W I T N E S S E T H: WHEREAS, the Representative has agreed, pursuant to the underwriting agreement (the "Underwriting Agreement") dated November 25, 1997 between the Representative, as representative of the several Underwriters named in the Underwriting Agreement (the "Underwriters") and the Company, to act as one of the underwriters in connection with the Company's proposed initial public offering (the "Public Offering") of 24,000,000 shares of Common Stock ("Public Shares") at an initial public offering price of $20.00 per Public Share; and WHEREAS, the Company proposes to issue to the Representative, in its individual capacity and not as representative of the several Underwriters (defined below) warrants ("Warrants") to purchase up 1,130,000 shares of common stock, par value $.001 per share ("Common Stock") (the shares of Common Stock covered by the Warrants are referred to as "Shares"); and WHEREAS, the Warrants issued pursuant to this Agreement are being issued by the Company to the Representative or officers or partners of the Representative in consideration for, and as part of the Representative's compensation in connection with, the Representative acting as one of the underwriters pursuant to the Underwriting Agreement; NOW, THEREFORE, in consideration of the premises and the agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. GRANT. The Representative, and/or any of its designees who are officers or partners of the Representative is hereby granted the right to purchase, at any time from November 25, 1998 until 5:00 P.M., New York City time, on November 25, 2002 (the "Warrant Exercise Term"), up to 1,130,000 shares of Common Stock at an initial exercise price (subject to adjustment as provided in Article 8 hereof) of $20.00 per Share. Except as provided in Section 13 hereof, the Shares are in all respects identical to the Public Shares being sold to the public pursuant to the terms and provisions of the Underwriting Agreement. 2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant Certificates") delivered and to be delivered pursuant to this Agreement shall be in the form set forth as Exhibit A, attached hereto and made a part hereof, with such appropriate insertions, omissions, substitutions and other variations as required or permitted by this Agreement. 3. EXERCISE OF WARRANTS. 3.1 CASH EXERCISE. The Warrants initially are exercisable at a price of $20.00 per Share purchased, payable in cash or by check to the order of the Company, or any combination of cash or check, subject to adjustment as provided in Article 8 hereof. Upon surrender of the Warrant Certificate with the annexed Form of Election to Purchase duly executed, together with payment of the Exercise Price (as hereinafter defined) for the Shares purchased, at the principal office of the Company (presently located at 1747 Pennsylvania Avenue, NW, Suite 900, Washington, DC 20006) or at the office of its transfer agent, the registered holder(s) of a Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a certificate or certificates for the Shares so purchased. The purchase rights represented by each Warrant Certificate are exercisable at the option of the Holder hereof, in whole or in part (but not as to fractional Shares). In the case of the purchase of less than all of the Shares purchasable under any Warrant Certificate, the Company shall cancel said Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate of like tenor for the balance of the Shares purchasable thereunder. 3.2 CASHLESS EXERCISE. At any time during the Warrant Exercise Term, the Holder may, at its option, exchange this Warrant, in whole or in part (a "Warrant Exchange"), into the number of Shares determined in accordance with this Section 3.2, by surrendering this Warrant at the principal office of the Company or at the office of its transfer agent, accompanied by a notice stating such Holder's intent to effect such exchange, the number of Shares to be exchanged and the date on which the Holder requests that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company (the "Exchange Date"). Certificates for the Shares issuable upon such Warrant Exchange and, if applicable, a new warrant of like tenor evidencing the balance of the Shares remaining subject to this Warrant, shall be issued as of the Exchange Date and delivered to the Holder within three (3) days following the Exchange Date. In connection with any Warrant Exchange, this Warrant shall represent the right to subscribe for and acquire the number of Shares (rounded to the next highest integer) equal to (i) the number of Shares specified by the Holder in its Notice of Exchange (the "Total Number"), but in no case more than the number of shares equal to the number of shares listed on the warrant certificate, less (ii) the number of Shares equal to the quotient obtained by dividing (A) the product of the Total Number and the existing Exercise Price (as hereinafter defined) by (B) the current market value of a Public Share. 4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants, the issuance of certificates for the Shares purchased shall be made forthwith (and in any event within three business days thereafter) without charge to the Holder thereof including, without limitation, any tax which may be payable in respect of the issuance thereof, and such certificates shall (subject to the provisions of Article 5 hereof) be issued in the name of, or in such names as may be directed by, the Holder thereof; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificates in a name other than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Warrant Certificates and the certificates representing the Shares shall be executed on behalf of the Company by the manual or facsimile signature of the present or any future Chairman or Vice Chairman of the Board of Directors or President or Vice President of the Company under its corporate seal reproduced thereon, attested to by the manual or facsimile signature of the present or any future Secretary or Assistant Secretary of the Company. Warrant Certificates shall be dated the date of execution by the Company upon initial issuance, division, exchange, substitution or transfer. Upon exercise, in part or in whole, of the Warrants, certificates representing the Shares shall bear a legend substantially similar to the following: "The securities represented by this certificate and the other securities issuable upon exercise thereof have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii), to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under such Act relating to the disposition of securities), or (iii) upon the delivery by the holder to the Company of an opinion of counsel, reasonably satisfactory to counsel to the Company, stating that an exemption from registration under such Act is available." 5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant Certificate, by its acceptance thereof, covenants and agrees that the Warrants are being acquired as an investment and not with a view to the distribution thereof, and that the Warrants may not be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or in part, except (i) to officers, directors or affiliates of the Representative (ii) to transferees whom in the opinion of counsel to the Company qualify for an exemption from the Act pursuant to a section 4 (1 1/2) analysis. The Warrant Certificate may bear a legend substantially similar to the following: . 6. PRICE. 6.1 INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise price of each Warrant shall be $20.00 per Share. The adjusted exercise price shall be the price which shall result from time to time from any and all adjustments of the initial exercise price in accordance with the provisions of Article 8 hereof. 6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the initial exercise price or the adjusted exercise price, depending upon the context. 7. REGISTRATION RIGHTS. 7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. None of the Warrants nor the Shares have been registered for purposes of public distribution under the Securities Act of 1933, as amended (the "Act"). 7.2 REGISTRABLE SECURITIES. As used herein the term "Registrable Security" means each of the Shares and any Common Stock issued upon any stock split or stock dividend in respect of such Shares; provided, however, that with respect to any particular Registrable Security, such security shall cease to be a Registrable Security when, as of the date of determination, (i) it has been effectively registered under the Act and disposed of pursuant thereto, (ii) registration under the Act is no longer required for subsequent sale of such security or (iii) it has ceased to be outstanding. The term "Registrable Securities" means any and/or all of the securities falling within the foregoing definition of a "Registrable Security." In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be made in the definition of "Registrable Security" as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Article 7. 7.3 PIGGYBACK REGISTRATION. (a) If, at any time during the seven years following the date of this Agreement, the Company proposes to prepare and file one or more registration statement(s) filed in connection with a public offering covering equity securities of the Company, or any such securities of the Company held by its shareholders (other than in connection with an exchange offer, a "rights" offering to shareholders, an offering relating to an employee benefit plan, dividend reinvestment plan, an acquisition, a merger, the conversion of any convertible securities, an exchange of a security, or a stand-by underwriting with respect to the call of a warrant, option, right or convertible security for redemption), (for purposes of this Article 7, collectively, a "Registration Statement"), it will give written notice of its intention to do so by registered mail ("Notice"), at least thirty (30) business days prior to the filing of each such Registration Statement, to all holders of the Registrable Securities or, in the event that the Company has not formulated its intent to file such Registration Statement at least thirty (30) calendar days before the anticipated filing date of the Registration Statement, as soon as practicable upon the formation by the Company of such intent. However, no such Notice need be given if the Registration Statement is for an underwritten offering of securities other than equity securities or securities convertible into equity securities. Upon the written request of such a holder (a "Requesting Holder"), made within twenty (20) business days after receipt of the Notice, that the Company include any of the Requesting Holder's Registrable Securities in the proposed Registration Statement, the Company shall, as to each such Requesting Holder, use its best efforts to effect the registration under the Act of the Registrable Securities which it has been so requested to register ("Piggyback Registration"), at the Company's sole cost and expense and at no cost or expense to the Requesting Holders. The Company shall not be required to honor any such request (i) if, in opinion of counsel to the Company reasonably acceptable to such Holder who wishes to have such Registrable Securities included in such Registration Statement, registration under the Act is not required for the transfer of the Registrable Securities in the manner proposed by such Holder; or (ii) to register in the aggregate fewer than 25,000 Shares held by the Holders. The Company shall permit, or shall use its best efforts to cause the managing underwriter of a proposed offering to permit, the Holders of Registrable Securities requested to be included in the registration (the "Piggy-Back Shares") to include such Piggy-Back Shares in the proposed offering on the same terms and conditions as applicable to the shares of Common Stock offered by the Company and for the account of any person other than the Company, as the case may be. (b) Notwithstanding the foregoing, if any such managing underwriter shall advise the Company in writing that, in its opinion, the distribution of all or a portion of the Registrable Securities requested to be included in the Registration Statement concurrently with the shares of Common Stock being registered by the Company would materially adversely affect the distribution of such securities by the Company for its own account, or for the account of any person or persons other than the Company that have asserted, with respect to such registration, demand registration rights under any other agreement, then such inclusion of Registrable Securities shall be made pro rata among the aggregate of the Registrable Securities for which a proper request was made under this subsection 7.3 and any other securities properly requested to be included in the registration by other holders pursuant to piggy-back or incidental registration rights under any other agreement. 7.4 DEMAND REGISTRATION. (a) At any time during the Warrant Exercise Term, any "Majority Holder" (as such term is defined in Section 7.4(c) below) of the Registrable Securities shall have the right (which right is in addition to the piggyback registration rights provided for under Section 7.3 hereof), exercisable by written notice to the Company (the "Demand Registration Request"), to have the Company prepare and file with the Securities and Exchange Commission (the "Commission"), on one occasion, at the sole expense of the Company, a Registration Statement and such other documents, including a prospectus, as may be necessary (in the opinion of both counsel for the Company and counsel for such Majority Holder), in order to comply with the provisions of the Act, so as to permit a public offering and sale of the Registrable Securities by the holders thereof, for twelve (12) consecutive months. The Company shall not be required to file any amendments to the Registration Statement required by this subsection 7.4(a) except as is necessary to keep the disclosure about the Company current. (b) The Company covenants and agrees to give written notice of any Demand Registration Request to all holders of the Registrable Securities within ten (10) days from the date of the Company's receipt of any such Demand Registration Request. After receiving notice from the Company as provided in this Section 7.4(b), holders of Registrable Securities may request the Company to include their Registrable Securities in the Registration Statement to be filed pursuant to Section 7.4(a) hereof by notifying the Company of their decision to include such securities within ten (10) days of their receipt of the Company's notice. (c) The term "Majority Holder" as used in this Section 7.4 shall mean any holder or any combination of holders of Registrable Securities, if included in such holders' Registrable Securities are that aggregate number of Shares (including Shares already issued and Shares issuable pursuant to the exercise of outstanding Warrants) as would constitute a majority of the aggregate number of Shares (including Shares already issued and Shares issuable pursuant to the exercise of outstanding Warrants) included in all of the Registrable Securities. 7.5 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The Company covenants and agrees as follows: (a) In connection with any registration under Section 7.4 hereof, the Company shall file the Registration Statement as expeditiously as possible, but in no event later than thirty (30) days following receipt of any demand therefor, shall use its best efforts to have any such Registration Statements declared effective at the earliest possible time. If a written request, however, is received by the Company that would require the filing of a Registration Statement between 45 and 105 days after the end of its fiscal year, the deadline for the filing of the Registration Statement shall be extended until the 106th day of such fiscal year. The Company shall furnish each holder of Registrable Securities such number of prospectuses as shall reasonably be requested. However, in connection with any registration under Sections 7.3 and 7.4 hereof, the Company shall have sole control in connection with the preparation, filing, amending and supplementing of the Registration Statement, including the right to withdraw the same or delay the effectiveness thereof when, in the sole judgment of the Board of Directors of the Company, the filing or pendency of such registration statement or the effectiveness thereof would impose an undue burden upon the ability by the Company to proceed with any other material financing for its own account or any material corporate transaction, including, but not limited to, a reorganization, recapitalization, merger, consolidation or material acquisition of the securities or assets of another firm or corporation; provided, however, that the Company's exercise of any such right of withdrawal or delay shall not be deemed a waiver of the rights of the Holders, and the Company shall be required to file a new Registration Statement or to proceed with such actions as reasonably may be required to cause the Registration Statement to become effective within a reasonable time after the consummation of the event or transaction which required such withdrawal or delay. (b) The Company shall pay all costs, fees and expenses in connection with all Registration Statements filed pursuant to Sections 7.3 and 7.4(a) hereof including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses. Each Holder, however, shall pay the underwriting discount attributable to such Holder's Registrable Securities, any transfer tax payable with respect thereto and the fees and expenses of such Holder's counsel. (c) The Company will take all necessary action which may be required in qualifying or registering the Registrable Securities included in a Registration Statement for offering and sale under the securities or blue sky laws of such states as are requested by the holders of such securities, provided that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (d) The Company shall indemnify any holder of the Registrable Securities to be sold pursuant to any Registration Statement and any underwriter or person deemed to be an underwriter under the Act and each person, if any, who controls such holder or underwriter or person deemed to be an underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage, expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such Registration Statement to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 8 of the Underwriting Agreement and shall provide for just and equitable contribution as set forth in Section 8 of the Underwriting Agreement. (e) Any holder of Registrable Securities to be sold pursuant to a Registration Statement, and its successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished in writing by or on behalf of such holder, or its successors or assigns, for specific inclusion in such Registration Statement to the same extent and with the same effect as the provisions contained in Section 8 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company and shall provide for just and equitable contribution as set forth in Section 8 of the Underwriting Agreement. (f) Nothing contained in this Agreement shall be construed as requiring any Holder to exercise his Warrants prior to the initial filing of any Registration Statement or the effectiveness thereof. (g) If the Company shall fail to comply with the provisions of this Article 7, the Company shall, in addition to any other equitable or other relief available to the holders of Registrable Securities, be liable for any or all incidental, special and consequential damages sustained by the holders of Registrable Securities that request registration of their Registrable Securities. (h) Except as set forth in Section 7.5(j) hereof, the Company shall not permit the inclusion of any securities other than the Registrable Securities to be included in any Registration Statement filed pursuant to Section 7.4 hereof, or permit a Registration Statement relating to an underwritten offering of the same securities as the Registrable Securities to be filed during an underwritten offering of the Registrable Securities covered by a Registration Statement filed pursuant to Section 7.4 hereof, without the prior written consent of the Majority Holders, which consent shall not be unreasonably withheld. (i) The Company shall deliver promptly to each holder of Registrable Securities participating in the offering in which such Holder's shares are being registered pursuant to Section 7.3 hereof and requesting the correspondence and memoranda described in this Section 7.5(i) and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the Registration Statement and permit each holder of Registrable Securities and underwriters to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the Registration Statement as it deems reasonably necessary to comply with applicable securities laws or rules of the National Association of Securities Dealers, Inc. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times and as often as any such holder of Registrable Securities or underwriter shall reasonably request. (j) Upon the written request therefor by any holders of Registrable Securities, the Company shall include in the Registration Statement filed for an underwritten offering covering any such holders Registrable Securities, any additional shares of Common Stock of the Company held by such holders as of the date of filing of such Registration Statement. The holders shall pay any additional costs, fees and expenses associated with the inclusion on such Registration Statement of any of such holders shares of Common Stock that are not Registerable Securities that are included on the Registration Statement. Notwithstanding the foregoing, if any such managing underwriter shall advise the Company in writing that, in its opinion, the distribution of all or a portion of the Common Stock that are not Registrable Securities requested to be included in the Registration Statement concurrently with the Registrable Securities being registered by such holders would materially adversely affect the distribution of such offering then such additional shares of Common Stock shall be excluded from the Registration Statement. (k) Upon the written request therefor by any holders of Registrable Securities, the Company shall include in the Registration Statement filed for a non-underwritten offering covering any of the Registrable Securities, any other securities of the Company held by such holders as of the date of filing of such Registration Statement, including, without limitation, restricted shares of Common Stock, options, warrants or any other securities convertible into shares of Common Stock. The holders shall pay any additional costs, fees and expenses associated with the inclusion on such Registration Statement of any of such holders other securities of the Company that are not Registerable Securities that are included on the Registration Statement. 8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SECURITIES. The following adjustments apply to the Exercise Price of the Warrants with respect to the Shares and the number of Shares purchasable upon exercise of the Warrants. 8.1 COMPUTATION OF ADJUSTED PRICE. In case the Company shall at any time after the date hereof pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to its stockholders, then upon such dividend or distribution the Exercise Price in effect immediately prior to such dividend or distribution shall forthwith be reduced to a price determined by dividing: (a) an amount equal to the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution multiplied by the Exercise Price in effect immediately prior to such dividend or distribution, by (b) the total number of shares of Common Stock outstanding immediately after such issuance or sale. For the purposes of any computation to be made in accordance with the provisions of this Section 8.1, the shares of Common Stock issuable by way of a dividend or other distribution on any shares of Common Stock of the Company shall be deemed to have been issued immediately after the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution. 8.2 SUBDIVISION AND COMBINATION. In case the Company shall at any time subdivide or combine the outstanding shares of Common Stock, the Exercise Price shall forthwith be proportionately decreased in the case of a subdivision or increased in the case of a combination. 8.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the Exercise Price pursuant to the provisions of this Article 8, the number of Shares issuable upon the exercise of each Warrant shall be adjusted to the nearest full Share by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. 8.4 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or in the case of a sale or conveyance to another corporation of the property of the Company as an entirety, the Holders shall thereafter have the right to purchase the kind and number of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance as if the Holders were the owners of the Shares immediately prior to any such events and at an aggregate price equal to the product of (x) the number of shares of Common Stock issuable upon exercise of the Holders' Warrants and (y) the Exercise Price in effect immediately prior to the record date for such reclassification, change, consolidation, merger, sale or conveyance as if such Holders had exercised the Warrants. 8.5 DETERMINATION OF OUTSTANDING COMMON STOCK. The number of shares of Common Stock at any one time outstanding shall include the aggregate number of shares issued or issuable upon the exercise of options, rights, warrants and upon the conversion or exchange of convertible or exchangeable securities. 8.6 SUBSCRIPTION RIGHTS FOR COMMON STOCK OR OTHER SECURITIES. In the case that the Company or an affiliate of the Company shall at any time after the date hereof and prior to the exercise of all of the Warrants issue any rights to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all of the shareholders of the Company, the Holders of the unexercised Warrants shall be entitled, in addition to the shares of Common Stock or other securities receivable upon the exercise of the Warrants, to receive at the time such rights as are distributed to the other shareholders of the Company. 9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant Certificate is exchangeable without expense, upon the surrender hereof by the registered Holder at the principal executive office of the Company, for a new Warrant Certificate of like tenor and date representing in the aggregate the right to purchase the same number of Shares in such denominations as shall be designated by the Holder thereof at the time of such surrender. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Warrants, if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor, in lieu thereof. 10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Warrants nor shall it be required to issue scrip or pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of Shares. 11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Common Stock as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Warrants and payment of the Exercise Price therefor, all Shares issuable upon such exercise shall be duly and validly issued, fully paid, non-assessable and not subject to the preemptive rights of any shareholder. As long as the Warrants shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon the exercise of the Warrants to be listed on or quoted by the Nasdaq National Market, or listed on such national securities exchanges as requested by the Underwriter. 12. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement shall be construed as conferring upon the Holder or Holders the right to vote or to consent or to receive notice as a stockholder in respect of any meetings of stockholders for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Warrants and their exercise, any of the following events shall occur: (a) the Company shall take a record of all of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or (b) the Company shall offer to all of the holders of its shares of Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor; or (c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business as an entirety shall be proposed; or (d) reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the shares of outstanding Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or a sale or conveyance to another corporation of the property of the Company as an entirety is proposed; or (e) the Company or an affiliate of the Company shall propose to issue any rights to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all the stockholders of the Company; then, in any one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, options or warrants, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to give such notice or any defect therein shall not affect the validity of any action taken in connection with the declaration or payment of any such dividend or distribution, or the issuance of any convertible or exchangeable securities or subscription rights, options or warrants, or any proposed dissolution, liquidation, winding up or sale. 13. NOTICES. All of notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered, or mailed by registered or certified mail, return receipt requested: (a) If to a registered Holder of the Warrants, to the address of such Holder as shown on the books of the Company; or (b) If to the Company, to the address set forth in Section 3 of this Agreement or to such other address as the Company may designate by notice to the Holders. 14. SUPPLEMENTS AND AMENDMENTS. The Company and the Representative may from time to time supplement or amend this Agreement without the approval of any Holders of Warrant Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Representative may deem necessary or desirable and which the Company and the Representative deem not to adversely affect the interests of the Holders of Warrant Certificates. 15. SUCCESSORS. All of the covenants and provisions of this Agreement by or for the benefit of the Company and the Holders inure to the benefit of their respective successors and assigns hereunder. 16. TERMINATION. This Agreement shall terminate at the close of business on November 25, 2005. Notwithstanding the foregoing, this Agreement will terminate on any earlier date when all Warrants have been exercised and all Shares have been resold to the public. 17. GOVERNING LAW. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of said State. 18. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the Underwriter and any other registered holder or holders of the Warrant Certificates, or Shares any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and the Underwriter and any other holder or holders of the Warrant Certificates, Warrants or the Shares. 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. CONSOLIDATION CAPITAL CORPORATION By: /s/ JOHATHAN J. LEDECKY -------------------------------- Name: Jonathan J. Ledecky Title: Chairman and Chief Executive Officer Attest: /s/ F. T. BECK - -------------------------- FRIEDMAN, BILLINGS, RAMSEY & CO., INC. By: /s/ JAMES R. KLEEBLATT -------------------------------- Name: James R. Kleeblatt Title: Managing Director EXHIBIT A THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, November 25, 2002 No. W-1 1,130,000 Warrants WARRANT CERTIFICATE This Warrant Certificate certifies that Friedman, Billings, Ramsey & Co., Inc. or registered assigns, is the registered holder of 1,130,000 Warrants to purchase, at any time from November 25, 1998 until 5:00 P.M. New York City time on November 25, 2002 ("Expiration Date"), up to 1,130,000 fully paid and non- assessable shares ("Shares") of the Common Stock, par value $.001 per share ("Common Stock"), of Consolidation Capital Corporation, a Delaware corporation (the "Company"), at the initial exercise price, subject to adjustment in certain events (the "Exercise Price"), of $20.00 per Share, upon surrender of this Warrant Certificate and payment of the Exercise Price at an office or agency of the Company, but subject to the conditions set forth herein and in the warrant agreement dated as of November 25, 1997 between the Company and Friedman, Billings, Ramsey & Co., Inc. (the "Warrant Agreement"). Payment of the Exercise Price may be made in cash, or by check payable to the order of the Company, or any combination of cash or check, or pursuant to Section 3.2 of the Warrant Agreement. No Warrant may be exercised after 5:00 P.M., New York City time, on the Expiration Date, at which time all Warrants evidenced hereby, unless exercised prior thereto, shall thereafter be void. The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to in a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. The Warrant Agreement provides that upon the occurrence of certain events, the Exercise Price and/or number of the Company's securities issuable thereupon may, subject to certain conditions, be adjusted. In such event, the Company will, at the request of the holder, issue a new Warrant Certificate evidencing the adjustment in the Exercise Price and the number and/or type of securities issuable upon the exercise of the Warrants; provided, however, that the failure of the Company to issue such new Warrant Certificates shall not in any way change, alter, or otherwise impair, the rights of the holder as set forth in the Warrant Agreement. Upon due presentment for registration of transfer of this Warrant Certificate at an office or agency of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided herein and in the Warrant Agreement, without any charge except for any tax, or other governmental charge imposed in connection therewith. Upon the exercise of less than all of the Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Warrant Certificate representing such number of unexercised Warrants. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. All terms used in this Warrant Certificate which are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed under its corporate seal. Dated: December 2, 1997 CONSOLIDATION CAPITAL CORPORATION [SEAL] By: /s/ JONATHAN J. LEDECKY ------------------------------------ Name: Jonathan J. Ledecky Title: Chairman and Chief Executive Officer [FORM OF ELECTION TO PURCHASE] The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase _________ Shares and herewith tenders in payment for such Shares cash or a certified or official bank check payable in New York Clearing House Funds to the order of CONSOLIDATION CAPITAL CORPORATION in the amount of $__________, all in accordance with the terms hereof. The undersigned requests that a certificate for such Shares be registered in the name of ___________________, whose address is __________________, and that such Certificate be delivered to __________________, whose address is _____________. Dated: Signature:_______________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate.) ________________________________ ________________________________ (Insert Social Security or Other Identifying Number of Holder) [FORM OF ASSIGNMENT] (To be executed by the registered holder if such holder desires to transfer the Warrant Certificate.) FOR VALUE RECEIVED _________________________________________________ hereby sells, assigns and transfers unto _____________________________________________________________________________ (Please print name and address of transferee) this Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________, Attorney, to transfer the within Warrant Certificate on the books of the within-named Company, with full power of substitution. Dated: Signature:______________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate) _______________________________ ________________________________ Insert Social Security or Other Identifying Number of Assignee) EX-10.19 14 WARRANT AGREEMENT EXHIBIT 10.19 WARRANT AGREEMENT dated as of November 25, 1997 between Consolidation Capital Corporation, a Delaware corporation (the "Company"), and Jonathan J. Ledecky, a resident of the District of Columbia ("Mr. Ledecky"). W I T N E S S E T H: WHEREAS, the Company proposes to issue to Mr. Ledecky warrants ("Warrants") to purchase 1,950,000 shares of common stock, par value $.001 per share ("Common Stock"), on the closing date of the initial public offering (the shares of Common Stock covered by the Warrants are referred to as the "Shares"); WHEREAS the Company in connection with its initial public offering has entered into an underwriting agreement with Friedman, Billings, Ramsey & Co., Inc. dated November 25, 1997 (the "Underwriting Agreement"); and WHEREAS, the Warrants issued pursuant to this Agreement are being issued by the Company to Mr. Ledecky in connection with the Company's initial public offering and in view of his interest in having the ability to purchase additional shares of Common Stock in the Company; NOW, THEREFORE, in consideration of the premises and the agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. GRANT. Mr. Ledecky is hereby granted the right to purchase, at any time from November 25, 1997 until 5:00 p.m., Washington, D.C. time, on November 25, 2007 (the "Warrant Exercise Term"), 1,950,000 shares of Common Stock on the closing date of the initial public offering at an initial exercise price (subject to adjustment as provided in Article 7 hereof) of $20.00 per Share. Except as provided in Section 12 hereof, the Shares are in all respects identical to the public shares being sold to the public pursuant to the terms and provisions of the Underwriting Agreement. 2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant Certificates") delivered and to be delivered pursuant to this Agreement shall be in the form set forth as Exhibit A, attached hereto and made a part hereof, with such appropriate insertions, omissions, substitutions and other variations as required or permitted by this Agreement. 3. EXERCISE OF WARRANTS. 3.1 CASH EXERCISE. The Warrants initially are exercisable at a price of $20.00 per Share purchased, payable in cash or by check to the order of the Company, or any combination of cash or check, subject to adjustment as provided in Article 7 hereof. Upon surrender of the Warrant Certificate with the annexed Form of Election to Purchase duly executed, together with payment of the Exercise Price (as hereinafter defined) for the Shares purchased, at the principal office of the Company (presently located at 1747 Pennsylvania Avenue, NW, Suite 900, Washington, D.C. 20006) or at the office of its transfer agent, the registered holder(s) of a Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a certificate or certificates for the Shares so purchased. The purchase rights represented by each Warrant Certificate are exercisable at the option of the Holder hereof, in whole or in part (but not as to fractional Shares). In the case of the purchase of less than all of the Shares purchasable under any Warrant Certificate, the Company shall cancel said Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate of like tenor for the balance of the Shares purchasable thereunder. 4. RESTRICTION ON TRANSFER. The Holder of a Warrant Certificate, by its acceptance thereof, covenants and agrees that the Warrants are being acquired as an investment and not with a view to the distribution thereof, and that the Warrants may not be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or in part, except (i) to officers, directors or affiliates of Mr. Ledecky or (ii) to transferees whom with the opinion of counsel, acceptable to the Company and the transferor, that such transfer is exempt from registration under the Securities Act of 1933, as amended (the "Act"). The Warrant Certificate issued pursuant to (ii) above will bear a legend stating that the Warrants may only be exercised if there is an applicable exemption under the Act, for the issuance of shares of Common Stock of the Company upon the exercise of the Warrants. Additionally, upon exercise, in part or in whole, of the Warrants, certificates representing the Shares shall bear a legend substantially similar to the following: "The securities represented by this certificate and the other securities issuable upon exercise thereof have not been registered under the Act, and may not be offered or sold except (i) pursuant to an effective registration statement under the Act, (ii), to the extent applicable, pursuant to Rule 144 under the Act (or any similar rule under such Act relating to the disposition of securities), or (iii) upon the delivery by the holder to the Company of an opinion of counsel, reasonably satisfactory to counsel to the Company, stating that an exemption from registration under such Act is available." 5. PRICE. 5.1 INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise price of each Warrant shall be $20.00 per Share. The adjusted exercise price shall be the price which shall result from time to time from any and all adjustments of the initial exercise price in accordance with the provisions of Article 7 hereof. 5.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the initial exercise price or the adjusted exercise price, depending upon the context. 6. REGISTRATION RIGHTS. 6.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. None of the Warrants nor the Shares have been registered for purposes of public distribution under the Act. 6.2 REGISTRABLE SECURITIES. As used herein the term "Registrable Security" means each of the Shares and any Common Stock issued upon any stock split or stock dividend in respect of such Shares; provided, however, that with respect to any particular Registrable Security, such security shall cease to be a Registrable Security when, as of the date of determination, (i) it has been effectively registered under the Act and disposed of pursuant thereto, (ii) registration under the Act is no longer required for subsequent sale of such security or (iii) it has ceased to be outstanding. The term "Registrable Securities" means any and/or all of the securities falling within the foregoing definition of a "Registrable Security." In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be made in the definition of "Registrable Security" as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Article 7. 6.3 PIGGYBACK REGISTRATION. (a) If, at any time during the twelve years following the date of this Agreement, the Company proposes to prepare and file one or more registration statement(s) filed in connection with a public offering covering equity securities of the Company, or any such securities of the Company held by its shareholders (other than in connection with an exchange offer, a "rights" offering to shareholders, an offering relating to an employee benefit plan, dividend reinvestment plan, an acquisition, a merger, the conversion of any convertible securities, an exchange of a security, or a stand-by underwriting with respect to the call of a warrant, option, right or convertible security for redemption), (for purposes of this Article 7, collectively, a "Registration Statement"), it will give written notice of its intention to do so by registered mail ("Notice"), at least thirty (30) business days prior to the filing of each such Registration Statement, to all holders of the Registrable Securities or, in the event that the Company has not formulated its intent to file such Registration Statement at least thirty (30) calendar days before the anticipated filing date of the Registration Statement, as soon as practicable upon the formation by the Company of such intent. However, no such Notice need be given if the Registration Statement is for an underwritten offering of securities other than equity securities or securities convertible into equity securities. Upon the written request of such a holder (a "Requesting Holder"), made within twenty (20) business days after receipt of the Notice, that the Company include any of the Requesting Holder's Registrable Securities in the proposed Registration Statement, the Company shall, as to each such Requesting Holder, use its best efforts to effect the registration under the Act of the Registrable Securities which it has been so requested to register ("Piggyback Registration"), at the Company's sole cost and expense and at no cost or expense to the Requesting Holders. The Company shall not be required to honor any such request (i) if, in the opinion of counsel to the Company reasonably acceptable to such Holder who wishes to have such Registrable Securities included in such Registration Statement, registration under the Act is not required for the transfer of the Registrable Securities in the manner proposed by such Holder; or (ii) to register in the aggregate fewer than 25,000 Shares held by the Holders. The Company shall permit, or shall use its best efforts to cause the managing underwriter of a proposed offering to permit, the Holders of Registrable Securities requested to be included in the registration (the "Piggy-Back Shares") to include such Piggy-Back Shares in the proposed offering on the same terms and conditions as applicable to the shares of Common Stock offered by the Company and for the account of any person other than the Company, as the case may be. (b) Notwithstanding the foregoing, if any such managing underwriter shall advise the Company in writing that, in its opinion, the distribution of all or a portion of the Registrable Securities requested to be included in the Registration Statement concurrently with the shares of Common Stock being registered by the Company would materially adversely affect the distribution of such securities by the Company for its own account, or for the account of any person or persons other than the Company that have asserted, with respect to such registration, demand registration rights under any other agreement, then such inclusion of Registrable Securities shall be made pro rata among the aggregate of the Registrable Securities for which a proper request was made under this subsection 6.3 and any other securities properly requested to be included in the registration by other holders pursuant to piggy-back or incidental registration rights under any other agreement. 6.4 DEMAND REGISTRATION. (a) At any time during the Warrant Exercise Term, any "Majority Holder" (as such term is defined in Section 6.4(c) below) of the Registrable Securities shall have the right (which right is in addition to the piggyback registration rights provided for under Section 6.3 hereof), exercisable by written notice to the Company (the "Demand Registration Request"), to have the Company prepare and file with the Securities and Exchange Commission (the "Commission"), on one occasion, at the sole expense of the Company, a Registration Statement and such other documents, including a prospectus, as may be necessary (in the opinion of both counsel for the Company and counsel for such Majority Holder), in order to comply with the provisions of the Act, so as to permit a public offering and sale of the Registrable Securities by the holders thereof, for twelve (12) consecutive months. The Company shall not be required to file any amendments to the Registration Statement required by this subsection 6.4(a) except as is necessary to keep the disclosure about the Company current. (b) The Company covenants and agrees to give written notice of any Demand Registration Request to all holders of the Registrable Securities within ten (10) days from the date of the Company's receipt of any such Demand Registration Request. After receiving notice from the Company as provided in this Section 6.4(b), holders of Registrable Securities may request the Company to include their Registrable Securities in the Registration Statement to be filed pursuant to Section 6.4(a) hereof by notifying the Company of their decision to include such securities within ten (10) days of their receipt of the Company's notice. (c) The term "Majority Holder" as used in this Section 6.4 shall mean any holder or any combination of holders of Registrable Securities, if included in such holders' Registrable Securities are that aggregate number of Shares (including Shares already issued and Shares issuable pursuant to the exercise of outstanding Warrants) as would constitute a majority of the aggregate number of Shares (including Shares already issued and Shares issuable pursuant to the exercise of outstanding Warrants) included in all of the Registrable Securities. 6.5 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The Company covenants and agrees as follows: (a) In connection with any registration under Section 6.4 hereof, the Company shall file the Registration Statement as expeditiously as possible, but in no event later than thirty (30) days following receipt of any demand therefor, shall use its best efforts to have any such Registration Statement declared effective at the earliest possible time. If a written request, however, is received by the Company that would require the filing of a Registration Statement between 45 and 105 days after the end of its fiscal year, the deadline for the filing of the Registration Statement shall be extended until the 106th day of such fiscal year. The Company shall furnish each holder of Registrable Securities such number of prospectuses as shall reasonably be requested. However, in connection with any registration under Sections 6.3 and 6.4 hereof, the Company shall have sole control in connection with the preparation, filing, amending and supplementing of the Registration Statement, including the right to withdraw the same or delay the filing or effectiveness thereof when, in the sole judgment of the Board of Directors of the Company, the filing or pendency of such registration statement or the effectiveness thereof would impose an undue burden upon the ability by the Company to proceed with any other material financing for its own account or any material corporate transaction, including, but not limited to, a reorganization, recapitalization, merger, consolidation or material acquisition of the securities or assets of another firm or corporation; provided, however, that the Company's exercise of any such right of withdrawal or delay shall not be deemed a waiver of the rights of the Holders, and the Company shall be required to file a new Registration Statement or to proceed with such actions as reasonably may be required to cause the Registration Statement to become effective within a reasonable time after the consummation of the event or transaction which required such withdrawal or delay. (b) The Company shall pay all costs, fees and expenses in connection with all Registration Statements filed pursuant to Sections 6.3 and 6.4(a) hereof including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses. Each Holder, however, shall pay the underwriting discount attributable to such Holder's Registrable Securities, any transfer tax payable with respect thereto and the fees and expenses of such Holder's counsel. (c) The Company will take all necessary action which may be required in qualifying or registering the Registrable Securities included in a Registration Statement for offering and sale under the securities or blue sky laws of such states as are requested by the holders of such securities, provided that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (d) The Company shall indemnify any holder of the Registrable Securities to be sold pursuant to any Registration Statement and any underwriter or person deemed to be an underwriter under the Act and each person, if any, who controls such holder or underwriter or person deemed to be an underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage, expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such Registration Statement to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the underwriters contained in Section 8 of the Underwriting Agreement and shall provide for just and equitable contribution as set forth in Section 8 of the Underwriting Agreement. (e) Any holder of Registrable Securities to be sold pursuant to a Registration Statement, and its successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished in writing by or on behalf of such holder, or its successors or assigns, for specific inclusion in such Registration Statement to the same extent and with the same effect as the provisions contained in Section 8 of the Underwriting Agreement pursuant to which the underwriters have agreed to indemnify the Company and shall provide for just and equitable contribution as set forth in Section 8 of the Underwriting Agreement. (f) Nothing contained in this Agreement shall be construed as requiring any Holder to exercise his Warrants prior to the initial filing of any Registration Statement or the effectiveness thereof. (g) If the Company shall fail to comply with the provisions of this Article 6, the Company shall, in addition to any other equitable or other relief available to the holders of Registrable Securities, be liable for any or all incidental, special and consequential damages sustained by the holders of Registrable Securities that request registration of their Registrable Securities. (h) Except as set forth in Section 6.5(j) hereof, the Company shall not permit the inclusion of any securities other than the Registrable Securities to be included in any Registration Statement filed pursuant to Section 6.4 hereof, or permit a Registration Statement relating to an underwritten offering of the same securities as the Registrable Securities to be filed during an underwritten offering of the Registrable Securities covered by a Registration Statement filed pursuant to Section 7.4 hereof, without the prior written consent of the Majority Holders, which consent shall not be unreasonably withheld. (i) The Company shall deliver promptly to each holder of Registrable Securities participating in the offering in which such Holder's shares are being registered pursuant to Section 6.3 hereof and requesting the correspondence and memoranda described in this Section 6.5(i) and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the Registration Statement and permit each holder of Registrable Securities and underwriters to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the Registration Statement as it deems reasonably necessary to comply with applicable securities laws or rules of the National Association of Securities Dealers, Inc. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times and as often as any such holder of Registrable Securities or underwriter shall reasonably request. (j) Upon the written request therefor by any holders of Registrable Securities, the Company shall include in the Registration Statement filed for an underwritten offering covering any such holders Registrable Securities, any additional shares of Common Stock of the Company, or, with the approval of the managing underwriter, any additional securities, held by such holders as of the date of filing of such Registration Statement. The holders shall pay any additional costs, fees and expenses associated with the inclusion on such Registration Statement of any of such holders shares of Common Stock or other securities that are not Registerable Securities that are included on the Registration Statement. Notwithstanding the foregoing, if any such managing underwriter shall advise the Company in writing that, in its opinion, the distribution of all or a portion of the Common Stock that are not Registrable Securities requested to be included in the Registration Statement concurrently with the Registrable Securities being registered by such holders would materially adversely affect the distribution of such offering then such additional shares of Common Stock shall be excluded from the Registration Statement. (k) Upon the written request therefor by any holders of Registrable Securities, the Company shall include in the Registration Statement filed for a non-underwritten offering covering any of the Registrable Securities, any other securities of the Company held by such holders as of the date of filing of such Registration Statement, including, without limitation, restricted shares of Common Stock, options, warrants or any other securities convertible into shares of Common Stock. The holders shall pay any additional costs, fees and expenses associated with the inclusion on such Registration Statement of any of such holders other securities of the Company that are not Registerable Securities that are included on the Registration Statement. 7. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SECURITIES. The following adjustments apply to the Exercise Price of the Warrants with respect to the Shares and the number of Shares purchasable upon exercise of the Warrants. 7.1 COMPUTATION OF ADJUSTED PRICE. In case the Company shall at any time after the date hereof pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to its stockholders, then upon such dividend or distribution the Exercise Price in effect immediately prior to such dividend or distribution shall forthwith be reduced to a price determined by dividing: (a) an amount equal to the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution multiplied by the Exercise Price in effect immediately prior to such dividend or distribution, by (b) the total number of shares of Common Stock outstanding immediately after such issuance or sale. For the purposes of any computation to be made in accordance with the provisions of this Section 7.1, the shares of Common Stock issuable by way of a dividend or other distribution on any shares of Common Stock of the Company shall be deemed to have been issued immediately after the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution. 7.2 SUBDIVISION AND COMBINATION. In case the Company shall at any time subdivide or combine the outstanding shares of Common Stock, the Exercise Price shall forthwith be proportionately decreased in the case of a subdivision or increased in the case of a combination. 7.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the Exercise Price pursuant to the provisions of this Article 7, the number of Shares issuable upon the exercise of each Warrant shall be adjusted to the nearest full Share by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. 7.4 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or in the case of a sale or conveyance to another corporation of the property of the Company as an entirety, the Holders shall thereafter have the right to purchase the kind and number of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance as if the Holders were the owners of the Shares immediately prior to any such events and at an aggregate price equal to the product of (x) the number of shares of Common Stock issuable upon exercise of the Holders' Warrants and (y) the Exercise Price in effect immediately prior to the record date for such reclassification, change, consolidation, merger, sale or conveyance as if such Holders had exercised the Warrants. 7.5 DETERMINATION OF OUTSTANDING COMMON STOCK. The number of shares of Common Stock at any one time outstanding shall include the aggregate number of shares issued or issuable upon the exercise of options, rights, warrants and upon the conversion or exchange of convertible or exchangeable securities. 7.6 SUBSCRIPTION RIGHTS FOR COMMON STOCK OR OTHER SECURITIES. In the case that the Company or an affiliate of the Company shall at any time after the date hereof and prior to the exercise of all of the Warrants issue any rights to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all of the shareholders of the Company, the Holders of the unexercised Warrants shall be entitled, in addition to the shares of Common Stock or other securities receivable upon the exercise of the Warrants, to receive at the time such rights as are distributed to the other shareholders of the Company. 8. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant Certificate is exchangeable without expense, upon the surrender hereof by the registered Holder at the principal executive office of the Company, for a new Warrant Certificate of like tenor and date representing in the aggregate the right to purchase the same number of Shares in such denominations as shall be designated by the Holder thereof at the time of such surrender. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Warrants, if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor, in lieu thereof. 9. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Warrants nor shall it be required to issue scrip or pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of Shares. 10. RESERVATION AND LISTING OF SECURITIES. The Company shall at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Common Stock as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Warrants and payment of the Exercise Price therefor, all Shares issuable upon such exercise shall be duly and validly issued, fully paid, non-assessable and not subject to the preemptive rights of any shareholder. As long as the Warrants shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon the exercise of the Warrants to be listed on or quoted by the Nasdaq National Market, or listed on such national securities exchanges as requested by the Underwriter. 11. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement shall be construed as conferring upon the Holder or Holders the right to vote or to consent or to receive notice as a stockholder in respect of any meetings of stockholders for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Warrants and their exercise, any of the following events shall occur: (a) the Company shall take a record of all of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or (b) the Company shall offer to all of the holders of its shares of Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor; or (c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business as an entirety shall be proposed; or (d) reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the shares of outstanding Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or a sale or conveyance to another corporation of the property of the Company as an entirety is proposed; or (e) the Company or an affiliate of the Company shall propose to issue any rights to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all the stockholders of the Company; then, in any one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, options or warrants, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to give such notice or any defect therein shall not affect the validity of any action taken in connection with the declaration or payment of any such dividend or distribution, or the issuance of any convertible or exchangeable securities or subscription rights, options or warrants, or any proposed dissolution, liquidation, winding up or sale. 12. NOTICES. All of notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered, or mailed by registered or certified mail, return receipt requested: (a) If to a registered Holder of the Warrants, to the address of such Holder as shown on the books of the Company; or (b) If to the Company, to the address set forth in Section 3 of this Agreement or to such other address as the Company may designate by notice to the Holders. 13. SUPPLEMENTS AND AMENDMENTS. The Company and Mr. Ledecky may from time to time supplement or amend this Agreement without the approval of any Holders of Warrant Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and Mr. Ledecky may deem necessary or desirable and which the Company and Mr. Ledecky deem not to adversely affect the interests of the Holders of Warrant Certificates. 14. SUCCESSORS. All of the covenants and provisions of this Agreement by or for the benefit of the Company and the Holders inure to the benefit of their respective successors and assigns hereunder. 15. TERMINATION. This Agreement shall terminate at the close of business on November 25, 2010. Notwithstanding the foregoing, this Agreement will terminate on any earlier date when all Warrants have been exercised and all Shares have been resold to the public. 16. GOVERNING LAW. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of said State. 17. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and Mr. Ledecky and any other registered holder or holders of the Warrant Certificates, or Shares any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and Mr. Ledecky and any other holder or holders of the Warrant Certificates, Warrants or the Shares. 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. CONSOLIDATION CAPITAL CORPORATION By: /s/ DAVID LEDECKY -------------------------------- Name: David Ledecky Title: Executive Vice President Attest: /s/ F. T. Beck - ------------------------------ /s/ JOHNATHAN J. LEDECKY -------------------------------- Jonathan J. Ledecky THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. EXERCISABLE ON OR BEFORE 5:00 P.M., WASHINGTON, D.C. TIME, November 25, 2007 No. W-2 1,950,000 Warrants WARRANT CERTIFICATE This Warrant Certificate certifies that Jonathan J. Ledecky or registered assigns, is the registered holder of 1,950,000 Warrants to purchase, at any time from November 25, 1997 until 5:00 p.m. Washington, D.C. time on November 25, 2007 ("Expiration Date"), 1,950,000 fully paid and non-assessable shares ("Shares") of the Common Stock, par value $.001 per share ("Common Stock"), of Consolidation Capital Corporation, a Delaware corporation (the "Company"), at the initial exercise price, subject to adjustment in certain events (the "Exercise Price"), of $20.00 per Share, upon surrender of this Warrant Certificate and payment of the Exercise Price at an office or agency of the Company, but subject to the conditions set forth herein and in the warrant agreement dated as of November 25, 1997 between the Company and Jonathan J. Ledecky (the "Warrant Agreement"). Payment of the Exercise Price may be made in cash, or by check payable to the order of the Company, or any combination of cash or check. No Warrant may be exercised after 5:00 p.m., Washington, D.C. time, on the Expiration Date, at which time all Warrants evidenced hereby, unless exercised prior thereto, shall thereafter be void. The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to in a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. The Warrant Agreement provides that upon the occurrence of certain events, the Exercise Price and/or number of the Company's securities issuable thereupon may, subject to certain conditions, be adjusted. In such event, the Company will, at the request of the holder, issue a new Warrant Certificate evidencing the adjustment in the Exercise Price and the number and/or type of securities issuable upon the exercise of the Warrants; provided, however, that the failure of the Company to issue such new Warrant Certificates shall not in any way change, alter, or otherwise impair, the rights of the holder as set forth in the Warrant Agreement. Upon due presentment for registration of transfer of this Warrant Certificate at an office or agency of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided herein and in the Warrant Agreement, without any charge except for any tax, or other governmental charge imposed in connection therewith. Upon the exercise of less than all of the Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Warrant Certificate representing such number of unexercised Warrants. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. All terms used in this Warrant Certificate which are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed under its corporate seal. Dated: December 2, 1997 CONSOLIDATION CAPITAL CORPORATION [SEAL] By: /s/ DAVID LEDECKY ---------------------------- Name: David Ledecky Title: Executive Vice President FORM OF ELECTION TO PURCHASE The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase _________ Shares and herewith tenders in payment for such Shares cash or a certified or official bank check payable in New York Clearing House Funds to the order of CONSOLIDATION CAPITAL CORPORATION in the amount of $__________, all in accordance with the terms hereof. The undersigned requests that a certificate for such Shares be registered in the name of ___________________, whose address is __________________, and that such Certificate be delivered to __________________, whose address is _____________. Dated: Signature:_______________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate.) ________________________________ ________________________________ (Insert Social Security or Other Identifying Number of Holder) FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Warrant Certificate.) FOR VALUE RECEIVED _________________________________________________ hereby sells, assigns and transfers unto _____________________________________________________________________________ (Please print name and address of transferee) this Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________, Attorney, to transfer the within Warrant Certificate on the books of the within-named Company, with full power of substitution. Dated: Signature:______________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate) _______________________________ ________________________________ Insert Social Security or Other Identifying Number of Assignee) EX-21 15 SUBSIDIARIES EXHIBIT 21 ENCOMPASS SERVICES CORPORATION AND SUBSIDIARIES AS OF MARCH 1, 2000 Encompass Services Corporation (Texas) A-1 Mechanical of Lansing, Inc. (Michigan) AA Advance Air, Inc. (Florida) AA JARL, Inc. (Delaware) (dba Jarrell Plumbing) Advent Electric Co., Inc. (Tennessee) Air Conditioning Engineers, Inc. (Michigan) Air Conditioning, Plumbing & Heating Service Co., Inc. (Colorado) Aircon Energy Incorporated (California) Airtron, Inc. (Delaware) Airtron of Central Florida, Inc. (Florida) GroupMAC Indiana, L.L.C. (Indiana)* All Service Electric, Inc. (Florida) American Air Company, Inc. (California) Arkansas Mechanical Services, Inc. (Arkansas) Atlantic Electric Company, Inc. (South Carolina) Atlantic Industrial Constructors, Inc. (Virginia) B&R Electrical Services, Inc. (Maryland) Building One Commercial, Inc. (Missouri) Building One Mechanical Services, Inc. (Delaware) Building One Service Solutions, Inc. (Virginia) Diversified Management Services, U.S.A., Inc. (Virginia) FacilityDirect.com, LLC (Virginia) Interstate Building Services, LLC (Virginia) D&P Janitorial, Inc. (Rhode Island) Direct Engineered Maintenance, Inc. (Rhode Island) BUYR, Inc. (Delaware) C.R. Hipp Construction Co., Inc. (South Carolina) Callahan Roach Products & Publications, Inc. (Colorado) Cardinal Contracting Corporation (Indiana) GroupMAC Indiana, L.L.C. (Indiana)* Central Air Conditioning Contractors, Inc. (Delaware) Central Carolina Air Conditioning Company (North Carolina) Chapel Electric Co. (Ohio) Clark Converse Electric Service, Inc. (Ohio) Colonial Air Conditioning Company (Delaware) Commercial Air Holding Company (Maryland) Commercial Air, Power & Cable, Inc. (Maryland) Consolidated Electrical Group, Inc. (Delaware) Continental Electrical Construction Co. (Delaware) Costa and Rihl, Inc. (New Jersey) Costa & Rihl Plumbing, Inc. (New Jersey) Costner Brothers, Inc. (South Carolina) Del-Air Service Company, Inc. (Tennessee) D/FW Mechanical Services, Inc. (Texas) Divco, Inc. (Washington) Dynalink Corporation (Ohio) Electrical Contracting, Inc. (California) Evans Services, Inc. (Alabama) The Farfield Company (Delaware) Ferguson Electric Corporation (Delaware) G.S. Group, Inc. (Nevada) Brazosport Management, Inc. (Texas) G.S. Financial, Inc. (Nevada) G.S.I. of California, Inc. (California) Gulf States, Inc. (Texas) Testronics, Inc. (Texas) Gamewell Mechanical, Inc. (North Carolina) Garfield-Indecon Electrical Services, Inc. (Ohio) Gentzler Electrical Contractors, Inc. (Delaware) Gilbert Mechanical Contractors, Inc. (Minnesota) Greenway Investment Corp. (Delaware) GroupMAC Texas L.P. (Texas)+ GroupMAC Holding Corp. (Delaware) A-ABC Appliance, Inc. (Texas) A-ABC Services, Inc. (Delaware) (dba A-ABC Appliance, Inc. and A-1 Appliance & Air Conditioning, Inc. Charlie Crawford, Inc. (Delaware) Electrical Associates of Dallas, Inc. (Texas) GroupMAC Texas L.P. (Texas)+ Hallmark Air Conditioning, Inc. (Delaware) K & N Plumbing, Heating and Air Conditioning, Inc. (Delaware) Trinity Contractors, Inc. (Delaware) GroupMAC Management Co. (Delaware) HPS Plumbing Services, Inc. (California) Hungerford Mechanical Corporation (Virginia) Ivey Mechanical Company, Inc. (Mississippi) Barnes Ivey Mechanical Company, L.L.C. (North Carolina) Beltline Mechanical Services, Inc. (Texas) Ivey Mechanical Services, L.L.C. (Texas) Lexington/Ivey Mechanical Company, LLC (Kentucky) J. D. Steward Air Conditioning, Inc. (Colorado) K & A Mechanical, Inc. (Texas) L.T. Mechanical, Inc. (Delaware) Laney's, Inc. (Delaware) The Lewis Companies, Inc. (Oklahoma) Electrical Design & Construction, Inc. (Oklahoma) Engineering Design Group, Inc. (Oklahoma) Fred Clark Electrical Contractor, Inc. (Texas) Oil Capital Electric, Inc. (Oklahoma) Omni Mechanical Services (Oklahoma) EDG Power Group, Inc. (Oklahoma) Linford Service Co. (California) MH Technologies, Inc. (Texas) MacDonald-Miller Industries, Inc. (Washington) MacDonald-Miller Co., Inc. (Washington) MacDonald-Miller of Oregon, Inc. (Delaware) MacDonald-Miller Service, Inc. (Washington) GroupMAC Facility Services, Inc. (Delaware) Masters, Inc. (Maryland) McIntosh Mechanical, Inc. (South Carolina) Mechanical Interiors, Inc. (Delaware) Mechanical Services of Orlando, Inc. (Florida) Merritt Island Air & Heat, Inc. (Delaware) National Network Services, Inc. (Delaware) New Construction Air Conditioning, Inc. (Michigan) Noron, Inc. (Ohio) Omni Mechanical Company (Oklahoma) Omni Mechanical Services (Oklahoma) Pacific Rim Mechanical Contractors, Inc. (California) Air Systems, Inc. (California) Paul E. Smith Co., Inc. (Indiana) GroupMAC Indiana, L.L.C. (Indiana)* Phoenix Electric Company (Delaware) Potter Electric Co., Inc. (Nevada) Ray and Claude Goodwin, Inc. (Florida) (dba Ray's Plumbing Contractors) Regency Electric Company, Inc. (Florida) Regency Electric Company Atlanta Office, Inc. (Georgia) Regency Electric Company Charlotte Office, Inc. (North Carolina) Regency Electric Company Jacksonville, Inc. (Florida) Regency Electric Company Memphis Office, Inc. (Tennessee) Regency Electric Company Orlando Office, Inc. (Florida) Regency Electric Company Projects Group, Inc. (Florida) Regency Electric Company South Florida Office, Inc. (Florida) Reliable Mechanical, Inc. (Delaware) Riviera Electric Construction Co. (Colorado) Riviera Electric of California, Inc. (California) Robinson Mechanical Company (Colorado) Romanoff Electric Corp. (Ohio) SKC Electric, Inc. (Kansas) Cramar Electric, Inc. (Kansas) Pro Wire Security Systems, Inc. (Kansas) SKCE, Inc. (Kansas) S.L. Page Corporation (Florida) Hydro Cooling, Inc. (Florida) Sanders Bros., Inc. (South Carolina) Process Design Builders, LLC (South Carolina) Sequoyah Corporation (Washington) Sibley Services, Incorporated (Tennessee) Snyder Mechanical (Nevada) Southeast Mechanical Service, Inc. (Florida) Statewide Heating & Air Conditioning, Inc. (Delaware) Stephen C. Pomeroy, Inc. (Delaware) Sterling Air Conditioning, Inc. (Delaware) Sullivan Electric, Inc. (Tennessee) Sun Plumbing, Inc. (Florida) Taylor-Hunt Electric, Inc. (Utah) Team Mechanical, Inc. (Utah) Tower Electric Company (Delaware) Town & Country Electric, Inc. (Wisconsin) Tri-City Electrical Contractors, Inc. (Florida) Tri-M Holding Corp. (Pennsylvania) tri-M Corporation (Pennsylvania) tri-M Building Automation Systems Corp. (Pennsylvania) tri-M Electrical Construction Corp. (Pennsylvania) Tri-State Acquisition Corp. (Nevada) TSE Acquisition Corp. (Nevada) United Acquisition Corp. (Iowa) (dba United Service Alliance) Valley Wide Plumbing and Heating, Inc. (Colorado) Van's Comfortemp Air Conditioning, Inc. (Florida) Vantage Mechanical Contractors, Inc. (Maryland) Vermont Mechanical, Inc. (Delaware) Wade's Heating and Cooling, Inc. (Florida) Walker Engineering, Inc. (Texas) Walter C. Davis & Son, Incorporated (Virginia) Watson Electrical Construction Co. (North Carolina) Wayzata, Inc. (Delaware) Wiegold & Sons, Inc. (Florida) Willis Refrigeration, Air Conditioning & Heating, Inc. (Ohio) Wilson Electric Company, Inc. (Arizona) Chambers Electronic Communications, Inc. (Arizona) Yale Incorporated (Minnesota) Zwart, Inc. (Colorado) (dba Mountain View Electric, Inc.) __________ * GroupMAC Indiana L.L.C. is an Indiana limited liability company jointly owned by Airtron, Inc., Cardinal Contracting Corporation and Paul E. Smith Co., Inc. + GroupMAC Texas L.P. is a Texas limited partnership in which GroupMAC Holding Corp. is the sole general partner (with a 1% interest) and Greenway Investment Corp. is the sole limited partner (with a 99% interest). EX-23 16 CONSENT OF KPMG LLP EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Encompass Services Corporation: We consent to incorporation by reference in the registration statements (No. 333-41749, No. 333-41751, No. 333-58651, No. 333-60537, No. 333-69421 and No. 333-78311) on Form S-8, the registration statements (No. 333-69533, No. 333-81201 and No. 333-93649) on Form S-4, and the registration statement (No. 333-93665) on Form S-3 of Encompass Services Corporation (formerly Group Maintenance America Corp.) of (i) our report dated February 16, 2000, relating to the consolidated balance sheets of Encompass Services Corporation (formerly Group Maintenance America Corp.) and Subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended December 31, 1999 and 1998, and the ten months ended December 31, 1997, and (ii) our report dated July 11, 1997 relating to the balance sheets of Group Maintenance America Corp. as of December 31, 1996 and April 30, 1997, and the related statements of operations, shareholders' equity (deficit) and cash flows for the periods then ended, which reports appear in the December 31, 1999 annual report on Form 10-K of Encompass Services Corporation. KPMG LLP Houston, Texas March 29, 2000 EX-24 17 POWERS OF ATTORNEY EXHIBIT 24 ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation, does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ ANDREW AFRICK ------------------------- Andrew Africk ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation, does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ VINCENT W. EADES ----------------------------- Vincent W. Eades ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation, does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ MICHAEL GROSS -------------------------------- Michael Gross ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ WILLIAM P. LOVE, JR. ---------------------------------- William P. Love, Jr. ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation, does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ DONALD L. LUKE ----------------------------------- Donald L. Luke ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation, does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ LUCIAN L. MORRISON ------------------------------------- Lucian L. Morrison ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation, does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ BROOKS NEWMARK ------------------------------- Brooks Newmark ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation, does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ M. JUDE REYES --------------------------- M. Jude Reyes ENCOMPASS SERVICES CORPORATION POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K The undersigned, in his capacity as a Director of Encompass Services Corporation, does hereby appoint J. Patrick Millinor, Jr. and Darren B. Miller, and each of them, severally, his true and lawful attorneys, or attorney, to execute in his name, place and stead, in his capacity as a Director of said Company, an Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to said Annual Report, and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Each of said attorneys shall have the power to act hereunder with or without the other of said attorneys and shall have full power and authority to do and perform, in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th day of March, 2000. /s/ JOHN M. SULLIVAN -------------------------------------- John M. Sullivan EX-27 18 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 3,452 0 347,728 9,591 22,551 445,744 83,332 24,281 1,061,533 244,391 383,550 0 0 39 425,931 1,061,533 1,547,791 1,547,791 1,229,063 1,229,063 213,962 0 28,727 76,039 34,483 41,556 0 0 0 41,556 1.12 1.11
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