10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended October 25, 2003
	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 number 0-5423

DYCOM INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Florida	59-1277135
(State of incorporation)	(IRS Employer Identification No.)
4440 PGA Boulevard, Suite 500 Palm Beach Gardens, Florida	33410
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (561) 627-7171

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X] No [  ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of November 25, 2003
Common Stock, par value $0.33 1/3 per share	48,254,798

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TABLE OF CONTENTS

	CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EX-10.1 2nd Amendment to Credit Agreement
EX-10.2 Amendment to Employment Agreement
EX-10.3 Plan of Merger
EX-31.1 CEO Certification Pursuant to Section 302
EX-31.2 CFO Certification Pursuant to Section 302
EX-32.1 CEO Certification Pursuant to Section 906
EX-32.2 CFO Certification Pursuant to Section 906

DYCOM INDUSTRIES, INC.

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
	Condensed Consolidated Balance Sheets-October 25, 2003 and July 26, 2003		3
	Condensed Consolidated Statements of Operations for the Three Months Ended October 25, 2003 and October 26, 2002		4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended October 25, 2003 and October 26, 2002		5-6
	Notes to Condensed Consolidated Financial Statements		7-14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15-21
Item 3. Quantitative and Qualitative Disclosures about Market Risk			21
Item 4. Controls and Procedures			22
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K			22
SIGNATURES			23

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		October 25,		July 26,
ASSETS		2003		2003
CURRENT ASSETS:
Cash and equivalents		$	149,794,385	$	129,851,760
Accounts receivable, net			124,803,409		121,979,664
Costs and estimated earnings in excess of billings			37,319,061		34,814,130
Deferred tax assets, net			9,269,856		8,778,775
Inventories			3,068,041		2,669,796
Other current assets			10,562,491		7,378,452
Total current assets			334,817,243		305,472,577
PROPERTY AND EQUIPMENT, net			80,665,828		86,893,826
OTHER ASSETS:
Goodwill, net			106,615,836		106,615,836
Intangible assets, net			664,998		729,646
Accounts receivable			21,567,480		21,567,480
Deferred tax assets, net non-current			7,260,991		7,167,117
Other			7,340,333		8,096,095
Total other assets			143,449,638		144,176,174
TOTAL		$	558,932,709	$	536,542,577
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	26,359,139	$	22,734,971
Notes payable			8,886		9,537
Billings in excess of costs and estimated earnings			720,876		703,063
Accrued self-insured claims			11,259,228		11,219,265
Income taxes payable			8,266,683		5,168,984
Other accrued liabilities			32,082,695		30,897,930
Total current liabilities			78,697,507		70,733,750
NOTES PAYABLE			18,355		20,160
ACCRUED SELF-INSURED CLAIMS			13,633,951		14,175,209
OTHER LIABILITIES			1,116,156		1,273,889
Total liabilities			93,465,969		86,203,008
COMMITMENTS AND CONTINGENCIES, Note 9 STOCKHOLDERS’ EQUITY:
Preferred stock, par value $1.00 per share:
	1,000,000 shares authorized: no shares issued and outstanding		—		—
Common stock, par value $0.33 1/3 per share:
	150,000,000 shares authorized: 48,073,264 and 47,986,768 issued and outstanding, respectively		16,024,416		15,995,584
Additional paid-in capital			337,565,116		336,394,016
Retained earnings			111,877,208		97,949,969
Total stockholders’ equity			465,466,740		450,339,569
TOTAL		$	558,932,709	$	536,542,577

See notes to condensed consolidated financial statements—unaudited.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		For the Three Months Ended
		October 25,			October 26,
		2003			2002
REVENUES:
Contract revenues earned		$	196,021,442		$	158,480,914
EXPENSES:
Costs of earned revenues, excluding depreciation			147,049,735			123,580,192
General and administrative			17,507,642			18,275,419
Depreciation and amortization			9,334,410			10,829,811
Total			173,891,787			152,685,422
Interest income, net			318,251			274,980
Other income, net			845,543			1,085,272
INCOME BEFORE INCOME TAXES			23,293,449			7,155,744
PROVISION FOR INCOME TAXES:
	Current		9,951,165			4,160,089
	Deferred		(584,955	)		(1,118,898	)
Total			9,366,210			3,041,191
NET INCOME		$	13,927,239		$	4,114,553
EARNINGS PER COMMON SHARE:
Basic earnings per share		$	0.29		$	0.09
Diluted earnings per share		$	0.29		$	0.09
SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE
	Basic		48,028,895			47,863,069
	Diluted		48,486,210			47,866,546

See notes to condensed consolidated financial statements—unaudited.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		For the Three Months Ended
		October 25,			October 26,
		2003			2002
Increase (Decrease) in Cash and Equivalents from:
OPERATING ACTIVITIES:
		$	13,927,239		$	4,114,553
Net Income Adjustments to reconcile net cash provided by operating activities:
	Depreciation and amortization		9,334,410			10,829,811
	Bad debts expense		813,411			430,515
	Gain on disposal of assets		(594,893	)		(825,189	)
	Deferred income taxes		(584,955	)		(1,118,898	)
	Other		18,955			—
Change in operating assets and liabilities, net of acquisitions and divestitures:
(Increase) decrease in operating assets:
	Accounts receivable, net		(3,637,156	)		(19,075,790	)
	Unbilled revenues, net		(2,487,118	)		855,575
	Other current assets		(3,582,284	)		(2,450,282	)
	Other assets		755,762			16,016
Increase (decrease) in operating liabilities:
	Accounts payable		3,624,168			399,826
	Customer advances		(2,273	)		52,395
	Accrued self-insured claims and other liabilities		528,010			259,186
	Accrued income taxes		3,097,699			1,821,065
Net cash inflow (outflow) from operating activities			21,210,975			(4,691,217	)
INVESTING ACTIVITIES:
	Capital expenditures		(3,806,285	)		(2,107,238	)
	Proceeds from sale of assets		1,359,414			1,888,040
Net cash outflow from investing activities			(2,446,871	)		(219,198	)
FINANCING ACTIVITIES:
	Principal payments on notes payable and bank lines-of-credit		(2,456	)		(26,277	)
	Exercise of stock options		1,180,977			206,026
Net cash inflow from financing activities			1,178,521			179,749
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES			19,942,625			(4,730,666	)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD			129,851,760			116,052,139
CASH AND EQUIVALENTS AT END OF PERIOD		$	149,794,385		$	111,321,473

See notes to condensed consolidated financial statements—unaudited.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)

		For the Three Months Ended
		October 25,		October 26,
		2003		2002
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
	Interest	$	6,240	$	1,179
	Income taxes	$	7,363,014	$	2,821,796

See notes to condensed consolidated financial statements—unaudited.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Unaudited

The accompanying condensed consolidated balance sheets of Dycom Industries, Inc. (“Dycom” or the “Company”) as of October 25, 2003 and July 26, 2003, and the related condensed consolidated statements of operations and cash flows for the three months ended October 25, 2003 and October 26, 2002, reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the three months ended October 25, 2003 are not necessarily indicative of the results that may be expected for the entire year.

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION — The condensed consolidated financial statements are unaudited. These statements include Dycom Industries, Inc. and its subsidiaries, all of which are wholly owned.

The Company’s operations consist primarily of providing specialty-contracting services to the telecommunications and electrical utility industries. All material intercompany accounts and transactions have been eliminated.

ACCOUNTING PERIOD — The Company uses a fiscal year ending the Saturday closest to July 31. Fiscal year 2003 consisted of 52 weeks, while fiscal year 2004 will consist of 53 weeks.

USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements.

Estimates are used in the Company’s revenue recognition of work-in-process and in the determination of the allowance for doubtful accounts, self-insured claims liability, and asset lives used in computing depreciation and amortization, including amortization of intangibles.

RECLASSIFICATIONS — Certain prior year amounts have been reclassified in order to conform to the current year presentation.

REVENUE RECOGNITION — The majority of the Company’s contracts are unit based. Revenue on unit based contracts is recognized as the unit is completed. Revenue on non-unit based contracts is recognized under the percentage-of-completion method based primarily on the ratio of contract costs incurred to date to total estimated contract costs. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is accrued.

“Costs and estimated earnings in excess of billings” primarily relates to revenues for completed but unbilled units under unit based contracts, as well as unbilled revenues recognized under the percentage-of-completion method for non-unit based contracts. For those contracts in which billings exceed contract revenues recognized to date, such excesses are included in the caption “billings in excess of costs and estimated earnings.”

CASH AND EQUIVALENTS — Cash and equivalents include cash balances on deposit in banks, overnight repurchase agreements, certificates of deposit, commercial paper, and various other financial instruments having an original maturity of three months or less. For purposes of the consolidated statements of cash flows, the Company considers these amounts to be cash equivalents.

INVENTORIES — Inventories consist primarily of materials and supplies used in the Company’s business and are carried at the lower of cost (first in, first out) or market (net realizable value). No obsolescence reserve has been recorded in the periods presented.

PROPERTY AND EQUIPMENT — Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives. Useful lives range from: buildings — 20-31 years; leasehold improvements — the term of the respective lease or the estimated useful life of the improvements, whichever is shorter; new vehicles — 3-7 years; used vehicles — 1-7 years; new equipment and machinery — 2-10 years; used equipment and machinery — 1-10 years; and furniture and fixtures — 3-10 years. Maintenance and repairs are expensed as incurred and major improvements are capitalized. When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in income.

INTANGIBLE ASSETS — In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangibles Assets”, which supersedes Accounting Principle Board “(APB”) Opinion No. 17, “Intangible Assets”. SFAS No. 142 establishes new standards for goodwill acquired in a business combination, eliminates amortization of goodwill, and instead sets forth methods to periodically evaluate goodwill for impairment. The Company adopted SFAS No. 142 in the first quarter of 2002. In accordance with SFAS No. 142, the Company will conduct on at least an annual basis a review of its reporting units with goodwill to determine whether their carrying value exceeds their fair market value. Should this be the case, a detailed analysis of the reporting unit’s assets and liabilities is performed to determine whether the

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goodwill is impaired. Impairment losses are required to be reflected in operating income or loss in the consolidated statements of operations.

The Company’s annual valuation for fiscal year 2003 did not result in any impairment charge.

Information regarding the Company’s other intangible assets subject to testing for impairment in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” is as follows:

		Weighted
		Average Life
		In Years		October 25, 2003		July 26, 2003
Carrying amount:
Licenses			5	$	51,030	$	51,030
Covenants not to compete			7		450,843		450,843
Backlog			4		1,236,154		1,236,154
					1,738,027		1,738,027
Accumulated amortization:
Licenses					38,151		35,600
Covenants not to compete					342,527		330,026
Backlog					692,351		642,755
					1,073,029		1,008,381
	Net			$	664,998	$	729,646

Amortization expense was $64,648 and $148,971 for the three months ended October 25, 2003 and October 26, 2002, respectively. Estimated amortization expense for fiscal 2004 through 2006 is as follows:

Fiscal year ending July:	Amount:
2004	$	258,090
2005	$	305,460
2006	$	166,096

SELF-INSURED CLAIMS LIABILITY — The Company retains the risk, up to certain limits, for automobile and general liability, workers’ compensation, and employee group health claims. A liability for unpaid claims and the associated claim expenses, including incurred but not reported losses, is actuarially determined and reflected in the consolidated financial statements as an accrued liability. The self-insured claims liability includes incurred but not reported losses of $15,466,880 and $13,078,624 at October 25, 2003 and July 26, 2003, respectively. The determination of such claims and expenses and the appropriateness of the related liability is periodically reviewed and updated. Because the Company retains these risks, up to certain limits, a change in experience or actuarial assumptions could materially affect results of operations in a particular period.

INCOME TAXES — The Company files a consolidated federal income tax return. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of its assets and liabilities.

PER SHARE DATA — Earnings per common share-basic is computed using the weighted average common shares outstanding during the period. Earnings per common share-diluted is computed using the weighted average number of common shares outstanding during the period plus all potentially dilutive common stock equivalents except in cases where the effect would be anti-dilutive, using the treasury stock method. See Note 2.

STOCK OPTION PLANS — Under SFAS No. 123 and No. 148, companies are permitted to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company continues to apply APB Opinion No. 25 to its stock based compensation awards. The pro forma disclosures required by SFAS No. 148 are reflected

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below. No stock-based compensation cost is reflected in net income as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.

	For the Three Months Ended
	October 25,			October 26,
	2003			2002
Net income, as reported	$	13,927,239		$	4,114,553
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects*		(936,539	)		(1,610,137	)
Pro forma net income	$	12,990,700		$	2,504,416
Earnings per share:
Basic — as reported	$	0.29		$	0.09
Basic — pro forma	$	0.27		$	0.05
Diluted — as reported	$	0.29		$	0.09
Diluted — pro forma	$	0.27		$	0.05

*   All awards refers to awards granted, modified, or settled in fiscal periods beginning after December 15, 1994 — that is, awards for which the fair value was required to be measured under SFAS No. 123.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS — In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement requires certain financial instruments that could previously be accounted for by issuers as equity be classified as liabilities or, in some cases, assets. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not have any financial instruments that are impacted by SFAS No. 150.

In January 2003, FASB Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities” was issued with the objective of improving financial reporting by companies involved with variable interest entities. In October 2003, the FASB deferred the effective date for applying certain provisions of FIN 46. The Company does not have any interests in variable interest entities.

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2.     COMPUTATION OF PER SHARE EARNINGS

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computation as required by SFAS No. 128.

	For the Three Months Ended
	October 25,		October 26,
	2003		2002
Net income available to common stockholders (numerator)	$	13,927,239	$	4,114,553
Weighted-average number of common shares (denominator)		48,028,895		47,863,069
Basic earnings per common share	$	0.29	$	0.09
Weighted-average number of common shares		48,028,895		47,863,069
Potential common stock arising from stock options		457,315		3,477
Total shares — diluted (denominator)		48,486,210		47,866,546
Diluted earnings per common share	$	0.29	$	0.09

3.     ACQUISITIONS

The Company completed no acquisitions in fiscal 2003.

Subsequent to the end of the quarter, the Company closed two acquisitions.

On November 25, 2003, the Company purchased substantially all of First South Utility Construction, Inc.’s (“First South”) assets and assumed certain liabilities associated with these assets for approximately $50 million in cash and 175,840 shares of Dycom’s common stock. In conjunction with the acquisition, the Company also paid approximately $9 million for excess working capital consisting primarily of accounts receivable and unbilled revenue. The Company deposited approximately $6.4 million of such amount in escrow, to be returned to the Company to the extent such amounts remain outstanding on April 15, 2004.

On December 3, 2003, the Company acquired UtiliQuest Holdings Corp. (“UtiliQuest”) for approximately $120 million in cash. Under the terms of the merger agreement, UtiliQuest merged with a newly-formed subsidiary of the Company with UtiliQuest surviving as a wholly owned subsidiary of the Company. The Company borrowed approximately $85 million under its Credit Agreement in connection with this acquisition.

4.     ACCOUNTS RECEIVABLE

Accounts receivable, net classified as current, consist of the following:

	October 25,		July 26,
	2003		2003
Contract billings	$	124,623,653	$	121,061,058
Retainage		4,322,186		3,657,219
Other receivables		797,214		1,239,925
Total		129,743,053		125,958,202
Less allowance for doubtful accounts		4,939,644		3,978,538
Accounts receivable, net	$	124,803,409	$	121,979,664

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The allowance for doubtful accounts changed as follows:

	For the Three Months Ended
	October 25,		October 26,
	2003		2002
Allowance for doubtful accounts at 7/26/2003 and 7/27/2002, respectively	$	3,978,538	$	4,826,124
Additions charged to bad debt expense		813,411		430,515
Amounts charged against the allowance, net of recoveries		147,695		(208,712	)
Allowance for doubtful accounts	$	4,939,644	$	5,047,927

As of October 25, 2003, the Company expected to collect all retainage balances within the next twelve months.

Accounts receivable, classified as non-current, consist of pre-petition trade receivables due from Adelphia Communications Corporation (“Adelphia”) of $21,567,480. Adelphia filed for bankruptcy protection in the fourth quarter of fiscal 2002.

5.     COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

The accompanying consolidated balance sheets include costs and estimated earnings on contracts in progress, net of progress billings as follows:

	October 25,			July 26,
	2003			2003
Costs incurred on contracts in progress	$	31,524,902		$	29,066,176
Estimated to date earnings		10,560,900			8,687,173
Total costs and estimated earnings		42,085,802			37,753,349
Less billings to date		5,487,617			3,642,282
	$	36,598,185		$	34,111,067
Included in the accompanying consolidated balance sheets under the captions:
Costs and estimated earnings in excess of billings	$	37,319,061		$	34,814,130
Billings in excess of costs and estimated earnings		(720,876	)		(703,063	)
	$	36,598,185		$	34,111,067

As stated in Note 1, the Company performs services under unit based and non-unit based contracts. The amounts presented above aggregate the effects of these types of contracts.

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6.     PROPERTY AND EQUIPMENT

The accompanying consolidated balance sheets include the following property and equipment:

	October 25, 2003		July 26, 2003
Land	$	5,267,572	$	5,267,572
Buildings		10,755,864		10,752,264
Leasehold improvements		1,517,682		1,495,615
Vehicles		117,885,975		119,717,399
Furniture and fixtures		17,559,824		17,129,884
Equipment and machinery		89,048,680		89,214,913
Total		242,035,597		243,577,647
Less accumulated depreciation		161,369,769		156,683,821
Property and equipment, net	$	80,665,828	$	86,893,826

Maintenance and repairs of property and equipment amounted to $3,058,717 and $2,695,599 for the three months ended October 25, 2003 and October 26, 2002, respectively. Depreciation expense amounted to $9,269,762 and $10,680,839 for the three months ended October 25, 2003 and October 26, 2002, respectively.

7.     OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:

	October 25, 2003		July 26, 2003
Accrued payroll and related taxes	$	10,559,321	$	9,516,881
Accrued employee bonus and benefit costs		6,346,887		8,770,112
Accrued construction costs		4,008,292		3,474,217
Other		11,168,195		9,134,447
Accrued liabilities	$	32,082,695	$	30,895,657

8. NOTES PAYABLE

     Notes payable are summarized as follows:

	October 25,		July 26,
	2003		2003
Equipment loans	$	27,241	$	29,697
Less current portion		8,886		9,537
Notes payable — non-current	$	18,355	$	20,160

During fiscal year 2002, the Company entered into a new three-year $200 million unsecured revolving Credit Agreement (the “Credit Agreement”) with a syndicate of banks that replaced the Company’s prior credit agreement. The Credit Agreement provides the Company with a commitment of $200 million for a three-year period and includes a $40 million sublimit for the issuance of letters of credit. Under the most restrictive covenants of the Credit Agreement, as of October 25, 2003, based on a multiple of EBITDA (as defined in the Credit Agreement), the available borrowing capacity is approximately $163.2 million, after considering the impact of

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outstanding letters of credit. As of October 25, 2003, the Company had $26.5 million of outstanding letters of credit issued under the Credit Agreement. The outstanding letters of credit are all issued to insurance companies as part of the Company’s self-insurance program.

The Credit Agreement requires that the Company maintain certain financial covenants and imposes certain conditions including restricting its ability to encumber assets or incur certain types of indebtedness and maintaining a leverage ratio of not greater than 2.25:1.00, as measured at the end of each fiscal quarter. The Company must also maintain consolidated tangible net worth of not less than (i) $170,000,000 plus (ii) 50% of consolidated net income (positive or negative) from the date of acquisitions of both Utiliquest and First South Utility Construction are completed plus (iii) 75% of the equity issuances made from that date to the date of acquisition. At October 25, 2003, the Company was in compliance with all financial covenants and conditions under the Credit Agreement.

Loans under the Credit Agreement bear interest, at the Company’s option, at the bank’s prime interest rate or LIBOR plus a spread of 1.25%, 1.50%, or 2.00% based upon the Company’s leverage ratio. Based upon the Company’s current leverage ratio, borrowings would be eligible for the 1.25% spread. The Company deferred approximately $1.1 million of fees related to the Credit Agreement, which are being amortized over its three year term. The Company is required to pay an annual non-utilization fee equal to 0.50% of the unused portion of the facilities. In addition, the Company pays an annual agent fee of $50,000.

9.     COMMITMENTS AND CONTINGENCIES

In the normal course of business, certain of the Company’s subsidiaries have pending claims and legal proceedings. It is the opinion of the Company’s management, based on information available at this time, that none of the current claims or proceedings will have a material effect on the Company’s consolidated financial statements.

In the normal course of business, the Company enters into employment agreements with certain members of its executive management. It is the opinion of the Company’s management, based on information available at this time, that these agreements will not have a material effect on the Company’s consolidated financial statements.

10.     CAPITAL STOCK

On February 24, 2003, the Board of Directors authorized the repurchase of up to $25 million worth of the Company’s common stock over an eighteen-month period. Any such repurchases will be made in the open market or in privately negotiated transactions from time to time, subject to market conditions, applicable legal requirements and other factors. This plan does not obligate the Company to acquire any particular amount of common stock, and the plan may be suspended at any time. Pursuant to Florida law, any shares repurchased will be added to the Company’s authorized, unissued shares and would be available for future use. No shares have been repurchased under this program as of October 25, 2003.

On November 26, 2002, the shareholders of the Company approved the 2002 Directors Restricted Stock Plan whereby non-employee directors must elect to receive a minimum percentage of their annual fees in restricted shares of the Company’s common stock. The Company has reserved 100,000 shares of its common stock for issuance under the plan. The number of restricted shares of the Company’s common stock to be granted is based on the fair market value of a share of common stock on the date such fees are payable. As of October 25, 2003, aggregate 5,183 shares had been issued under this plan at a weighted average market price of $13.16 per share. For the quarter ended October 25, 2003, 1,117 shares had been issued under the plan at a price of $16.97 per share.

11.     SEGMENT INFORMATION

The Company operates in one reportable segment as a specialty contractor. The Company provides engineering, placement and maintenance of aerial, underground, and buried fiber-optic, coaxial and copper cable systems owned by local and long distance communications carriers, and cable television multiple system operators. Additionally, the Company provides similar services related to the installation of integrated voice, data, and video local and wide area networks within buildings and also provides underground locating services to various utilities and provides electrical and other construction and maintenance services to electric utilities and others. These services are provided by the Company’s various subsidiaries, which provide management with monthly financial statements. All of the Company’s subsidiaries have been aggregated into one reporting segment due to their similar customer bases, products and production methods, and distribution methods. The following table presents information regarding contract revenues by type of customer:

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	For the Three Months Ended
	October 25, 2003		October 26, 2002
Telecommunications	$	167,850,043	$	139,801,354
Utility line locating		17,267,323		15,189,257
Electrical utilities and other customers		10,904,076		3,490,303
Total contract revenues	$	196,021,442	$	158,480,914

12.     SUBSEQUENT EVENTS

On November 25, 2003, the Company purchased substantially all of First South Utility Construction, Inc.’s (“First South”) assets and assumed certain liabilities associated with these assets for approximately $50 million in cash and 175,840 shares of Dycom’s common stock. In conjunction with the acquisition, the Company also paid approximately $9 million for excess working capital consisting primarily of accounts receivable and unbilled revenue. The Company deposited approximately $6.4 million of such amount in escrow, to be returned to the Company to the extent such amounts remain outstanding on April 15, 2004.

On December 3, 2003, the Company acquired UtiliQuest Holdings Corp. (“UtiliQuest”) for approximately $120 million in cash. Under the terms of the merger agreement, UtiliQuest merged with a newly-formed subsidiary of the Company with UtiliQuest surviving as a wholly owned subsidiary of the Company. The Company borrowed approximately $85 million under its Credit Agreement in connection with this acquisition.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a leading provider of specialty contracting services, including engineering, construction, installation and maintenance services, to telecommunications providers throughout the United States. We also provide underground locating services to various utilities and electrical and other construction and maintenance services to electric utilities and others. For the three months ended October 25, 2003, specialty contracting services related to the telecommunications industry, underground utility locating and electrical and other construction and maintenance to electric utilities and others contributed approximately 85.6%, 8.8% and 5.6%, respectively, to our total contract revenues.

We provide a significant portion of our services pursuant to multi-year master service agreements. Under master service agreements, we generally agree to provide for a period of one or more years, generally on an exclusive basis, a customer’s specified service requirements within a given geographical area. Master service agreements generally provide that we will furnish a specified unit of service for a specified unit price (e.g., fiber optic cable will be installed underground for a specified rate of dollars per foot). In some cases, a customer may terminate these agreements for convenience with at least 90 days prior written notice. Although historically master service agreements have been awarded through a competitive bidding process, recent trends have been toward securing or extending such contracts on negotiated terms. We are currently a party to approximately 63 master service agreements.

The remainder of our services are provided pursuant to contracts for particular jobs. Long-term contracts relate to specific projects with terms in excess of one year from the contract date. Short-term contracts are generally from three to four months in duration, depending upon the size of the project. A portion of our contracts include retainage provisions under which 5% to 10% of the contract invoicing is withheld subject to project completion and acceptance by the customer.

Contract revenues from multi-year master service agreements represented 41.4% and 44.8% of total contract revenues for the three months ended October 25, 2003 and October 26, 2002, respectively, and contract revenues from long-term contracts, including multi-year master service agreements, represented 81.4% and 76.5% of total contract revenues, respectively.

We recognize revenue on unit based contracts as the unit is completed. Revenue on non-unit based contracts is recognized under the percentage-of-completion method based primarily on the ratio of contract costs incurred to date to total estimated contract costs. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is accrued.

A significant portion of our revenue comes from several large customers. The following table reflects the percentage of total contract revenue received from customers contributing at least 2.5% of our total contract revenue in either the quarter ending October 25, 2003 or October 26, 2002:

	For the Three Months Ended
	October 25, 2003			October 26, 2002
Comcast *		34.8	%		22.4	%
Sprint		13.7	%		5.6	%
BellSouth		11.0	%		12.6	%
Qwest		5.7	%		5.0	%
Adelphia		4.7	%		4.3	%
Alltel		4.2	%		2.1	%
DIRECTV		3.2	%		8.2	%
Charter Communications		2.9	%		6.3	%
Sierra/Touch America		—			6.5	%
Insight		—			2.9	%

* Comcast and AT&T Broadband revenues have been combined for periods prior to Comcast’s November 18, 2002 acquisition of AT&T Broadband.

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Cost of earned revenues includes all direct costs of providing services under our contracts, including all costs of construction personnel, subcontractor costs, all costs associated with operation of equipment (excluding depreciation), insurance and materials not supplied by the customer. Generally the customer provides the materials that are to be used for its job. Because we retain the risk for automobile and general liability, worker’s compensation, and employee group health claims subject to certain limits, a change in experience or actuarial assumptions could materially affect results of operations in a particular period.

General and administrative costs include all our costs at the parent company level, as well as subsidiary management personnel and administrative overhead. Our management personnel, including subsidiary management, perform substantially all sales and marketing functions as part of their management responsibilities and, accordingly, we have not incurred material selling expenses.

Acquisitions

Subsequent to the end of the quarter, the Company closed acquisitions.

On November 25, 2003, the Company purchased substantially all of First South Utility Construction, Inc.’s (“First South”) assets and assumed certain liabilities associated with these assets for approximately $50 million in cash and 175,840 shares of Dycom’s common stock. In conjunction with the acquisition, the Company also paid approximately $9 million for excess working capital consisting primarily of accounts receivable and unbilled revenue. The Company deposited approximately $6.4 million of such amount in escrow, to be returned to the Company to the extent such amounts remain outstanding on April 15, 2004.

On December 3, 2003, the Company acquired UtiliQuest Holdings Corp. (“UtiliQuest”) for approximately $120 million in cash. Under the terms of the merger agreement, UtiliQuest merged with a newly-formed subsidiary of the Company with UtiliQuest surviving as a wholly owned subsidiary of the Company. The Company borrowed approximately $85 million under its Credit Agreement in connection with this acquisition.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related 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. On an ongoing basis, we evaluate these estimates, including those related to revenue recognition, bad debts, self-insured claims liability, income taxes, intangible assets, investments, contingencies and litigation. We base our estimates on current information, historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recognition of revenue that are not readily apparent from other sources. We cannot assure you that actual results will not differ from those estimates.

We have identified the accounting policies below as critical to the accounting for our business operations and the understanding of our results of operations. The impact of these policies on our operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect our reported and expected financial results. Our key accounting estimates and policies are reviewed with our Audit Committee. For a further discussion of the application of these and other accounting policies, see Note 1 to the Notes to Condensed Consolidated Financial Statements.

Revenue Recognition. The majority of our contracts are unit based. Revenue on unit based contracts is recognized as the unit is completed. Revenue on non-unit based contracts is recognized under the percentage-of-completion method based primarily on the ratio of contract costs incurred to date to total estimated contract costs. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is accrued.

“Costs and estimated earnings in excess of billings”, classified as a current asset, primarily relates to revenues for completed but unbilled units under unit based contracts, as well as unbilled revenues recognized under the percentage-of-completion method for non-unit based contracts. For those contracts in which billings exceed contract revenues recognized to date, such excesses are classified as a current liability in the caption “billings in excess of costs and estimated earnings.”

Estimation of the Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We record an increase in the allowance for doubtful accounts when it is probable that the receivable has been impaired at the date of the financial statements and the loss can be reasonably estimated. Any increase in the allowance account has a corresponding negative effect on our results of operations. Estimates of uncollectable amounts are reviewed each period, and changes are recorded in the period they become known. Management analyzes accounts receivable and historical bad debts, customer creditworthiness and current economic trends and considers changes in customer payment terms and other factors when evaluating the adequacy of the allowance for doubtful accounts. Should any of these factors change, the estimate made by management may also change, which could affect the level of our future provision for doubtful accounts.

Self-Insured Claims Liability. We retain the risk of loss, up to certain limits, for automobile, general liability and workers’ compensation claims. A liability for unpaid claims and the associated claim expenses, including incurred but unreported losses, is

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actuarially determined and reflected in the consolidated financial statements as an accrued liability. Factors affecting the determination of amounts to be accrued for automobile, general liability and workers’ compensation claims include, but are not limited to, expected cost for existing and anticipated claims, frequency, or payment patterns resulting from new types of claims, the hazard level of our operations, tort reform or other legislative changes, unfavorable jury decisions, court interpretations, changes in the medical conditions of claimants and economic factors such as inflation.

In addition, we retain the risk, up to certain limits, under a self-insured employee health plan. We review quarterly the paid claims history of our employee health plan and analyze our accrued liability for claims, including claims incurred but not yet paid. Factors affecting the determination of amounts to be accrued under the employee health plan include, but are not limited to, frequency of use, changes in medical costs, unfavorable jury decisions, legislative changes, changes in the medical conditions of claimants, court interpretations and economic factors such as inflation.

For losses occurring during fiscal years 2003 and 2004, we have retained the risk on a per occurrence basis for automobile liability to $500,000, for general liability to $250,000, and for worker’s compensation, in states where we are allowed to retain risk, to $500,000. For fiscal year 2004, we have aggregate stop loss coverage for the above exposures at the stated retention of approximately $15.8 million and $17.4 million for fiscal year 2003. In addition, we have umbrella liability coverage to a policy limit for each year of $75 million. Within the umbrella coverage, we have retained the risk of loss between $2.0 and $5.0 million, on a per occurrence basis, with an aggregate stop loss for this layer of $10.0 million for each of fiscal years 2003 and 2004.

The method of calculating the estimated accrued liability for automobile, general liability and workers’ compensation and employee group health claims is subject to inherent uncertainty. If actual results are less favorable than what we use to calculate the accrued liability, we would have to record expenses in excess of what we have already accrued.

Valuation of Intangible Assets and Investments. We have adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with that statement, we conduct, on at least an annual basis, a review of our reporting units to determine whether their carrying value exceeds their fair market value. Should this be the case, the value of our goodwill may be impaired and is written down. The valuations employ a combination of present value techniques to measure fair value corroborated by comparisons to estimated market multiples. When necessary, we engage third party specialists to assist us with our valuations. Impairment losses are reflected in operating income or loss in the consolidated statements of operations.

Accounting for Income Taxes. We account for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Developing our provision for income taxes requires significant judgment and expertise in federal and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. We have not recorded any valuation allowances as of October 25, 2003 because management believes that future taxable income will, more likely than not, be sufficient to realize the benefits of those assets as the temporary differences in basis reverse over time. Our judgments and tax strategies are subject to audit by various taxing authorities. While the Company believes it has provided adequately for its income tax liabilities in its consolidated financial statements, adverse determinations by taxing authorities could have a material adverse effect on our consolidated financial condition and results of operations.

Contingencies and Litigation. In the ordinary course of our business we are involved in certain legal proceedings. We estimate the range of liability related to pending litigation where the amount and range of loss can be estimated. Where there is a range of loss and no amount within the range is a better estimate than any other amount, we record the minimum estimated liability related to those claims. As additional information becomes available, we assess the potential liability related to our pending litigation and revise our estimates. Revisions of our estimates of the potential liability could materially impact our results of operations. If the final outcome of such litigation and contingencies differs adversely from that currently expected, it would result in a charge to earnings when determined.

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Results of Operations

The following table sets forth, as a percentage of contract revenues earned, certain items in our condensed consolidated statements of operations for the periods indicated:

		For the Three Months Ended
		(dollars in millions)
		October 25, 2003				October 26, 2002
Contract revenues earned		$	196.0	100.0	%	$	158.5	100.0	%
Expenses:
	Cost of earned revenue, excluding depreciation		147.0	75.0			123.6	78.0
	General and administrative		17.5	8.9			18.3	11.6
	Depreciation and amortization		9.3	4.8			10.8	6.8
Total			173.8	88.7			152.7	96.4
Interest income, net			0.3	0.2			0.3	0.2
Other income, net			0.8	0.4			1.1	0.7
Income before income taxes			23.3	11.9			7.2	4.5
Provision for income taxes			9.4	4.8			3.1	1.9
Net income		$	13.9	7.1	%	$	4.1	2.6	%

Revenues. Contract revenues increased $37.5 million, or 23.7%, to $196.0 million in the quarter ending October 25, 2003 from $158.5 million in the quarter ended October 26, 2002. Of this increase, $28.0 million was attributable to an increase in demand for specialty contracting services provided to telecommunications companies, $2.1 million was attributable to an increase in underground utility locating services provided to various utilities, and $7.4 million was attributable to an increase in electrical and other construction and maintenance services provided to electric utilities and others.

During the quarter ended October 25, 2003, we recognized $167.8 million of contract revenues, or 85.6% of our total contract revenues, from telecommunications services as compared to $139.8 million, or 88.2% for the quarter ended October 26, 2002. The increase in our telecommunications service revenues is attributable primarily to revenues from one of our significant customers engaged in a major upgrade project and from another significant customer for a major new construction and maintenance contract.

We recognized contract revenues of $17.3 million, or 8.8% of our total contract revenues, from underground utility locating services in the quarter ended October 25, 2003 as compared to $15.2 million, or 9.6%, in the quarter ended October 26, 2002. We recognized contract revenues of $10.9 million, or 5.6% of our total contract revenues, from electrical utilities and other construction and maintenance services in the quarter ended October 25, 2003 as compared to $3.5 million, or 2.2%, in the quarter ended October 26, 2002. The increase in our revenues from electrical utilities and other construction and maintenance services is attributable primarily to new contracts.

Contract revenues from multi-year master service agreements and other long-term agreements represented 81.4% of total contract revenues in the quarter ended October 25, 2003 as compared to 76.5% in the quarter ended October 26, 2002. Contract revenues from multi-year master service agreements represented 41.4% of total contract revenues in the quarter ended October 25, 2003 as compared to 44.8% in the quarter ended October 26, 2002.

Costs of Earned Revenues. Costs of earned revenues increased $23.4 million to $147.0 million in the quarter ended October 25, 2003 from $123.6 million in the quarter ended October 26, 2002. As a percentage of contract revenues, costs of earned revenues decreased to 75.0% in the quarter ended October 25, 2003 from 78.0% in the quarter ended October 26, 2002. Direct labor, direct materials,

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payroll costs and other direct costs declined by 9.9% as a percentage of contract revenues while subcontractor costs increased by 7.0%. Subcontractor costs rose in response to the increased work demand and the shift in the business mix toward operating units that utilize more subcontract labor.

General and Administrative Expenses. General and administrative expenses decreased $0.8 million to $17.5 million in the quarter ended October 25, 2003 from $18.3 million in the quarter ended October 26, 2002. General and administrative expenses decreased as a percentage of contract revenues to 8.9% in the quarter ended October 25, 2003 from 11.5% in the quarter ended October 26, 2002.

Depreciation and Amortization. Depreciation and amortization decreased $1.5 million to $9.3 million in the quarter ending October 25, 2003 as compared to $10.8 million in the quarter ended October 26, 2002, and decreased as a percentage of contract revenues to 4.8% from 6.8%. This decrease was a result of lower levels of capital expenditures during the last four fiscal years.

Interest Income, Net. Interest income, net remained constant at $0.3 million for the quarters ended October 25, 2003 and October 26, 2002.

Other Income, Net. Other income, net decreased $0.3 million to $0.8 million in the quarter ended October 25, 2003 from $1.1 million in the quarter ended October 26, 2002. This decrease is primarily a result of fewer sales of idle assets in the first quarter of fiscal 2004.

Income Taxes. The provision for income taxes was $9.4 million for the three months ended October 25, 2003 as compared to $3.1 million for the same period last year. Our effective tax rate was 40.2% for the three months ended October 25, 2003 as compared to 42.5% for the three months ended October 26, 2002. The impact of higher pretax income combined with relatively fixed permanent non-deductible expense items for tax purposes and the state tax impact of the reorganization of our subsidiaries resulted in a lower tax rate for the three months ended October 25, 2003 as compared to the same period last year.

Net Income. Net income was $13.9 million in the quarter ended October 25, 2003 as compared to $4.1 million in the quarter ended October 26, 2002.

Liquidity and Capital Resources

Capital requirements. Our primary capital needs are for equipment to support our contractual commitments to customers and to maintain sufficient working capital. We have typically financed capital expenditures by internal cash flows, operating and capital leases, and bank borrowings. Our sources of cash have historically been operating activities, equity offerings, bank borrowings, and proceeds from the sale of idle and surplus equipment and real property. To the extent we seek to grow by acquisitions that involve consideration other than our stock, our capital requirements may increase.

Cash and cash equivalents totaled $149.8 million at October 25, 2003 compared to $129.9 million at July 26, 2003.

		Three Months Ended (in millions)
		October 25, 2003			October 26, 2002
Net cash flows:
	Provided by (used in) operations	$	21.2		$	(4.7	)
	Used in investment activities	$	(2.4	)	$	(0.2	)
	Provided by financing activities	$	1.2		$	0.2

Cash from operating activities. For the three months ended October 25, 2003, net cash provided from operating activities was $21.2 million compared to cash used of $4.7 million for the three months ended October 26, 2002. Net income, adjusted for non-cash items primarily consisting of depreciation, amortization, and provision for bad debts, was our main source of operating cash flow and was offset in part by changes in working capital items that used $1.4 million of operating cash flow during the quarter ended October 25, 2003.

Components of the working capital increase were an increase in accounts receivable of $3.6 million and an increase in unbilled revenue, net of $2.5 million both of which were attributable to increased levels of revenues and an increase in other assets of $2.8 million primarily the result of increases in prepaid insurance premiums. These increases were partially offset by increases in accounts payable of $3.6 million, attributable to higher levels of operations, and income taxes payable of $3.1 million attributable to higher levels of pre tax income.

Based on quarterly revenues, days sales outstanding was 57.9 days for the quarter ended October 25, 2003 compared to 60.4 days for the quarter ended October 26, 2002, for current accounts receivable, net. Based on quarterly revenues, days sales outstanding was 17.0 days for the quarter ended October 25, 2003 compared to 18.5 days for the quarter ended October 26, 2002, for unbilled revenues, net.

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During the fourth quarter of fiscal 2002, two of our major customers, Adelphia and WorldCom, filed for bankruptcy protection. At October 25, 2003, we had long-term accounts receivables of $21.6 million from Adelphia, representing the remaining balance of pre-petition receivables of $40.7 million less $19.1 million that was written off against a previously established allowance for doubtful accounts. WorldCom’s long-term accounts receivables of $2.1 million were written-off entirely in fiscal year 2002. Should any additional customers file for bankruptcy or experience financial difficulties, or if our efforts to recover outstanding receivables fail, we could experience reduced cash flows and losses in excess of current allowances provided. In addition, material changes in our customer’s revenues or cash flows could affect our ability to collect amounts due from them.

Cash from investing activities. For the three months ended October 25, 2003, net cash used in investing activities was $2.4 million as compared to $0.2 million for the same period last year. For the three months ended October 25, 2003, capital expenditures of $3.8 million were offset by $1.4 million in proceeds from the sale of idle assets.

Cash from financing activities. For the three months ended October 25, 2003, net cash provided by financing activities, primarily from the exercise of employee stock options, was $1.2 million compared to $0.2 million for the three months ended October 26, 2002.

On June 3, 2002, we entered into a new $200 million unsecured revolving credit agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement provides us with a commitment of $200 million for a three-year period and includes a sublimit of $40 million for the issuance of letters of credit. Under the most restrictive covenants of our Credit Agreement, as of October 25, 2003, based on a multiple of EBITDA (as defined in the Credit Agreement), our available borrowing capacity is approximately $163.2 million, after considering the impact of outstanding Letters of Credit. As of October 25, 2003 we had no amounts outstanding under the Credit Agreement and $26.5 million of outstanding letters of credit. The outstanding letters of credit are all issued to our insurance companies as part of our self-insurance program.

Loans under the Credit Agreement bear interest, at our option, at the bank’s prime interest rate or LIBOR plus a spread of 1.25%, 1.50% or 2.00% based upon our leverage ratio. Based on our current leverage ratio, borrowings would be eligible for the 1.25% spread. We are required to pay an annual non-utilization fee equal to 0.50% of the unused portion of the facilities. In addition, we pay an annual agent fee of $50,000.

Under the Credit Agreement we are subject to certain financial covenants and conditions which restrict our ability to encumber our assets or incur certain types of indebtedness. We must maintain a leverage ratio of not greater than 2.25:1.00, as measured at the end of each fiscal quarter. At October 25, 2003, this leverage ratio, defined as consolidated funded debt including any outstanding letters of credit divided by consolidated EBITDA (as defined in the Credit Agreement), was 0.31:1.00. We must also maintain consolidated tangible net worth of not less than (i) $170,000,000 plus (ii) 50% of consolidated net income (positive or negative) from the date the acquisitions of both Utiliquest and First South Utility Construction are completed plus (iii) 75% of the equity issuances made from that date to the date of computation. At October 25, 2003, we were in compliance with all financial covenants and conditions under the Credit Agreement.

Certain subsidiaries have outstanding obligations under real estate leases and equipment and vehicle financing arrangements. The obligations are payable in monthly installments, expiring at various dates through November 2023.

Interest costs incurred on notes payable, all of which were expensed, during the three months ended October 25, 2003 were $1,467.

Related party transactions. We lease some of our administrative offices from entities related to officers of our subsidiaries.

Stock Repurchase Program. On February 24, 2003, the Board of Directors authorized the repurchase of up to $25 million worth of the Company’s common stock over an eighteen-month period. Such repurchases will be made in the open market or in privately negotiated transactions from time to time, subject to market conditions, applicable legal requirements and other factors. This plan does not obligate the Company to acquire any particular amount of common stock, and the plan may be suspended at any time. Pursuant to Florida law, any shares repurchased will be added to the Company’s authorized, unissued shares and are available for future issue. No shares have been repurchased under this program as of December 5, 2003.

We believe that our capital resources, together with existing cash balances, are sufficient to meet our acquisition commitments, financial obligations, operating lease commitments, and to support our normal replacement of equipment at our current level of business for at least the next twelve months. Our future operating results and cash flows may be affected by a number of factors including our success in bidding on future contracts and our continued ability to manage controllable costs effectively.

Backlog. Our backlog is comprised of the uncompleted portion of services to be performed under job-specific contracts and the estimated value of future services that we expect to provide under long-term requirements contracts. Our backlog at October 26, 2003 and July 26, 2003 was $900.4 million and $890.9 million, respectively. We expect to complete approximately 46.3% of our current backlog during the next twelve months. In many instances our customers are not contractually committed to specific volumes of services under a contract. However, the customer is obligated to obtain these services from us if they are not performed by the customer’s employees and we are committed to perform these services if requested by the customer. Many of these contracts are

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multi-year agreements, and we include in our backlog the amount of services projected to be performed over the terms of the contracts based on our historical relationships with customers and our experience in procurements of this nature. There can be no assurance, however, as to a customer’s requirements during a particular period or that such estimates at any point in time are accurate.

Seasonality and Quarterly Fluctuations

Our revenues can be affected by seasonality. Since most of the work we perform is done outdoors, our results of operations can be impacted by extended periods of inclement weather. Generally, inclement weather occurs during the winter months or in our second and third quarters of our fiscal year. In addition, a disproportionate number of holidays fall within our second quarter impacting our productivity. Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.

Special Note Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the Notes to the Condensed Consolidated Financial Statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “forecast,” “project,” and similar expressions identify forward-looking statements. Such statements may include, but may not be limited to, the anticipated outcome of contingent events, including litigation, projections of revenues, income or loss, capital expenditures, plans for future operations, growth and acquisitions, financial needs or plans and the availability of financing, and plans relating to our services including backlog, as well as assumptions relating to the foregoing. These forward-looking statements are based on management’s current expectations, estimates and projections. Forward-looking statements are subject to risks and uncertainties that may cause actual results in the future to differ materially from the results projected or implied in any forward-looking statements contained in this report. Such risks and uncertainties include: business and economic conditions in the telecommunications industry affecting our customers, a deterioration in our customers’ financial condition, the adequacy of our insurance and other reserves and allowances for doubtful accounts, whether the carrying value of our assets may be impaired, whether pending acquisitions are consummated and, if consummated, the timing thereof, the anticipated outcome of other contingent events, including litigation, liquidity needs and the availability of financing. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Recently Issued Accounting Pronouncements

In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement requires certain financial instruments that could previously be accounted for by issuers as equity be classified as liabilities or, in some cases, assets. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not have any financial instruments that are impacted by SFAS No. 150.

In January 2003, FASB Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities” was issued with the objective of improving financial reporting by companies involved with variable interest entities. In October 2003, the FASB deferred the effective date for applying certain provisions of FIN 46. The Company does not have any interests in variable interest entities.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We considered the provision of Financial Reporting Release No. 48, “Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments” in determining our market risk. We had no significant holdings of derivative financial or commodity instruments at October 25, 2003. A review of our other financial instruments and risk exposures at that date revealed that we had exposure to interest rate risk. At October 25, 2003, we performed sensitivity analyses to assess the potential effect of this risk and concluded that reasonably possible near-term changes in interest rates should not materially affect our financial position, results of operations or cash flows.

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Item 4. CONTROLS AND PROCEDURES

The Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer each concluded that the Company’s disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the Company in reports that it files under the Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibits furnished pursuant to the requirements of Form 10-Q:

Number	Description
(10.1)	Second Amendment to Credit Agreement and Consent and Waiver dated as of November 10, 2003
(10.2)	Amended and Restated Employment Agreement between Steven E. Nielsen and Dycom Industries, Inc. dated as of November 25, 2003
(10.3)	Agreement and Plan of Merger among Dycom Industries, Inc., UtiliQuest Acquisition Corp., UtiliQuest Holdings Corp., and OCM/GFI Power Opportunities Fund, L.P. dated as of November 17, 2003
(11)	Statement re computation of per share earnings; All information required by Exhibit 11 is presented within Note 2 of the Company’s condensed consolidated financial statements in accordance with the provisions of SFAS No. 128
(31.1)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(31.2)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32.1)	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(32.2)	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

The following reports on Form 8-K were filed on behalf of the Registrant during the quarter ended October 25, 2003:

(i)	Press release with respect to fourth quarter results and conference call held August 26, 2003.
	Item Reported: 9
	Date Filed: August 28, 2003
(ii)	Press release announcing earnings for the fourth quarter of 2003 and guidance for the first two quarters of 2004.
	Item Reported: 9
	Date Filed: August 25, 2003

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SIGNATURES

Pursuant to the requirements 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.

DYCOM INDUSTRIES, INC.

Registrant

Date:	December 5, 2003	/s/ Steven E. Nielsen
		Name: Steven E. Nielsen
		Title: President and Chief Executive Officer
Date:	December 5, 2003	/s/ Richard L. Dunn Name: Richard L. Dunn Title: Senior Vice President and Chief Financial Officer

23 of 23 EX-10.1 3 g86172exv10w1.txt EX-10.1 2ND AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.1 SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER, dated as of November 10, 2003 (this "Second Amendment"), is entered into by and among DYCOM INDUSTRIES, INC., a Delaware corporation (the "Borrower"), certain Domestic Subsidiaries of the Borrower as Guarantors (the "Guarantors" and together with the Borrower, the "Credit Parties"), the Required Lenders identified on the signature pages hereto and WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders (the "Administrative Agent"). W I T N E S S E T H WHEREAS, the Borrower, the Guarantors, the Administrative Agent and the Lenders are parties to that certain Credit Agreement dated as of June 3, 2002 (as previously amended and modified and as further amended, modified, supplemented or restated from time to time, the "Credit Agreement"; capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement unless otherwise defined herein); WHEREAS, the Borrower has notified the Lenders that it intends to (a) acquire the assets of First South Utility Construction, a North Carolina corporation ("First South"), on terms and conditions substantially the same as those set forth on the summary of material terms attached hereto as Schedule A (the "First South Acquisition") and (b) acquire the Capital Stock of UtiliQuest Holdings Corp., a Delaware corporation ("UtiliQuest"), on terms and conditions substantially the same as those set forth on the summary of material terms attached hereto as Schedule B (the "UtiliQuest Acquisition"; together with the First South Acquisition, individually an "Acquisition" and collectively the "Acquisitions"); WHEREAS, the Borrower has requested that the Required Lenders (a) consent to the consummation of the Acquisitions by the Credit Parties, (b) waive the Borrower's failure to provide certain documents twenty Business Days in advance of a Permitted Acquisition and (c) agree to amend a certain provision of the Credit Agreement; and WHEREAS, the Required Lenders have agreed to the consent, waiver and amendment requested by the Borrower, subject to the terms and conditions set forth herein. NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1 CONSENT 1.1 Consent to Acquisitions. The Required Lenders, for and on behalf of the Lenders under the Credit Agreement, hereby consent to the consummation of the Acquisitions by the Credit Parties, notwithstanding any prohibitions to the contrary set forth in Section 7.5 of the Credit Agreement (Advances, Investments and Loans) or in the definition of "Permitted Acquisition" in Section 1.1 of the Credit Agreement. This consent shall be effective solely with respect to the specific circumstances of the Acquisitions. SECTION 2 AMENDMENT 2.1 Consolidated Tangible Net Worth Covenant. (a) If, and upon such time that, one (but not both) of the Acquisitions is consummated, Section 6.7(c) to the Credit Agreement shall be amended and restated in its entirety as of such date such that: (i) if the First South Acquisition, but not the UtiliQuest Acquisition, has been consummated, Section 6.7(c) to the Credit Agreement shall read in its entirety as follows: (c) Consolidated Tangible Net Worth. Maintain Consolidated Tangible Net Worth of not less than (i) $265,000,000 plus (ii) 50% of Consolidated Net Income (positive or negative) from the date the Borrower's acquisition of First South Utility Construction, a North Carolina corporation, is consummated (the "First South Acquisition Date") to the date of computation plus (iii) 75% of the Equity Issuances made from the First South Acquisition Date to the date of computation. (ii) if the UtiliQuest Acquisition, but not the First South Acquisition, has been consummated, Section 6.7(c) to the Credit Agreement shall read in its entirety as follows: (c) Consolidated Tangible Net Worth. Maintain Consolidated Tangible Net Worth of not less than (i) $200,000,000 plus (ii) 50% of Consolidated Net Income (positive or negative) from the date the Borrower's acquisition of UtiliQuest Holdings Corp., a Delaware corporation, is consummated (the "UtiliQuest Acquisition Date") to the date of computation plus (iii) 75% of the Equity Issuances made from the UtiliQuest Acquisition Date to the date of computation. 2 (b) If, and upon such time that, both Acquisitions have been consummated, Section 6.7(c) to the Credit Agreement shall be amended and restated in its entirety as of such date to read as follows: (c) Consolidated Tangible Net Worth. Maintain Consolidated Tangible Net Worth of not less than (i) $170,000,000 plus (ii) 50% of Consolidated Net Income (positive or negative) from the date the Borrower has completed the acquisitions of both UtiliQuest Holdings Corp., a Delaware corporation, and First South Utility Construction, a North Carolina corporation (the "Acquisitions Completion Date"), plus (iii) 75% of the Equity Issuances made from the Acquisitions Completion Date to the date of computation. SECTION 3 WAIVER 3.1 Waiver. The Required Lenders hereby waive, on a one-time basis for the Acquisitions, any failure of the Borrower to comply with the requirement set forth in Section 6.2(e) of the Credit Agreement to provide the Lenders with a complete Permitted Acquisition report twenty Business Days' prior to the consummation of a Permitted Acquisition. Except for the specific, one-time waiver set forth above, nothing set forth herein or contemplated hereby is intended to constitute a waiver of (i) any rights or remedies available to the Lenders or the Administrative Agent under the Credit Agreement or any other Credit Document or under applicable law (all of which rights and remedies are hereby expressly reserved by the Lenders and the Administrative Agent) or (ii) the Credit Parties' obligation to comply fully with any duty, term, condition, obligation or covenant contained in the Credit Agreement and the other Credit Documents. SECTION 4 CLOSING CONDITIONS AND POST-CLOSING REQUIREMENTS 4.1 Closing Conditions. This Second Amendment shall be effective as of the date hereof upon satisfaction of the following conditions precedent, in form and substance reasonably acceptable to the Administrative Agent: (a) Second Amendment. The Administrative Agent shall have received a copy of this Second Amendment duly executed by each of the Credit Parties and the Required Lenders. 3 (b) Officer's Certificate. The Administrative Agent shall have received an officer's certificate, dated as of the date hereof, executed by a Responsible Officer of the Borrower (i) certifying that (A) no Default or Event of Default exists or will exist after giving effect to the Acquisitions (after giving effect to this Second Amendment), (B) each of First South and UtiliQuest has earnings before interest, taxes, depreciation and amortization (excluding, in the case of First South, any extraordinary credit losses) for the most recent four fiscal quarters prior to the applicable acquisition date for which financial statements are available in an amount greater than $0 and (C) neither the First South Acquisition nor the UtiliQuest Acquisition is a "hostile acquisition" and (ii) demonstrating that the Leverage Ratio shall be less than or equal to 1.75 to 1.0 after giving effect to each of the Acquisitions. (c) Amendment Fee. The Borrower shall have paid a non-refundable amendment fee to the Administrative Agent, for the pro rata benefit of each Lender who duly executes and delivers a counterpart to this Second Amendment on or before 12:00 Noon (Eastern Time) on Monday, November 10, 2003 (the "Consenting Lenders"), in an amount equal to ten basis points (.10%) of the aggregate Commitments of the Consenting Lenders. 4.2 Post-Closing Requirements. (a) Joinder Agreement. As soon as possible, and in any event no later than ten (10) Business Days after the closing date of the UtiliQuest Acquisition (or such later date as agreed to by the Administrative Agent in its sole discretion), the Administrative Agent shall have received, in accordance with the terms of Section 6.9 of the Credit Agreement, a Joinder Agreement duly executed by the Borrower, UtiliQuest and any other Domestic Subsidiary of the Borrower that is not a Guarantor as of the date of this Second Amendment. (b) Authority Documents. As soon as possible, and in any event no later than ten (10) Business Days after the closing date of the UtiliQuest Acquisition (or such later date as agreed to by the Administrative Agent in its sole discretion), the Administrative Agent shall have received, with respect to each of UtiliQuest and any other Domestic Subsidiary of the Borrower party to the Joinder Agreement referenced in Section 4.2(a) above, the following authority documents: (i) a secretary's certificate of such Person, (ii) a copy of its articles of incorporation, (iii) a copy of the resolutions of its board of directors, approving and adopting the Joinder Agreement and the other Credit Documents, (iv) a copy of its bylaws, (v) copies of a certificate of good standing, existence or its equivalent certified as of a recent date by the appropriate Governmental Authority of its state of incorporation and (vi) an incumbency certificate. (c) Legal Opinion. As soon as possible, and in any event no later than ten (10) Business Days after the closing date of the UtiliQuest Acquisition (or such later date as agreed to by the Administrative Agent in its sole discretion), the Administrative Agent shall have received a legal opinion from counsel to the Credit Parties, in form and 4 substance reasonably satisfactory to the Administrative Agent, which opinion shall include, without limitation, an opinion as to the enforceability of the Joinder Agreement referenced in Section 4.2(a) above. (d) Effect of Non-Compliance. Notwithstanding the terms of Section 8.1(c)(iii) of the Credit Agreement to the contrary, the failure of any requirement set forth in this Section 4.2 to be satisfied within the time period allotted therefor shall constitute an immediate Event of Default under the Credit Agreement. SECTION 5 MISCELLANEOUS 5.1 Amended Terms. The term "Credit Agreement" as used in each of the Credit Documents shall hereafter mean the Credit Agreement as amended by this Second Amendment. Except as specifically amended or modified hereby or otherwise agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms. 5.2 Representations and Warranties of the Borrower. Each of the Credit Parties represents and warrants to the Lenders as follows: (a) It has taken all necessary action to authorize the execution, delivery and performance of this Second Amendment. (b) This Second Amendment has been duly executed and delivered by such Person and constitutes such Person's legal, valid and binding obligations, enforceable in accordance with its terms, except as such enforceability may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (c) No consent, approval, authorization or order of, or filing, registration or qualification with, any court or Governmental Authority or third party is required in connection with the execution, delivery or performance by such Person of this Second Amendment. 5.3 Reaffirmation of Credit Party Obligations. Each Credit Party hereby ratifies the Credit Agreement (as amended by this Second Amendment) and acknowledges and reaffirms (a) that it is bound by all terms of the Credit Agreement (as amended by this Second Amendment) applicable to it and (b) that it is responsible for the observance and full performance of its respective Credit Party Obligations. 5.4 Credit Document. This Second Amendment shall constitute a Credit Document under the terms of the Credit Agreement. 5 5.5 Expenses. The Borrower agrees to pay all reasonable costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Second Amendment, including, without limitation, the reasonable fees and expenses of Moore & Van Allen, PLLC, and all previously incurred fees and expenses, if any, which remain outstanding on the date hereof. 5.6 Entirety. This Second Amendment and the other Credit Documents embody the entire agreement between the parties hereto and supersede all prior agreements and understandings, oral or written, if any, relating to the subject matter hereof. 5.7 Counterparts/Telecopy. This Second Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of executed counterparts of the Second Amendment by telecopy shall be effective as an original and shall constitute a representation that an original shall be delivered. 5.8 Governing Law. This Second Amendment and the rights and obligations of the parties under this Second Amendment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 5.9 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial. The jurisdiction, services of process and waiver of jury trial provisions set forth in Sections 11.14 and 11.18 of the Credit Agreement are hereby incorporated by reference, mutatis mutandis. 5.10 Further Assurances. The Credit Parties agree to promptly take such action, upon the request of the Administrative Agent, as is reasonably necessary to carry out the intent of this Second Amendment. [Signature Pages Follow] 6 DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Second Amendment to be duly executed and delivered as of the date first above written. BORROWER: DYCOM INDUSTRIES, INC., a Florida corporation By: -s- Richard L. Dunn --------------------------------- Name: Richard L. Dunn Title: Sr. Vice President & CFO GUARANTORS: COMMUNICATIONS CONSTRUCTION GROUP, INC., a Pennsylvania corporation ANSCO & ASSOCIATES, INC., a Florida corporation DYCOM CAPITAL MANAGEMENT, INC., a Delaware corporation DYCOM CORPORATE IDENTITY, INC., a Delaware corporation DYCOM INVESTMENTS, INC., a Delaware corporation ERVIN CABLE CONSTRUCTION, INC., a Kentucky corporation CABLE COM INC., a Delaware corporation NIELS FUGAL SONS COMPANY, a Utah corporation By: -s- Richard L. Dunn --------------------------------- Name: Richard L. Dunn Title: Treasurer of each of the foregoing DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER LENDERS: WACHOVIA BANK, NATIONAL ASSOCIATION, individually in its capacity as a Lender and in its capacity as Administrative Agent By: -s- Michael Romanzo ----------------------------------- Name: Michael Romanzo Title: Vice President DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER BANK OF AMERICA, N.A. By: -s- Timothy H. Spanos ------------------------------------ Name: Timothy H. Spanos Title: Managing Director DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER LASALLE BANK NATIONAL ASSOCIATION By: -s- Robert Lozano -------------------------------------- Name: Robert Lozano Title: First Vice President DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER HSBC BANK USA By: -s- Gregory Roll -------------------------------------- Name: Gregory Roll Title: First Vice President DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER HARRIS TRUST AND SAVINGS BANK By: -s- Wes W. Frangul -------------------------------------- Name: Wes W. Frangul Title: Managing Director DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER SUNTRUST BANK By: -s- Edward E. Wooten -------------------------------------- Name: Edward E. Wooten Title: Director DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER REGIONS BANK By: -s- David Waller -------------------------------------- Name: David Waller Title: Vice President DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER COMPASS BANK By: -s- C. French Yarbrough JR -------------------------------------- Name: C. FRENCH YARBROUGH JR Title: SVP DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER COMMERCEBANK N.A. By: -s- Terry Lysengen --------------------------------------- Name: Terry Lysengen Title: Vice President DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER BANK HAPOALIM B.M. By: -s- Marc Bosc [ILLEGIBLE] ----------------- Name: MARC BOSC [ILLEGIBLE] Title: VICE PRESIDENT DYCOM INDUSTRIES, INC. SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER ISRAEL DISCOUNT BANK OF NEW YORK By: -s- Roberto R. Munoz ----------------------------------------- Name: Roberto R. Munoz Title: Senior Vice President Chief Landing Officer for Florida SCHEDULE A SUMMARY OF MATERIAL TERMS OF FIRST SOUTH ACQUISITION [see attached] EXECUTIVE SUMMARY PROPOSED ACQUISITION OF SUBSTANTIALLY ALL OF THE ASSETS OF FIRST SOUTH UTILITY CONSTRUCTION, INC. (THE "COMPANY") - - LOCATION OF COMPANY: Greensboro, North Carolina. - - SELLER: First South Utility Construction, Inc. - - ACQUISITION STRUCTURE: Asset purchase by Dycom Industries, Inc. - - DESCRIPTION OF THE ASSETS: - Substantially all of the property and assets of Seller's business of construction, design and engineering and rights of way services for government agencies and utilities at various locations in the United States. - Includes, among other things, owned and lease real property, tangible personal property, vehicles, inventories, receivables, records, goodwill, owned intellectual property, claims and rights of action, sales-related material, rights under contracts and permits and licenses. - Does not include assets used exclusively in the Pot-Fill division of the Company. - Dycom will also assume certain liabilities associated with these assets and the business. - - PURCHASE PRICE: $50 million in cash and $4 million in newly-issued common stock, subject to adjustment. - - INDEMNIFICATION: - Representations and warranties survive until October 1, 2004 (except tax which survives until the 30th day after the applicable statute of limitations and environmental which survives until the third anniversary of the Closing). - $4 million reciprocal indemnification cap (except in the case of tax indemnification or Excluded Liabilities). - $700,000 basket (except for tax indemnification which has no basket); once basket reached, recovery on claim from first dollar. - - INDEMNITY ESCROW: - $4 million stock escrow. - $3.5 million for General Indemnification Claims. - $500,000 for Environmental Indemnification Claims. - General Indemnification Escrow "stepped-down" to $2 million in the event Dycom receives $2,750,000 from outstanding AT&T receivable. - - AT&T ESCROW: - $6,350,000 cash escrow. - Paid back by Dycom (dollar for dollar) to the Company as funds from outstanding AT&T receivable are collected by Dycom. - - ANTITRUST FILING: Dycom will need to make an antitrust filing under the Hart-Scott-Rodino Antitrust Act of 1976, as amended, in connection with this transaction. - - EMPLOYMENT AGREEMENTS: Dycom will enter into employment agreements with Susan M. Knox, Bruce A. Clemment, James E. Conrad, Jr. and Elaine K. Shelton. The terms of these agreements are substantially similar to the standard Dycom employment agreements for executive officers at the subsidiary level. The salary amounts are still being negotiated. - - CONSULTING AGREEMENT: Dycom is also considering entering into a consulting agreement with Jeffrey Mott. - - REGISTRATION RIGHTS AGREEMENT: Dycom is currently negotiating a registration rights agreement with the Company. This agreement will be substantially similar to registration rights agreements Dycom has entered into in past transactions. - - SCHEDULED CLOSING DATE: To be determined, but prior to December 5, 2003. 2 - - SIGNIFICANT CLOSING CONDITIONS: - Antitrust approval (HSR) - No Litigation - Accuracy of representations and warranties. - No governmental order prohibiting the transaction. - - TERMINATION: - By either party due to a Material Adverse Effect, untrue representations and warranties or unfulfilled covenants. - If the Closing has not occurred by December 5, 2003. - By mutual consent. - - BROKER: None. 3 SCHEDULE B SUMMARY OF MATERIAL TERMS OF UTILIQUEST ACQUISITION [see attached] SUMMARY OF PROPOSED TRANSACTION WITH UTILIQUEST HOLDINGS CORP. CONSIDERATION: $120 million in cash, less (i) Closing Date Debt (includes capital leases) which Dycom will repay (except for the capital leases) at Closing (approximately $30 million) and (ii) UtiliQuest Holdings Corp.'s ("UtiliQuest") and GFI's (the "Sellers") expenses. WORKING CAPITAL ADJUSTMENT: Adjustment based on amount of working capital at Closing (>$750,000, merger consideration is increased, <$750,000, merger consideration is reduced). STRUCTURE: Merger of newly-formed Dycom subsidiary with and into UtiliQuest with UtiliQuest surviving the merger. DESCRIPTION OF BUSINESS: UtiliQuest provides facility-locating services to utilities. DEAL PROTECTIONS: GFI, as 99% shareholder of UtiliQuest, will have approved the merger by the time the merger agreement is entered into. None of GFI, UtiliQuest or any of their affiliates will solicit, initiate or encourage proposals from other parties to enter into any competing business combinations. KEY CLOSING CONDITIONS: - Accuracy of representations and warranties; - HSR clearance; - GFI entering into a confidentiality/non-disclosure agreement; - Number of dissenting shares must be less than 1% of the outstanding shares of UtiliQuest; - No Governmental Order or action or litigation seeking to restrain the transaction; - Delivery of payoff certificates/letters by UtiliQuest for each repayment by UtiliQuest of a portion of the Closing Date Debt; and - No Material Adverse Effect. SCHEDULED CLOSING DATE: To be determined, but prior to December 5, 2003. DROP DEAD DATE: December 5, 2003. SUMMARY OF PROPOSED TRANSACTION (CONTINUED) INDEMNIFICATION: - Reps and warranties survive until the first anniversary of the Closing. - Dycom indemnified for: - Breach of reps and warranties: Basket $1.2 million (deductible), except for breach of tax representation which has no basket. - Covenants not performed by Closing. - Any action by dissenting stockholders. - UtiliQuest expenses to the extent not paid as of Closing. - Inaccuracy of the Per Share Merger Consideration. - Cap - $10 million. ESCROW: $10 million Indemnity Escrow and $ [ ] Working Capital Adjustment Escrow. TREATMENT OF OPTIONS: UtiliQuest optionholders will be cashed out at the Closing (included in Merger Consideration). ANTITRUST FILING: Dycom filed an antitrust filing under the Hart-Scott-Rodino Antitrust Act of 1976, as amended, in connection with this transaction on October 31, 2003. TERMINATION: - By mutual consent; - By Dycom if UtiliQuest is in material breach or closing conditions are not satisfied; - By GFI if Dycom is in material breach or closing conditions are not satisfied; - By Dycom or GFI if any law or governmental order makes consummation of the Merger illegal; and - If the Closing has not occurred by the Drop-Dead Date. ENRON CLAIM: UtiliQuest has outstanding claims against Enron in connection with GFI's initial acquisition of UtiliQuest. If these claims are not settled prior to the Closing, Dycom will receive a portion of any subsequent settlement. EX-10.2 4 g86172exv10w2.txt EX-10.2 AMENDMENT TO EMPLOYMENT AGREEMENT EXHIBIT 10.2 2003 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement is made this 25th day of November, 2003, between Steven E. Nielsen ("EMPLOYEE") and Dycom Industries, Inc. ("EMPLOYER"). 1. EMPLOYMENT. Subject to the terms and conditions hereof, Employer hereby agrees to continue to employ Employee as President and Chief Executive Officer to perform such specific duties and have such responsibilities as Employer's Board of Directors (the "BOARD") may from time to time establish; PROVIDED, HOWEVER, that such duties shall be consistent with the status, duties and responsibilities typically accorded to a President and Chief Executive Officer. Employee hereby accepts continued employment by Employer as President and Chief Executive Officer of Employer, subject to the terms and conditions hereof, and agrees to continue to devote his full business time and attention to his duties hereunder, to the best of his abilities. This Employment Agreement supersedes that certain Amended and Restated Employment between the parties hereto made the 14th day of December, 1998 (the "PRIOR AGREEMENT"). 2. TERM OF EMPLOYMENT. Employee's period of employment pursuant to this Employment Agreement (the "TERM") shall commence on the date set forth above and shall terminate upon the earlier to occur of (a) termination pursuant to paragraph 5 hereof or (b) May 15, 2008, unless extended by the parties hereto. 3. COMPENSATION, BENEFITS AND EXPENSES. (a) At the commencement of Employee's term of employment pursuant to this Employment Agreement, Employee shall be paid a base salary at an annual rate of $575,000. Payment will be made on the regularly scheduled pay dates of Employer, subject to all appropriate withholdings or other deductions required by law or by Employer's established policies applicable to all employees of Employer. The Compensation Committee of the Board shall review Employee's salary annually, and may increase Employee's salary in its sole discretion, but shall not reduce such salary below the rate established by this Employment Agreement (as it may be increased from time to time hereunder) without Employee's written consent. (b) In addition to any other compensation payable to Employee pursuant to this Employment Agreement, Employee during the term of this Employment Agreement shall participate in an annual bonus plan or otherwise be eligible for an annual bonus, with a target of 100% of his base salary, if applicable performance criteria are fully achieved. (c) Employee's services hereunder shall be performed at the principal offices of Employer in Palm Beach Gardens, Florida, subject to such reasonable travel as the performance of Employee's duties and the business of Employer may require. (d) In addition to compensation payable to Employee as described above, Employee shall be entitled to participate in all employee benefit plans or programs of Employer as are available to management employees of Employer generally and such other benefit plans or programs as may be specified by the Board, including any stock options that may be granted by the Board. Employer also shall reimburse Employee for an annual physical examination by a physician of Employee's choice. (e) Employee shall receive a grant of 105,000 restricted shares of Employer common stock (the "RESTRICTED STOCK") as follows: (I) 5,000 shares of Restricted Stock shall be granted upon shareholder approval of the 2 Dycom Industries, Inc. 2003 Long-Term Incentive Plan (the "LTIP") and (II) 100,000 shares of Restricted Stock shall be granted on or about January 2, 2004. The Restricted Stock shall (i) vest, on a pro-rata basis, at the rate of 25% percent on each of December 31, 2004, December 31, 2005, December 31, 2006 and December 31, 2007; PROVIDED, HOWEVER, that if, (A) Employee dies, (B) he becomes disabled (as set forth in paragraph 5(b) hereof), (C) the Company terminates his employment for any reason other than for Cause (as defined in paragraph 5(a) hereof) or (D) he resigns his employment for Good Reason (as defined in paragraph 5(c) hereof) on or before December 31, 2004, then 30,000 shares of Restricted Stock shall be deemed to be immediately and fully vested on the date of such termination or resignation and (ii) otherwise be subject to the same terms and conditions applicable to shares of Restricted Stock granted to other senior executives of Employer. Notwithstanding the foregoing, in the event that Employee's employment is terminated without Cause or Employee resigns for Good Reason during the 13-month period commencing on the date of a Change of Control (as defined in paragraph 5(c) hereof), all outstanding and unvested shares of Restricted Stock shall fully and immediately vest and all restrictions shall lapse. In the event that the LTIP is not approved by shareholders, Employee shall receive a stock option grant under Employer's 1998 Incentive Stock Option Plan of comparable value. (f) Upon shareholder approval of the LTIP, Employee shall receive a grant of 68,000 options to purchase shares of Employer's common stock (the "OPTIONS") with an exercise price per share equal to the closing price of a share of Employer's common stock on the date the Options are granted. The Options shall (i) vest, on a pro-rata basis, at the rate of twenty-five percent on each of the first four anniversaries of the date that the Options are granted to Employee and (ii) otherwise be subject to the same terms and conditions applicable to stock options granted to other senior executives of Employer. In the event that the LTIP is not approved by shareholders, the Options shall be 3 granted to Employee under Employer's 1998 Incentive Stock Option Plan (the "1998 OPTION PLAN"). Notwithstanding the foregoing, all Options granted by Employer to Employee on or after the date of this Agreement shall fully and immediately vest to the extent not already vested in the event that Employee's employment is terminated without Cause or Employee resigns for Good Reason during the 13-month period commencing on the date of a Change of Control. All outstanding stock options granted by Employer to Employee pursuant to the 1998 Option Plan shall fully and immediately vest to the extent not already vested upon the occurrence of a Change of Control. (g) On a timely basis, Employer shall reimburse Employee for such reasonable out-of-pocket expenses as Employee may incur for and on behalf of the furtherance of Employer's business provided that Employee submits to Employer satisfactory documentation or other support for such expenses in accordance with Employer's expense reimbursement policy. 4. COVENANTS OF EMPLOYEE. (a) During the Term and ending on the fifth anniversary following the termination of Employee's employment with Employer for any reason, Employee shall not divulge or appropriate to Employee's own use or to the use of others any trade secrets or confidential information or confidential knowledge pertaining in any respect to the business of Employer (collectively, the "PROPRIETARY INFORMATION"). The restrictions contained herein shall not apply to, and Proprietary Information shall not include, any information which (i) was already available to the public at the time of disclosure, or subsequently became available to the public, otherwise than by breach of this Employment Agreement or (ii) is or becomes available to Employee after the termination of 4 Employee's employment with Employer on a non-confidential basis from a third-party source; PROVIDED that such third-party source is not bound by a confidentiality agreement or any other obligation of confidentiality to Employer. Employee expressly understands and agrees that the restrictions contained in this paragraph 4(a) have perpetual duration. (b) During Employee's employment with Employer and, in the event of his termination of employment or resignation for any reason, for a period ending on the first anniversary of such termination or resignation (the "RESTRICTED PERIOD"), Employee shall not directly or indirectly engage in any business, whether as proprietor, partner, joint venturer, employer, agent, employee, consultant, officer or beneficial or record owner of more than one percent of the stock of any corporation or association of any nature which is competitive with the business conducted by Employer in the current geographical service area of Employer or in any other geographical service area of Employer during the term of Employee's employment. (c) In addition, during the Restricted Period Employee shall not, directly or indirectly, (i) interfere with any relationship between Employer and any of its employees, consultants, agents or representatives, (ii) employ or otherwise engage, or attempt to employ or otherwise engage, any current or former employee, consultant, agent or representative of Employer in a business competitive with Employer, (iii) solicit the business or accounts of Employer or (iv) divert or attempt to divert from Employer any business or interfere with any relationship between Employer and any of its clients or customers. (d) Employee agrees that the breach by Employee of any of the foregoing covenants is likely to result in irreparable harm, directly or indirectly, to Employer. Employee, therefore, consents and agrees that if Employee violates any of such covenants, Employer shall be entitled, among and in addition to any other rights or remedies available under this Employment 5 Agreement or at law or in equity, to temporary and permanent injunctive relief to prevent Employee from committing or continuing a breach of such covenants. (e) It is the desire, intent and agreement of Employee and Employer that the restrictions placed on Employee by this paragraph 4 be enforced to the fullest extent permissible under the law and public policy applied by any jurisdiction in which enforcement is sought. Accordingly, if and to the extent that any portion of this paragraph 4 shall be adjudicated to be unenforceable, such portion shall be deemed amended to delete therefrom or to reform the portion thus adjudicated to be invalid or unenforceable, such deletion or reformation to apply only with respect to the operation of such portion in the particular jurisdiction in which such adjudication is made. 5. TERMINATION OF EMPLOYMENT. (a) Employer shall have the right to terminate Employee's employment at any time with or without Cause. For purposes of this Employment Agreement, "CAUSE" shall mean (A) Employee's indictment for any crime, whether a (i) felony or (ii) misdemeanor, that materially impairs Employee's ability to perform the functions of a Chief Executive Officer, in each case involving the purchase or sale of any security, mail or wire fraud, theft, embezzlement, moral turpitude, or Employer property; (B) Employee's repeated willful neglect of his duties to Employer; or (C) Employee's willful material misconduct in connection with the performance of his duties or other willful material breach by Employee of this Agreement. No act or omission on Employee's part shall be considered "willful" if it is done by Employee in good faith and with reasonable belief that Employee's conduct was in the best interests of Employer. Employer may not terminate Employee's employment for Cause under clauses (B) and (C) above unless: (w) Employer gives Employee at least 30 days' written notice in which to cure such act or failure, (x) if Employee fails to timely cure such act or 6 failure, Employer gives Employee at least 15 days' prior written notice of a special Board meeting called to make a determination that Employee should be terminated for Cause, (y) Employee and his legal counsel are given the opportunity to address such meeting prior to a vote of the Board and (z) a determination that Cause exists is made and approved by three-quarters of the Board. Anything in the foregoing to the contrary notwithstanding, if Employee has been terminated ostensibly for Cause because he has been indicted for a crime described in clause (A) of the definition of Cause, and if he is not convicted of, or does not plead guilty or no contest to, such crime or a lesser offense (based on the same operative facts), such termination shall be deemed to be a termination by Employer without Cause as of the relevant date of termination. (b) Unless otherwise terminated earlier pursuant to the terms of this Employment Agreement, Employee's employment under this Employment Agreement will terminate upon Employee's death and may be terminated by Employer or Employee upon giving not less than 30 days written notice to the other party in the event that Employee, because of physical or mental disability or incapacity, is unable to perform Employee's duties hereunder for an aggregate of 180 working days during any 12-month period. All questions arising under this Employment Agreement as regards Employee's disability or incapacity shall be determined by a reputable physician mutually selected by Employer and Employee at the time such question arises. If Employer and Employee cannot agree upon the selection of a physician within a period of seven days after such question arises, then the chief of staff of Good Samaritan Hospital, West Palm Beach, 7 Florida shall be asked to select a physician to make such determination. The determination of the physician selected pursuant to the above provisions of this paragraph 5(b) as to such matters shall be conclusively binding upon the parties hereto. (c) Employee may resign from his employment hereunder at any time with or without Good Reason, upon 30 days' prior written notice. For purposes of this Agreement, "Good Reason" shall exist if (i) Employer fails to pay any portion of the compensation or provide Employee any employee benefit due Employee hereunder, (ii) Employer materially changes the duties and responsibilities performed by Employee as Chief Executive Officer, (iii) any successor to Employer fails to appoint Employee as President and Chief Executive Officer of a company listed on a North American stock exchange, (iv) Employer relocates Employee's principal place of business by more than 25 miles without Employee's consent or (v) Employer fails to cause a successor to assume this Employment Agreement in accordance with paragraph 7(b) hereof. In addition, any resignation by Employee during the one-month period commencing on the first anniversary of a Change of Control (as defined below) shall be deemed a resignation for Good Reason for purposes of this Employment Agreement. For purposes of this Employment Agreement, a "CHANGE OF CONTROL" shall be deemed to have occurred with respect to Employer if any one or more of the following events occur: (i) An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of Employer's common stock (the "OUTSTANDING COMMON STOCK") or (B) the combined voting power of the then outstanding voting securities of Employer entitled to vote generally in the election of directors (the "OUTSTANDING VOTING SECURITIES"); EXCLUDING, HOWEVER, the following: (1) any acquisition directly from Employer, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from Employer; (2) any acquisition by Employer; (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Employer or any entity controlled by Employer; or (4) any acquisition pursuant to a 8 transaction which complies with clauses (A), (B) and (C) of subparagraph (iii) of this definition of Change of Control; or (ii) A change in the composition of the Board such that the individuals who, as of the date hereof, constitute the Board (such Board shall be hereinafter referred to as the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board; PROVIDED, HOWEVER, for purposes of this paragraph, that any individual who becomes a member of the Board subsequent to the date hereof, whose election, or nomination for election by Employer's shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but PROVIDED FURTHER that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Employer ("CORPORATE TRANSACTION"); EXCLUDING, 9 HOWEVER, such a Corporate Transaction pursuant to which all of the following conditions are met: (A) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns Employer or all or substantially all of Employer's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (B) no Person (other than Employer, any employee benefit plan (or related trust) of Employer or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (iv) The approval by the shareholders of Employer of a complete liquidation or dissolution of Employer. 10 (d) In the event Employer terminates Employee's employment (other than by reason of Cause or Employer's failure to renew this Employment Agreement on substantially no less favorable terms to Employee as the then effective Employment Agreement) or Employee resigns for Good Reason, Employee shall, subject to his execution of a general release of claims against Employer and its affiliates in a form satisfactory to Employer, receive as severance pay a cash amount equal to three times the sum of (i) Employee's base salary then in effect, plus (ii) the highest bonus paid to Employee during the three fiscal years immediately preceding his termination or resignation of employment (the "SEVERANCE PAYMENT"). The Severance Payment shall be paid to Employee as soon as administratively practical in substantially equal payments over the 18-month period immediately following Employee's termination or resignation of employment (the "SEVERANCE PERIOD") in accordance with Employer's payroll practices; PROVIDED, HOWEVER, that after a Change of Control, any portion of the Severance Payment that remains unpaid shall be paid to Employee as a single sum payment within five days of the Change of Control. If a termination or resignation occurs after a Change of Control, the Severance Payment shall be paid in a single sum payment within 5 days following such termination or resignation. In addition, during the Severance Period, Employee and his dependents shall be entitled to continue to participate in all employee benefit plans (other than equity-based plans, bonus plans or disability plans) that Employer provides (and continues to provide) generally to its employees, PROVIDED that Employee is entitled to continue to participate in such plans under the terms thereof. (e) In the event Employer fails to renew this Employment Agreement following the expiration of the Term on substantially no less favorable terms to Employee as the then effective Employment Agreement, Employee shall, subject to his execution of a general release of claims against Employer 11 and its affiliates in a form satisfactory to Employer, receive a cash payment equal to one times the sum of (i) Employee's base salary then in effect, plus (ii) the highest bonus paid to Employee during the three fiscal years immediately preceding his termination or resignation of employment. Such amount shall be paid to Employee as soon as administratively practical in substantially equal payments over the 12-month period immediately following such non-renewal in accordance with Employer's payroll practices; PROVIDED, HOWEVER, that after a Change of Control, any portion of such amount that remains unpaid shall be paid to Employee as a single sum payment within five days of the Change of Control. (f) In the event Employee's employment is terminated by Employer for Cause, or if Employee resigns for any reason other than Good Reason, Employee shall receive no severance pay. 6. GROSS UP PAYMENTS. (a) Anything in this Employment Agreement to the contrary or any termination of this Employment Agreement notwithstanding, in the event that it shall be determined that Employee becomes entitled to any payments or distribution or benefits under this Employment Agreement or any benefit plan or program of Employer which would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "CODE"), or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest or penalties, are hereinafter collectively referred to as the "EXCISE TAX"), then Employer shall pay Employee an additional amount or amounts (each, a "GROSS UP PAYMENT") such that the net amount or amounts retained by Employee, after deduction of any Excise Tax on any of the above-described payments or benefits and any federal, state and local 12 income tax and Excise Tax upon payment provided for by this paragraph 6, shall be equal to the amount of such payments or benefits prior to the imposition of such Excise Tax. (b) For purposes of determining the amount of a Gross Up Payment, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross Up Payment is payable and state and local income taxes at the highest marginal rate of taxation in the state and locality of Employee's residence on the date the Gross Up Payment is payable, net of the maximum reduction in federal income taxes which could be obtained from any available deduction of such state and local taxes. (c) In the event that the amount of the Excise Tax is subsequently determined to be less than the amount taken into account in calculating a Gross Up Payment hereunder, Employee shall repay to Employer (to the extent actually paid to Employee) at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross Up Payment attributable to such reduction (plus the portion of the Gross Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the Gross Up Payment being repaid by Employee if such repayment results in a reduction in, or a refund of, Excise Tax and/or federal, state and local income tax) plus interest on the amount of such payment at the rate provided in Section 1274(b)(2)(B) of the Code. (d) In the event that the amount of the Excise Tax is determined to exceed the amount taken into account in calculating a Gross Up Payment hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross Up Payment), Employer shall pay an additional Gross Up Payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. 13 (e) Each Gross Up Payment shall be paid by Employer on the date on which Employee becomes entitled to the payment or benefits giving rise to such Gross Up Payment. 7. ASSIGNMENT AND SUCCESSION. (a) The services to be rendered and obligations to be performed by Employee under this Employment Agreement are special and unique, and all such services and obligations and all of Employee's rights under this Employment Agreement are personal to Employee and shall not be assignable or transferable. In the event of Employee's death, however, Employee's personal representative shall be entitled to receive any and all payments then due under this Employment Agreement. (b) This Employment Agreement shall inure to the benefit of and be binding upon and enforceable by Employer and Employee and their respective successors, permitted assigns, heirs, legal representatives, executors and administrators. If Employer shall be merged into or consolidated with another entity, the provisions of the Employment Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Employer, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Employment Agreement in the same manner that Employer would be required to perform it if no such succession had taken place. The provisions of this paragraph 7(b) shall continue to apply to each subsequent employer of Employee hereunder in the event of any subsequent merger, consolidation, transfer of assets of such subsequent employer or otherwise. 14 8. NOTICES. Any notice, request or other communication to be given by any party to this Employment Agreement shall be in writing and be sent by certified mail, postage prepaid, addressed to the parties as follows: If to Employer: First Union Center 4440 PGA Boulevard, Suite 600 Palm Beach Gardens, Florida 33410 Attention: General Counsel If to Employee: Mr. Steven E. Nielsen Dycom Industries, Inc. First Union Center 4440 PGA Boulevard, Suite 600 Palm Beach Gardens, Florida 33410 or to such other address as the parties respectively may designate by notice given in like manner, and any such notice, request or other communication shall be deemed to have given when mailed as described above. 9. WAIVER OF BREACH. The waiver by Employer or Employee of a breach of any provision of this Employment Agreement by either party shall not operate or be construed as a waiver by the other party of any subsequent breach. 10. AMENDMENT. This Employment Agreement may be amended only by written instrument signed by all parties hereto. 11. FULL SETTLEMENT. Employer's obligation to pay Employee the amounts required by this Employment Agreement shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any offset, 15 counterclaim, recoupment, defense or other right which Employer may have against Employee or anyone else. All payments and benefits to which Employee is entitled under this Employment Agreement shall be made and provided without offset, deduction, or mitigation on account of income that Employee may receive from employment from Employer or otherwise, except as provided in paragraphs 6(c) and 6(d) hereof, or on account of any inability of Employer to take a tax deduction with respect to any such payments or benefits. 12. VOLUNTARY LIMITATION. Employee may elect to limit amounts payable under this Employment Agreement by notifying Employer, prior to Employee's receipt of such amounts, that Employee elects to receive either none or some portion of such amounts. 13. PARTIAL INVALIDITY. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. 14. ARBITRATION; LEGAL FEES. Any controversy or claim arising out of or relating to this Employment Agreement shall be settled by arbitration in Palm Beach County, Florida, in accordance with the rules then in effect of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereon. The arbitrator(s) shall have the right and ability to award attorneys' fees to the prevailing party in any such arbitration proceeding. If an arbitration shall be commenced to challenge, enforce or interpret any provision contained in this Agreement, Employer agrees to 16 indemnify Employee for his reasonable attorneys' fees and expenses incurred in such arbitration; PROVIDED, HOWEVER, that any arbitration commenced by Employee is done so in good faith. 15. GOVERNING LAW. This Employment Agreement shall be governed by the laws of the State of Florida without giving effect to choice of law principles. 16. ENTIRE AGREEMENT. All prior negotiations and agreements between the parties hereto with respect to the matters contained herein are superseded by this Employment Agreement, including without limitation, the Prior Agreement, and there are no representations, warranties, understandings or agreements with respect to the subject matter hereof other than those expressly set forth herein. IN WITNESS WHEREOF, the parties have entered into this Employment Agreement as of the date set forth above. DYCOM INDUSTRIES, INC. By: /s/ MICHAEL K. MILLER --------------------------------------- Name: Michael K. Miller Title: General Counsel /s/ STEVEN E. NIELSEN --------------------------------------- STEVEN E. NIELSEN 17 EX-10.3 5 g86172exv10w3.txt EX-10.3 PLAN OF MERGER EXECUTION COPY Exhibit 10.3 ================================================================================ AGREEMENT AND PLAN OF MERGER among DYCOM INDUSTRIES, INC., UTILIQUEST ACQUISITION CORP., UTILIQUEST HOLDINGS CORP. and OCM/GFI POWER OPPORTUNITIES FUND, L.P. Dated as of November 17, 2003 ================================================================================ TABLE OF CONTENTS

PAGE ---- ARTICLE I THE MERGER SECTION 1.01. The Merger................................................. 1 SECTION 1.02. Effective Time; Closing.................................... 1 SECTION 1.03. Effect of the Merger....................................... 2 SECTION 1.04. Certificate of Incorporation; By-Laws...................... 2 SECTION 1.05. Directors.................................................. 2 ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES Section 2.01 Conversion of Securities................................... 2 Section 2.02 Merger Consideration....................................... 3 Section 2.03 Stock Options.............................................. 4 Section 2.04 Exchange of Certificates................................... 4 Section 2.05 Calculation of the Merger Consideration and the Per Share Merger Consideration....................................... 5 Section 2.06 Merger Consideration Adjustment............................ 5 Section 2.07 Stock Transfer Books....................................... 7 Section 2.08 Escrow..................................................... 8 Section 2.09 Withholding................................................ 8 Section 2.10 Dissenting Shares.......................................... 8

i ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Section 3.01 Organization and Qualification of the Company.............. 9 Section 3.02 Subsidiaries............................................... 9 Section 3.03 Certificate of Incorporation and By-Laws................... 10 Section 3.04 Capitalization............................................. 10 Section 3.05 Authority Relative to This Agreement....................... 11 Section 3.06 No Conflict; Required Filings and Consents................. 12 Section 3.07 Licenses and Permits....................................... 12 Section 3.08 Compliance with Law and Notices of Violation............... 13 Section 3.09 Financial Information; Books and Records; Undisclosed Liabilities................................................ 13 Section 3.10 Absence of Certain Changes or Events....................... 14 Section 3.11 Absence of Litigation...................................... 14 Section 3.12 Employee Benefit Plans..................................... 14 Section 3.13 Labor and Employment Matters............................... 16 Section 3.14 Key Employees.............................................. 17 Section 3.15 Real Property.............................................. 17 Section 3.16 Intellectual Property...................................... 18 Section 3.17 Taxes...................................................... 20 Section 3.18 Environmental Matters...................................... 22 Section 3.19 Accounts Receivable........................................ 22 Section 3.20 Inventories................................................ 22 Section 3.21 Material Contracts......................................... 23 Section 3.22 Insurance.................................................. 24 Section 3.23 Related Party Transactions................................. 24 ii Section 3.24 Board Approval; Vote Required.............................. 24 Section 3.25 Title to Assets............................................ 25 Section 3.26 Customers.................................................. 25 Section 3.27 Brokers.................................................... 25 Section 3.28 No Other Representations or Warranties..................... 26 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB Section 4.01 Corporate Organization..................................... 26 Section 4.02 Authority Relative to This Agreement....................... 26 Section 4.03 No Conflict; Required Filings and Consents................. 26 Section 4.04 No Vote Required........................................... 27 Section 4.05 Operations of Merger Sub................................... 27 Section 4.06 Financing.................................................. 27 Section 4.07 Brokers.................................................... 27 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER Section 5.01 Conduct of Business by the Company Pending the Merger...... 28 ARTICLE VI ADDITIONAL AGREEMENTS Section 6.01 Access to Information; Confidentiality..................... 30 Section 6.02 No Solicitation of Transactions............................ 31 Section 6.03 Further Action; Commercially Reasonable Efforts............ 31 Section 6.04 Obligations of Merger Sub.................................. 32 Section 6.05 Public Announcements....................................... 32 iii Section 6.06 Closing Date Debt.......................................... 33 Section 6.07 UQ Acquisition Claims...................................... 33 Section 6.08 Termination of Enumerated Related Party Agreements and Other Contracts........................................ 34 Section 6.09 Settlement Agreement and Mutual Release.................... 34 Section 6.10 Estoppel Certificates...................................... 35 ARTICLE VII CONDITIONS TO THE MERGER Section 7.01 Conditions to the Obligations of Parent and Merger Sub..... 35 Section 7.02 Conditions to the Obligations of GFI and the Company....... 36 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER Section 8.01 Termination................................................ 37 Section 8.02 Effect of Termination...................................... 38 Section 8.03 Expenses................................................... 38 ARTICLE IX INDEMNIFICATION Section 9.01 Survival of Representations, Warranties and Covenants...... 39 Section 9.02 Indemnification of Parent Indemnified Parties.............. 39 Section 9.03 Indemnification by Parent.................................. 40 Section 9.04 Limits on Indemnification.................................. 40 Section 9.05 Indemnification Procedures................................. 41 Section 9.06 Delivery and Release of Indemnity Escrow................... 42 Section 9.07 No Right of Contribution................................... 43 iv Section 9.08 Exclusive Remedy........................................... 43 Section 9.09 Losses Net of Insurance, Tax Benefits...................... 43 Section 9.10 No Consequential Damages................................... 44 Section 9.11 Subrogation of Rights...................................... 44 Section 9.12 Tax Matters................................................ 45 Section 9.13 Stockholder Representative................................. 49 ARTICLE X MISCELLANEOUS PROVISIONS Section 10.01 Notices.................................................... 49 Section 10.02 Certain Definitions........................................ 50 Section 10.03 Severability............................................... 60 Section 10.04 Entire Agreement; Assignment............................... 61 Section 10.05 Parties in Interest........................................ 61 Section 10.06 Arbitration; Legal Proceedings............................. 61 Section 10.07 Specific Performance....................................... 62 Section 10.08 Amendment.................................................. 62 Section 10.09 Waiver..................................................... 62 Section 10.10 Headings................................................... 63 Section 10.11 Pronouns................................................... 63 Section 10.12 Counterparts............................................... 63 EXHIBITS Exhibit 2.05 - Calculation of Closing Date Debt Exhibit 2.06(a) - Form of Statement of Working Capital and Working Capital Calculation Procedures Exhibit 2.08 - Form of Escrow Agreement Exhibit 6.06 - List of Capital Leases Exhibit 6.08 - Enumerated Contracts for Termination Exhibit 6.10 - List of Leased Properties Requiring Estoppel Certificates v Exhibit 7.01(h) - Form of Non-Disclosure Agreement SCHEDULES Schedule I - List of Persons Deemed to Have Knowledge of the Company vi AGREEMENT AND PLAN OF MERGER, dated as of November 17, 2003 (this "Agreement"), among Dycom Industries, Inc., a Florida corporation ("Parent"), UtiliQuest Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), UtiliQuest Holdings Corp., a Delaware corporation (the "Company"), and OCM/GFI Power Opportunities Fund, L.P., a Delaware limited partnership ("GFI"). WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), Parent and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company with the Company being the surviving corporation (the "Merger"); WHEREAS, this Agreement and the Merger have been adopted and approved by the respective boards of directors of Parent, Merger Sub and the Company; WHEREAS, this Agreement and the Merger have been duly adopted and approved by the holders of a majority of the outstanding shares of common stock of the Company entitled to vote; and WHEREAS, on or prior to the Closing, Parent, the Representative and Wilmington Trust Company, or another mutually acceptable escrow agent (the "Escrow Agent"), shall execute an escrow agreement (the "Escrow Agreement") substantially in the form of Exhibit 2.08 hereof; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub, GFI and the Company hereby agree as follows: ARTICLE I THE MERGER SECTION 1.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time (as defined in Section 1.02), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). SECTION 1.02. Effective Time; Closing. As promptly as practicable after the satisfaction or waiver of the conditions set forth in Article VII (other than those conditions that by their nature are to be performed at Closing), but in no event later than two (2) Business Days after such satisfaction or waiver, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL (the date and time of such filing of the Certificate of Merger (or such later time as may be agreed by each of the parties hereto and specified in the Certificate of Merger) being the "Effective Time"). Contemporaneously with the filing of the Certificate of Merger, a closing (the "Closing") shall be held at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022, or such other place as the parties shall agree. The date the Closing occurs shall be referred to herein as the "Closing Date". SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 1.04. Certificate of Incorporation; By-Laws. (a) At the Effective Time, the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by Law and such Certificate of Incorporation; provided, however, that, at the Effective Time, Article I of the Certificate of Incorporation of the Surviving Corporation shall be amended to read as follows: "The name of the corporation is UtiliQuest Holdings Corp.". (b) At the Effective Time, the By-Laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the By-Laws of the Surviving Corporation until thereafter amended as provided by Law, the Certificate of Incorporation of the Surviving Corporation and such By-Laws. SECTION 1.05. Directors. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until their earlier death resignation or approval. ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES Section 2.01 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holders of any of the following securities: (a) each share of common stock, par value $0.001 per share, of the Company (the "Company Common Stock") issued and outstanding immediately prior to the Effective Time (each a "Share" and collectively, the "Shares" and each holder of Shares, a 2 "Stockholder") (other than any Shares to be canceled pursuant to Section 2.01(b)) shall be canceled and shall be converted automatically into the right to receive the Per Share Merger Consideration (as defined below). As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except for the right to receive the Per Share Merger Consideration payable upon surrender of the certificate (or delivery of a duly executed affidavit of lost certificate) that formerly evidenced such Share in the manner provided in Section 2.04; (b) each share held in the treasury of the Company immediately prior to the Effective Time shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto; and (c) each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. Section 2.02 Merger Consideration. (a) Subject to the adjustments set forth in Section 2.06, the "Merger Consideration" shall consist of (i) $120 million in cash, less (ii) an amount equal to the Closing Date Debt (only to the extent not previously paid or taken into account in determining Working Capital), all of which Parent shall cause to be repaid as of the Closing, as set forth in Section 6.06 hereof, less (iii) the Closing Expenses (only to the extent not previously paid or taken into account in determining Working Capital) and less (iv) the Adjustment Escrow Amount and the Indemnity Escrow Amount which amounts shall be deposited into the Escrow Accounts by the Parent pursuant to Section 2.08 hereof, as adjusted in accordance with the provisions of this Agreement. (b) Subject to the adjustments set forth in Section 2.06 for purposes of this Agreement, the "Per Share Merger Consideration" shall mean (i) the sum of (A) the Merger Consideration, plus (B) the Aggregate Option Exercise Price (as defined below), divided by (ii) the Aggregate Fully-Diluted Shares (as defined below). The "Aggregate Fully-Diluted Shares" shall be the sum of the aggregate number of Shares outstanding immediately prior to the Effective Time, plus the aggregate number of Shares issuable upon the exercise in full of all Options (as defined below) outstanding immediately prior to the Effective Time, and the "Aggregate Option Exercise Price" shall mean the sum of the cash exercise prices payable upon exercise in full of all such outstanding Options. 3 Section 2.03 Stock Options. (a) Effective as of the Effective Time, the Company shall take all necessary action, including obtaining the consent of the individual holders of Options (the "Optionholders"), if necessary, and the adoption of board of directors resolutions providing for the acceleration and cash-out of the Options to (i) terminate the Company's Stock Option Plan, as amended through the date of this Agreement, (ii) provide that each outstanding option to purchase Shares granted under the Company Stock Option Plan (each, an "Option") that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested or exercisable, shall become fully vested and exercisable as of the Effective Time and (iii) cancel as of the Effective Time each Option that is outstanding and unexercised at the Effective Time. Each holder of an Option that is outstanding and unexercised at the Effective Time and that has an exercise price per Share that is less than the Per Share Merger Consideration shall be entitled (subject to the provisions of this Section 2.03) to be paid by the Surviving Corporation immediately after the Effective Time, in exchange for the cancellation of such Option, an amount in cash (subject to any applicable withholding taxes) equal to the product of (i) the difference between the Per Share Merger Consideration and the exercise price of such Option and (ii) the aggregate number of Shares issuable upon exercise of such Option. Any such payment shall be subject to all applicable federal, state and local tax withholding requirements. At the Effective Time, Parent shall wire to an account designated by the Company an amount sufficient to enable the Surviving Corporation to make the payments required pursuant to this Section 2.03 and shall cause the Surviving Corporations to make such payments. Section 2.04 Exchange of Certificates. (a) At the Effective Time of the Merger, each holder of an outstanding certificate or certificates representing Shares ("Certificates"), upon surrender of the same to Parent (or delivery of a duly executed affidavit of lost certificate), shall be entitled to receive from Parent in exchange therefore an amount equal to the Per Share Merger Consideration multiplied by the number of Shares represented by the Certificates (the "Merger Payment"). Pending such surrender and exchange, a holder's Certificates shall be deemed for all purposes (other than the exchange contemplated by this Section 2.04) to evidence such holder's right to receive the Merger Payment. At the Effective Time, Parent shall make payment to each Stockholder by wire transfer to the account designated by such Stockholder not later than three (3) Business Days prior to the Effective Time. (b) Upon surrender of a Certificate, together with such documents as may be reasonably requested by Parent, such Certificate shall forthwith be cancelled. (c) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, providing an indemnity against any claim that may be made against it with respect to such Certificate, the Parent will issue in 4 exchange for such lost, stolen or destroyed Certificate the Merger Payment to which the holders thereof are entitled pursuant to this Section 2.04. Section 2.05 Calculation of the Merger Consideration and the Per Share Merger Consideration. At least three (3) Business Days prior to the Effective Time, the Company shall provide to Parent (i) a true and complete schedule setting forth the name, address and tax identification number of each holder of Shares or Options as well as the number and type of such securities held by such holder as of immediately prior to the Effective Time, (ii) a true and complete schedule of the Closing Date Debt and a calculation pursuant to Exhibit 2.05 hereof showing how the Closing Date Debt was calculated, certified by the Company's chief financial officer, (iii) a true and complete schedule setting forth the exercise price of each Option, (iv) a true and complete schedule setting forth the Company's best estimate of the Closing Expenses, (v) a true and complete schedule setting forth the Per Share Merger Consideration (the "Per Share Merger Consideration Certificate") to be paid to each Stockholder and (vi) such additional information as is reasonably requested by Parent in order to determine the Merger Consideration and the amount to be paid to the Stockholders. Section 2.06 Merger Consideration Adjustment. (a) At least three (3) Business Days prior to the Effective Time, the Company will deliver to Parent a statement indicating the Company's good faith estimate of the consolidated balance sheet of the Company and its Subsidiaries as of the Closing Date (the "Estimated Balance Sheet") and a statement of Working Capital in the form of Exhibit 2.06(a), indicating the Company's good faith estimate of Working Capital at the Closing Date based on the Estimated Balance Sheet ("Estimated Working Capital"). The Estimated Balance Sheet shall be prepared, and Estimated Working Capital shall be calculated, in accordance with GAAP consistent with the Company's past practice and in accordance with the policies and procedures set forth in Exhibit 2.06(a) hereto. If the Estimated Working Capital exceeds Targeted Working Capital, then such excess shall be added to the Merger Consideration (and shall be reflected in the calculation of Per Share Merger Consideration payable at Closing) on a dollar-for-dollar basis. If the Targeted Working Capital exceeds Estimated Working Capital, then such excess shall be subtracted from the Merger Consideration (and shall be reflected in the calculation of Per Share Merger Consideration payable at Closing) on a dollar-for-dollar basis. As soon as practicable, but in no event later than 75 days following the Closing Date, the Surviving Corporation shall prepare a consolidated balance sheet of the Company and its Subsidiaries as of the Closing Date (the "Closing Balance Sheet") and a statement of Working Capital in the form of Exhibit 2.06, which shall set forth a calculation of Working Capital at the Closing Date based on the Closing Balance Sheet ("Closing Working Capital"). The Closing Balance Sheet shall be prepared, and Closing Working Capital shall be calculated, in accordance with GAAP consistent with the Company's past practice and in accordance with the policies and procedures set forth in Exhibit 2.06(a) hereto. The Closing Balance Sheet shall be audited by Deloitte & Touche, whose 5 expenses shall be borne by the Surviving Corporation, and who shall also certify as to the calculation of the Working Capital. (b) During the preparation of the Closing Balance Sheet and the calculation of Closing Working Capital (collectively, the "Closing Financial Data"), and the period of any dispute within the contemplation of this Section 2.06, the Representative shall reasonably cooperate with Parent and Parent's authorized representatives, including by providing on a timely basis all information in its possession necessary in preparing the Closing Financial Data that is not in the possession of the Surviving Corporation. (c) Parent shall deliver a copy of the Closing Financial Data to the Representative promptly after it has been prepared together with duly executed certificates from each of the Surviving Corporation and Deloitte & Touche stating that such Closing Financial Data was prepared in accordance with GAAP consistent with the Company's past practice and in accordance with the policies and procedures set forth in Exhibit 2.06(a). After receipt of the Closing Financial Data, the Representative shall have 45 days to review the Closing Financial Data, together with the workpapers used in the preparation thereof, and have its independent auditors, at its expense, audit the Closing Balance Sheet in accordance with GAAP consistent with the Company's past practice. From and after the Closing Date, Parent shall cooperate with the Representative and its authorized representatives (including its auditors) (including providing access to books, records, facilities and employees of the Surviving Corporation and the workpapers of the Surviving Corporation and Deloitte & Touche) so that the Representative and its auditors may review the Closing Financial Data. The Representative may dispute items reflected in the Closing Financial Data only on the basis that such amounts were not prepared in conformity with GAAP consistent with the Company's past practice and the accounting policies and procedures set forth on Exhibit 2.06(a) hereto or were arrived at based on mathematical or clerical error. Unless the Representative delivers written notice to Parent on or prior to the 45th day after the Representative's receipt of the Closing Financial Data specifying in reasonable detail the amount, nature and basis of all disputed items, the Representative shall be deemed to have accepted and agreed to the calculation of Closing Working Capital. If the Representative so notifies Parent of its objection to the calculation of Closing Working Capital, the Representative and Parent shall, within 30 days (or such longer period as the parties may agree) following such notice (the "Resolution Period"), attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive. All amounts that are not in dispute with respect to the calculation of Closing Working Capital shall be released from the Adjustment Escrow Account by the Escrow Agent pursuant to the Escrow Agreement, and paid to the Stockholders and Optionholders in accordance with their Applicable Percentage. (d) If, at the conclusion of the Resolution Period, any amounts remain in dispute, then all amounts remaining in dispute shall be submitted to KPMG (the "Neutral Auditor"). Each party agrees to execute, if requested by the Neutral Auditor, a reasonable engagement letter, including customary indemnities. Parent and the Company shall each pay the 6 percentage of the amount of the fees and expenses of the Neutral Auditor equal to (A) the aggregate amount of the disputed matters submitted to the Neutral Auditor that are not settled in favor of such party (as finally determined by the Neutral Auditor), divided by (B) the aggregate amount of all disputed matters submitted to the Neutral Auditor; provided, that the amount (if any) the Company would be required to pay pursuant to this sentence shall be paid to the Neutral Auditor from the Adjustment Escrow. The Neutral Auditor shall act as an arbitrator to determine, based solely on the provisions of this Section 2.06 and the presentations by Parent and the Representative, and not by independent review, only those issues still in dispute and only as to whether such amounts were arrived at in conformity with this Section 2.06. The Neutral Auditor's determination shall be made within 30 days of their engagement, shall be set forth in a written statement delivered to Parent and the Representative and shall be final, binding and conclusive. The term "Final Closing Working Capital" shall mean the definitive Closing Working Capital agreed to (or deemed to be agreed to) by Parent and the Representative in accordance with Section 2.06(c) hereof or the definitive Closing Financial Data resulting from the determinations made by the Neutral Auditor in accordance with this Section 2.06(d) (in addition to those items theretofore agreed to by Parent and the Representative). (e) (i) If the Final Closing Working Capital exceeds the Estimated Working Capital then the Merger Consideration shall be increased by the amount by which the Final Closing Working Capital exceeds the Estimated Working Capital. In such case, Parent shall promptly pay the Stockholders and the Optionholders such additional Merger Consideration (the "Additional Merger Consideration") and each Stockholder and Optionholder shall be entitled to receive their Applicable Percentage of the Additional Merger Consideration in cash; provided, however, that in no event shall the amount of the Additional Merger Consideration payable by Parent hereunder exceed the Adjustment Escrow Amount. (ii) If the Estimated Working Capital exceeds the Final Closing Working Capital, then the Merger Consideration shall be decreased by the amount by which the Estimated Working Capital exceeds the Final Closing Working Capital. The amount of such decrease to the Merger Consideration made pursuant to this Section 2.06(e)(ii) shall be released from the Adjustment Escrow Account by the Escrow Agent, pursuant to the Escrow Agreement, and paid to the Parent in cash; provided, however, that in no event shall such decrease to the Merger Consideration payable hereunder exceed the Adjustment Escrow Amount. (f) Upon the completion of the Merger Consideration adjustment process, the Escrow Agent shall release any amounts left in the Adjustment Escrow Account to the Stockholders and Optionholders in accordance with their Applicable Percentage. Section 2.07 Stock Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Shares thereafter on the records of the Company. From and after the Effective Time, the holders 7 of Certificates shall cease to have any rights with respect to Shares represented by such Certificates, except as otherwise provided in this Agreement or by Law. Section 2.08 Escrow. On or prior to the Closing, the Representative and Parent shall enter into the Escrow Agreement. In accordance with the terms of the Escrow Agreement, at the Effective Time Parent shall deposit by wire transfer the Adjustment Escrow Amount and the Indemnity Escrow Amount in two separate accounts to be managed and paid out by the Escrow Agent in accordance with the terms of the Escrow Agreement and this Agreement. Section 2.09 Withholding. Parent and the Company shall each be entitled at any time to deduct and withhold from the Per Share Merger Consideration otherwise payable to the Stockholders pursuant to this Agreement and from any payments made to the Optionholders pursuant to Section 2.03 such amounts as Parent and the Company reasonably determine they are required to deduct and withhold and pay over to the applicable taxing authorities with respect to the making of such payment under the Code or any applicable provision of state or local Tax Law. To the extent that amounts are so withheld by Parent or the Company, Parent or the Company, as applicable, shall pay over such amounts to the applicable taxing authorities. To the extent that amounts are so withheld by Parent or the Company and paid over to the applicable Tax Authority, such amounts shall be treated for all purposes as having been paid to the Stockholder or holder of Options, as applicable, in respect of whose consideration such deduction or withholding was made. Section 2.10 Dissenting Shares. (a) Notwithstanding any provision of this Agreement to the contrary and to the extent available under the DGCL, Shares that are outstanding immediately prior to the Effective Time and that are held by Stockholders who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such Shares in accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be converted into, or represent the right to receive, the Per Share Merger Consideration. Such Stockholders shall be entitled to receive payment of the appraised value of such Shares held by them in accordance with the provisions of such Section 262, except that all Dissenting Shares held by Stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Shares under such Section 262 shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.04, of the certificate or certificates that formerly evidenced such Shares. (b) The Company shall give Parent timely notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by the Company. 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY As an inducement to Parent and Merger Sub to enter into this Agreement, the Company hereby represents and warrants to Parent and Merger Sub that, except as set forth in the company disclosure schedule which has been prepared by the Company and delivered by the Company to Parent and Merger Sub prior to the execution and delivery of this Agreement (the "Company Disclosure Schedule"): Section 3.01 Organization and Qualification of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary except such jurisdictions, if any, in which the failure to be in good standing or be so qualified or licensed would not reasonably be expected to have a Material Adverse Effect. Section 3.01 of the Company Disclosure Schedule sets forth a true and complete list of all jurisdictions in which the Company is duly qualified or licensed as a foreign corporation to do business. Section 3.02 Subsidiaries. (a) Section 3.02(a) of the Company Disclosure Schedule sets forth a true and complete list of all Subsidiaries, listing for each Subsidiary its name, type of entity, the jurisdiction and date of its incorporation or organization, its authorized capital stock, partnership capital or equivalent, the number and type of its issued and outstanding shares of capital stock, partnership interests or similar ownership interests and the current ownership of the Company and each other Person of such shares, partnership interests or similar ownership interests. The Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any Person other than the Subsidiaries. (b) Each Subsidiary that is a corporation: (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business as it is currently conducted by such Subsidiary and (iii) is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except such jurisdictions, if any, in which the failure to be in good standing or be so qualified or licensed would not reasonably be expected to have a Material Adverse Effect. Each Subsidiary that is not 9 a corporation: (i) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business as it has been and is currently conducted by such Subsidiary and (iii) is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except such jurisdictions, if any, in which the failure to be in good standing or be so qualified or licensed would not reasonably be expected to have a Material Adverse Effect. (c) True and complete copies of the certificate of incorporation and bylaws (or similar organizational documents), in each case as in effect on the date hereof, of each Subsidiary have been delivered by the Company to Parent. Section 3.03 Certificate of Incorporation and By-Laws. The Company has heretofore furnished to Parent a complete and correct copy of the Certificate of Incorporation and the By-Laws or equivalent organizational documents, each as amended to date, of the Company (collectively, the "Organizational Documents"). Such Organizational Documents are in full force and effect. Section 3.04 Capitalization. (a) The authorized capital stock of the Company consists of 50,000,000 shares of Company Common Stock. As of the date of this Agreement, (i) 42,710,291 Shares are issued and outstanding, (ii) there are no Shares held in the treasury of the Company and (iii) 4,200,000 Shares are reserved for future issuance pursuant to Options granted pursuant to the Company Stock Option Plan. Except as set forth in Section 3.04(a) of the Company Disclosure Schedule or as provided in the Stockholders' Agreement, the Company Stock Option Plan and any awards agreements thereunder, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or obligating the Company to issue or sell any shares of capital stock of, or other equity interests in, the Company. (b) As of the date hereof, there are outstanding Options exercisable for an aggregate of 2,725,000 Shares. All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. (c) Section 3.04(c) of the Company Disclosure Schedule sets forth the following information with respect to each holder of shares of capital stock of the Company outstanding as of the date of this Agreement: (i) the name and address of such holder of record on the stock books of the Company and (ii) the number of and type of shares held. 10 (d) Section 3.04(d) of the Company Disclosure Schedule sets forth the following information with respect to each Option outstanding as of the date of this Agreement: (i) the name and address of the optionee of record on the stock books of the Company, (ii) the particular plan pursuant to which such Option was granted, (iii) the number of shares of Company Common Stock subject to such Option, (iv) the exercise price of such Option and (v) the date on which such Option was granted. The Company has made available to Parent accurate and complete copies of the Company Stock Option Plan pursuant to which the Company has granted such Options that are currently outstanding and the form of the stock option agreements evidencing such Options. (e) Except as set forth on Section 3.04(e) of the Company Disclosure Schedule, or as provided in the Stockholders' Agreement or pursuant to the Company Stock Option Plan, there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any capital stock of the Company or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person. Except for the Stockholders' Agreement, the Company Stock Option Plan and any awards agreements thereunder, neither the Company nor GFI is a party to any stockholders, voting or other agreement with respect to the Shares. All outstanding shares of capital stock of the Company and all outstanding Options have been issued and granted in compliance in all material respects with (i) all applicable securities laws and other applicable material Laws (as defined below) and (ii) all material requirements set forth in applicable contracts. (f) Each Share and Option has been duly authorized and validly issued. GFI is the record owner of 42,660,291 Shares, free and clear of any and all Encumbrances other than Encumbrances under this Agreement and restrictions on transfer under applicable Law. Section 3.05 Authority Relative to This Agreement. Each of GFI and the Company has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by GFI and the Company and the consummation by GFI and the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary action, and no other proceedings on the part of GFI or the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by the DGCL). The requisite Stockholders have duly approved and adopted this Agreement in accordance with the DGCL. This Agreement has been duly and validly executed and delivered by GFI or the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of GFI and the Company, enforceable against GFI and the Company in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency, moratorium or other terms relating to or limiting creditors rights generally or by general principles of equity, regardless of whether such enforceability is considered in law or equity. 11 Section 3.06 No Conflict; Required Filings and Consents. Except as set forth on Section 3.06(a) of the Company Disclosure Schedule, (a) The execution and delivery of this Agreement by GFI and the Company do not, and the performance of this Agreement by GFI and the Company will not, (i) conflict with or violate the Organizational Documents of GFI and the Company, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 3.06(b) have been obtained and all filings and obligations described in Section 3.06(b) have been made, conflict with or violate in any material respect any United States or non-United States statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order ("Law") applicable to GFI and the Company or by which any property or asset of the Company is bound or affected, or (iii) result in any breach of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, except, in the case of clause (ii), such conflicts or violations, and in the case of clause (iii), such breaches, defaults rights of termination, amendment, acceleration, or cancellation or creations of liens or encumbrances as would not reasonably be expected to have a Material Adverse Effect, or with respect to any Material Contracts with customers of the Company, would not result in any material breach of, or constitute a material default under, or give rise to a right to terminate or materially amend, such Material Contracts. (b) The execution and delivery of this Agreement by GFI and the Company do not, and the performance of this Agreement by GFI and the Company will not, require any material consent, approval, authorization or permit of, or filing with or notification to, any United States federal, state, county or local or non-United States government, governmental, regulatory or administrative authority, agency, instrumentality or commission or any court, tribunal, or judicial or arbitral body (a "Governmental Authority"), except pursuant to applicable requirements, if any, of (i) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act") and (ii) filing and recordation of appropriate merger documents as required by the DGCL. Section 3.07 Licenses and Permits. Except as set forth in Section 3.07 of the Company Disclosure Schedule or as would not reasonably be expected to have a Material Adverse Effect, (i) the Company and each of its Subsidiaries owns, holds or possesses all licenses, consents, franchises, permits, approvals and other orders or authorizations of, or registrations, declarations, notices or filings with (collectively, "Permits"), any Governmental Authority and any other Person necessary to own or lease, operate and use its assets and properties and to carry on and conduct its business and operations as presently conducted and (ii) neither the Company nor any of its Subsidiaries is in violation of or default under any Permit or 12 any judgment, order, writ, injunction or decree of any court or administrative agency issued against it or any law, ordinance, rule or regulation applicable to it. Section 3.08 Compliance with Law and Notices of Violation. Except as set forth in Section 3.08 of the Company Disclosure Schedule, since September 1, 2001, the Company and each of its Subsidiaries has complied in all material respects with all applicable Laws of any Governmental Authority material to them, and no material action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice ("Action") has been filed or commenced against it or any of them alleging any failure so to comply. Except as set forth in Section 3.08 of the Company Disclosure Schedule, since September 1, 2001, neither the Company nor any of its Subsidiaries has received written notice of a material violation of any Law of any Governmental Authority material to them and, to the Knowledge of the Company, no investigation or review by any Governmental Authority with respect to the Company or any of its Subsidiaries, which would be material to the Company or any of its Subsidiaries, is pending or threatened, nor, to the Knowledge of the Company, has any Governmental Authority indicated in writing an intention to conduct any such investigation or review. Section 3.09 Financial Information; Books and Records; Undisclosed Liabilities. (a) True and complete copies of (i) the audited consolidated balance sheet of the Company for the stub period ended as of December 31, 2001 and the fiscal year ended as of December 31, 2002, and the related audited consolidated statements of income and cashflows, together with all related notes and schedules thereto, accompanied by the reports thereon of the Company's Accountants (collectively referred to herein as the "Financial Statements") and (ii) the unaudited consolidated balance sheet of the Company as of September 30, 2003, and the related consolidated statements of income and cashflows, of the Company (collectively referred to herein as the "Interim Financial Statements") have been delivered by the Company to Parent. The Financial Statements and the Interim Financial Statements: (i) were prepared in accordance with the books of account and other financial records of the Company, (ii) present fairly in all material respects the consolidated financial condition of the Company as of the dates thereof and the income and cashflows for the periods involved (subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments which, except as set forth in Section 3.09(a) of the Company Disclosure Schedule, are not expected to be material), and (iii) have been prepared in accordance with U.S. GAAP applied on a basis consistent with the past practices of the Company (except, with respect to the Interim Financial Statements, the absence of notes and normal and recurring year-end adjustments which, except as set forth in Section 3.09(a) of the Company Disclosure Schedule, are not expected to be material). (b) There are no material Liabilities of the Company and its Subsidiaries other than Liabilities (i) reflected or reserved against on the unaudited consolidated balance sheet of the Company dated September 30, 2003, (ii) set forth in Section 3.09(b) of the Company Disclosure Schedule, (iii) incurred since September 30, 2003 in the ordinary course of business, 13 consistent with past practice, or (iv) not required to be reflected in the Financial Statements in accordance with GAAP. Section 3.10 Absence of Certain Changes or Events. Since September 30, 2003 through the date of this Agreement, except as set forth in Section 3.10 of the Company Disclosure Schedule, or as expressly contemplated by this Agreement (a) the Company and the Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and (b) there has not been any Material Adverse Effect and (c) the Company has not taken any action that, if taken after the date of this Agreement, would constitute a breach of the covenants set forth in Section 5.01(c), (e), (f), (h) and (i). Section 3.11 Absence of Litigation. Except as set forth in Section 3.11(i) of the Company Disclosure Schedule, there is no Action (i) seeking monetary damages in excess of $150,000 or (ii) seeking equitable or injunctive relief, in each case, pending or, to the Knowledge of the Company, threatened against the Company or any Subsidiary, or any property or asset of the Company or any Subsidiary, before any Governmental Authority. Except as set forth in Section 3.11(ii) of the Company Disclosure Schedule, none of the Company, the Subsidiaries or any property or asset of the Company or any Subsidiary is subject to any material continuing order of, consent decree, settlement agreement or other similar material written agreement with any Governmental Authority. None of the items set forth on Section 3.11(ii) of the Company Disclosure Schedule would prevent or materially delay consummation of the Merger or otherwise prevent or materially delay GFI and the Company from performing their respective obligations under this Agreement or would reasonably be expected to have a Material Adverse Effect. To the Knowledge of the Company, except as set forth in Section 3.11(iii) of the Company Disclosure Schedule and except for claims asserted in amounts less than the deductible under the applicable insurance policy, as of the date hereof, (i) no claim submitted by the Company or any Subsidiary for insurance coverage with respect to any Action listed in Section 3.11(i) of the Company Disclosure Schedule has been denied and (ii) coverage has not been exhausted under any of the insurance policies listed in Section 3.22 of the Company Disclosure Schedule. Section 3.12 Employee Benefit Plans. (a) Section 3.12(a)(i) of the Company Disclosure Schedule lists all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other contracts or agreements to which the Company is a party, with respect to which the Company has any obligation or which are maintained, contributed to or sponsored by the Company for the benefit of any current or former employee, officer, consultant, or director of the Company (collectively, the "Plans"). Except as set forth in Section 3.12(a)(ii) of the Company Disclosure Schedule, each Plan is in writing and the Company has made 14 available to Parent a true and complete copy of each Plan and has delivered to Parent, with respect to each Plan, a true and complete copy of (as applicable), (i) each trust agreement or other funding arrangement, (ii) the most recent summary plan description and any summary of material modifications issued with respect to such summary plan description, (iii) the three most recently filed annual reports on IRS Form 5500, (iv) the most recently received IRS determination letter for each such Plan, and (v) the most recently prepared actuarial report and financial statement in connection with each such Plan. Except as provided for in this Agreement, the Company does not have any express commitment (i) to create, incur liability with respect to or cause to exist any other material Plan, (ii) to enter into any contract or agreement to provide compensation or benefits to any individual for an amount greater than $50,000 per year, or (iii) to modify, change or terminate any Plan in a manner that would materially increase the benefits provided under such Plan or the costs of maintaining such Plan, other than with respect to a modification, change or termination required by applicable Law. (b) Except as disclosed in Section 3.12(b) of the Company Disclosure Schedule, the Company has not at any time maintained, sponsored or contributed to a plan that is (i) a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) or (ii) a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) that is subject to Title IV of ERISA or Section 412 of the Code. No liability under Title IV of ERISA has been incurred by the Company or any of its Subsidiaries that has not been satisfied in full, and no condition exists that presents a material risk to the Company or any of its Subsidiaries incurring any liability under such Title. (c) Except as disclosed in Section 3.12(c) of the Company Disclosure Schedule, none of the Plans (i) provides for the payment of separation, severance, termination or similar type benefits to any person or (ii) obligates the Company to pay separation, severance, termination or similar type benefits solely or partially as a result of any transaction contemplated by this Agreement or as a result of a "change in control" within the meaning of such term under Section 280G of the Code. None of the Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company. None of the Plans provides benefits to persons other than residents of the United States. (d) None of the Company, its parent, any of its Subsidiaries, any of the Plans, any trust created thereunder, nor to the Knowledge of the Company, any trustee or administrator thereof has engaged in a transaction or has taken or failed to take any action in connection with which the Company or any of its Subsidiaries would reasonably be subject to any material liability for either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975, 4976 or 4980B of the Code. (e) Each Plan has been operated in all material respects in accordance with its terms and the requirements of all applicable Laws including, without limitation, ERISA and the Code. No Action is pending or, to the Knowledge of the Company, threatened with 15 respect to any Plan (other than claims for benefits in the ordinary course) and, to the Knowledge of the Company, no fact or event exists that would reasonably give rise to any such Action. (f) All contributions, premiums or payments required to be made with respect to any Plan have in all material respects been made (or will be made) on or before their due dates. All such contributions have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority and no fact or event exists which would reasonably be expected to give rise to any such challenge or disallowance. (g) Each Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has received a favorable determination letter from the IRS that considers Plan provisions required by the "GUST" Amendments, indicating that the Plan is so qualified and that the associated trust established in connection with such Plan is exempt from federal income taxation under Section 501(a) of the Code and no fact or event has occurred since the date of such determination letter or letters from the IRS that would reasonably be expected to have an adverse effect on the qualified status of any such Plan or the exempt status of any such trust. (h) Section 3.12(h) of the Company Disclosure Schedule set forth all current consultants, officers and employees of the Company and each Subsidiary who have entered into a written obligation with the Company or a Subsidiary to maintain in confidence all confidential or proprietary information (as defined in such agreements) acquired by them in the course of their employment and to assign to the Company or a Subsidiary all inventions made by them within the scope of their employment during such employment. (i) The Company and its Subsidiaries are in compliance with the requirements of the Workers Adjustment and Retraining Notification Act and any similar state or local law ("WARN") and, to the Knowledge of the Company, have no liabilities pursuant to WARN. Section 3.13 Labor and Employment Matters. (a) Except as set forth in Section 3.13(a) of the Company Disclosure Schedule, (i) there are no material controversies pending or, to the Knowledge of the Company, threatened in writing between the Company or the Subsidiaries, on the one hand, and any of their respective employees or consultants, on the other hand, and the Company and the Subsidiaries have not experienced any controversy, strike, slowdown or work stoppage within the past three years, (ii) neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any of its Subsidiaries, nor, to the Knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees (iii) there are no unfair labor practice complaints pending against the Company or any of its Subsidiaries before the National Labor 16 Relations Board or any other Governmental Authority or any current portion under representations and questions involving employees of the Company or any of its Subsidiaries. (b) Except as set forth in Section 3.13(b) of the Company Disclosure Schedule (i) the Company and each Subsidiary is in compliance in all material respects with all applicable Laws relating to the employment of labor, including those related to wages, hours, collective bargaining and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority and have withheld and paid in all material respects to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of the Company and each Subsidiary and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing, (ii) the Company and each Subsidiary has paid in full to all employees or adequately accrued for in accordance with GAAP consistently applied all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees and there is no claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or, to the Knowledge of the Company, threatened before any Governmental Authority with respect to any persons currently or formerly employed by the Company and each Subsidiary, (iii) neither the Company nor any Subsidiary is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices, (iv) there is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted or is now pending or, to the Knowledge of the Company, threatened in writing with respect to the Company or any Subsidiary and (v) there is no charge of discrimination in employment or employment practices respecting any current or former employee of the Company or any Subsidiary, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted or is now pending or, to the Knowledge of the Company, threatened before the United States Equal Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which the Company or any Subsidiary has employed or employ any person. Section 3.14 Key Employees. Section 3.14 of the Company Disclosure Schedule lists as of October 31, 2003, the name, title, place of employment, the current annual salary rates, bonuses earned, deferred compensation (other than with respect to deferred salary or bonus or with respect to Plans intended to be qualified under Section 401(a) of the Code), accrued vacation, and the date of employment of each current salaried employee of the Company and each Subsidiary whose salary in fiscal year 2003 is expected to exceed $125,000. Section 3.15 Real Property. (a) Section 3.15(a) of the Company Disclosure Schedule lists each parcel of real property currently owned by the Company or any Subsidiary. Each parcel of real property owned by the Company or any Subsidiary (i) is owned free and clear of all mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, 17 charges or other claims of third parties of any kind, including, without limitation, any easement, right of way or other encumbrance to title, or any option, right of first refusal, or right of first offer (collectively, "Liens"), other than (A) Liens for current taxes and assessments not yet past due, (B) inchoate mechanics' and materialmen's Liens for construction in progress, (C) workmen's, repairmen's, warehousemen's and carriers' Liens arising in the ordinary course of business of the Company or such Subsidiary consistent with past practice, and (D) all matters of record, Liens and other imperfections of title and encumbrances that would not reasonably be expected to have a Material Adverse Effect (collectively, "Permitted Liens") and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefore, nor, to the Knowledge of the Company, has any such condemnation, expropriation or taking been proposed. (b) Section 3.15(b) of the Company Disclosure Schedule sets forth a list of each parcel of real property currently leased or subleased, with a remaining term of at least 24 months or a monthly rental rate greater than $5,000, by the Company or any Subsidiary, with the name of the lessor and the date of the lease, sublease, assignment of the lease, any guaranty given by the Company or any Subsidiary in connection therewith and each amendment to any of the foregoing (collectively, the "Lease Documents"). True, correct and complete copies of all Lease Documents have been delivered or made available to Parent. All such current leases and subleases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing material default or event of default (or event which, with notice or lapse of time, or both, would constitute a default) thereunder by the Company or any Subsidiary or, to the Knowledge of the Company, by the other party to such lease or sublease, or person in the chain of title to such leased premises, except as would not reasonably be expected to have a Material Adverse Effect. (c) To the Knowledge of the Company, (i) the use and occupancy by the Company or any Subsidiary (and the conduct of its business thereon) of any of its owned or leased real property does not violate any applicable material contractual or legal restrictions affecting such real property and (ii) the real property (including any improvements thereon) owned or leased by the Company or any Subsidiary is in reasonably good operating condition and repair. Section 3.16 Intellectual Property. (a) Section 3.16(a) of the Company Disclosure Schedule sets forth a true and complete list of (other than off-the-shelf commercial software) all Company IP Agreements. (b) Except to the extent set forth in Section 3.16(b) of the Company Disclosure Schedule, to the Knowledge of the Company, the operation of the business as currently conducted by the Company or any Subsidiary and the use of the Owned Intellectual Property and Licensed Intellectual Property in connection therewith do not conflict with, 18 infringe, misappropriate or otherwise in any material respect violate the Intellectual Property or other proprietary rights, including rights of privacy, publicity and endorsement, of any third party. (c) Except as disclosed in Section 3.16(c) of the Company Disclosure Schedule, the Company or one of its Subsidiaries is the exclusive owner of the Owned Intellectual Property free and clear of all liens, claims or encumbrances of others. The Company or one of its Subsidiaries has a valid right to use the Owned Intellectual Property and, to the Knowledge of the Company, has a valid right and license to use the Licensed Intellectual Property in the ordinary course of its business as presently conducted. (d) Except as disclosed in Section 3.16(d) of the Company Disclosure Schedule and with respect to any off-the-shelf commercial software to which the Company or one of its Subsidiaries has a license, no Owned Intellectual Property, to the Knowledge of the Company, or Licensed Intellectual Property is subject to any outstanding decree, order, injunction, judgment or ruling restricting the use of such Intellectual Property by the Company or its Subsidiaries. (e) Except for off-the-shelf commercial software, (i) the Owned Intellectual Property and the Licensed Intellectual Property include all of the Intellectual Property used in the ordinary day-to-day conduct of the Company's business, and (ii) there are no other items of Intellectual Property of the Company that are material to the ordinary day-to-day conduct of such businesses. The Owned Intellectual Property, and to the Knowledge of the Company, the Licensed Intellectual Property, have not been adjudged invalid or unenforceable in whole or part by a court of competent jurisdiction. (f) Except as disclosed on Section 3.16(f) of the Company Disclosure Schedule, (i) no Actions or claims have been asserted or are pending or, to the Knowledge of the Company, threatened against the Company or one of its Subsidiaries (A) based upon or challenging or seeking to deny or restrict the use by the Company or one of its Subsidiaries of any of the Owned Intellectual Property other than any use restrictions set forth in the Company IP Agreements, or (B) alleging that the Licensed Intellectual Property is being licensed or sublicensed, by the Company or any Subsidiary, in conflict with the terms of any license or other agreement. (g) To the Knowledge of the Company, no person is engaging in any activity that infringes the Owned Intellectual Property or Licensed Intellectual Property. Except as set forth in Section 3.16(g) of the Company Disclosure Schedule, neither the Company nor any Subsidiary has granted any license or other right to any third party with respect to the Owned Intellectual Property or Licensed Intellectual Property. The consummation of the transactions contemplated by this Agreement will not result in the termination or impairment of any of the material Owned Intellectual Property or of any material Licensed Intellectual Property. 19 (h) The Company and each Subsidiary has taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of the trade secrets and other confidential Intellectual Property used in connection with their respective businesses. Except as disclosed on Section 3.16(h) of the Company Disclosure Schedule, to the Knowledge of the Company, (i) there has been no misappropriation of any material trade secrets or other material confidential Intellectual Property used in connection with the business of the Company or one of its Subsidiaries by any person, (ii) no employee, independent contractor or agent of the Company or one of its Subsidiaries has misappropriated any trade secrets of any other person in the course of their performance as an employee, independent contractor or agent of their respective businesses and (iii) no employee, independent contractor or agent of the Company or one of its Subsidiaries is in default or breach of any term of any employment agreement, nondisclosure agreement, assignment of invention agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of Intellectual Property. (i) Except with respect to the Company IP Agreements set forth on Section 3.16(a) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is obligated to pay any royalty payments or licensing fees to a third party (except with respect to off-the-shelf commercial software) or owes any past due royalty payments or licensing fees to a third party. Section 3.17 Taxes. (a) Except as set forth in Section 3.17(a) of the Company Disclosure Schedule, the Company and the Subsidiaries (i) have timely filed or caused to be timely filed all material Tax Returns required to be filed as of the date hereof, and all such filed Tax Returns are true, correct and complete in all material respects; (ii) except for Taxes being contested in good faith in appropriate proceedings and for which adequate reserves have been maintained in accordance with U.S. GAAP, have paid all material amounts of Taxes required to be paid (whether or not shown on such Tax Returns); and (iii) have not waived any statute of limitations with respect to any Tax or agreed to an extension of time with respect to a Tax assessment or deficiency. Except as set forth in Section 3.17(a) of the Company Disclosure Schedule, all material amounts of Taxes required to have been withheld by or with respect to the Company and the Subsidiaries have been withheld and remitted to the applicable Tax Authority. (b) Except as set forth in Section 3.17(b) of the Company Disclosure Schedule, neither the Company nor any Subsidiary has (i) at any time, been a member of any affiliated, consolidated, combined or unitary group of corporations other than the affiliated group (within the meaning of Section 1504(a)(1) of the Code) for which the Company files a consolidated return as the common parent or (ii) any liability for Taxes of any other Person (A) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Tax Law), (B) as a transferee or successor, (C) by contract or (D) otherwise. Neither the Company nor any Subsidiary is subject to any agreement for the sharing of Taxes or is obligated 20 to indemnify any other Person for Taxes pursuant to any agreement, which agreement will remain in effect after the Closing Date. (c) Except as set forth in Section 3.17(c) of the Company Disclosure Schedule, as of the date hereof, there are no pending or, to the Knowledge of the Company, threatened in writing, audits, examinations, investigations or other proceedings in respect of any Tax matter of the Company or any Subsidiary. Except as set forth in Section 3.17(c) of the Company Disclosure Schedule, no deficiency for any Tax has been asserted or assessed by any taxing authority against the Company or any Subsidiary, which deficiency has not been satisfied by payment or been withdrawn. No claim in writing has been made by a taxing authority in a jurisdiction where the Company or any Subsidiary does not file Tax Returns that the Company or such Subsidiary is or may be subject to taxation by such jurisdiction. No power of attorney has been granted with respect to any matter relating to Taxes that could affect the Company or any Subsidiary in any taxable period ending after the Closing Date. (d) Except as set forth in Section 3.17(d) of the Company Disclosure Schedule, there are no Tax liens on any assets of the Company or any Subsidiary (other than any liens for Taxes not yet due and payable or for which adequate reserves have been maintained in accordance with U.S. GAAP). Neither the Company nor any Subsidiary has been required to recognize income as a result of any adjustment following a change in accounting method initiated by the Company or such Subsidiary, and no taxing authority has in writing initiated or proposed any such adjustment or change in accounting method. Neither the Company nor any Subsidiary is required to include in a taxable period ending after the Closing Date any amount of taxable income attributable to income that economically accrued in a prior taxable period but was not recognized for Tax purposes in any prior taxable period, including as a result of the installment method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code (or any comparable provision of state or local Tax Law) or for any other reason. The federal income Tax Returns of the Company and the Subsidiaries have disclosed any Tax positions of the Company and the Subsidiaries that, if not disclosed, could give rise to penalties under Section 6662 of the Code. (e) At all times prior to its acquisition by the Company, UtiliQuest LLC was treated as a partnership for federal, state and local Tax purposes, and at all times since its acquisition by the Company, UtiliQuest LLC has been treated as a disregarded entity for federal, state and local Tax purposes. (f) Section 3.17(f) of the Company Disclosure Schedule indicates for which jurisdictions Tax Returns that include the Company and any Subsidiary have been filed on a consolidated, combined, affiliated or unitary group basis and indicates the most recent income, franchise or similar Tax Return for each relevant jurisdiction for which an audit has been completed. 21 Section 3.18 Environmental Matters. (a) Except as described in Section 3.18(a) of the Company Disclosure Schedule or as would not reasonably be expected to have a Material Adverse Effect, (i) the Company and the Subsidiaries have not violated or are not in violation of any Environmental Law, (ii) none of the properties currently or, to the Knowledge of the Company, formerly owned, leased or operated by the Company and the Subsidiaries (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance in a manner requiring investigation, remediation or other action pursuant to Environmental Law, (iii) there are no pending, or to the Knowledge of the Company, threatened claims against the Company for actual, potential or alleged liability for any off-site contamination by Hazardous Substances, (iv) to the Knowledge of the Company, the Company and the Subsidiaries are not actually, potentially or allegedly liable under any Environmental Law (including, without limitation, pending or threatened liens), (v) the Company has all permits, licenses and other authorizations required under any Environmental Law ("Environmental Permits"), (vi) the Company and the Subsidiaries are and have always been, in compliance with their Environmental Permits and (vii) to the Knowledge of the Company, neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will require any investigation, remediation or other action with respect to Hazardous Substances or any notice to or consent of Governmental Authorities or third parties pursuant to any applicable Environmental Law or Environmental Permit. (b) The Company has provided or made available to Parent copies of any Phase I environmental site assessments, environmental compliance audits, and other similar reports in the Company's possession addressing the Company's or any of its Subsidiaries' business or operations, or any Owned Real Property or Leased Real Property, that have been conducted in the past two years. Section 3.19 Accounts Receivable. Schedule 3.19 is an aged list of the Accounts Receivable as of the date hereof showing separately those Accounts Receivable that as of October 31, 2003 have been outstanding for (a) 30 days or less, (b) 31 to 60 days, (c) 61 to 90 days and more than 90 days. All Accounts Receivable (a) are valid and genuine and (b) arose out of bona fide sales and deliveries of goods, performance of services or other transactions in the ordinary course of business consistent with past practices. Section 3.20 Inventories. All Inventory used in the business (a) was acquired and has been maintained in accordance with regular business practices of the Company, (b) consists of items of a quality and quantity useable or saleable in the ordinary course of business consistent with past practice and (c) is valued at the lower of cost or market value taking into account the Company's allowance for excess and obsolete inventory. The Inventory is in good and merchantable condition in all material respects, is suitable and useable for the purposes for which it is intended and is in a condition such that it can be sold in the ordinary course of business consistent with past practice. 22 Section 3.21 Material Contracts. (a) Subsections (i) through (vii) of Section 3.21 of the Company Disclosure Schedule contain a list of the contracts and agreements to which the Company or any Subsidiary is a party that meet the criteria enumerated below (such contracts, agreements and arrangements (whether written or oral) as are required to be set forth in Section 3.21(a) of the Company Disclosure Schedule being the "Material Contracts"): (i) each contract and agreement which provides for annual aggregate payments to or by the Company or its Subsidiaries of more than $1,000,000; (ii) all management contracts (excluding contracts for employment) and contracts with consultants including any contracts involving the payment of royalties or other amounts calculated based upon the revenues or income of the Company or the Subsidiaries to which the Company or the Subsidiaries are a party that are not terminable by the Company or the Subsidiaries on thirty (30) days' or less notice and which involve an annual payment of more than $125,000; (iii) all contracts and agreements evidencing Indebtedness except for capital leases for office equipment in an amount less than $20,000; (iv) all material contracts and agreements with any Governmental Authority to which the Company or the Subsidiaries is a party; (v) all contracts and agreements that limit, or purport to limit, the ability of the Company or the Subsidiaries to compete in any line of business or with any Person or in any geographic area or during any period of time; (vi) all contracts or arrangements that result in any Person holding a power of attorney from the Company that relates to the Company or its business; and (vii) the Lease Documents. (b) (i) Each Material Contract is a legal, valid and binding agreement of the Company and to the Knowledge of the Company, the other parties thereto, (ii) to the Knowledge of the Company, no Material Contract has been canceled by any other party thereto, (iii) neither the Company nor its Subsidiaries are in material default under any Material Contract to which they are a party, (iv) to the Knowledge of the Company, no other party is in material 23 breach or violation of, or material default under, any Material Contract, (v) neither the Company nor its Subsidiaries are in receipt of any written claim of a material default under any such Material Contract and (vi) neither the execution of this Agreement nor the consummation of any transaction contemplated by this Agreement shall constitute a material default or give rise to cancellation rights under any Material Contract. The Company has furnished or made available to Parent true and complete copies of all written Material Contracts, including any amendments thereto. Section 3.22 Insurance. (a) Section 3.22(a) of the Company Disclosure Schedule sets forth, with respect to each material insurance policy under which the Company or any Subsidiary is an insured, a named insured or otherwise the principal beneficiary of coverage, (i) the names of the insurer, the principal insured and each named insured, (ii) the policy number, (iii) the period, scope and amount of coverage and (iv) the premium charged. (b) With respect to each current material insurance policy: (i) such policy is in full force and effect, (ii) neither the Company nor any Subsidiary is in material breach or default (including any such breach or default with respect to the payment of premiums or the giving of notice) and (iii) no event has occurred which, with notice or the lapse of time, would constitute such a material breach or default, or permit termination or modification, under the policy. Section 3.23 Related Party Transactions. Except for the Stockholders' Agreement or as set forth in Section 3.23 of the Company Disclosure Schedule, there are no contracts, commitments, agreements, arrangements or other transactions (other than employment agreements, consulting agreements, option agreements, confidentiality agreements, noncompetition agreements, severance agreements, release agreements, or any Plan set forth on Section 3.12(a) of the Company Disclosure Schedule) between the Company and any Subsidiary, on the one hand, and any (i) officer, director, employee or consultant of the Company and any Subsidiary, (ii) holder of Shares or Options or (iii) an Affiliate of any such officer, director, employee, consultant or security holder, on the other hand (any of the foregoing, a "Related Party Transaction"). Neither the Company nor any Subsidiary has made any loans to any of its respective officers, directors, employees or consultants except for advances of expenses in the ordinary course of business. Section 3.24 Board Approval; Vote Required. (a) The Company board of directors, by resolutions duly adopted and not subsequently rescinded or modified, has duly (i) determined that this Agreement and the Merger are in the best interests of the Company and its Stockholders, (ii) approved this Agreement and the Merger and declared their advisability, (iii) recommended that the stockholders of the Company approve and adopt this Agreement and approve the Merger and (iv) directed that this 24 Agreement and the transactions contemplated hereby be submitted for consideration by the Company's stockholders entitled to vote thereon. (b) The only vote of the holders of any class or series of capital stock of the Company necessary to approve this Agreement, the Merger and the other transactions contemplated hereby is the affirmative vote of the holders of at least a majority of the outstanding shares of Company Common Stock. The Stockholders have approved and adopted the Merger, this Agreement, and the other transactions contemplated hereby. Section 3.25 Title to Assets. (a) Except as set forth in Section 3.25 of the Company Disclosure Schedule, each of the Company and its Subsidiaries has good and marketable title to, or a valid leasehold interest in, the material properties and assets used by it, or shown on the balance sheet of the Company as of September 30, 2003 or acquired after the date thereof, free and clear of all Encumbrances other than Permitted Liens and Encumbrances securing Indebtedness that will not be prepaid as of the Closing Date, except for properties and assets disposed of in the ordinary course of business since the date of the balance sheet. Except as set forth in Section 3.25 of the Company Disclosure Schedule and except as entered into in the ordinary course of business, there are no outstanding options, warrants, commitments, agreements or any other rights of any character, entitling any person other than as contemplated in this Agreement to acquire any material interest in all, or any substantial part of, such assets. (b) The buildings, machinery, equipment and other tangible assets constituting the assets that the Company and its Subsidiaries own, lease and use in the conduct of their business, are, taken as a whole, in good operating condition and repair (subject to normal wear and tear) and are adequate for the uses to which they are being put. These assets constitute all the material assets of the business and material rights necessary to operate the business of the Company and its Subsidiaries as currently conducted. Section 3.26 Customers. Section 3.26 of the Company Disclosure Schedule sets forth a complete and accurate list of the top fourteen customers of the Company and its Subsidiaries by revenue on a consolidated basis during fiscal 2002 and for the nine months ended September 30, 2003 showing approximate total revenue received in each such period from each such customer. Except as set forth in Section 3.26 of the Company Disclosure Schedule, as of the date hereof, to the Knowledge of the Company, none of such customers within the last twelve months has cancelled, terminated or threatened in writing to cancel any Material Contract. Section 3.27 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Company. 25 Section 3.28 No Other Representations or Warranties. EXCEPT AS SPECIFICALLY SET FORTH IN THIS ARTICLE III, NEITHER THE COMPANY NOR ANY OF ITS STOCKHOLDERS, OFFICERS OR DIRECTORS IS MAKING, AND EACH OF THEM HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB As an inducement to GFI and the Company to enter into this Agreement, Parent and Merger Sub hereby, jointly and severally, represent and warrant to GFI and the Company that: Section 4.01 Corporate Organization. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. Section 4.02 Authority Relative to This Agreement. Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement and the Escrow Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Escrow Agreement, as applicable, by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or the Escrow Agreement or to consummate the transactions contemplated hereby or thereby (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement and the Escrow Agreement have been duly and validly executed and delivered by Parent and Merger Sub, and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding obligations of each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms. Section 4.03 No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement and the Escrow Agreement by Parent and Merger Sub do not, and the performance of this Agreement and the Escrow Agreement, by Parent and Merger Sub will not, (i) conflict with or violate the Organizational Documents of either Parent or Merger Sub, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 4.03(b) have been obtained and 26 all filings and obligations described in Section 4.03(b) have been made, conflict with or violate any law, applicable to Parent or Merger Sub or by which any property or asset of either of them is bound or affected, or (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Parent or Merger Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Merger Sub is a party or by which Parent or Merger Sub or any property or asset of either of them is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which would not prevent or materially delay consummation of the transactions contemplated by this Agreement or the Escrow Agreement or otherwise prevent or materially delay Parent or Merger Sub from performing their obligations under this Agreement or the Escrow Agreement. (b) The execution and delivery of this Agreement and the Escrow Agreement by Parent and Merger Sub do not, and the performance of this Agreement and the Escrow Agreement by Parent and Merger Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except for applicable requirements, if any, of (i) the HSR Act and (ii) filing and recordation of the appropriate merger documents as required by the DGCL. Section 4.04 No Vote Required. No vote of the stockholders of Parent is required by Law, Parent's Organizational Documents or otherwise in order for Parent and Merger Sub to consummate the transactions contemplated hereby. Section 4.05 Operations of Merger Sub. Merger Sub is a direct, wholly owned subsidiary of Parent, was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement. Section 4.06 Financing. As of the date hereof, Parent has funds, or has access to committed bank funds, in amounts sufficient to pay the Merger Consideration, and shall have at Closing, sufficient funds to cause the Surviving Corporation to pay the Merger Consideration in connection with the Merger Agreement and consummate the Merger. Section 4.07 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Parent or Merger Sub. 27 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER Section 5.01 Conduct of Business by the Company Pending the Merger. The Company agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 5.01 of the Company Disclosure Schedule or as expressly contemplated by any other provision of this Agreement, unless Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed): (i) the business of the Company shall be conducted only in, and the Company shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and (ii) the Company shall use its commercially reasonable efforts to preserve substantially intact the business organization of the Company and each Subsidiary and to keep available the current employees of the Company (taken as a whole) consistent with past practice, and to preserve the current relationships of the Company and each Subsidiary with customers, suppliers and other persons with which the Company and each Subsidiary has significant business relations consistent with past practice. By way of amplification and not limitation, except as expressly contemplated by any other provision of this Agreement or as set forth in Section 5.01 of the Company Disclosure Schedule, the Company or any Subsidiary shall not, between the date of this Agreement and the Effective Time, directly or indirectly, do, any of the following without the prior written consent of Parent (which shall not be unreasonably withheld or delayed): (a) amend or otherwise change its Organizational Documents; (b) issue, sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of any class of capital stock of the Company, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company, except for the issuance of options pursuant to the Company's Stock Option Plan and shares issuable pursuant to the exercise of Options or (ii) except in the ordinary course of business and in a manner consistent with past practice, sell any material assets or property of the Company or any Subsidiary; (c) authorize, declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, except for dividends paid to the Company, or enter into any Agreement with respect to the voting of its Capital Stock; 28 (d) reclassify, combine, split or subdivide, any of its capital stock; (e) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership, other business organization or any division thereof or, other than in the ordinary course of business, any material amount of assets, (ii) other than in the ordinary course of business, incur any Indebtedness or issue any debt securities or assume, guarantee or endorse, or, otherwise become responsible for, the obligations of any Person (other than the Company or any Subsidiary), or make any loans or advances or grant any security interest in any of its assets except for any incurrence of Indebtedness under the CapitalSource Credit Agreement, (iii) make or authorize any capital expenditures other than capital expenditures reflected in the Company's budget for the fiscal year ending December 31, 2003, previously delivered by the Company to Parent or (iv) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this Section 5.01(e); (f) (i) increase the compensation payable or to become payable or the benefits provided to its directors or officers generally, or, except in the ordinary course of business and consistent with past practice, employees, other than with respect to obligations incurred by the Company prior to the date hereof, (ii) grant any severance or termination pay to or enter into any employment, bonus, change of control or severance agreement or arrangement with, any director, officer or other employee of the Company who receives annual salary from the Company in excess of $125,000 per year, (iii) establish, adopt, enter into, increase or promise to increase or amend any material bonus, profit-sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee, except as required by Law and (iv) hire or retain any person with an annual salary greater than $125,000; provided that the foregoing shall not restrict the Company from taking any action to accelerate the vesting of outstanding stock options; (g) waive any stock repurchase or acceleration rights or materially amend or change the terms of any capital stock; (h) take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice or as required by GAAP, with respect to accounting policies or procedures; (i) unless otherwise required by applicable Law, (i) adopt or change any accounting method used by it, including any accounting method relating to Taxes, (ii) make, change or revoke any material election relating to Taxes, or (iii) enter into any closing agreement relating to Taxes, settle any material claim or assessment relating to Taxes or consent to any material claim or assessment relating to Taxes or any waiver of the statute of limitations for any such claim or assessment; 29 (j) enter into any contract or agreement providing for aggregate payments to or by the Company or its Subsidiaries of more than $5 million per year, or amend, modify or consent to the termination of any Material Contract; (k) commence or settle (except a settlement in connection with the Enron Claim) any Action other than any settlement which does not subject the Company or any Subsidiary to injunctive or other equitable relief; (l) except as specifically contemplated by this Agreement or entered into in connection herewith, enter into any Related Party Transaction; or (m) except as specifically contemplated by this Agreement, enter into any agreement or otherwise make a commitment, to do any of the foregoing. ARTICLE VI ADDITIONAL AGREEMENTS Section 6.01 Access to Information; Confidentiality. (a) Except as required pursuant to any confidentiality agreement or similar agreement or arrangement to which the Company or any Subsidiary is a party or pursuant to applicable Law, from the date of this Agreement until the Effective Time, the Company and each Subsidiary shall: (i) provide to Parent (and Parent's officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives, collectively, "Parent's Representatives") reasonable access during normal business hours to the officers, employees, agents, properties, offices and other facilities of such party and its subsidiaries and to the books and records thereof; and (ii) furnish to Parent such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of such party and its subsidiaries as Parent or Parent's Representatives may reasonably request. (b) All information obtained by Parent pursuant to this Section 6.01 shall be kept confidential in accordance with the confidentiality agreement, dated July 18, 2003 (the "Confidentiality Agreement"), between Parent and the Company. (c) Notwithstanding anything herein to the contrary, each party hereto (and its representatives, agents and employees) may consult any tax advisor regarding the tax treatment and tax structure of the transactions contemplated hereby and, from and after the date of execution of this Agreement (or, if earlier, the date of public announcement of this Agreement, or public announcement of discussions between the parties relating to the transactions) may disclose to any Person, without limitation of any kind, the tax treatment and tax structure of such transactions and all materials (including opinions and other tax analyses) that are provided relating to such treatment or structure provided, however, that neither party (nor 30 any employee, representative or other agent thereof) may disclose any other information that is not relevant to understanding the tax treatment and tax structure of the transaction (including the identity of any party), or any other information to the extent that such disclosure could result in a violation of any federal or state securities law. (d) No investigation pursuant to Section 6.01 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. Section 6.02 No Solicitation of Transactions. None of GFI, the Company nor any of their Affiliates, or their Affiliates' respective officers, employees, directors, agents or other representatives (collectively, the "Representatives") will, and GFI and, the Company shall use their commercially reasonable efforts to cause no Stockholders of the Company to, (i) solicit, initiate, encourage or accept any other inquiries, proposals or offers from any person (x) relating to any acquisition or purchase of all or any portion of the capital stock of the Company or material portion of the assets of the Company outside of the ordinary course of business consistent with past practice, excluding the issuance of Shares upon the exercise of Options, (y) enter into any merger, recapitalization, reorganization, joint venture or other business combination with the Company or (z) enter into any other extraordinary business transaction involving or otherwise relating to the Company (any of the transactions described in clauses (x), (y) and (z) being referred to herein as a "Business Combination") or (ii) other than to notify a person who has contacted the Company or any of its Representatives in connection with a Business Combination that the Company is unable to respond thereto, participate in any discussions, conversations, negotiations or other communications with any other person regarding, or furnish to any other person any information with respect to a Business Combination. The Company shall notify Parent promptly if any proposal or offer, or any inquiry or other contact with any other individual or entity with respect to a Business Combination, is made or received by the Company or any of its Representatives. The parties agree that irreparable harm would occur in the event any obligation under this Section was not performed in accordance with its terms and that Parent shall be entitled to specific performance of the terms thereof, in addition to any other remedy available at law or in equity, without the necessity of demonstrating the inadequacy of money damages. Section 6.03 Further Action; Commercially Reasonable Efforts. (a) Each of the parties hereto agrees to use its commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated hereby, (ii) obtain from Governmental Authorities and third parties any material consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by Parent or the Company or any of their subsidiaries in connection with the authorization, execution and delivery of this Agreement, and (iii) make all necessary filings, and thereafter make any other required submissions, with respect to this 31 Agreement and the transactions contemplated hereby required under the HSR Act. Subject to appropriate confidentiality protections, the parties hereto shall cooperate with each other in connection with the making of all such filings, will furnish to the other party such necessary information and assistance as such other party may reasonably request with respect to the foregoing, will provide the other party with copies of all filings made by such party with any Governmental Authority and, upon request, any other information supplied by such party to a Governmental Authority in connection with this Agreement and the transactions contemplated hereby. (b) Parent and the Company shall have filed prior to the date of this Agreement, or shall file as soon as practicable after the date of this Agreement, notifications under the HSR Act and shall respond as promptly as practicable to all inquiries or requests received from the Federal Trade Commission or the Antitrust Division of the Department of Justice for additional information or documentation and shall respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other Governmental Authority in connection with antitrust matters. The parties shall cooperate with each other in connection with the making of all such filings or responses, including providing copies of all such documents to the other party and its advisors prior to filing or responding. Notwithstanding anything to the contrary contained herein, Parent shall not be required to take any action, including entering into any consent decree, hold separate orders or other arrangements, that (i) requires the divestiture of any assets of any of Parent, the Company or any subsidiary of Parent or Subsidiary or (ii) limits Parent's freedom of action with respect to, or its ability to retain, the Company or Subsidiaries or any portion thereof or any of Parent's, Parent subsidiaries' or their respective affiliates assets or businesses. (c) The Company and Parent shall use their respective commercially reasonable efforts to obtain any material third party consents (A) necessary, proper, or advisable to consummate the transaction contemplated by this Agreement, (B) required to be disclosed in the Disclosure Schedule or (C) required to prevent a company Material Adverse Effect from occurring prior to the Effective Time. Section 6.04 Obligations of Merger Sub. Parent shall take all action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and subject to the conditions set forth in this Agreement. Section 6.05 Public Announcements. Promptly following the execution of this Agreement, the parties shall issue a press release regarding the transactions contemplated by this Agreement in the form agreed upon by the parties (the "Press Release"). Subject to compliance with applicable Law or stock exchange regulations, no party hereto shall make, or cause to be made, any press release or public announcement in respect of this Agreement, the Merger or the transactions contemplated hereby or otherwise communicate with news media in a manner inconsistent with the Press Release without the prior written consent of the other parties hereto, subject to applicable Law. The parties shall cooperate as to the timing and content of any press 32 releases or public announcements made in connection with the Merger or the transactions contemplated hereby, subject to applicable Law. Section 6.06 Closing Date Debt. At the Effective Time, Parent shall contribute to the capital of the Company an amount in cash equal to the Closing Date Debt, less (i) any amounts included in the Closing Date Debt attributable to the capital leases set forth on Exhibit 6.06 hereto, (ii) the aggregate amount of Indebtedness of the Company under Promissory Note A and (iii) the aggregate amount of Indebtedness of the Company under Promissory Note B (including all accrued but unpaid interest), and the Company shall utilize such contribution to repay the Closing Date Debt in full other than with respect to the debt attributable to the capital leases set forth in Exhibit 6.06 hereto and the Gerblick Notes. Section 6.07 UQ Acquisition Claims. (a) In the event that all UQ Acquisition Claims are not finally settled at least two (2) Business Days prior to the Closing Date, the Company shall, prior to the Closing Date, assign all of its right, title and interest in and to the UQ Acquisition Claims to GFI (in its capacity as the Representative) pursuant to the terms of an Assignment Agreement to be entered into among the Company, GFI in its capacity as Representative, and Parent (the "Assignment Agreement"). The Assignment Agreement (i) shall assign all of the Company's right, title and interest in and to the UQ Acquisition Claims to GFI (in its capacity as the Representative), (ii) shall contain further assurances consistent with the terms of this Section 6.07, (iii) shall provide for the distribution of any recovery from the UQ Acquisition Claims (net of expenses) to the Stockholders and Optionholders in accordance with their Applicable Percentage, and shall otherwise be in a form reasonably satisfactory to GFI and Parent. (b) In the event that any proceeds from the settlement of the UQ Acquisition Claims are paid to the Company or the Surviving Corporation, Parent shall cause the Surviving Corporation to, and the Surviving Corporation shall, promptly remit such proceeds to GFI (in its capacity as the Representative) to the extent such proceeds were not included in the calculation of Working Capital, and GFI shall distribute such proceeds (net of expenses) to the Stockholders and Optionholders in accordance with the terms of the Assignment Agreement. (c) In the event that GFI is prepared to enter into a definitive written settlement agreement with respect to the UQ Acquisition Claims subsequent to the Closing Date, the Parent shall cause the Surviving Corporation to, and the Surviving Corporation shall, reasonably cooperate with GFI to effect such settlement, including without limitation causing the Surviving Corporation to provide general and unconditional releases to the parties to the UPA of their obligations thereunder and a release to Byers of his obligations pursuant to Section 1c. of the Seller Noncompetition Agreement, dated as of August 31, 2001, by and between UtiliQuest, LLC and Byers. 33 (d) The Parent shall cause the Surviving Corporation to, and the Surviving Corporation shall, make reasonably available to GFI the employees of the Surviving Corporation that GFI requires to pursue the UQ Acquisition Claims; provided, however, that such availability shall not unreasonably interfere with the duties of such employees at the Surviving Corporation. (e) In the event that the UQ Acquisition Claims cannot be assigned as contemplated by this Section 6.07, the Parent shall and shall cause the Surviving Corporation to, cooperate with GFI in a mutually agreeable arrangement under which GFI (in its capacity as the Representative) would control the pursuit, prosecution and resolution of the UQ Acquisition Claims and any recovery in respect thereof (net of expenses) would be for the account of the Stockholders and the Optionholders in accordance with their Applicable Percentages. For purposes of this Section 6.07, "UQ Acquisition Claims" means all claims of the Company against ECTMI Trutta Holdings LP, a Delaware limited partnership ("Trutta"), Joint Energy Development Investments II, Limited Partnership, a Delaware limited partnership ("JEDI"), Byers Engineering Company, a Georgia corporation ("Byers"), Neal Allen Robertson, an individual ("Robertson"), and Enron North America Corp., a Delaware corporation ("Enron") (collectively, Trutta, JEDI, Byers, Robertson and Enron are referred to as the "Seller Parties"), pursuant to or in connection with (i) the Unit Purchase Agreement (the "UPA") dated as of July 24, 2001, among Holdings, the Company, the Seller Parties and OCM/GFI Power Opportunities Fund, L.P., a Delaware limited partnership (the "Power Fund"), (ii) the Settlement Agreement and Mutual General Release ("Settlement Agreement") entered into and effective April 9, 2002, among Holdings, the Company, the Seller Parties and the Power Fund, and (iii) the Escrow Agreement ("UQ Escrow Agreement") entered into as of April 19, 2002, among Holdings, the Seller Parties (other than Enron) and JP Morgan Chase Bank, a New York corporation, as escrow agent, including, without limiting the generality of the foregoing, (A) all indemnification claims that may be asserted against the Seller Parties pursuant to Article IX of the UPA (as modified by Section 3(b) of the Settlement Agreement), and (B) all claims that may be asserted against the escrow fund established pursuant to the UQ Escrow Agreement. Section 6.08 Termination of Enumerated Related Party Agreements and Other Contracts. On or prior to the Effective Time, the Company and each of the Subsidiaries shall have terminated the related party agreements and the contracts, in each case, that are enumerated in Exhibit 6.08 hereto. Section 6.09 Settlement Agreement and Mutual Release. In the event that the Company and GFI do not enter into the Settlement Agreement and Mutual Release by the Closing Date, the Parent shall and shall cause the Surviving Corporation to, cooperate with GFI to enter into the Settlement Agreement and Mutual Release. Any recoveries (inclusive of any reduction in the amount of the Company's obligations) in connection with the Settlement Agreement and Mutual Release (net of expenses) shall be for the account of the Stockholders and the Optionholders in accordance with their Applicable Percentages. 34 Section 6.10 Estoppel Certificates. The Company agrees to use its reasonable efforts to deliver to the Parent prior to the Closing Date an estoppel certificate for each of the leased properties set forth in Exhibit 6.10 hereto. ARTICLE VII CONDITIONS TO THE MERGER Section 7.01 Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions: (a) Representations, Warranties and Covenants. (i) The representations and warranties of the Company contained in this Agreement shall be true and correct (without giving effect to any limitation as to materiality or Material Adverse Effect set forth herein) as of the Effective Time, as though made on and as of the Effective Time (except to the extent expressly made as of an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to materiality or Material Adverse Effect set forth herein) would not have a Material Adverse Effect and (ii) the covenants and agreements contained in this Agreement to be complied with by GFI and the Company on or before the Closing shall have been complied with in all material respects and Parent shall have received a certificate from the Company with respect to the foregoing and from GFI with respect to compliance with its covenants and agreements only; (b) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or amended any Law, rule, regulation, judgment, decree, executive order or demand (an "Order") which is then in effect and has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger; (c) HSR Act. Any waiting period (and any extension thereof) under the HSR Act applicable to the Merger contemplated by this Agreement shall have expired or shall have been terminated; (d) No Proceeding or Litigation. No Action shall have been commenced or threatened by or before any Governmental Authority against either GFI or the Company, seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of Parent, has a reasonable likelihood of success and would reasonably be expected to render it impossible or unlawful to consummate such transactions or have a Material Adverse Effect; 35 (e) Consents and Approvals. The Company shall have received, each in form and substance reasonably satisfactory to Parent, all required material authorizations, consents, orders and approvals of all Governmental Authorities and all such other third party consents as are set forth in Section 3.06(b) of the Company Disclosure Schedule; (f) Payoff Certificates/Letter. The Company shall have delivered to Parent payoff certificates/letters for each repayment by the Company of a portion of the Closing Date Debt. (g) Resignations. Parent shall have received resignations, in writing, of all the members of the Board of the Company effective as of the Effective Time; (h) Non-Disclosure Agreement. GFI shall have entered into a confidentiality/non-disclosure agreement with Parent substantially in the form of Exhibit 7.01(h) hereto. (i) Dissenting Shares. The number of Dissenting Shares shall be less than 1% of the issued and outstanding Company Common Stock. (j) No Material Adverse Effect. Since the date of this Agreement, no event or events shall have occurred, and none of GFI, the Company or its Subsidiaries shall have received any notice or notices regarding any event or events, which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole; and (k) FIRPTA Certificate. Parent shall have received from GFI a certificate in compliance with Treasury Regulation Section 1.1445-2(b), certifying that it is not a "foreign person" under Section 1445 of the Code. Section 7.02 Conditions to the Obligations of GFI and the Company. The obligations of GFI and the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions: (a) Representations, Warranties and Covenants. (i) The representations and warranties of Parent and Merger Sub contained in this Agreement shall be true and correct (without giving effect to any limitation as to materiality or Material Adverse Effect set forth herein) in all material respects as of the Effective Time, as though made on and as of the Effective Time (except to the extent expressly made as of an earlier date, in which case as of such earlier date), and (ii) the covenants and agreements contained in this Agreement to be complied with by Parent and Merger Sub on or before the Closing shall have been complied with in all material respects and GFI and the Company shall have received a certificate from the Parent and Merger Sub with respect to the foregoing; 36 (b) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or amended any Law or Order which is then in effect and has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger; (c) HSR Act. Any waiting period (and any extension thereof) under the HSR Act applicable to the Merger contemplated by this Agreement shall have expired or shall have been terminated; (d) No Proceeding or Litigation. No Action shall have been commenced or threatened by or before any Governmental Authority against any party hereto, seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of the Representative, has a reasonable likelihood of success and would reasonably be expected to render it impossible or unlawful to consummate such transactions or have a Material Adverse Effect. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER Section 8.01 Termination. This Agreement may be terminated and the Merger and the other transactions contemplated hereby may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby by the Stockholders, as follows: (a) by mutual written consent of Parent and the Company; (b) by either Parent, on the one hand, or the Company, on the other hand, if there shall be any Law that makes consummation of the Merger illegal or otherwise prohibited or, notwithstanding the provisions of Section 6.03(b), if consummation of the Merger would violate any nonappealable final Order of any Governmental Entity having competent jurisdiction; provided, however, that the right to terminate this Agreement under this Section 8.01(b) shall not be available to any party who has not used its commercially reasonable efforts to have such Order rescinded; (c) by Parent, if (i) any of the conditions set forth in Section 7.01 shall have become incapable of fulfillment and shall not have been waived or (ii) GFI or the Company shall breach in any material respect any of its obligations hereunder and such breach shall not have been cured in all material respects or waived; (d) by the Company or GFI, if (i) any of the conditions set forth in Section 7.02 shall have become incapable of fulfillment and shall not have been waived or (ii) either Parent or Merger Sub shall breach in any material respect any of their representations, warranties 37 or obligations hereunder and such breach shall not have been cured in all material respects or waived; or (e) by either Parent, on the one hand, or the Company and GFI on the other hand, if the Effective Time shall not have occurred on or before December 5, 2003; provided, however, that the right to terminate this Agreement under this Section 8.01(e) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Effective Time to occur on or prior to such date. The party desiring to terminate this Agreement shall give written notice of such termination to the other parties. Section 8.02 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void, and there shall be no liability under this Agreement on the part of any party hereto, except as set forth in Sections 6.01(b) (Confidentiality), 6.05 (Public Announcements) and 8.03 (Expenses); provided, however, that nothing herein shall relieve any party from liability for any willful breach of this Agreement. Section 8.03 Expenses. (a) The Company shall be responsible for and bear all of the Expenses of the Representative and the Company and of their respective legal counsel, accountants or other advisors incurred at anytime in connection with this Agreement and the transactions contemplated hereby (collectively, the "Closing Expenses"). Parent shall be responsible for and bear all of its own and Merger Sub's Expenses and any Expenses of their respective legal counsel, accountants or other advisors, incurred at any time in connection with this Agreement and the transactions contemplated hereby. All Expenses relating to the filing fee for the Notification and Report Forms filed under the HSR Act shall be borne solely by Parent. (b) In the event that after the Effective Time the Surviving Corporation or Parent receives an invoice for any Closing Expenses that were not deducted from the Merger Consideration or reflected as liabilities in the calculation of Working Capital, the Surviving Corporation shall immediately forward such invoices directly to the Representative and Parent and the Representative shall direct the Escrow Agent to reimburse Parent or the Surviving Corporation for the full amount of such invoices (as and when they are paid) out of the Indemnity Escrow Account. Prior to ordering any such payment, the Parent shall send the Representative a copy of any such invoice and allow the Representative 20 days to review and, if appropriate, seek to reduce the amount of the invoice. 38 ARTICLE IX INDEMNIFICATION Section 9.01 Survival of Representations, Warranties and Covenants. (a) The representations and warranties contained in this Agreement shall survive after the Effective Time until the first anniversary of the Closing Date (the "Expiration Date"). If written notice of a claim in accordance with Section 9.05(b) has been given prior to the expiration of the applicable representations and warranties by a party hereto to another party hereto, then the relevant representations and warranties shall survive, but only with respect to such specific claim, until such claim has been finally resolved. (b) The covenants contained in this Agreement shall survive indefinitely; provided, that the covenants in Sections 9.02(ii) (as it pertains to Excluded Taxes) and the covenants in Section 9.02(iii) shall terminate on the Expiration Date. If written notice of a claim in accordance with Section 9.05(b) has been given prior to the expiration of the applicable covenants by a party hereto to another party hereto, then the relevant covenants shall survive, but only with respect to such specific claim, until such claim has been finally resolved. Section 9.02 Indemnification of Parent Indemnified Parties. After the Effective Time, Parent and its Affiliates (including, after the Effective Time, the Surviving Corporation), officers, directors, employees, agents, successors and assigns (collectively, the "Parent Indemnified Parties", shall be indemnified and held harmless for any and all liabilities, losses, damages, claims, incidental damages, interest, awards, judgments and penalties (including reasonable attorneys' and consultants' fees and expenses) actually suffered or incurred by them (including, without limitation, in connection with any action brought or otherwise initiated by any of them) (hereinafter, a "Loss" and collectively, "Losses"), arising out of or resulting from (without duplication): (i) excluding any matters related to Taxes, the breach of any representation or warranty made by the Company in this Agreement (provided that in calculating the amount of any Loss, as opposed to whether there has been a breach, such Loss shall be calculated without regard to qualifications as to "materiality" including the word "material" or Material Adverse Effect) and any other certificate delivered by GFI and the Company pursuant to this Agreement; (ii) the breach of any covenant or agreement made by GFI, the Representative and the Company in this Agreement and any other certificate delivered pursuant to this Agreement, which, in the case of the Company, is to be performed on or prior to the Closing Date; 39 (iii) the payment by Parent, the Surviving Corporation, any Subsidiary or any Affiliate thereof of any Excluded Taxes; (iv) any action by any Stockholder in respect of any Dissenting Shares, but only to the extent Losses in respect thereof exceed the Per Share Merger Consideration otherwise payable in respect of such Dissenting Shares; (v) any Closing Expenses to the extent such Closing Expenses were not (A) deducted from the Merger Consideration, (B) paid or (C) reflected as liabilities in the calculation of Working Capital; or (vi) the inaccuracy of the Per Share Merger Consideration Certificate to the extent it results in the payment of excess Merger Consideration. Recovery under this indemnity shall be solely as provided in Section 9.04. Section 9.03 Indemnification by Parent. After the Effective Time, the Stockholders and the Optionholders and their respective affiliates, officers, directors, employees, agents, successors and assigns (collectively, the "Stockholder Indemnified Parties") shall be indemnified and held harmless by Parent for any and all Losses, arising out of or resulting from: (i) the breach of any representation or warranty made by Parent or Merger Sub in this Agreement (provided that in calculating the amount of any Loss, as opposed to whether there has been a breach, such Loss shall be calculated without regard to qualifications as to "materiality" including the word "material" or Material Adverse Effect) and any other certificate or document delivered by Parent or Merger Sub pursuant to this Agreement; or (ii) the breach of any covenant or agreement made by Parent or Merger Sub in this Agreement and any other certificate or document delivered pursuant to this Agreement. (iii) The inaccuracy of the Per Share Merger Consideration Certificate to the extent it results in an underpayment with respect to the Merger Consideration. Section 9.04 Limits on Indemnification. Notwithstanding anything to the contrary contained in this Agreement: (a) an Indemnifying Party (as defined below) shall not be liable for any claim for indemnification and Parent Indemnified Parties, or Shareholder Indemnified Parties, as the case may be, shall not be entitled to indemnification under Section 9.02(i) or (iii) (solely with respect to Non-Income Taxes other than any Non-Income Taxes 40 included in the 2003 Tax Liability) or 9.03(i), unless and until the aggregate amount of indemnifiable Losses which may be recovered from the Indemnifying Party or the Indemnity Escrow, as applicable, equals or exceeds $1,200,000, after which the Indemnifying Party shall be liable only for, or there may only be recovered from the Indemnity Escrow, as applicable, those Losses in excess of $1,200,000, (b) the maximum amount of indemnifiable Losses which may be recovered (i) arising out of or resulting from the causes set forth in Section 9.02 or Section 9.03, shall be an amount equal to the Indemnity Escrow Amount. The provisions of Section 9.04(a) shall not apply with respect to indemnification of the Parent Indemnified Parties for any Income Taxes and the 2003 Tax Liability pursuant to Section 9.02(iii) hereof. The sole recourse for indemnification claims made by the Parent Indemnified Parties pursuant to this Agreement shall be recovery of amounts from the Indemnity Escrow Account in accordance with the terms of this Agreement. Section 9.05 Indemnification Procedures. (a) For purposes of this Section 9.05, a party against which indemnification may be sought (or, in the case of a claim for indemnification pursuant to Section 9.02, the Representative) is referred to as the "Indemnifying Party" and the party which may be entitled to indemnification is referred to as the "Indemnified Party". (b) The obligations of Indemnifying Parties under this Article IX with respect to Losses arising from claims of any third party which are subject to the indemnification provided for in this Article IX ("Third Party Claims") shall be governed by and contingent upon the following additional terms and conditions: if an Indemnified Party shall receive notice of any Third Party Claim, the Indemnified Party shall promptly give all Indemnifying Parties notice of such Third Party Claim; provided, however, that the failure to provide such notice shall not release an Indemnifying Party from any of its obligations under this Article IX except to the extent that such Indemnifying Party is materially prejudiced by such failure. The notice of claim shall describe in reasonable detail the facts known to the Indemnified Party giving rise to such indemnification claim, and the amount or good faith estimate of the amount arising therefrom. The Indemnified Party shall deliver to the Indemnifying Party, promptly after the Indemnified Party's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to a Third Party Claim. (c) The Indemnifying Party shall be entitled to assume and control the defense of such Third Party Claim at its expense and through counsel of its choice if it gives notice of its intention to do so to the Indemnified Party within thirty (30) days of the receipt of such notice from the Indemnified Party in which case the Indemnifying Party shall not be liable to the Indemnified Person for any fees of counsel or any other expenses with respect to the defense of such Third Party Claim; provided, however, that, if the Indemnified Party reasonably determines based upon advice of counsel that a conflict of interest exists that would make it inappropriate for the same counsel to represent both the Indemnified Party and the Indemnifying Party, then the Indemnified Party shall be entitled to retain its own counsel at the expense of the 41 Indemnifying Party. In the event that the Indemnifying Party exercises the right to undertake any such defense against such Third Party Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party's expense, all witnesses, pertinent records, materials and information in the Indemnified Party's possession or under the Indemnified Party's control relating thereto as is reasonably required by the Indemnifying Party. Similarly, in the event the Indemnified Party is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party's expense, all such witnesses, records, materials and information in the Indemnifying Party's possession or under the Indemnifying Party's control relating thereto as is reasonably required by the Indemnified Party. No compromise or settlement of such Third Party Claim may be effected by either the Indemnified Party or the Indemnifying Parties without the other party's consent (which shall not be unreasonably withheld or delayed) unless (i) there is no finding or admission of any violation of Law and no effect on any other claims that may be made against such other party and (ii) each Indemnified Party that is party to such claim is unconditionally released from liability with respect to such claim. (d) A claim for indemnification for any matter not including a Third-Party Claim shall be asserted by notice to the party from whom indemnification is sought. Section 9.06 Delivery and Release of Indemnity Escrow. (a) The Indemnity Escrow Amount (including all accrued interest thereon) shall be used to satisfy indemnification claims, finally determined by (x) mutual written agreement of Parent and the Representative or (y) a final award of an arbitral tribunal in accordance with Section 10.06, of the Parent Indemnified Parties for which such Persons are entitled to recovery pursuant to the terms of this Article IX and shall be disbursed in accordance with the procedures set forth in the Escrow Agreement. (b) If, as of the Expiration Date, a Parent Indemnified Party has asserted in writing any claim (and its good faith estimate of its Losses in respect of such claim) that is reasonably expected to give rise to a right of indemnification pursuant to this Article IX that is pending and unresolved, Parent and the Representative shall give joint written instructions to the Escrow Agent to retain an amount equal to the lesser of (x) the Indemnity Escrow Amount as such amount may have been previously reduced pursuant to this Article IX or (y) the amounts asserted in writing by Parent to be claimed to be owing to the Parent Indemnified Parties under this Article IX (subject to adjustment in accordance with the last proviso to this sentence), and the remaining balance shall be released to the Stockholders and the Optionholders in accordance with their respective Applicable Percentage; provided, however, that to the extent that the Indemnity Escrow Amount had been previously reduced, and such remaining claims exceed the current Indemnity Escrow Amount, no amount shall be released, pursuant to this provision at such time; and provided further that any dispute as to the appropriate amount of such good faith 42 estimate shall be resolved in accordance with Section 10.06 hereof. Within one (1) Business Day of the final resolution of each indemnity claim properly brought and pending as of the Expiration Date by (x) mutual written agreement of Parent and the Representative or (y) a final award of an arbitral tribunal in accordance with Section 10.06, Parent and the Representative shall give joint written instructions to the Escrow Agent to release to the Stockholders and the Optionholders in accordance with their respective Applicable Percentage the amount, if any, by which the estimated Losses in respect of such claim exceeded the finally determined Losses in respect of such claim. Upon final resolution of all indemnity claims properly brought and pending as of the Expiration Date by (x) mutual written agreement of Parent and the Representative or (y) a final award of an arbitral tribunal in accordance with Section 10.06, Parent and the Representative shall give joint written instruction to the Escrow Agent to release to the Stockholders and the Optionholders in accordance with their respective Applicable Percentage the remaining balance, if any, of the Indemnity Escrow Amount. Section 9.07 No Right of Contribution. GFI acknowledges and agrees that, upon and after the Closing, the Company shall not have any liability or obligation to indemnify, save or hold harmless or otherwise pay, reimburse or make GFI or any other Stockholder or Optionholder whole for or on account of any claim for indemnification by Parent pursuant to this Article IX or any untruth, inaccuracy or incorrectness of, or other breach of, any representation or warranty or the nonfulfillment, nonperformance, nonobservance or other breach or violation of, or default under, any covenant or agreement made by GFI or the Company in this Agreement, and neither GFI nor any Stockholder or Optionholder shall have any right of contribution against the Company. Section 9.08 Exclusive Remedy. Following the Closing the sole and exclusive remedy for each of the Parent Indemnified Parties and Stockholder Indemnified Parties with respect to any and all claims relating to a breach of this Agreement (other than claims of, or causes of action, arising from, fraud) shall be pursuant to the indemnification provisions set forth in this Article IX which, in the case of the Parent Indemnified Parties, limit indemnification to recovery of amounts from the Indemnity Escrow Account and which in the case of the Shareholder Indemnified Parties, limit indemnification to an amount equal to the Escrow Amount. In furtherance of the foregoing, each of the Parent Indemnified Parties and the Stockholder Indemnified Parties hereby waives, to the fullest extent permitted under applicable Law, any and all rights, claims and causes of action (other than claims of, or causes of action arising from, fraud) it may have against the other parties hereto, arising under or based upon any Federal, state, local or foreign Law. Notwithstanding anything to the contrary in this Agreement, this Section 9.08 shall not limit a party's right to specific performance or injunctive relief in connection with the other party's breach of its covenants in this Agreement. Section 9.09 Losses Net of Insurance, Tax Benefits. The amount of any Loss for which indemnification is provided to a Parent Indemnified Party or a Stockholder Indemnified Party, as the case may be, under this Article IX shall be (i) increased to take account 43 of any net Tax cost (except as provided below) actually incurred by such Indemnified Party or any Consolidated Tax Group of which it is a member arising from the receipt of indemnity payments hereunder, (ii) reduced to take account of any net Tax benefit actually realized by such Indemnified Party or any Consolidated Tax Group of which it is a member arising from the incurrence or payment of any such Loss, and (iii) net of any amounts recovered by, the such Indemnified Party with respect to such Loss under insurance policies. For the avoidance of doubt, the parties acknowledge and agree that (i) a net Tax cost shall not include any portion of the gain or decrease in the loss, as the case may be, that would be recognized by Parent or any Affiliate of Parent upon a disposition of any shares of stock of the Company, and (ii) an Indemnified Party, in accordance with Section 9.12(k) below, shall not treat the receipt of any indemnity payment hereunder as taxable income to such Indemnified Party unless required to do so by applicable Tax Law. In computing the amount of any such net Tax cost or net Tax benefit, the Indemnified Party shall be deemed to realize all other items of income, gain, loss, deduction or credit before realizing any item arising from the receipt of any indemnity payment hereunder or the incurrence or payment of any indemnified Loss. An Indemnified Party shall be deemed to have "actually realized" a net Tax cost or a net Tax benefit to the extent that, and at such time as, the amount of Taxes payable (as determined on a present value basis in the taxable year in which such indemnity payment is made using a discount rate of 7%) by such Indemnified Party is increased above or reduced below, as the case may be, the amount of Taxes that such Indemnified Party would be required to pay but for the receipt or accrual of the indemnity payment or the incurrence or payment of such indemnified amount, as the case may be. An Indemnified Party shall submit claims under and diligently pursue recovery under all insurance policies under which any Losses may be insured. Section 9.10 No Consequential Damages. Notwithstanding anything to the contrary contained in this agreement, no Person shall be liable to or otherwise responsible for consequential damages, punitive damages or for diminution in value or lost profits (except with respect to payment of any such damages in respect of Third-Party Claims). Section 9.11 Subrogation of Rights. The Indemnifying Party shall be subrogated to all rights and remedies of the Indemnified Party. Each Indemnified Party shall take all commercially reasonable action to perfect the above subrogation rights and, prior to seeking any indemnification from any Indemnifying Party, the Indemnified Party shall pursue all claims of the Company, the Surviving Corporation and the Subsidiaries under all of its agreements and instruments, including without limitation, those agreements and instruments relating to prior acquisitions by the Company or the Subsidiaries. Notwithstanding the foregoing, nothing herein shall prevent an Indemnified Party from asserting a claim pursuant to Sections 9.02 and 9.05 hereof prior to or in conjunction with pursuing such claims against other parties; provided, however, that the Indemnified Party may not pursue such claim against the Indemnifying Party until it has complied with its obligations under this Section 9.11. 44 Section 9.12 Tax Matters. (a) The Representative shall be responsible for causing to be filed all Tax Returns required or permitted by applicable Law to be filed by the Company and its Subsidiaries with respect to taxable periods that end on or before the Closing Date (such periods, the "Pre-Closing Periods" and such Tax Returns, the "Pre-Closing Period Tax Returns"). All such Pre-Closing Period Tax Returns shall be prepared and filed in a manner that is consistent with the prior practice of the Company and its Subsidiaries, except as required by applicable Law. If any such Pre-Closing Period Tax Returns are due after the Closing, (i) the Representative shall prepare and submit such Tax Returns to Parent if the Representative is not authorized to file such Pre-Closing Tax Returns by applicable law, and (ii) Parent shall file (or cause to be filed) such Pre-Closing Period Tax Returns with the appropriate taxing authority and pay (except as set forth below) the Taxes shown as due and payable on such Tax Return as prepared by the Representative. The Escrow Agent shall disburse to the Representative or the Parent, as applicable, from the Indemnity Escrow Amount, at least three (3) Business Days before the due date of the applicable Pre-Closing Period Tax Return, an amount equal to the portion of the Taxes shown as due and payable on such Tax Return as prepared by the Representative (or, in the case of a dispute (as described below) that is not resolved by the due date for the filing of such Tax Return (including extensions), such Tax Return shall be filed in accordance with Parent's determination and the amount disbursed from the Indemnity Escrow Amount shall include the amount in dispute) but only to the extent such Taxes were not (i) taken into account as a liability in the determination of Final Closing Working Capital or (ii) paid prior to the Closing, including as a payment of an estimated Tax. For the avoidance of doubt, Parent shall be responsible for the payment of any Taxes taken into account as a Liability in the determination of the Final Closing Working Capital and shall remit such amount to the relevant taxing authority (or, if the Representative files the applicable Pre-Closing Period Tax Return, Parent shall remit such amount to the Representative). (b) The Representative shall submit to Parent a draft of each Pre-Closing Period Tax Return (regardless of whether Parent or the Representative, as the case may be, must file such Tax Return under applicable Law) at least forty-five (45) days prior to the due date for the filing of such Tax Return (taking into account any extensions thereof), together with the Representative's calculation of the Tax for the Pre-Closing Period and the details supporting such calculation. Such draft Tax Return and calculation shall be subject to Parent's review and approval. Parent may, after receipt of such draft Tax Return and calculation (with supporting details), notify the Representative, in writing, of any disagreement with such Tax Return and/or calculation. If Parent notifies the Representative, in writing, of any such disagreement, Parent and the Representative shall proceed in good faith to attempt to resolve such disagreement. If they do not resolve such disagreement by the due date for the filing of such Tax Return (including extensions), the Representative or Parent, as applicable, shall cause the Tax Return to be filed, and the Neutral Auditors shall be retained to resolve such disagreement. In resolving any such disagreement, the Neutral Auditor shall apply principles consistent with the Company's or, as applicable, its Subsidiary's past practice (in the case of any Subsidiary of the Company during the period that the Company owned such Subsidiary); provided, however, that the Neutral 45 Auditor shall not be required to follow past practice to the extent the Neutral Auditor reasonably determines, in writing, that (i) the relevant past practice is contrary to applicable Tax Law, or (ii) the applicable Tax Return could not have been filed without being subject to penalties. The principles of Section 2.06(d) with respect to the scope and timing of determination, the effect of such determination, and the payment of the fees and expenses of the Neutral Auditor shall apply. If the Tax, as determined by the Neutral Auditors, for the Pre-Closing Period is less than the amount of such Tax disbursed from the Indemnity Escrow Amount, Parent shall pay to the Stockholders and Optionholders, in accordance with their respective Applicable Percentages, the amount by which the finally determined Tax for the Pre-Closing Period is less than the amount of such Tax shown as payable on the applicable Pre-Closing Period Tax Return. Parent shall make such payment on the later of the due date (taking into account any extension thereof) of the Pre-Closing Period Tax Return or five (5) days after the determination of the amount of the Tax by the Neutral Auditors for the Pre-Closing Period, if such determination is made after such due date. (c) Parent, the Company, or its Subsidiaries shall be responsible for filing all Tax Returns required to be filed by the Company or its Subsidiaries with respect to Straddle Periods and periods that begin after the Closing Date. The Escrow Agent shall disburse to Parent from the Indemnity Escrow Amount at least three (3) Business Days before the due date of the applicable Tax Return for a Straddle Period an amount equal to the portion of the Taxes shown as due and payable on such Tax Return that are allocable to the Pre-Closing Straddle Period as determined under this Section 9.12(c) (including any amounts remaining in dispute and for which resolution has not occurred (as described below) prior to the due date for filing such Tax Return (including extensions)) but only to the extent such Taxes were not (i) taken into account as a liability in the determination of Final Closing Working Capital or (ii) paid prior to the Closing, including as a payment of an estimated Tax. Parent shall pay or cause to be paid all Taxes due and payable in respect of all such Straddle Period Tax Returns. For the avoidance of doubt, Parent shall be responsible for the payment of any Taxes taken into account as a liability in the determination of the Final Closing Working Capital and shall remit such amount to the relevant taxing authority. In order to apportion appropriately any Taxes relating to a Straddle Period, the parties shall, to the extent permitted under applicable Tax Law, elect with the relevant taxing authority to treat for all Tax purposes the Closing Date as the last day of the taxable year or period of the Company and its Subsidiaries. In any case where applicable Tax Law does not permit the Company or its Subsidiaries to treat the Closing Date as the last day of the taxable year or period, the portion of any Taxes that are allocable to the portion of the Straddle Period ending on and including the Closing Date (the "Pre-Closing Straddle Period") shall be: (A) in the case of Taxes that are imposed on a periodic basis (and not based on invoices, receipts, sales or payments), deemed to be the amount of such Taxes for the entire period multiplied by a fraction the numerator of which is the number of calendar days in the Straddle Period ending on (and including) the Closing Date and the denominator of which is the number of calendar days in the entire relevant Straddle Period, and (B) in the case of Taxes not described in (i) (such as taxes that are either (x) based upon or related to income or receipts, or (y) imposed in connection 46 with any sale or other transfer or assignment of property (real or personal, tangible or intangible)), deemed equal to the amount that would be payable if the taxable year or period ended and the books closed at the close of the Closing Date. (d) Parent shall submit to the Representative a draft of each Straddle Period Tax Return prepared, except as otherwise required by Law or to the extent that counsel for Parent reasonably determines, in writing, that such a Tax Return could not be so prepared and filed without being subjected to penalties, in a manner that is consistent with the Company's or, as applicable, any of its Subsidiary's past practice (in the case of any Subsidiary of the Company during the period that the Company owned such Subsidiary) at least forty-five (45) days prior to the due date for the filing of such Tax Return (taking into account any extensions thereof), together with Parent's calculation of the Tax for the Pre-Closing Straddle Period and the details supporting such calculation. Such draft Tax Return and calculation shall be subject to the Representative's review and approval. The Representative may, after receipt of such draft Tax Return and calculation (with supporting details), notify Parent, in writing, of any disagreement with such Tax Return and/or calculation. If the Representative notifies Parent, in writing, of any such disagreement, Parent and the Representative shall proceed in good faith to attempt to resolve such disagreement. If they do not resolve such disagreement by the due date (including extensions) for the filing of such Tax Return, Parent shall cause the Tax Return to be filed, and the Neutral Auditors shall be retained to resolve such disagreement. The principles of Section 2.06(d) with respect to the scope and timing of determination, the effect of such determination, and the payment of the fees and expenses of the Neutral Auditors shall apply. If the Tax, as determined by the Neutral Auditors, for the Pre-Closing Straddle Period is less than the amount of such Tax disbursed from the Indemnity Escrow Amount, Parent shall pay to the Stockholders and Optionholders, in accordance with their respective Applicable Percentages, the amount by which the finally determined Tax for the Pre-Closing Straddle Period is less than the amount of such Tax. Parent shall make such payment on the later of the due date (taking into account extension thereof) of the Straddle Period Tax Return or five (5) days after the determination of the amount of the Tax by the Neutral Auditors for the Pre-Closing Straddle Period, if such determination is made after such due date. (e) Notwithstanding any other provision in this Agreement, the Parent Indemnified Parties shall have no recourse against the Indemnity Escrow Amount for any liability for Taxes attributable to any action taken on the Closing Date after the Closing by Parent or any Affiliate thereof (other than any such action expressly required by this Agreement). (f) After the Closing Date, each of Parent, the Company and its Subsidiaries, on the one hand, and the Representative, on the other, shall (i) provide, or cause to be provided, to each other's respective subsidiaries, officers, employees, representatives and affiliates, such assistance as may reasonably be requested by any of them in connection with the preparation of any Tax Return or any audit of the Company or its Subsidiaries in respect of which Parent, the Company and its Subsidiaries, as the case may be, is responsible pursuant to 47 this Article IX, (ii) retain, or cause to be retained, for so long as any such Taxable years or Audits shall remain open for adjustments, any records or information which may be relevant to any such Tax Returns or audits, and (iii) compensate the other party for all reasonable out-of-pocket costs incurred by such other party in connection with providing any assistance requested pursuant to (i). The assistance provided for in this Section 9.12(f) shall include, without limitation, each of the Parent, the Company and its Subsidiaries, and the Representative (x) making their agents and employees and the agents and employees of their respective subsidiaries and Affiliates available to each other on a mutually convenient basis to provide such assistance as might reasonably be expected to be of use in connection with any such Tax Returns or audits and (y) providing, or causing to be provided, such information as might reasonably be expected to be of use in connection with any such Tax Returns or audits, including without limitation records, returns, schedules, documents, work papers, opinions, letters or memoranda, or other relevant materials relating thereto. (g) Each of Parent, the Company or its Subsidiaries, and the Representative, shall promptly inform, keep regularly apprised of the progress with respect to, and notify the other party in writing after the receipt of any notice of any audit in respect of any Tax Liability for which it was responsible hereunder which could affect the Tax liability of such other party for any taxable year; provided, however, that a failure by a party to provide such notice will not affect such party's right to indemnification for Taxes under this Article IX except to the extent that the Indemnifying Party was materially prejudiced by such failure. (h) Any Tax refund or equivalent benefit actually realized through a reduction in any Tax Liability (including any interest with respect thereto) relating to the Company or any Subsidiary for any taxable period shall be the property of Parent. (i) Any Conveyance Taxes payable in connection with the transactions contemplated by this Agreement shall be borne by Parent; provided that the Representative shall execute and deliver all instruments and certificates necessary to enable Parent to comply with the foregoing. (j) All payments payable under any Tax sharing agreement (or other similar arrangement) between GFI (or any Affiliate thereof) and the Company (or any Subsidiary) shall be calculated on a basis consistent with past practice and shall be payable in full prior to the Closing Date. Any such agreement or arrangement between GFI (or any Affiliate thereof) and the Company (or any Subsidiary) shall be terminated prior to the Closing Date. (k) GFI and Parent agree to treat all payments made by either of them to or for the benefit of the other (including any payments to the Company or any Subsidiary) under any indemnity provision of this Agreement and for any misrepresentations or breaches of warranties or covenants as adjustments to the Merger Consideration for Tax purposes and that such treatment shall govern for purposes hereof except to the extent that any applicable Tax Law 48 would not permit such treatment, in which case such payments shall be made in an amount sufficient to indemnify the relevant party on an after-Tax basis to the extent provided by Section 9.09 hereof. (l) Except with respect to any action required to be taken by the Parent or any Affiliate thereof under applicable Tax Law, neither the Parent nor any Affiliate thereof shall take or allow to be taken any action to contact a taxing authority regarding any Tax reporting position of the Company or any Subsidiary of the Company in respect of a Pre-Closing Period or Straddle Period the effect of which is to accelerate the making of any claim, the commencement of any audit or other inquiry by a taxing authority or the payment of (or increase in the amount of) any Excluded Tax. If Parent or any Affiliate thereof takes or causes to be taken any such action, the indemnity provided in this Article IX shall be void solely with respect to any associated payment of (or increase in) Excluded Taxes; provided, that the participation by (or the representation) of the Parent or any Affiliate thereof in a Tax audit, examination or other proceeding shall have no effect on the Parent's right to indemnification under this Section 9.12. (m) Unless required by applicable Tax Law or after receipt of the written consent of the Representative, neither the Parent nor any Affiliate thereof shall amend any Pre-Closing Period Tax Return or Straddle Period Tax Return of the Company or any Subsidiary, and, if the Parent or such Affiliate amends any such Tax Return, the indemnity provided in this Article IX shall be void solely with respect to any associated payment of (or increase in) Excluded Taxes. (n) With respect to Tax matters, nothing in this Article IX or elsewhere in this Agreement shall require a party to reimburse another party more than once for the same Tax benefit or to indemnify a party more than once for the same Tax Liability. Section 9.13 Stockholder Representative. In connection with this Agreement, GFI, as stockholder representative (the "Representative"), shall have exclusive power and authority with respect to any action taken pursuant to this Agreement (including, without limitation, with respect to indemnification claims, waivers and the Merger Consideration adjustment) and the Parent Indemnified Parties shall be entitled to rely on such actions of GFI. ARTICLE X MISCELLANEOUS PROVISIONS Section 10.01 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by telecopy or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.01): 49 (a) If to Parent or Merger Sub: Dycom Industries, Inc. First Union Center Suite 500 4440 PGA Boulevard Palm Beach Gardens, FL 33410 Facsimile: Attention: Mike Miller, Esq. With a copy to: Shearman & Sterling LLP 599 Lexington Avenue New York, New York 10022 Facsimile: (212) 848-7179 Attention: Stephen M. Besen, Esq. (b) If to GFI, the Representative or the Company: GFI Energy Ventures LLC 11611 San Vicente Blvd. Suite 710 Los Angeles, CA 90047 Facsimile: (310) 442-0540 Attention: Ian Schapiro With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 310 S. Grand Avenue Suite 3400 Los Angeles, CA 90071 Facsimile: (213) 687-5600 Attention: Jeffrey H. Cohen, Esq. Section 10.02 Certain Definitions. (a) For purposes of this Agreement and the Company Disclosure Schedule: 50 "2003 Tax Liability" means the aggregate Tax Liabilities that are unpaid as of the Closing Date and otherwise constitute Excluded Taxes of the Company and its Subsidiaries for any tax period beginning on or after January 1, 2003 and ending on or before the Closing Date and for any Pre-Closing Straddle Period. "Accounts Receivable" means any and all accounts receivable, notes and other amounts receivable from third parties, including, without limitation, customers and employees, arising from the conduct of the business of the Company and its Subsidiaries. "Additional Merger Consideration" has the meaning set forth in Section 2.06(e)(i). "Adjustment Escrow Amount" equals $500,000. "Affiliate(s)" of a specified person means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person. "Affiliated Group" means any consolidated, affiliated, combined or unitary group of companies or corporations for federal, state, local or foreign Tax purposes with respect to which the Company or any Subsidiary is or has been a member. "Aggregate Fully-Diluted Shares" shall have the meaning set forth in Section 2.02 (b). "Aggregate Option Exercise Price" shall have the meaning set forth in Section 2.02(b). "Applicable Percentage" of any Stockholder or Optionholder, as the case may be, means the quotient (expressed as a percentage) of (i) the amount such holder is entitled to receive pursuant to Section 2.04 or 2.03, as the case may be, over (ii) the Merger Consideration. "Business Day" means any day on which banks are not required or authorized to close in the City of New York. "Capital Source Credit Agreement" means the Revolving Credit, Term Loan and Security Agreement, among the Company, UtiliQuest, LLC, Underground Technology Incorporated and Capital Source Finance LLC, dated as of December 6, 2002. "Closing Date Debt" means (i) the aggregate amount of Indebtedness of the Company and its Subsidiaries (including any current portion) outstanding immediately prior to the Effective Time plus (ii) all accrued and unpaid interest thereon plus (iii) the aggregate amount of premiums, prepayment penalties, make-wholes or similar amounts payable in 51 connection with the payment or redemption of such Indebtedness, including any fees and expenses incurred in connection therewith. "Code" means the Internal Revenue Code of 1986, as amended through the date hereof. "Company Common Stock" means the shares of common stock, $0.001 par value per share, of the Company. "Company IP Agreements" means (a) licenses or assignments of Intellectual Property by the Company to any third party, (b) licenses or assignments of Intellectual Property by any third party to the Company, (c) agreements between the Company and any third party relating to the development or use of Intellectual Property, the development or transmission of data, or the use, modification, framing, linking, advertisement or other practices with respect to Internet web sites, and (d) consents, settlements, decrees, orders, injunctions, judgments or rulings governing the use, validity or enforceability of Owned Intellectual Property. "Company Stock Option Plan" means the UtiliQuest Holdings Corp. 2001 Omnibus Stock Incentive Plan. "Consolidated Tax Group" shall mean any affiliated group filing a consolidated federal income Tax Return within the meaning of Section 1504(a) of the Code or any similar state, local or foreign Tax Law. "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise. "Conveyance Taxes" means sales, use, value added, transfer, stamp, share, stock transfer, real property transfer or gains and other similar Taxes. "Encumbrance" means any security interest, pledge, hypothecation, mortgage, lien (including, without limitation, environmental and Tax liens), charge, encumbrance, right of first refusal, option, servient easement, adverse claim, reversion reverter, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership. "Environmental Law" means any applicable United States federal, state or local or non-United States laws relating to (i) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (ii) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (iii) pollution or protection of the environment, human health or natural resources. 52 "Escrow Accounts" means the Adjustment Escrow Account and the Indemnity Escrow Account. "Excluded Taxes" means after taking into account with respect to Income Taxes the deemed utilization of any net operating loss carrybacks or carryforwards of the Company or any Subsidiary, as the case may be, as of the Closing Date and unreduced by the Parent's or any Affiliate of Parent's, including the Company or any Subsidiary, use of such net operating losses, (i) Taxes imposed on or payable by the Company or any Subsidiary for any Pre-Closing Period Tax Return or Pre-Closing Straddle Period and (ii) Taxes imposed on Parent or the Company as a result of any breach of warranty or representation relating to Taxes, or breach by GFI of any covenant relating to Taxes; provided, however, that Excluded Taxes shall not include Taxes relating to the absence or loss, in each case in whole or in part, of any Tax attribute, including, but not limited to, any net operating loss of the Company or any of its Subsidiaries. Notwithstanding the foregoing, any such Taxes described in clause (i) or (ii) of the preceding sentence shall be treated as Excluded Taxes only to the extent that such Taxes exceed the amount, if any, specifically reserved for Taxes (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) on the face of the Final Closing Working Capital. "Expenses" shall include all reasonable out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the solicitation of stockholder approvals, the filing of any required notices under the HSR Act or other similar regulations and all other matters related to the closing of the merger and the other transactions contemplated by this Agreement. "Gerblick Notes" means Promissory Note A and Promissory Note B. "Hazardous Substances" means (i) those substances defined in or regulated under the following United States federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act, (ii) petroleum and petroleum products, including crude oil and any fractions thereof, (iii) natural gas, synthetic gas, and any mixtures thereof, (iv) polychlorinated biphenyls, asbestos and radon, and (v) any contaminant, substance, material or waste regulated by any Governmental Authority pursuant to any Environmental Law. "Income Taxes" means Excluded Taxes imposed on or measured by income or capital gain. 53 "Indebtedness" means, with respect to any Person, (i) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (ii) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (iii) all liabilities secured by any Encumbrances on any property, (iv) all obligations of such Person as lessee under leases that have been or should be, in accordance with U.S. GAAP, recorded as capital leases, (v) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities other than performance bonds or letters of credit supporting insurance policies or programs and (vi) all guarantee obligations; provided, that guarantee obligations entered into, or collateral posted in connection with insurance policies or performance bonds, shall be deemed not to constitute Indebtedness. "Indemnity Escrow Account" means that account with the Escrow Agent into which the Indemnity Escrow Amount is deposited in accordance with the terms of this Agreement. "Indemnity Escrow Amount" equals $10,000,000. "Intellectual Property" means (i) United States, non-United States and international patents, patent applications and statutory invention registrations, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names and other identifiers of source or goodwill, and registrations and applications for registration thereof, (iii) copyrightable works, copyrights, and registrations and applications for registration thereof, and (iv) confidential and proprietary information, including trade secrets, know-how and invention rights. "Inventory" means all stock in trade, merchandise, goods, supplies and other products, raw materials, work-in-process and finished products related primarily to the business, together with all rights against suppliers of such inventories (including claims receivable for rejected inventory), and all prepayments and amounts paid on deposit with respect to the same (including any of the foregoing owned by the Company but at metered customer locations or in the possession of manufacturers, suppliers or dealers or in transit or returned goods). "Knowledge of the Company" means the actual knowledge of the persons listed on Schedule I hereto or the Knowledge such persons would have had after reasonable inquiry of the persons responsible for the applicable area. "Liabilities" means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including, without limitation, those arising under any Law, Action or Order and those arising under any contract, agreement, arrangement, commitment or undertaking. "Licensed Intellectual Property" means Intellectual Property licensed to the Company pursuant to a Company IP Agreement. 54 "Material Adverse Effect" means any material adverse effect on (i) the business, financial condition, assets, liabilities or results of operations of the Company and its Subsidiaries taken as a whole or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement; provided, however, that none of the following shall be considered a Material Adverse Effect: (i) changes in general economic conditions,(ii) any changes generally affecting the industries in which the Company and its Subsidiaries operate, or (iii) the execution of this Agreement, the public announcement of the transactions contemplated hereby or the consummation of the transactions contemplated hereby. "Merger Consideration" has the meaning set forth in Section 2.02(a). "Non-Income Taxes" means any Excluded Taxes other than Income Taxes. "Owned Intellectual Property" means Intellectual Property owned by the Company. "Person" means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government. "Per Share Merger Consideration" shall have the meaning set forth in Section 2.02(b). "Promissory Note A" means the promissory note, dated September 27, 2002, in favor of the James G. Gerblick Trust in the original principal amount of $3 million, together with interest in arrears on the unpaid principal balance at an annual rate of 6%, which is due on the third anniversary of its issuance, as such is amended (or the obligations thereunder are revised) pursuant to the Settlement Agreement and Mutual Release. "Promissory Note B" means the promissory note, dated September 27, 2002, in favor of the James G. Gerblick Trust in the amount of $3.6 million, together with interest in arrears on the unpaid principal balance at an annual rate of 6%, which is due on the fifth anniversary of its issuance. "Settlement Agreement and Mutual Release" means the agreement to be entered into among UtiliQuest Holdings Corp., James G. Gerblick, and The James G. Gerblick Trust, amending the terms of (or revising the obligations under) Promissory Note A and releasing certain claims against James G. Gerblick and the James G. Gerblick Trust. "Straddle Period" shall mean any taxable period beginning before the Closing Date and ending after the Closing Date. 55 "Subsidiary" or "Subsidiaries" means any person controlled by the Company, directly or indirectly, through one or more intermediaries. "Targeted Working Capital" equals $800,000. "Tax" or "Taxes" means (i) any and all taxes, fees, levies, duties, tariffs, imposts, and other similar charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any government or taxing authority, including taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, share capital, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; (ii) any liability for the payment of any Tax as a result of membership in any Affiliated Group and (iii) any transferee or secondary liability in respect of any Tax (whether imposed by Law or contractual arrangement). "Tax Returns" means any return, declaration, report, election, claim for refund or information return or other statement or form relating to, filed or required to be filed with any taxing authority, including any schedule or attachment thereto, and including any amendment thereof. "U.S. GAAP" means United States generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved. "Working Capital" means the consolidated net current assets (including current assets relating to tax refunds and cash and deposits to the extent not applied to reduce Indebtedness prior to the Closing) less the consolidated net current liabilities of the Company and its Subsidiaries, plus all cash used by the Company or any of its Subsidiaries to support insurance programs or policies or performance bonds regardless of the GAAP characterization of such cash, excluding (i) the current portion of any Indebtedness to the extent included in Closing Date Debt, (ii) any accrued but unpaid management fees, (iii) any interest accrued or fees payable on Indebtedness to the extent included in Closing Date Debt and (iv) any deferred taxes shown on the Closing Balance Sheet but including as a fixed amount (not subject to adjustment) $7,764,000 of deferred taxes as a current asset, all, except as otherwise provided above, as determined in accordance with GAAP and applied in a manner consistent with the Company's past practice. (c) The following terms have the meaning set forth in the Sections set forth below: 56

Defined Term Location of Definition ------------ ---------------------- AAA........................................................... Section 10.06 Action........................................................ Section 3.08 Agreement..................................................... Preamble Assignment Agreement.......................................... Section 6.07(a) Business Combination.......................................... Section 6.02 Byers......................................................... Section 6.07 Certificates.................................................. Section 2.04(a) Certificate of Merger......................................... Section 1.02 Closing....................................................... Section 1.02 Closing Balance Sheet......................................... Section 2.06(a) Closing Date.................................................. Section 1.02 Closing Expenses.............................................. Section 8.03(a) Closing Financial Data........................................ Section 2.06(b) Closing Working Capital....................................... Section 2.06(a) Company....................................................... Preamble Company Disclosure Schedule................................... Article III Confidentiality Agreement..................................... Section 6.01(b) DGCL.......................................................... Recitals Dispute....................................................... Section 10.06(a) Dissenting Shares............................................. Section 2.10 Effective Time................................................ Section 1.02

57

Defined Term Location of Definition ------------ ---------------------- Enron......................................................... Section 6.07 Environmental Permits......................................... Section 3.18(a) ERISA......................................................... Section 3.12(a) Escrow Agent.................................................. Recitals Escrow Agreement.............................................. Recitals Estimated Balance Sheet....................................... Section 2.06(a) Estimated Working Capital..................................... Section 2.06(a) Expiration Date............................................... Section 9.01(a) Financial Statements.......................................... Section 3.09(a)(i) GFI........................................................... Preamble Governmental Authority........................................ Section 3.06(b) HSR Act....................................................... Section 3.06(b) Indemnified Party............................................. Section 9.05 Indemnifying Party............................................ Section 9.05 Interim Financial Statements.................................. Section 3.09(a)(ii) JEDI.......................................................... Section 6.07 Law........................................................... Section 3.06(a) Lease Documents............................................... Section 3.15(b) Liens......................................................... Section 3.15(a) Loss.......................................................... Section 9.02 Losses........................................................ Section 9.02

58

Defined Term Location of Definition ------------ ---------------------- Material Contracts............................................ Section 3.21(a) Merger........................................................ Recitals Merger Payment................................................ Section 2.04(a) Merger Sub.................................................... Preamble Neutral Auditor............................................... Section 2.06(d) New York Courts............................................... Section 10.06(e) Optionholders................................................. Section 2.03 Option........................................................ Section 2.03 Order......................................................... Section 7.01(b) Organizational Documents...................................... Section 3.03 Parent........................................................ Preamble Parent Indemnified Parties.................................... Section 9.02 Parent's Representatives...................................... Section 6.01(a)(i) Permits....................................................... Section 3.07 Permitted Liens............................................... Section 3.15(a) Per Share Merger Consideration Certificate.................... Section 2.05 Plans......................................................... Section 3.12(a) Power Fund.................................................... Section 6.07 Pre-Closing Periods........................................... Section 9.12(a) Pre-Closing Period Tax Returns................................ Section 9.12(a) Pre-Closing Straddle Period................................... Section 9.12(c)

59

Defined Term Location of Definition ------------ ---------------------- Press Release................................................. Section 6.05 Related Party Transaction..................................... Section 3.23 Representatives............................................... Section 6.02 Resolution Period............................................. Section 2.06(c) Robertson..................................................... Section 6.07 Rules......................................................... Section 10.06(a) Seller Parties................................................ Section 6.07 Settlement Agreement.......................................... Section 6.07 Shares........................................................ Section 2.01(a) Stockholder................................................... Section 2.01(a) Stockholder Indemnified Parties............................... Section 9.03 Surviving Corporation......................................... Section 1.01 Third Party Claims............................................ Section 9.05(b) Trutta........................................................ Section 6.07 UPA........................................................... Section 6.07 UQ Acquisition Claims......................................... Section 6.07 UQ Escrow Agreement........................................... Section 6.07 WARN.......................................................... Section 3.12(h)(i)

Section 10.03 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other 60 provision is invalid, illegal or incapable of being enforced, 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 in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. Section 10.04 Entire Agreement; Assignment. This Agreement, the Escrow Agreement and the Confidentiality Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned, except that Parent and Merger Sub may assign all or any of their rights and obligations hereunder to any Affiliate of Parent, provided that no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. Section 10.05 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Section 10.06 Arbitration; Legal Proceedings. (a) Submission of Controversy to Arbitration. Except as provided in Section 2.06 and 9.12, any dispute, claim or controversy arising out of or relating to this Agreement, including the breach, termination or validity thereof and the arbitrability of any claim thereunder (a "Dispute"), shall be settled by final and binding arbitration in the Borough of Manhattan of the City of New York, under the then-effective Commercial Arbitration Rules of the American Arbitration Association ("AAA"), (the "Rules") as modified by this Agreement. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. The award rendered by the arbitrator shall be final and binding on the parties. There shall be one arbitrator who shall be appointed by the parties within twenty (20) days of receipt by the respondent(s) of the demand for arbitration. If the parties are unable to timely agree on one arbitrator, they shall ask the AAA to appoint one in accordance with the listing, striking and ranking procedure in the Rules and such appointment shall be binding on the parties. Parent and the Surviving Corporation shall act and be treated as one party for all purposes in any arbitration, including selection of the arbitrator. The arbitrator shall have the authority to award any remedy or relief that a court in the State of New York could order or grant, including specific performance of any obligation created under this Agreement, the issuance of an injunction or other provisional relief, or the imposition of sanctions for abuse or frustration of the arbitration process. The arbitral tribunal shall apply the law of the state of New York in deciding the merits of any Dispute. The arbitration award will be in writing. (b) Arbitration to Be Expeditious. It is the intent of the parties that any arbitration shall be concluded as quickly as reasonably practicable. Unless the parties otherwise 61 agree, once commenced, the hearing on the disputed matters shall be held four (4) days a week until concluded, with each hearing date to begin at 9:00 a.m. and to conclude at 5:00 p.m. The arbitrator shall use all reasonable efforts to issue the final award or awards within a period of five (5) Business Days after closure of the proceedings. Failure of the arbitrator to meet the time limits of this Section 10.6 shall not be a basis for challenging the award. (c) Discovery and Certain Evidentiary Matters. Consistent with the expedited nature of arbitration, each party will, upon the timely written request of the other party, promptly provide the other with copies of documents relevant to the issues raised by any claim or counterclaim. Upon the timely request of a party, the arbitrator shall have the discretion to order examination by deposition of witnesses to the extent the arbitrator deems such discovery relevant and appropriate. In considering the relevancy, materiality, and admissibility of evidence, the arbitrators shall take into account, among other things, applicable principles of legal privilege, including the attorney-client privilege, the work product doctrine, and the self-evaluative privilege, and appropriate protection of confidential information. (d) Costs of Arbitration. The parties shall share equally the fees and expenses of the arbitrator. (e) Jurisdiction and Process. Each party hereto hereby submits to the exclusive jurisdiction of any New York federal court in the Borough of Manhattan, City of New York and if the court lacks jurisdiction over such proceeding, to the exclusive jurisdiction of any New York state court in the Borough of Manhattan, City of New York (collectively, the "New York Courts"), for the purpose of an order to compel arbitration and for provisional remedies or other relief in aid of arbitration, and to the non-exclusive jurisdiction of the New York Courts for the enforcement of any award issued hereunder. Each party hereby submits to personal jurisdiction in the New York Courts and irrevocably waives any objection as to venue therein, and further agrees not to plead or claim in any such court that any such proceeding has been brought in an inconvenient forum. Section 10.07 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to seek specific performance of the terms hereof, in addition to any other remedy at law or equity. Section 10.08 Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, Parent, the Company and GFI or (b) by a waiver in accordance with Section 10.08. Section 10.09 Waiver. Any party hereto may (a) extend the time for the performance of any obligations or other acts of any other party hereto, (b) waive any inaccuracies in the representations and warranties of any other party hereto contained herein or in any document delivered by such other party pursuant hereto or (c) waive compliance with any of 62 the agreements of any other party hereto or conditions to such party's obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any such rights. Section 10.10 Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. Section 10.11 Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of the nouns and pronouns shall include the plural and vice versa. Section 10.12 Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. [REST OF PAGE INTENTIONALLY LEFT BLANK] 63 IN WITNESS WHEREOF, Parent, Merger Sub, the Company and GFI have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. DYCOM INDUSTRIES, INC. By: /s/ Steven Nielsen ----------------------------------------- Name: Steven Nielsen Title: President and Chief Executive Officer UTILIQUEST ACQUISITION CORP. By: /s/ Steven Nielsen ----------------------------------------- Name: Steven Nielsen Title: President UTILIQUEST HOLDINGS CORP. By: /s/ Rob Karam ----------------------------------------- Name: Rob Karam Title: Vice President OCM/GFI POWER OPPORTUNITIES FUND, L.P. (in its own capacity and as Representative) By: GFI Energy Ventures LLC, its Co-General Partner 64 By: /s/ Ian Schapiro ------------------------------ Name: Ian Schapiro Title: Principal 65 EX-31.1 6 g86172exv31w1.txt EX-31.1 CEO CERTIFICATION PURSUANT TO SECTION 302 EXHIBIT 31.1 DYCOM INDUSTRIES, INC. CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, Steven E. Nielsen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dycom Industries, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 5, 2003 /s/ Steven E. Nielsen - ---------------------- Steven E. Nielsen President and Chief Executive Officer EX-31.2 7 g86172exv31w2.txt EX-31.2 CFO CERTIFICATION PURSUANT TO SECTION 302 EXHIBIT 31.2 DYCOM INDUSTRIES, INC. CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, Richard L. Dunn, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dycom Industries, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 5, 2003 /s/ Richard L. Dunn - ------------------- Richard L. Dunn Senior Vice-President and Chief Financial Officer EX-32.1 8 g86172exv32w1.txt EX-32.1 CEO CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 32.1 DYCOM INDUSTRIES, INC. CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Dycom Industries, Inc. (the "Company") on Form 10-Q for the period ending October 25, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies that to the best of my knowledge: 1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: December 5, 2003 /s/ Steven E. Nielsen --------------------- Steven E. Nielsen President and Chief Executive Officer EX-32.2 9 g86172exv32w2.txt EX-32.2 CFO CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 32.2 DYCOM INDUSTRIES, INC. CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Dycom Industries, Inc. (the "Company") on Form 10-Q for the period ending October 25, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies that to the best of my knowledge: 1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: December 5, 2003 /s/ Richard L. Dunn ------------------- Richard L. Dunn Senior Vice-President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    EXHIBIT 10.1

                      SECOND AMENDMENT TO CREDIT AGREEMENT
                             AND CONSENT AND WAIVER

         THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER, dated
as of November 10, 2003 (this "Second Amendment"), is entered into by and among
DYCOM INDUSTRIES, INC., a Delaware corporation (the "Borrower"), certain
Domestic Subsidiaries of the Borrower as Guarantors (the "Guarantors" and
together with the Borrower, the "Credit Parties"), the Required Lenders
identified on the signature pages hereto and WACHOVIA BANK, NATIONAL
ASSOCIATION, as administrative agent for the Lenders (the "Administrative
Agent").

                               W I T N E S S E T H

         WHEREAS, the Borrower, the Guarantors, the Administrative Agent and the
Lenders are parties to that certain Credit Agreement dated as of June 3, 2002
(as previously amended and modified and as further amended, modified,
supplemented or restated from time to time, the "Credit Agreement"; capitalized
terms used herein shall have the meanings ascribed thereto in the Credit
Agreement unless otherwise defined herein);

         WHEREAS, the Borrower has notified the Lenders that it intends to (a)
acquire the assets of First South Utility Construction, a North Carolina
corporation ("First South"), on terms and conditions substantially the same as
those set forth on the summary of material terms attached hereto as Schedule A
(the "First South Acquisition") and (b) acquire the Capital Stock of UtiliQuest
Holdings Corp., a Delaware corporation ("UtiliQuest"), on terms and conditions
substantially the same as those set forth on the summary of material terms
attached hereto as Schedule B (the "UtiliQuest Acquisition"; together with the
First South Acquisition, individually an "Acquisition" and collectively the
"Acquisitions");

         WHEREAS, the Borrower has requested that the Required Lenders (a)
consent to the consummation of the Acquisitions by the Credit Parties, (b) waive
the Borrower's failure to provide certain documents twenty Business Days in
advance of a Permitted Acquisition and (c) agree to amend a certain provision of
the Credit Agreement; and

         WHEREAS, the Required Lenders have agreed to the consent, waiver and
amendment requested by the Borrower, subject to the terms and conditions set
forth herein.

         NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:



                                    SECTION 1

                                     CONSENT

         1.1      Consent to Acquisitions. The Required Lenders, for and on
behalf of the Lenders under the Credit Agreement, hereby consent to the
consummation of the Acquisitions by the Credit Parties, notwithstanding any
prohibitions to the contrary set forth in Section 7.5 of the Credit Agreement
(Advances, Investments and Loans) or in the definition of "Permitted
Acquisition" in Section 1.1 of the Credit Agreement. This consent shall be
effective solely with respect to the specific circumstances of the Acquisitions.

                                    SECTION 2

                                    AMENDMENT

         2.1      Consolidated Tangible Net Worth Covenant.

         (a)      If, and upon such time that, one (but not both) of the
Acquisitions is consummated, Section 6.7(c) to the Credit Agreement shall be
amended and restated in its entirety as of such date such that:

                  (i)      if the First South Acquisition, but not the
         UtiliQuest Acquisition, has been consummated, Section 6.7(c) to the
         Credit Agreement shall read in its entirety as follows:

                           (c)      Consolidated Tangible Net Worth. Maintain
                  Consolidated Tangible Net Worth of not less than (i)
                  $265,000,000 plus (ii) 50% of Consolidated Net Income
                  (positive or negative) from the date the Borrower's
                  acquisition of First South Utility Construction, a North
                  Carolina corporation, is consummated (the "First South
                  Acquisition Date") to the date of computation plus (iii) 75%
                  of the Equity Issuances made from the First South Acquisition
                  Date to the date of computation.

                  (ii)     if the UtiliQuest Acquisition, but not the First
         South Acquisition, has been consummated, Section 6.7(c) to the Credit
         Agreement shall read in its entirety as follows:

                           (c)      Consolidated Tangible Net Worth. Maintain
                  Consolidated Tangible Net Worth of not less than (i)
                  $200,000,000 plus (ii) 50% of Consolidated Net Income
                  (positive or negative) from the date the Borrower's
                  acquisition of UtiliQuest Holdings Corp., a Delaware
                  corporation, is consummated (the "UtiliQuest Acquisition
                  Date") to the date of computation plus (iii) 75% of the Equity
                  Issuances made from the UtiliQuest Acquisition Date to the
                  date of computation.

                                       2


         (b)      If, and upon such time that, both Acquisitions have been
consummated, Section 6.7(c) to the Credit Agreement shall be amended and
restated in its entirety as of such date to read as follows:

                           (c)      Consolidated Tangible Net Worth. Maintain
                  Consolidated Tangible Net Worth of not less than (i)
                  $170,000,000 plus (ii) 50% of Consolidated Net Income
                  (positive or negative) from the date the Borrower has
                  completed the acquisitions of both UtiliQuest Holdings Corp.,
                  a Delaware corporation, and First South Utility Construction,
                  a North Carolina corporation (the "Acquisitions Completion
                  Date"), plus (iii) 75% of the Equity Issuances made from the
                  Acquisitions Completion Date to the date of computation.

                                    SECTION 3

                                     WAIVER

         3.1      Waiver. The Required Lenders hereby waive, on a one-time basis
for the Acquisitions, any failure of the Borrower to comply with the requirement
set forth in Section 6.2(e) of the Credit Agreement to provide the Lenders with
a complete Permitted Acquisition report twenty Business Days' prior to the
consummation of a Permitted Acquisition. Except for the specific, one-time
waiver set forth above, nothing set forth herein or contemplated hereby is
intended to constitute a waiver of (i) any rights or remedies available to the
Lenders or the Administrative Agent under the Credit Agreement or any other
Credit Document or under applicable law (all of which rights and remedies are
hereby expressly reserved by the Lenders and the Administrative Agent) or (ii)
the Credit Parties' obligation to comply fully with any duty, term, condition,
obligation or covenant contained in the Credit Agreement and the other Credit
Documents.

                                    SECTION 4

                               CLOSING CONDITIONS
                          AND POST-CLOSING REQUIREMENTS

         4.1      Closing Conditions.

         This Second Amendment shall be effective as of the date hereof upon
satisfaction of the following conditions precedent, in form and substance
reasonably acceptable to the Administrative Agent:

                  (a)      Second Amendment. The Administrative Agent shall have
         received a copy of this Second Amendment duly executed by each of the
         Credit Parties and the Required Lenders.

                                       3


                  (b)      Officer's Certificate. The Administrative Agent shall
         have received an officer's certificate, dated as of the date hereof,
         executed by a Responsible Officer of the Borrower (i) certifying that
         (A) no Default or Event of Default exists or will exist after giving
         effect to the Acquisitions (after giving effect to this Second
         Amendment), (B) each of First South and UtiliQuest has earnings before
         interest, taxes, depreciation and amortization (excluding, in the case
         of First South, any extraordinary credit losses) for the most recent
         four fiscal quarters prior to the applicable acquisition date for which
         financial statements are available in an amount greater than $0 and (C)
         neither the First South Acquisition nor the UtiliQuest Acquisition is a
         "hostile acquisition" and (ii) demonstrating that the Leverage Ratio
         shall be less than or equal to 1.75 to 1.0 after giving effect to each
         of the Acquisitions.

                  (c)      Amendment Fee. The Borrower shall have paid a
         non-refundable amendment fee to the Administrative Agent, for the pro
         rata benefit of each Lender who duly executes and delivers a
         counterpart to this Second Amendment on or before 12:00 Noon (Eastern
         Time) on Monday, November 10, 2003 (the "Consenting Lenders"), in an
         amount equal to ten basis points (.10%) of the aggregate Commitments of
         the Consenting Lenders.

         4.2      Post-Closing Requirements.

                  (a)      Joinder Agreement. As soon as possible, and in any
         event no later than ten (10) Business Days after the closing date of
         the UtiliQuest Acquisition (or such later date as agreed to by the
         Administrative Agent in its sole discretion), the Administrative Agent
         shall have received, in accordance with the terms of Section 6.9 of the
         Credit Agreement, a Joinder Agreement duly executed by the Borrower,
         UtiliQuest and any other Domestic Subsidiary of the Borrower that is
         not a Guarantor as of the date of this Second Amendment.

                  (b)      Authority Documents. As soon as possible, and in any
         event no later than ten (10) Business Days after the closing date of
         the UtiliQuest Acquisition (or such later date as agreed to by the
         Administrative Agent in its sole discretion), the Administrative Agent
         shall have received, with respect to each of UtiliQuest and any other
         Domestic Subsidiary of the Borrower party to the Joinder Agreement
         referenced in Section 4.2(a) above, the following authority documents:
         (i) a secretary's certificate of such Person, (ii) a copy of its
         articles of incorporation, (iii) a copy of the resolutions of its board
         of directors, approving and adopting the Joinder Agreement and the
         other Credit Documents, (iv) a copy of its bylaws, (v) copies of a
         certificate of good standing, existence or its equivalent certified as
         of a recent date by the appropriate Governmental Authority of its state
         of incorporation and (vi) an incumbency certificate.

                  (c)      Legal Opinion. As soon as possible, and in any event
         no later than ten (10) Business Days after the closing date of the
         UtiliQuest Acquisition (or such later date as agreed to by the
         Administrative Agent in its sole discretion), the Administrative Agent
         shall have received a legal opinion from counsel to the Credit Parties,
         in form and

                                       4


         substance reasonably satisfactory to the Administrative Agent, which
         opinion shall include, without limitation, an opinion as to the
         enforceability of the Joinder Agreement referenced in Section 4.2(a)
         above.

                  (d)      Effect of Non-Compliance. Notwithstanding the terms
         of Section 8.1(c)(iii) of the Credit Agreement to the contrary, the
         failure of any requirement set forth in this Section 4.2 to be
         satisfied within the time period allotted therefor shall constitute an
         immediate Event of Default under the Credit Agreement.

                                    SECTION 5

                                  MISCELLANEOUS

         5.1      Amended Terms. The term "Credit Agreement" as used in each of
the Credit Documents shall hereafter mean the Credit Agreement as amended by
this Second Amendment. Except as specifically amended or modified hereby or
otherwise agreed, the Credit Agreement is hereby ratified and confirmed and
shall remain in full force and effect according to its terms.

         5.2      Representations and Warranties of the Borrower. Each of the
Credit Parties represents and warrants to the Lenders as follows:

                  (a)      It has taken all necessary action to authorize the
         execution, delivery and performance of this Second Amendment.

                  (b)      This Second Amendment has been duly executed and
         delivered by such Person and constitutes such Person's legal, valid and
         binding obligations, enforceable in accordance with its terms, except
         as such enforceability may be subject to (i) bankruptcy, insolvency,
         reorganization, fraudulent conveyance or transfer, moratorium or
         similar laws affecting creditors' rights generally and (ii) general
         principles of equity (regardless of whether such enforceability is
         considered in a proceeding at law or in equity).

                  (c)      No consent, approval, authorization or order of, or
         filing, registration or qualification with, any court or Governmental
         Authority or third party is required in connection with the execution,
         delivery or performance by such Person of this Second Amendment.

         5.3      Reaffirmation of Credit Party Obligations. Each Credit Party
hereby ratifies the Credit Agreement (as amended by this Second Amendment) and
acknowledges and reaffirms (a) that it is bound by all terms of the Credit
Agreement (as amended by this Second Amendment) applicable to it and (b) that it
is responsible for the observance and full performance of its respective Credit
Party Obligations.

         5.4      Credit Document. This Second Amendment shall constitute a
Credit Document under the terms of the Credit Agreement.

                                       5


         5.5      Expenses. The Borrower agrees to pay all reasonable costs and
expenses of the Administrative Agent in connection with the preparation,
execution and delivery of this Second Amendment, including, without limitation,
the reasonable fees and expenses of Moore & Van Allen, PLLC, and all previously
incurred fees and expenses, if any, which remain outstanding on the date hereof.

         5.6      Entirety. This Second Amendment and the other Credit Documents
embody the entire agreement between the parties hereto and supersede all prior
agreements and understandings, oral or written, if any, relating to the subject
matter hereof.

         5.7      Counterparts/Telecopy. This Second Amendment may be executed
in any number of counterparts, each of which when so executed and delivered
shall be an original, but all of which shall constitute one and the same
instrument. Delivery of executed counterparts of the Second Amendment by
telecopy shall be effective as an original and shall constitute a representation
that an original shall be delivered.

         5.8      Governing Law. This Second Amendment and the rights and
obligations of the parties under this Second Amendment shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.

         5.9      Consent to Jurisdiction; Service of Process; Waiver of Jury
Trial. The jurisdiction, services of process and waiver of jury trial provisions
set forth in Sections 11.14 and 11.18 of the Credit Agreement are hereby
incorporated by reference, mutatis mutandis.

         5.10     Further Assurances. The Credit Parties agree to promptly take
such action, upon the request of the Administrative Agent, as is reasonably
necessary to carry out the intent of this Second Amendment.

                            [Signature Pages Follow]

                                       6


                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

         IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Second Amendment to be duly executed and delivered as of the date first
above written.

BORROWER:                 DYCOM INDUSTRIES, INC.,
                          a Florida corporation

                          By: -s- Richard L. Dunn
                             ---------------------------------
                          Name: Richard L. Dunn
                          Title: Sr. Vice President & CFO

GUARANTORS:               COMMUNICATIONS CONSTRUCTION
                          GROUP, INC.,
                          a Pennsylvania corporation
                          ANSCO & ASSOCIATES, INC.,
                          a Florida corporation
                          DYCOM CAPITAL MANAGEMENT, INC.,
                          a Delaware corporation
                          DYCOM CORPORATE IDENTITY, INC.,
                          a Delaware corporation
                          DYCOM INVESTMENTS, INC.,
                          a Delaware corporation
                          ERVIN CABLE CONSTRUCTION, INC.,
                          a Kentucky corporation
                          CABLE COM INC.,
                          a Delaware corporation
                          NIELS FUGAL SONS COMPANY,
                          a Utah corporation

                          By: -s- Richard L. Dunn
                             ---------------------------------
                          Name: Richard L. Dunn
                          Title: Treasurer of each of the foregoing



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

LENDERS:                  WACHOVIA BANK, NATIONAL ASSOCIATION,
                          individually in its capacity as a
                          Lender and in its capacity as Administrative Agent

                          By: -s- Michael Romanzo
                             -----------------------------------
                          Name:  Michael Romanzo
                          Title: Vice President



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          BANK OF AMERICA, N.A.

                          By: -s- Timothy H. Spanos
                             ------------------------------------
                          Name: Timothy H. Spanos
                          Title: Managing Director



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          LASALLE BANK NATIONAL ASSOCIATION

                          By: -s- Robert Lozano
                              --------------------------------------
                          Name: Robert Lozano
                          Title: First Vice President



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          HSBC BANK USA

                          By: -s- Gregory Roll
                              --------------------------------------
                          Name: Gregory Roll
                          Title: First Vice President



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          HARRIS TRUST AND SAVINGS BANK

                          By: -s- Wes W. Frangul
                              --------------------------------------
                          Name: Wes W. Frangul
                          Title: Managing Director



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          SUNTRUST BANK

                          By: -s- Edward E. Wooten
                              --------------------------------------
                          Name: Edward E. Wooten
                          Title: Director



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          REGIONS BANK

                          By: -s- David Waller
                              --------------------------------------
                          Name: David Waller
                          Title: Vice President



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          COMPASS BANK

                          By: -s- C. French Yarbrough JR
                              --------------------------------------
                          Name: C. FRENCH YARBROUGH JR
                          Title: SVP



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          COMMERCEBANK N.A.

                          By: -s- Terry Lysengen
                             ---------------------------------------
                          Name: Terry Lysengen
                          Title: Vice President



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          BANK HAPOALIM B.M.

                          By: -s- Marc Bosc         [ILLEGIBLE]
                             -----------------
                          Name: MARC BOSC           [ILLEGIBLE]
                          Title: VICE PRESIDENT



                             DYCOM INDUSTRIES, INC.
           SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER

                          ISRAEL DISCOUNT BANK OF NEW YORK

                          By: -s- Roberto R. Munoz
                             -----------------------------------------
                          Name: Roberto R. Munoz
                          Title: Senior Vice President
                                 Chief Landing Officer for Florida



                                   SCHEDULE A

              SUMMARY OF MATERIAL TERMS OF FIRST SOUTH ACQUISITION

                                 [see attached]


                                EXECUTIVE SUMMARY

                              PROPOSED ACQUISITION

                                       OF

                         SUBSTANTIALLY ALL OF THE ASSETS

                                       OF

             FIRST SOUTH UTILITY CONSTRUCTION, INC. (THE "COMPANY")

- -        LOCATION OF
         COMPANY:          Greensboro, North Carolina.

- -        SELLER:           First South Utility Construction, Inc.

- -        ACQUISITION
         STRUCTURE:        Asset purchase by Dycom Industries, Inc.

- -        DESCRIPTION OF
         THE ASSETS:       -        Substantially all of the property and assets
                                    of Seller's business of construction, design
                                    and engineering and rights of way services
                                    for government agencies and utilities at
                                    various locations in the United States.

                           -        Includes, among other things, owned and
                                    lease real property, tangible personal
                                    property, vehicles, inventories,
                                    receivables, records, goodwill, owned
                                    intellectual property, claims and rights of
                                    action, sales-related material, rights under
                                    contracts and permits and licenses.

                           -        Does not include assets used exclusively in
                                    the Pot-Fill division of the Company.

                           -        Dycom will also assume certain liabilities
                                    associated with these assets and the
                                    business.

- -        PURCHASE PRICE:   $50 million in cash and $4 million in newly-issued
                           common stock, subject to adjustment.

- -        INDEMNIFICATION:  -        Representations and warranties survive until
                                    October 1, 2004 (except tax which survives
                                    until the 30th day after the applicable
                                    statute of limitations



                                    and environmental which survives until the
                                    third anniversary of the Closing).

                           -        $4 million reciprocal indemnification cap
                                    (except in the case of tax indemnification
                                    or Excluded Liabilities).

                           -        $700,000 basket (except for tax
                                    indemnification which has no basket); once
                                    basket reached, recovery on claim from first
                                    dollar.

- -        INDEMNITY ESCROW: -        $4 million stock escrow.

                           -        $3.5 million for General Indemnification
                                    Claims.

                           -        $500,000 for Environmental Indemnification
                                    Claims.

                           -        General Indemnification Escrow
                                    "stepped-down" to $2 million in the event
                                    Dycom receives $2,750,000 from outstanding
                                    AT&T receivable.

- -        AT&T ESCROW:      -        $6,350,000 cash escrow.

                           -        Paid back by Dycom (dollar for dollar) to
                                    the Company as funds from outstanding AT&T
                                    receivable are collected by Dycom.

- -        ANTITRUST FILING: Dycom will need to make an antitrust filing under the
                           Hart-Scott-Rodino Antitrust Act of 1976, as amended,
                           in connection with this transaction.

- -        EMPLOYMENT
         AGREEMENTS:       Dycom will enter into employment agreements with
                           Susan M. Knox, Bruce A. Clemment, James E. Conrad,
                           Jr. and Elaine K. Shelton. The terms of these
                           agreements are substantially similar to the standard
                           Dycom employment agreements for executive officers at
                           the subsidiary level. The salary amounts are still
                           being negotiated.

- -        CONSULTING
         AGREEMENT:        Dycom is also considering entering into a consulting
                           agreement with Jeffrey Mott.

- -        REGISTRATION
         RIGHTS AGREEMENT: Dycom is currently negotiating a registration rights
                           agreement with the Company. This agreement will be
                           substantially similar to registration rights
                           agreements Dycom has entered into in past
                           transactions.

- -        SCHEDULED
         CLOSING DATE:     To be determined, but prior to December 5, 2003.

                                       2



- -        SIGNIFICANT
         CLOSING
         CONDITIONS:       -        Antitrust approval (HSR)

                           -        No Litigation

                           -        Accuracy of representations and warranties.

                           -        No governmental order prohibiting the
                                    transaction.

- -        TERMINATION:      -        By either party due to a Material Adverse
                                    Effect, untrue representations and
                                    warranties or unfulfilled covenants.

                           -        If the Closing has not occurred by December
                                    5, 2003.

                           -        By mutual consent.

- -        BROKER:           None.

                                       3



                                   SCHEDULE B

               SUMMARY OF MATERIAL TERMS OF UTILIQUEST ACQUISITION

                                 [see attached]



         SUMMARY OF PROPOSED TRANSACTION WITH UTILIQUEST HOLDINGS CORP.

                         
CONSIDERATION:              $120 million in cash, less (i) Closing Date Debt (includes capital
                            leases) which Dycom will repay (except for the capital leases) at
                            Closing (approximately $30 million) and (ii) UtiliQuest Holdings Corp.'s
                            ("UtiliQuest") and GFI's (the "Sellers") expenses.

WORKING CAPITAL
ADJUSTMENT:                 Adjustment based on amount of working capital at Closing (>$750,000,
                            merger consideration is increased, <$750,000, merger consideration is
                            reduced).

STRUCTURE:                  Merger of newly-formed Dycom subsidiary with and into UtiliQuest with
                            UtiliQuest surviving the merger.

DESCRIPTION OF BUSINESS:    UtiliQuest provides facility-locating services to utilities.

DEAL PROTECTIONS:           GFI, as 99% shareholder of UtiliQuest, will have approved the merger by
                            the time the merger agreement is entered into. None of GFI, UtiliQuest
                            or any of their affiliates will solicit, initiate or encourage proposals
                            from other parties to enter into any competing business combinations.

KEY CLOSING CONDITIONS:

                            -  Accuracy of representations and warranties;

                            -  HSR clearance;

                            -  GFI entering into a confidentiality/non-disclosure agreement;

                            -  Number of dissenting shares must be less than 1% of the outstanding
                                 shares of UtiliQuest;

                            -  No Governmental Order or action or litigation seeking to restrain the
                                 transaction;

                            -  Delivery of payoff certificates/letters by UtiliQuest for each
                                 repayment by UtiliQuest of a portion of the Closing Date Debt; and

                            -  No Material Adverse Effect.

SCHEDULED CLOSING DATE:     To be determined, but prior to December 5, 2003.

DROP DEAD DATE:             December 5, 2003.





                   SUMMARY OF PROPOSED TRANSACTION (CONTINUED)

                         
INDEMNIFICATION:

                            -  Reps and warranties survive until the first anniversary of the
                                 Closing.

                            -  Dycom indemnified for:

                                 -  Breach of reps and warranties: Basket $1.2 million (deductible),
                                      except for breach of tax representation which has no basket.

                                 -  Covenants not performed by Closing.

                                 -  Any action by dissenting stockholders.

                                 -  UtiliQuest expenses to the extent not paid as of Closing.

                                 -  Inaccuracy of the Per Share Merger Consideration.

                            -  Cap - $10 million.

ESCROW:                     $10 million Indemnity Escrow and $ [   ] Working Capital Adjustment
                            Escrow.

TREATMENT OF OPTIONS:       UtiliQuest optionholders will be cashed out at the Closing (included in
                            Merger Consideration).

ANTITRUST FILING:           Dycom filed an antitrust filing under the Hart-Scott-Rodino Antitrust
                            Act of 1976, as amended, in connection with this transaction on October
                            31, 2003.

TERMINATION:

                            -  By mutual consent;

                            -  By Dycom if UtiliQuest is in material breach or closing conditions
                                 are not satisfied;

                            -  By GFI if Dycom is in material breach or closing conditions are not
                                 satisfied;

                            -  By Dycom or GFI if any law or governmental order makes consummation
                                 of the Merger illegal; and

                            -  If the Closing has not occurred by the Drop-Dead Date.

ENRON CLAIM:                UtiliQuest has outstanding claims against Enron in connection with GFI's
                            initial acquisition of UtiliQuest. If these claims are not settled prior
                            to the Closing, Dycom will receive a portion of any subsequent
                            settlement.

EX-10.2

                                                                    EXHIBIT 10.2

                            2003 AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT


                  This Amended and Restated Employment Agreement is made this
25th day of November, 2003, between Steven E. Nielsen ("EMPLOYEE") and Dycom
Industries, Inc. ("EMPLOYER").

                  1. EMPLOYMENT. Subject to the terms and conditions hereof,
Employer hereby agrees to continue to employ Employee as President and Chief
Executive Officer to perform such specific duties and have such responsibilities
as Employer's Board of Directors (the "BOARD") may from time to time establish;
PROVIDED, HOWEVER, that such duties shall be consistent with the status, duties
and responsibilities typically accorded to a President and Chief Executive
Officer. Employee hereby accepts continued employment by Employer as President
and Chief Executive Officer of Employer, subject to the terms and conditions
hereof, and agrees to continue to devote his full business time and attention to
his duties hereunder, to the best of his abilities. This Employment Agreement
supersedes that certain Amended and Restated Employment between the parties
hereto made the 14th day of December, 1998 (the "PRIOR AGREEMENT").

                  2. TERM OF EMPLOYMENT. Employee's period of employment
pursuant to this Employment Agreement (the "TERM") shall commence on the date
set forth above and shall terminate upon the earlier to occur of (a) termination
pursuant to paragraph 5 hereof or (b) May 15, 2008, unless extended by the
parties hereto.

                  3. COMPENSATION, BENEFITS AND EXPENSES.

                  (a) At the commencement of Employee's term of employment
pursuant to this Employment Agreement, Employee shall be paid a base salary at
an annual rate of $575,000. Payment will be made on the regularly scheduled pay




dates of Employer, subject to all appropriate withholdings or other deductions
required by law or by Employer's established policies applicable to all
employees of Employer. The Compensation Committee of the Board shall review
Employee's salary annually, and may increase Employee's salary in its sole
discretion, but shall not reduce such salary below the rate established by this
Employment Agreement (as it may be increased from time to time hereunder)
without Employee's written consent.

                  (b) In addition to any other compensation payable to Employee
pursuant to this Employment Agreement, Employee during the term of this
Employment Agreement shall participate in an annual bonus plan or otherwise be
eligible for an annual bonus, with a target of 100% of his base salary, if
applicable performance criteria are fully achieved.

                  (c) Employee's services hereunder shall be performed at the
principal offices of Employer in Palm Beach Gardens, Florida, subject to such
reasonable travel as the performance of Employee's duties and the business of
Employer may require.

                  (d) In addition to compensation payable to Employee as
described above, Employee shall be entitled to participate in all employee
benefit plans or programs of Employer as are available to management employees
of Employer generally and such other benefit plans or programs as may be
specified by the Board, including any stock options that may be granted by the
Board. Employer also shall reimburse Employee for an annual physical examination
by a physician of Employee's choice.

                  (e) Employee shall receive a grant of 105,000 restricted
shares of Employer common stock (the "RESTRICTED STOCK") as follows: (I) 5,000
shares of Restricted Stock shall be granted upon shareholder approval of the


                                       2


Dycom Industries, Inc. 2003 Long-Term Incentive Plan (the "LTIP") and (II)
100,000 shares of Restricted Stock shall be granted on or about January 2, 2004.
The Restricted Stock shall (i) vest, on a pro-rata basis, at the rate of 25%
percent on each of December 31, 2004, December 31, 2005, December 31, 2006 and
December 31, 2007; PROVIDED, HOWEVER, that if, (A) Employee dies, (B) he becomes
disabled (as set forth in paragraph 5(b) hereof), (C) the Company terminates his
employment for any reason other than for Cause (as defined in paragraph 5(a)
hereof) or (D) he resigns his employment for Good Reason (as defined in
paragraph 5(c) hereof) on or before December 31, 2004, then 30,000 shares of
Restricted Stock shall be deemed to be immediately and fully vested on the date
of such termination or resignation and (ii) otherwise be subject to the same
terms and conditions applicable to shares of Restricted Stock granted to other
senior executives of Employer. Notwithstanding the foregoing, in the event that
Employee's employment is terminated without Cause or Employee resigns for Good
Reason during the 13-month period commencing on the date of a Change of Control
(as defined in paragraph 5(c) hereof), all outstanding and unvested shares of
Restricted Stock shall fully and immediately vest and all restrictions shall
lapse. In the event that the LTIP is not approved by shareholders, Employee
shall receive a stock option grant under Employer's 1998 Incentive Stock Option
Plan of comparable value.

                  (f) Upon shareholder approval of the LTIP, Employee shall
receive a grant of 68,000 options to purchase shares of Employer's common stock
(the "OPTIONS") with an exercise price per share equal to the closing price of a
share of Employer's common stock on the date the Options are granted. The
Options shall (i) vest, on a pro-rata basis, at the rate of twenty-five percent
on each of the first four anniversaries of the date that the Options are granted
to Employee and (ii) otherwise be subject to the same terms and conditions
applicable to stock options granted to other senior executives of Employer. In
the event that the LTIP is not approved by shareholders, the Options shall be


                                       3


granted to Employee under Employer's 1998 Incentive Stock Option Plan (the "1998
OPTION PLAN"). Notwithstanding the foregoing, all Options granted by Employer to
Employee on or after the date of this Agreement shall fully and immediately vest
to the extent not already vested in the event that Employee's employment is
terminated without Cause or Employee resigns for Good Reason during the 13-month
period commencing on the date of a Change of Control. All outstanding stock
options granted by Employer to Employee pursuant to the 1998 Option Plan shall
fully and immediately vest to the extent not already vested upon the occurrence
of a Change of Control.

                  (g) On a timely basis, Employer shall reimburse Employee for
such reasonable out-of-pocket expenses as Employee may incur for and on behalf
of the furtherance of Employer's business provided that Employee submits to
Employer satisfactory documentation or other support for such expenses in
accordance with Employer's expense reimbursement policy.

                  4. COVENANTS OF EMPLOYEE.

                  (a) During the Term and ending on the fifth anniversary
following the termination of Employee's employment with Employer for any reason,
Employee shall not divulge or appropriate to Employee's own use or to the use of
others any trade secrets or confidential information or confidential knowledge
pertaining in any respect to the business of Employer (collectively, the
"PROPRIETARY INFORMATION"). The restrictions contained herein shall not apply
to, and Proprietary Information shall not include, any information which (i) was
already available to the public at the time of disclosure, or subsequently
became available to the public, otherwise than by breach of this Employment
Agreement or (ii) is or becomes available to Employee after the termination of


                                       4


Employee's employment with Employer on a non-confidential basis from a
third-party source; PROVIDED that such third-party source is not bound by a
confidentiality agreement or any other obligation of confidentiality to
Employer. Employee expressly understands and agrees that the restrictions
contained in this paragraph 4(a) have perpetual duration.

                  (b) During Employee's employment with Employer and, in the
event of his termination of employment or resignation for any reason, for a
period ending on the first anniversary of such termination or resignation (the
"RESTRICTED PERIOD"), Employee shall not directly or indirectly engage in any
business, whether as proprietor, partner, joint venturer, employer, agent,
employee, consultant, officer or beneficial or record owner of more than one
percent of the stock of any corporation or association of any nature which is
competitive with the business conducted by Employer in the current geographical
service area of Employer or in any other geographical service area of Employer
during the term of Employee's employment.

                  (c) In addition, during the Restricted Period Employee shall
not, directly or indirectly, (i) interfere with any relationship between
Employer and any of its employees, consultants, agents or representatives, (ii)
employ or otherwise engage, or attempt to employ or otherwise engage, any
current or former employee, consultant, agent or representative of Employer in a
business competitive with Employer, (iii) solicit the business or accounts of
Employer or (iv) divert or attempt to divert from Employer any business or
interfere with any relationship between Employer and any of its clients or
customers.

                  (d) Employee agrees that the breach by Employee of any of the
foregoing covenants is likely to result in irreparable harm, directly or
indirectly, to Employer. Employee, therefore, consents and agrees that if
Employee violates any of such covenants, Employer shall be entitled, among and
in addition to any other rights or remedies available under this Employment


                                       5


Agreement or at law or in equity, to temporary and permanent injunctive relief
to prevent Employee from committing or continuing a breach of such covenants.

                  (e) It is the desire, intent and agreement of Employee and
Employer that the restrictions placed on Employee by this paragraph 4 be
enforced to the fullest extent permissible under the law and public policy
applied by any jurisdiction in which enforcement is sought. Accordingly, if and
to the extent that any portion of this paragraph 4 shall be adjudicated to be
unenforceable, such portion shall be deemed amended to delete therefrom or to
reform the portion thus adjudicated to be invalid or unenforceable, such
deletion or reformation to apply only with respect to the operation of such
portion in the particular jurisdiction in which such adjudication is made.

                  5. TERMINATION OF EMPLOYMENT.

                  (a) Employer shall have the right to terminate Employee's
employment at any time with or without Cause. For purposes of this Employment
Agreement, "CAUSE" shall mean (A) Employee's indictment for any crime, whether a
(i) felony or (ii) misdemeanor, that materially impairs Employee's ability to
perform the functions of a Chief Executive Officer, in each case involving the
purchase or sale of any security, mail or wire fraud, theft, embezzlement, moral
turpitude, or Employer property; (B) Employee's repeated willful neglect of his
duties to Employer; or (C) Employee's willful material misconduct in connection
with the performance of his duties or other willful material breach by Employee
of this Agreement. No act or omission on Employee's part shall be considered
"willful" if it is done by Employee in good faith and with reasonable belief
that Employee's conduct was in the best interests of Employer. Employer may not
terminate Employee's employment for Cause under clauses (B) and (C) above
unless: (w) Employer gives Employee at least 30 days' written notice in which to
cure such act or failure, (x) if Employee fails to timely cure such act or


                                       6


failure, Employer gives Employee at least 15 days' prior written notice of a
special Board meeting called to make a determination that Employee should be
terminated for Cause, (y) Employee and his legal counsel are given the
opportunity to address such meeting prior to a vote of the Board and (z) a
determination that Cause exists is made and approved by three-quarters of the
Board. Anything in the foregoing to the contrary notwithstanding, if Employee
has been terminated ostensibly for Cause because he has been indicted for a
crime described in clause (A) of the definition of Cause, and if he is not
convicted of, or does not plead guilty or no contest to, such crime or a lesser
offense (based on the same operative facts), such termination shall be deemed to
be a termination by Employer without Cause as of the relevant date of
termination.

                  (b) Unless otherwise terminated earlier pursuant to the terms
of this Employment Agreement, Employee's employment under this Employment
Agreement will terminate upon Employee's death and may be terminated by Employer
or Employee upon giving not less than 30 days written notice to the other party
in the event that Employee, because of physical or mental disability or
incapacity, is unable to perform Employee's duties hereunder for an aggregate of
180 working days during any 12-month period. All questions arising under this
Employment Agreement as regards Employee's disability or incapacity shall be
determined by a reputable physician mutually selected by Employer and Employee
at the time such question arises. If Employer and Employee cannot agree upon the
selection of a physician within a period of seven days after such question
arises, then the chief of staff of Good Samaritan Hospital, West Palm Beach,


                                       7


Florida shall be asked to select a physician to make such determination. The
determination of the physician selected pursuant to the above provisions of this
paragraph 5(b) as to such matters shall be conclusively binding upon the parties
hereto.

                  (c) Employee may resign from his employment hereunder at any
time with or without Good Reason, upon 30 days' prior written notice. For
purposes of this Agreement, "Good Reason" shall exist if (i) Employer fails to
pay any portion of the compensation or provide Employee any employee benefit due
Employee hereunder, (ii) Employer materially changes the duties and
responsibilities performed by Employee as Chief Executive Officer, (iii) any
successor to Employer fails to appoint Employee as President and Chief Executive
Officer of a company listed on a North American stock exchange, (iv) Employer
relocates Employee's principal place of business by more than 25 miles without
Employee's consent or (v) Employer fails to cause a successor to assume this
Employment Agreement in accordance with paragraph 7(b) hereof. In addition, any
resignation by Employee during the one-month period commencing on the first
anniversary of a Change of Control (as defined below) shall be deemed a
resignation for Good Reason for purposes of this Employment Agreement. For
purposes of this Employment Agreement, a "CHANGE OF CONTROL" shall be deemed to
have occurred with respect to Employer if any one or more of the following
events occur:

                  (i) An acquisition by any individual, entity or group (within
         the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
         Act of 1934 (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership
         (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
         of 20% or more of either (A) the then outstanding shares of Employer's
         common stock (the "OUTSTANDING COMMON STOCK") or (B) the combined
         voting power of the then outstanding voting securities of Employer
         entitled to vote generally in the election of directors (the
         "OUTSTANDING VOTING SECURITIES"); EXCLUDING, HOWEVER, the following:
         (1) any acquisition directly from Employer, other than an acquisition
         by virtue of the exercise of a conversion privilege unless the security
         being so converted was itself acquired directly from Employer; (2) any
         acquisition by Employer; (3) any acquisition by any employee benefit
         plan (or related trust) sponsored or maintained by Employer or any
         entity controlled by Employer; or (4) any acquisition pursuant to a


                                       8


         transaction which complies with clauses (A), (B) and (C) of
         subparagraph (iii) of this definition of Change of Control; or

                  (ii) A change in the composition of the Board such that the
         individuals who, as of the date hereof, constitute the Board (such
         Board shall be hereinafter referred to as the "INCUMBENT BOARD") cease
         for any reason to constitute at least a majority of the Board;
         PROVIDED, HOWEVER, for purposes of this paragraph, that any individual
         who becomes a member of the Board subsequent to the date hereof, whose
         election, or nomination for election by Employer's shareholders, was
         approved by a vote of at least a majority of those individuals who are
         members of the Board and who were also members of the Incumbent Board
         (or deemed to be such pursuant to this proviso) shall be considered as
         though such individual were a member of the Incumbent Board; but
         PROVIDED FURTHER that any such individual whose initial assumption of
         office occurs as a result of either an actual or threatened election
         contest (as such terms are used in Rule 14a-11 of Regulation 14A
         promulgated under the Exchange Act) or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board shall not be so considered as a member of the Incumbent
         Board; or

                  (iii) Consummation of a reorganization, merger or
         consolidation or sale or other disposition of all or substantially all
         of the assets of Employer ("CORPORATE TRANSACTION"); EXCLUDING,


                                       9


         HOWEVER, such a Corporate Transaction pursuant to which all of the
         following conditions are met: (A) all or substantially all of the
         individuals and entities who are the beneficial owners, respectively,
         of the Outstanding Common Stock and Outstanding Voting Securities
         immediately prior to such Corporate Transaction will beneficially own,
         directly or indirectly, more than 50% of, respectively, the outstanding
         shares of common stock, and the combined voting power of the then
         outstanding voting securities entitled to vote generally in the
         election of directors, as the case may be, of the corporation resulting
         from such Corporate Transaction (including, without limitation, a
         corporation which as a result of such transaction owns Employer or all
         or substantially all of Employer's assets either directly or through
         one or more subsidiaries) in substantially the same proportions as
         their ownership, immediately prior to such Corporate Transaction, of
         the Outstanding Common Stock and Outstanding Voting Securities, as the
         case may be, (B) no Person (other than Employer, any employee benefit
         plan (or related trust) of Employer or such corporation resulting from
         such Corporate Transaction) will beneficially own, directly or
         indirectly, 20% or more of, respectively, the outstanding shares of
         common stock of the corporation resulting from such Corporate
         Transaction or the combined voting power of the outstanding voting
         securities of such corporation entitled to vote generally in the
         election of directors except to the extent that such ownership existed
         prior to the Corporate Transaction and (C) individuals who were members
         of the Incumbent Board will constitute at least a majority of the
         members of the board of directors of the corporation resulting from
         such Corporate Transaction; or

                  (iv) The approval by the shareholders of Employer of a
         complete liquidation or dissolution of Employer.

                                       10


                  (d) In the event Employer terminates Employee's employment
(other than by reason of Cause or Employer's failure to renew this Employment
Agreement on substantially no less favorable terms to Employee as the then
effective Employment Agreement) or Employee resigns for Good Reason, Employee
shall, subject to his execution of a general release of claims against Employer
and its affiliates in a form satisfactory to Employer, receive as severance pay
a cash amount equal to three times the sum of (i) Employee's base salary then in
effect, plus (ii) the highest bonus paid to Employee during the three fiscal
years immediately preceding his termination or resignation of employment (the
"SEVERANCE PAYMENT"). The Severance Payment shall be paid to Employee as soon as
administratively practical in substantially equal payments over the 18-month
period immediately following Employee's termination or resignation of employment
(the "SEVERANCE PERIOD") in accordance with Employer's payroll practices;
PROVIDED, HOWEVER, that after a Change of Control, any portion of the Severance
Payment that remains unpaid shall be paid to Employee as a single sum payment
within five days of the Change of Control. If a termination or resignation
occurs after a Change of Control, the Severance Payment shall be paid in a
single sum payment within 5 days following such termination or resignation. In
addition, during the Severance Period, Employee and his dependents shall be
entitled to continue to participate in all employee benefit plans (other than
equity-based plans, bonus plans or disability plans) that Employer provides (and
continues to provide) generally to its employees, PROVIDED that Employee is
entitled to continue to participate in such plans under the terms thereof.

                  (e) In the event Employer fails to renew this Employment
Agreement following the expiration of the Term on substantially no less
favorable terms to Employee as the then effective Employment Agreement, Employee
shall, subject to his execution of a general release of claims against Employer


                                       11


and its affiliates in a form satisfactory to Employer, receive a cash payment
equal to one times the sum of (i) Employee's base salary then in effect, plus
(ii) the highest bonus paid to Employee during the three fiscal years
immediately preceding his termination or resignation of employment. Such amount
shall be paid to Employee as soon as administratively practical in substantially
equal payments over the 12-month period immediately following such non-renewal
in accordance with Employer's payroll practices; PROVIDED, HOWEVER, that after a
Change of Control, any portion of such amount that remains unpaid shall be paid
to Employee as a single sum payment within five days of the Change of Control.

                  (f) In the event Employee's employment is terminated by
Employer for Cause, or if Employee resigns for any reason other than Good
Reason, Employee shall receive no severance pay.

                  6. GROSS UP PAYMENTS.

                  (a) Anything in this Employment Agreement to the contrary or
any termination of this Employment Agreement notwithstanding, in the event that
it shall be determined that Employee becomes entitled to any payments or
distribution or benefits under this Employment Agreement or any benefit plan or
program of Employer which would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "CODE"), or any
interest or penalties are incurred by Employee with respect to such excise tax
(such excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "EXCISE TAX"), then Employer shall pay Employee
an additional amount or amounts (each, a "GROSS UP PAYMENT") such that the net
amount or amounts retained by Employee, after deduction of any Excise Tax on any
of the above-described payments or benefits and any federal, state and local


                                       12


income tax and Excise Tax upon payment provided for by this paragraph 6, shall
be equal to the amount of such payments or benefits prior to the imposition of
such Excise Tax.

                  (b) For purposes of determining the amount of a Gross Up
Payment, Employee shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the Gross
Up Payment is payable and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Employee's residence on the date
the Gross Up Payment is payable, net of the maximum reduction in federal income
taxes which could be obtained from any available deduction of such state and
local taxes.

                  (c) In the event that the amount of the Excise Tax is
subsequently determined to be less than the amount taken into account in
calculating a Gross Up Payment hereunder, Employee shall repay to Employer (to
the extent actually paid to Employee) at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross Up
Payment attributable to such reduction (plus the portion of the Gross Up Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the Gross Up Payment being repaid by Employee if such repayment results in a
reduction in, or a refund of, Excise Tax and/or federal, state and local income
tax) plus interest on the amount of such payment at the rate provided in Section
1274(b)(2)(B) of the Code.

                  (d) In the event that the amount of the Excise Tax is
determined to exceed the amount taken into account in calculating a Gross Up
Payment hereunder (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross Up Payment), Employer shall
pay an additional Gross Up Payment in respect of such excess (plus any interest
payable with respect to such excess) at the time that the amount of such excess
is finally determined.



                                       13



                  (e) Each Gross Up Payment shall be paid by Employer on the
date on which Employee becomes entitled to the payment or benefits giving rise
to such Gross Up Payment.

                  7. ASSIGNMENT AND SUCCESSION.

                  (a) The services to be rendered and obligations to be
performed by Employee under this Employment Agreement are special and unique,
and all such services and obligations and all of Employee's rights under this
Employment Agreement are personal to Employee and shall not be assignable or
transferable. In the event of Employee's death, however, Employee's personal
representative shall be entitled to receive any and all payments then due under
this Employment Agreement.

                  (b) This Employment Agreement shall inure to the benefit of
and be binding upon and enforceable by Employer and Employee and their
respective successors, permitted assigns, heirs, legal representatives,
executors and administrators. If Employer shall be merged into or consolidated
with another entity, the provisions of the Employment Agreement shall be binding
upon and inure to the benefit of the entity surviving such merger or resulting
from such consolidation. Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Employer, by agreement in
form and substance satisfactory to Employee, to expressly assume and agree to
perform this Employment Agreement in the same manner that Employer would be
required to perform it if no such succession had taken place. The provisions of
this paragraph 7(b) shall continue to apply to each subsequent employer of
Employee hereunder in the event of any subsequent merger, consolidation,
transfer of assets of such subsequent employer or otherwise.



                                       14


                  8. NOTICES.

                  Any notice, request or other communication to be given by any
party to this Employment Agreement shall be in writing and be sent by certified
mail, postage prepaid, addressed to the parties as follows:

                  If to Employer:

                  First Union Center
                  4440 PGA Boulevard, Suite 600
                  Palm Beach Gardens, Florida  33410
                  Attention:  General Counsel

                  If to Employee:

                  Mr. Steven E. Nielsen
                  Dycom Industries, Inc.
                  First Union Center
                  4440 PGA Boulevard, Suite 600
                  Palm Beach Gardens, Florida  33410

or to such other address as the parties respectively may designate by notice
given in like manner, and any such notice, request or other communication shall
be deemed to have given when mailed as described above.

                  9. WAIVER OF BREACH.

                  The waiver by Employer or Employee of a breach of any
provision of this Employment Agreement by either party shall not operate or be
construed as a waiver by the other party of any subsequent breach.

                  10. AMENDMENT.

                  This Employment Agreement may be amended only by written
instrument signed by all parties hereto.

                  11. FULL SETTLEMENT.

                  Employer's obligation to pay Employee the amounts required by
this Employment Agreement shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any offset,


                                       15


counterclaim, recoupment, defense or other right which Employer may have against
Employee or anyone else. All payments and benefits to which Employee is entitled
under this Employment Agreement shall be made and provided without offset,
deduction, or mitigation on account of income that Employee may receive from
employment from Employer or otherwise, except as provided in paragraphs 6(c) and
6(d) hereof, or on account of any inability of Employer to take a tax deduction
with respect to any such payments or benefits.

                  12. VOLUNTARY LIMITATION.

                  Employee may elect to limit amounts payable under this
Employment Agreement by notifying Employer, prior to Employee's receipt of such
amounts, that Employee elects to receive either none or some portion of such
amounts.

                  13. PARTIAL INVALIDITY.

                  The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.

                  14. ARBITRATION; LEGAL FEES.

                  Any controversy or claim arising out of or relating to this
Employment Agreement shall be settled by arbitration in Palm Beach County,
Florida, in accordance with the rules then in effect of the American Arbitration
Association, and judgment upon the award rendered may be entered in any court
having jurisdiction thereon. The arbitrator(s) shall have the right and ability
to award attorneys' fees to the prevailing party in any such arbitration
proceeding. If an arbitration shall be commenced to challenge, enforce or
interpret any provision contained in this Agreement, Employer agrees to


                                       16


indemnify Employee for his reasonable attorneys' fees and expenses incurred in
such arbitration; PROVIDED, HOWEVER, that any arbitration commenced by Employee
is done so in good faith.

                  15. GOVERNING LAW.

                  This Employment Agreement shall be governed by the laws of the
State of Florida without giving effect to choice of law principles.

                  16. ENTIRE AGREEMENT.

                  All prior negotiations and agreements between the parties
hereto with respect to the matters contained herein are superseded by this
Employment Agreement, including without limitation, the Prior Agreement, and
there are no representations, warranties, understandings or agreements with
respect to the subject matter hereof other than those expressly set forth
herein.

                  IN WITNESS WHEREOF, the parties have entered into this
Employment Agreement as of the date set forth above.


                                   DYCOM INDUSTRIES, INC.


                                   By:  /s/ MICHAEL K. MILLER
                                        ---------------------------------------
                                       Name:    Michael K. Miller
                                       Title:   General Counsel



                                        /s/ STEVEN E. NIELSEN
                                        ---------------------------------------
                                        STEVEN E. NIELSEN




                                       17

EX-10.3

                                                                  EXECUTION COPY

                                                                    Exhibit 10.3

================================================================================

                          AGREEMENT AND PLAN OF MERGER

                                      among

                             DYCOM INDUSTRIES, INC.,

                          UTILIQUEST ACQUISITION CORP.,

                            UTILIQUEST HOLDINGS CORP.

                                       and

                     OCM/GFI POWER OPPORTUNITIES FUND, L.P.

                          Dated as of November 17, 2003

================================================================================



                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
                                    ARTICLE I

                                   THE MERGER

SECTION 1.01. The Merger.................................................     1

SECTION 1.02. Effective Time; Closing....................................     1

SECTION 1.03. Effect of the Merger.......................................     2

SECTION 1.04. Certificate of Incorporation; By-Laws......................     2

SECTION 1.05. Directors..................................................     2

                                   ARTICLE II

               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

Section 2.01  Conversion of Securities...................................     2

Section 2.02  Merger Consideration.......................................     3

Section 2.03  Stock Options..............................................     4

Section 2.04  Exchange of Certificates...................................     4

Section 2.05  Calculation of the Merger Consideration and the Per Share
              Merger Consideration.......................................     5

Section 2.06  Merger Consideration Adjustment............................     5

Section 2.07  Stock Transfer Books.......................................     7

Section 2.08  Escrow.....................................................     8

Section 2.09  Withholding................................................     8

Section 2.10  Dissenting Shares..........................................     8


                                       i



                                                                          
                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 3.01  Organization and Qualification of the Company..............     9

Section 3.02  Subsidiaries...............................................     9

Section 3.03  Certificate of Incorporation and By-Laws...................    10

Section 3.04  Capitalization.............................................    10

Section 3.05  Authority Relative to This Agreement.......................    11

Section 3.06  No Conflict; Required Filings and Consents.................    12

Section 3.07  Licenses and Permits.......................................    12

Section 3.08  Compliance with Law and Notices of Violation...............    13

Section 3.09  Financial Information; Books and Records; Undisclosed
              Liabilities................................................    13

Section 3.10  Absence of Certain Changes or Events.......................    14

Section 3.11  Absence of Litigation......................................    14

Section 3.12  Employee Benefit Plans.....................................    14

Section 3.13  Labor and Employment Matters...............................    16

Section 3.14  Key Employees..............................................    17

Section 3.15  Real Property..............................................    17

Section 3.16  Intellectual Property......................................    18

Section 3.17  Taxes......................................................    20

Section 3.18  Environmental Matters......................................    22

Section 3.19  Accounts Receivable........................................    22

Section 3.20  Inventories................................................    22

Section 3.21  Material Contracts.........................................    23

Section 3.22  Insurance..................................................    24

Section 3.23  Related Party Transactions.................................    24



                                       ii



                                                                          
Section 3.24  Board Approval; Vote Required..............................    24

Section 3.25  Title to Assets............................................    25

Section 3.26  Customers..................................................    25

Section 3.27  Brokers....................................................    25

Section 3.28  No Other Representations or Warranties.....................    26

                                   ARTICLE IV

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Section 4.01  Corporate Organization.....................................    26

Section 4.02  Authority Relative to This Agreement.......................    26

Section 4.03  No Conflict; Required Filings and Consents.................    26

Section 4.04  No Vote Required...........................................    27

Section 4.05  Operations of Merger Sub...................................    27

Section 4.06  Financing..................................................    27

Section 4.07  Brokers....................................................    27

                                    ARTICLE V

                     CONDUCT OF BUSINESS PENDING THE MERGER

Section 5.01  Conduct of Business by the Company Pending the Merger......    28

                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS

Section 6.01  Access to Information; Confidentiality.....................    30

Section 6.02  No Solicitation of Transactions............................    31

Section 6.03  Further Action; Commercially Reasonable Efforts............    31

Section 6.04  Obligations of Merger Sub..................................    32

Section 6.05  Public Announcements.......................................    32



                                      iii



                                                                          
Section 6.06  Closing Date Debt..........................................    33

Section 6.07  UQ Acquisition Claims......................................    33

Section 6.08  Termination of Enumerated Related Party Agreements
              and Other Contracts........................................    34

Section 6.09  Settlement Agreement and Mutual Release....................    34

Section 6.10  Estoppel Certificates......................................    35

                                   ARTICLE VII

                            CONDITIONS TO THE MERGER

Section 7.01  Conditions to the Obligations of Parent and Merger Sub.....    35

Section 7.02  Conditions to the Obligations of GFI and the Company.......    36

                                  ARTICLE VIII

                        TERMINATION, AMENDMENT AND WAIVER

Section 8.01  Termination................................................    37

Section 8.02  Effect of Termination......................................    38

Section 8.03  Expenses...................................................    38

                                   ARTICLE IX

                                 INDEMNIFICATION

Section 9.01  Survival of Representations, Warranties and Covenants......    39

Section 9.02  Indemnification of Parent Indemnified Parties..............    39

Section 9.03  Indemnification by Parent..................................    40

Section 9.04  Limits on Indemnification..................................    40

Section 9.05  Indemnification Procedures.................................    41

Section 9.06  Delivery and Release of Indemnity Escrow...................    42

Section 9.07  No Right of Contribution...................................    43



                                       iv



                                                                          
Section 9.08  Exclusive Remedy...........................................    43

Section 9.09  Losses Net of Insurance, Tax Benefits......................    43

Section 9.10  No Consequential Damages...................................    44

Section 9.11  Subrogation of Rights......................................    44

Section 9.12  Tax Matters................................................    45

Section 9.13  Stockholder Representative.................................    49

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

Section 10.01 Notices....................................................    49

Section 10.02 Certain Definitions........................................    50

Section 10.03 Severability...............................................    60

Section 10.04 Entire Agreement; Assignment...............................    61

Section 10.05 Parties in Interest........................................    61

Section 10.06 Arbitration; Legal Proceedings.............................    61

Section 10.07 Specific Performance.......................................    62

Section 10.08 Amendment..................................................    62

Section 10.09 Waiver.....................................................    62

Section 10.10 Headings...................................................    63

Section 10.11 Pronouns...................................................    63

Section 10.12 Counterparts...............................................    63



EXHIBITS

Exhibit 2.05 - Calculation of Closing Date Debt

Exhibit 2.06(a) - Form of Statement of Working Capital and Working Capital
         Calculation Procedures

Exhibit 2.08 - Form of Escrow Agreement

Exhibit 6.06 - List of Capital Leases

Exhibit 6.08 - Enumerated Contracts for Termination

Exhibit 6.10 - List of Leased Properties Requiring Estoppel Certificates

                                       v



Exhibit 7.01(h) - Form of Non-Disclosure Agreement

SCHEDULES

Schedule I - List of Persons Deemed to Have Knowledge of the Company

                                       vi


                  AGREEMENT AND PLAN OF MERGER, dated as of November 17, 2003
(this "Agreement"), among Dycom Industries, Inc., a Florida corporation
("Parent"), UtiliQuest Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), UtiliQuest Holdings Corp., a Delaware
corporation (the "Company"), and OCM/GFI Power Opportunities Fund, L.P., a
Delaware limited partnership ("GFI").

                  WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), Parent and the Company will enter into a business
combination transaction pursuant to which Merger Sub will merge with and into
the Company with the Company being the surviving corporation (the "Merger");

                  WHEREAS, this Agreement and the Merger have been adopted and
approved by the respective boards of directors of Parent, Merger Sub and the
Company;

                  WHEREAS, this Agreement and the Merger have been duly adopted
and approved by the holders of a majority of the outstanding shares of common
stock of the Company entitled to vote; and

                  WHEREAS, on or prior to the Closing, Parent, the
Representative and Wilmington Trust Company, or another mutually acceptable
escrow agent (the "Escrow Agent"), shall execute an escrow agreement (the
"Escrow Agreement") substantially in the form of Exhibit 2.08 hereof;

                  NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Merger Sub, GFI and the Company hereby agree as follows:

                                    ARTICLE I

                                   THE MERGER

                  SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, at the
Effective Time (as defined in Section 1.02), Merger Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").

                  SECTION 1.02. Effective Time; Closing. As promptly as
practicable after the satisfaction or waiver of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
performed at Closing), but in no event later than two (2) Business Days after
such satisfaction or waiver, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware, in such form as is required by,
and executed in accordance with, the relevant provisions of the DGCL (the date
and time of such filing of the Certificate of Merger (or such later time as may
be agreed by each of the parties hereto and specified in the Certificate of
Merger) being the "Effective Time"). Contemporaneously with the filing of the
Certificate of Merger, a closing (the "Closing") shall be held at the offices of
Shearman & Sterling LLP, 599



Lexington Avenue, New York, New York 10022, or such other place as the parties
shall agree. The date the Closing occurs shall be referred to herein as the
"Closing Date".

                  SECTION 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the Certificate of
Merger and the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of each of the Company and
Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.

                  SECTION 1.04. Certificate of Incorporation; By-Laws.

                           (a) At the Effective Time, the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by Law and such Certificate of
Incorporation; provided, however, that, at the Effective Time, Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read as follows: "The name of the corporation is UtiliQuest Holdings Corp.".

                           (b) At the Effective Time, the By-Laws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended as provided by Law, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.

                  SECTION 1.05. Directors. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified or until their earlier death resignation
or approval.

                                   ARTICLE II

               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

                  Section 2.01 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:

                           (a) each share of common stock, par value $0.001 per
share, of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (each a "Share" and collectively, the
"Shares" and each holder of Shares, a

                                       2



"Stockholder") (other than any Shares to be canceled pursuant to Section
2.01(b)) shall be canceled and shall be converted automatically into the right
to receive the Per Share Merger Consideration (as defined below). As of the
Effective Time, all such Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except for the right to receive the Per Share Merger
Consideration payable upon surrender of the certificate (or delivery of a duly
executed affidavit of lost certificate) that formerly evidenced such Share in
the manner provided in Section 2.04;

                           (b) each share held in the treasury of the Company
immediately prior to the Effective Time shall be canceled without any conversion
thereof and no payment or distribution shall be made with respect thereto; and

                           (c) each share of common stock, par value $0.01 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.

                  Section 2.02 Merger Consideration.

                           (a) Subject to the adjustments set forth in Section
2.06, the "Merger Consideration" shall consist of (i) $120 million in cash, less
(ii) an amount equal to the Closing Date Debt (only to the extent not previously
paid or taken into account in determining Working Capital), all of which Parent
shall cause to be repaid as of the Closing, as set forth in Section 6.06 hereof,
less (iii) the Closing Expenses (only to the extent not previously paid or taken
into account in determining Working Capital) and less (iv) the Adjustment Escrow
Amount and the Indemnity Escrow Amount which amounts shall be deposited into the
Escrow Accounts by the Parent pursuant to Section 2.08 hereof, as adjusted in
accordance with the provisions of this Agreement.

                           (b) Subject to the adjustments set forth in Section
2.06 for purposes of this Agreement, the "Per Share Merger Consideration" shall
mean (i) the sum of (A) the Merger Consideration, plus (B) the Aggregate Option
Exercise Price (as defined below), divided by (ii) the Aggregate Fully-Diluted
Shares (as defined below). The "Aggregate Fully-Diluted Shares" shall be the sum
of the aggregate number of Shares outstanding immediately prior to the Effective
Time, plus the aggregate number of Shares issuable upon the exercise in full of
all Options (as defined below) outstanding immediately prior to the Effective
Time, and the "Aggregate Option Exercise Price" shall mean the sum of the cash
exercise prices payable upon exercise in full of all such outstanding Options.

                                       3



                  Section 2.03 Stock Options.

                           (a) Effective as of the Effective Time, the Company
shall take all necessary action, including obtaining the consent of the
individual holders of Options (the "Optionholders"), if necessary, and the
adoption of board of directors resolutions providing for the acceleration and
cash-out of the Options to (i) terminate the Company's Stock Option Plan, as
amended through the date of this Agreement, (ii) provide that each outstanding
option to purchase Shares granted under the Company Stock Option Plan (each, an
"Option") that is outstanding and unexercised immediately prior to the Effective
Time, whether or not vested or exercisable, shall become fully vested and
exercisable as of the Effective Time and (iii) cancel as of the Effective Time
each Option that is outstanding and unexercised at the Effective Time. Each
holder of an Option that is outstanding and unexercised at the Effective Time
and that has an exercise price per Share that is less than the Per Share Merger
Consideration shall be entitled (subject to the provisions of this Section 2.03)
to be paid by the Surviving Corporation immediately after the Effective Time, in
exchange for the cancellation of such Option, an amount in cash (subject to any
applicable withholding taxes) equal to the product of (i) the difference between
the Per Share Merger Consideration and the exercise price of such Option and
(ii) the aggregate number of Shares issuable upon exercise of such Option. Any
such payment shall be subject to all applicable federal, state and local tax
withholding requirements. At the Effective Time, Parent shall wire to an account
designated by the Company an amount sufficient to enable the Surviving
Corporation to make the payments required pursuant to this Section 2.03 and
shall cause the Surviving Corporations to make such payments.

                  Section 2.04 Exchange of Certificates.

                           (a) At the Effective Time of the Merger, each holder
of an outstanding certificate or certificates representing Shares
("Certificates"), upon surrender of the same to Parent (or delivery of a duly
executed affidavit of lost certificate), shall be entitled to receive from
Parent in exchange therefore an amount equal to the Per Share Merger
Consideration multiplied by the number of Shares represented by the Certificates
(the "Merger Payment"). Pending such surrender and exchange, a holder's
Certificates shall be deemed for all purposes (other than the exchange
contemplated by this Section 2.04) to evidence such holder's right to receive
the Merger Payment. At the Effective Time, Parent shall make payment to each
Stockholder by wire transfer to the account designated by such Stockholder not
later than three (3) Business Days prior to the Effective Time.

                           (b) Upon surrender of a Certificate, together with
such documents as may be reasonably requested by Parent, such Certificate shall
forthwith be cancelled.

                           (c) If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, providing an indemnity against any claim that may be
made against it with respect to such Certificate, the Parent will issue in

                                       4



exchange for such lost, stolen or destroyed Certificate the Merger Payment to
which the holders thereof are entitled pursuant to this Section 2.04.

                  Section 2.05 Calculation of the Merger Consideration and the
Per Share Merger Consideration. At least three (3) Business Days prior to the
Effective Time, the Company shall provide to Parent (i) a true and complete
schedule setting forth the name, address and tax identification number of each
holder of Shares or Options as well as the number and type of such securities
held by such holder as of immediately prior to the Effective Time, (ii) a true
and complete schedule of the Closing Date Debt and a calculation pursuant to
Exhibit 2.05 hereof showing how the Closing Date Debt was calculated, certified
by the Company's chief financial officer, (iii) a true and complete schedule
setting forth the exercise price of each Option, (iv) a true and complete
schedule setting forth the Company's best estimate of the Closing Expenses, (v)
a true and complete schedule setting forth the Per Share Merger Consideration
(the "Per Share Merger Consideration Certificate") to be paid to each
Stockholder and (vi) such additional information as is reasonably requested by
Parent in order to determine the Merger Consideration and the amount to be paid
to the Stockholders.

                  Section 2.06 Merger Consideration Adjustment.

                           (a) At least three (3) Business Days prior to the
Effective Time, the Company will deliver to Parent a statement indicating the
Company's good faith estimate of the consolidated balance sheet of the Company
and its Subsidiaries as of the Closing Date (the "Estimated Balance Sheet") and
a statement of Working Capital in the form of Exhibit 2.06(a), indicating the
Company's good faith estimate of Working Capital at the Closing Date based on
the Estimated Balance Sheet ("Estimated Working Capital"). The Estimated Balance
Sheet shall be prepared, and Estimated Working Capital shall be calculated, in
accordance with GAAP consistent with the Company's past practice and in
accordance with the policies and procedures set forth in Exhibit 2.06(a) hereto.
If the Estimated Working Capital exceeds Targeted Working Capital, then such
excess shall be added to the Merger Consideration (and shall be reflected in the
calculation of Per Share Merger Consideration payable at Closing) on a
dollar-for-dollar basis. If the Targeted Working Capital exceeds Estimated
Working Capital, then such excess shall be subtracted from the Merger
Consideration (and shall be reflected in the calculation of Per Share Merger
Consideration payable at Closing) on a dollar-for-dollar basis. As soon as
practicable, but in no event later than 75 days following the Closing Date, the
Surviving Corporation shall prepare a consolidated balance sheet of the Company
and its Subsidiaries as of the Closing Date (the "Closing Balance Sheet") and a
statement of Working Capital in the form of Exhibit 2.06, which shall set forth
a calculation of Working Capital at the Closing Date based on the Closing
Balance Sheet ("Closing Working Capital"). The Closing Balance Sheet shall be
prepared, and Closing Working Capital shall be calculated, in accordance with
GAAP consistent with the Company's past practice and in accordance with the
policies and procedures set forth in Exhibit 2.06(a) hereto. The Closing Balance
Sheet shall be audited by Deloitte & Touche, whose

                                       5



expenses shall be borne by the Surviving Corporation, and who shall also certify
as to the calculation of the Working Capital.

                           (b) During the preparation of the Closing Balance
Sheet and the calculation of Closing Working Capital (collectively, the "Closing
Financial Data"), and the period of any dispute within the contemplation of this
Section 2.06, the Representative shall reasonably cooperate with Parent and
Parent's authorized representatives, including by providing on a timely basis
all information in its possession necessary in preparing the Closing Financial
Data that is not in the possession of the Surviving Corporation.

                           (c) Parent shall deliver a copy of the Closing
Financial Data to the Representative promptly after it has been prepared
together with duly executed certificates from each of the Surviving Corporation
and Deloitte & Touche stating that such Closing Financial Data was prepared in
accordance with GAAP consistent with the Company's past practice and in
accordance with the policies and procedures set forth in Exhibit 2.06(a). After
receipt of the Closing Financial Data, the Representative shall have 45 days to
review the Closing Financial Data, together with the workpapers used in the
preparation thereof, and have its independent auditors, at its expense, audit
the Closing Balance Sheet in accordance with GAAP consistent with the Company's
past practice. From and after the Closing Date, Parent shall cooperate with the
Representative and its authorized representatives (including its auditors)
(including providing access to books, records, facilities and employees of the
Surviving Corporation and the workpapers of the Surviving Corporation and
Deloitte & Touche) so that the Representative and its auditors may review the
Closing Financial Data. The Representative may dispute items reflected in the
Closing Financial Data only on the basis that such amounts were not prepared in
conformity with GAAP consistent with the Company's past practice and the
accounting policies and procedures set forth on Exhibit 2.06(a) hereto or were
arrived at based on mathematical or clerical error. Unless the Representative
delivers written notice to Parent on or prior to the 45th day after the
Representative's receipt of the Closing Financial Data specifying in reasonable
detail the amount, nature and basis of all disputed items, the Representative
shall be deemed to have accepted and agreed to the calculation of Closing
Working Capital. If the Representative so notifies Parent of its objection to
the calculation of Closing Working Capital, the Representative and Parent shall,
within 30 days (or such longer period as the parties may agree) following such
notice (the "Resolution Period"), attempt to resolve their differences and any
resolution by them as to any disputed amounts shall be final, binding and
conclusive. All amounts that are not in dispute with respect to the calculation
of Closing Working Capital shall be released from the Adjustment Escrow Account
by the Escrow Agent pursuant to the Escrow Agreement, and paid to the
Stockholders and Optionholders in accordance with their Applicable Percentage.

                           (d) If, at the conclusion of the Resolution Period,
any amounts remain in dispute, then all amounts remaining in dispute shall be
submitted to KPMG (the "Neutral Auditor"). Each party agrees to execute, if
requested by the Neutral Auditor, a reasonable engagement letter, including
customary indemnities. Parent and the Company shall each pay the

                                       6



percentage of the amount of the fees and expenses of the Neutral Auditor equal
to (A) the aggregate amount of the disputed matters submitted to the Neutral
Auditor that are not settled in favor of such party (as finally determined by
the Neutral Auditor), divided by (B) the aggregate amount of all disputed
matters submitted to the Neutral Auditor; provided, that the amount (if any) the
Company would be required to pay pursuant to this sentence shall be paid to the
Neutral Auditor from the Adjustment Escrow. The Neutral Auditor shall act as an
arbitrator to determine, based solely on the provisions of this Section 2.06 and
the presentations by Parent and the Representative, and not by independent
review, only those issues still in dispute and only as to whether such amounts
were arrived at in conformity with this Section 2.06. The Neutral Auditor's
determination shall be made within 30 days of their engagement, shall be set
forth in a written statement delivered to Parent and the Representative and
shall be final, binding and conclusive. The term "Final Closing Working Capital"
shall mean the definitive Closing Working Capital agreed to (or deemed to be
agreed to) by Parent and the Representative in accordance with Section 2.06(c)
hereof or the definitive Closing Financial Data resulting from the
determinations made by the Neutral Auditor in accordance with this Section
2.06(d) (in addition to those items theretofore agreed to by Parent and the
Representative).

                           (e) (i) If the Final Closing Working Capital exceeds
the Estimated Working Capital then the Merger Consideration shall be increased
by the amount by which the Final Closing Working Capital exceeds the Estimated
Working Capital. In such case, Parent shall promptly pay the Stockholders and
the Optionholders such additional Merger Consideration (the "Additional Merger
Consideration") and each Stockholder and Optionholder shall be entitled to
receive their Applicable Percentage of the Additional Merger Consideration in
cash; provided, however, that in no event shall the amount of the Additional
Merger Consideration payable by Parent hereunder exceed the Adjustment Escrow
Amount.

                               (ii) If the Estimated Working Capital exceeds the
Final Closing Working Capital, then the Merger Consideration shall be decreased
by the amount by which the Estimated Working Capital exceeds the Final Closing
Working Capital. The amount of such decrease to the Merger Consideration made
pursuant to this Section 2.06(e)(ii) shall be released from the Adjustment
Escrow Account by the Escrow Agent, pursuant to the Escrow Agreement, and paid
to the Parent in cash; provided, however, that in no event shall such decrease
to the Merger Consideration payable hereunder exceed the Adjustment Escrow
Amount.

                           (f) Upon the completion of the Merger Consideration
adjustment process, the Escrow Agent shall release any amounts left in the
Adjustment Escrow Account to the Stockholders and Optionholders in accordance
with their Applicable Percentage.

                  Section 2.07 Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of Shares thereafter on the records of the
Company. From and after the Effective Time, the holders

                                       7



of Certificates shall cease to have any rights with respect to Shares
represented by such Certificates, except as otherwise provided in this Agreement
or by Law.

                  Section 2.08 Escrow. On or prior to the Closing, the
Representative and Parent shall enter into the Escrow Agreement. In accordance
with the terms of the Escrow Agreement, at the Effective Time Parent shall
deposit by wire transfer the Adjustment Escrow Amount and the Indemnity Escrow
Amount in two separate accounts to be managed and paid out by the Escrow Agent
in accordance with the terms of the Escrow Agreement and this Agreement.

                  Section 2.09 Withholding. Parent and the Company shall each be
entitled at any time to deduct and withhold from the Per Share Merger
Consideration otherwise payable to the Stockholders pursuant to this Agreement
and from any payments made to the Optionholders pursuant to Section 2.03 such
amounts as Parent and the Company reasonably determine they are required to
deduct and withhold and pay over to the applicable taxing authorities with
respect to the making of such payment under the Code or any applicable provision
of state or local Tax Law. To the extent that amounts are so withheld by Parent
or the Company, Parent or the Company, as applicable, shall pay over such
amounts to the applicable taxing authorities. To the extent that amounts are so
withheld by Parent or the Company and paid over to the applicable Tax Authority,
such amounts shall be treated for all purposes as having been paid to the
Stockholder or holder of Options, as applicable, in respect of whose
consideration such deduction or withholding was made.

                  Section 2.10 Dissenting Shares.

                           (a) Notwithstanding any provision of this Agreement
to the contrary and to the extent available under the DGCL, Shares that are
outstanding immediately prior to the Effective Time and that are held by
Stockholders who shall have neither voted in favor of the Merger nor consented
thereto in writing and who shall have demanded properly in writing appraisal for
such Shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into, or represent the right to
receive, the Per Share Merger Consideration. Such Stockholders shall be entitled
to receive payment of the appraised value of such Shares held by them in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by Stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such Shares under such
Section 262 shall thereupon be deemed to have been converted into, and to have
become exchangeable for, as of the Effective Time, the right to receive the Per
Share Merger Consideration, without any interest thereon, upon surrender, in the
manner provided in Section 2.04, of the certificate or certificates that
formerly evidenced such Shares.

                           (b) The Company shall give Parent timely notice of
any demands for appraisal received by the Company, withdrawals of such demands,
and any other instruments served pursuant to the DGCL and received by the
Company.

                                       8



                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  As an inducement to Parent and Merger Sub to enter into this
Agreement, the Company hereby represents and warrants to Parent and Merger Sub
that, except as set forth in the company disclosure schedule which has been
prepared by the Company and delivered by the Company to Parent and Merger Sub
prior to the execution and delivery of this Agreement (the "Company Disclosure
Schedule"):

                  Section 3.01 Organization and Qualification of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Company is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing necessary
except such jurisdictions, if any, in which the failure to be in good standing
or be so qualified or licensed would not reasonably be expected to have a
Material Adverse Effect. Section 3.01 of the Company Disclosure Schedule sets
forth a true and complete list of all jurisdictions in which the Company is duly
qualified or licensed as a foreign corporation to do business.

                  Section 3.02 Subsidiaries.

                           (a) Section 3.02(a) of the Company Disclosure
Schedule sets forth a true and complete list of all Subsidiaries, listing for
each Subsidiary its name, type of entity, the jurisdiction and date of its
incorporation or organization, its authorized capital stock, partnership capital
or equivalent, the number and type of its issued and outstanding shares of
capital stock, partnership interests or similar ownership interests and the
current ownership of the Company and each other Person of such shares,
partnership interests or similar ownership interests. The Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any Person other than the Subsidiaries.

                           (b) Each Subsidiary that is a corporation: (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, (ii) has all necessary power and authority
to own, operate or lease the properties and assets owned, operated or leased by
such Subsidiary and to carry on its business as it is currently conducted by
such Subsidiary and (iii) is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by it
or the operation of its business makes such licensing or qualification
necessary, except such jurisdictions, if any, in which the failure to be in good
standing or be so qualified or licensed would not reasonably be expected to have
a Material Adverse Effect. Each Subsidiary that is not

                                       9



a corporation: (i) is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, (ii) has all necessary power
and authority to own, operate or lease the properties and assets owned, operated
or leased by such Subsidiary and to carry on its business as it has been and is
currently conducted by such Subsidiary and (iii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary, except such jurisdictions, if any, in
which the failure to be in good standing or be so qualified or licensed would
not reasonably be expected to have a Material Adverse Effect.

                           (c) True and complete copies of the certificate of
incorporation and bylaws (or similar organizational documents), in each case as
in effect on the date hereof, of each Subsidiary have been delivered by the
Company to Parent.

                  Section 3.03 Certificate of Incorporation and By-Laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of the Company (collectively, the
"Organizational Documents"). Such Organizational Documents are in full force and
effect.

                  Section 3.04 Capitalization.

                           (a) The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock. As of the date of this
Agreement, (i) 42,710,291 Shares are issued and outstanding, (ii) there are no
Shares held in the treasury of the Company and (iii) 4,200,000 Shares are
reserved for future issuance pursuant to Options granted pursuant to the Company
Stock Option Plan. Except as set forth in Section 3.04(a) of the Company
Disclosure Schedule or as provided in the Stockholders' Agreement, the Company
Stock Option Plan and any awards agreements thereunder, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or
obligating the Company to issue or sell any shares of capital stock of, or other
equity interests in, the Company.

                           (b) As of the date hereof, there are outstanding
Options exercisable for an aggregate of 2,725,000 Shares. All Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable.

                           (c) Section 3.04(c) of the Company Disclosure
Schedule sets forth the following information with respect to each holder of
shares of capital stock of the Company outstanding as of the date of this
Agreement: (i) the name and address of such holder of record on the stock books
of the Company and (ii) the number of and type of shares held.

                                       10



                           (d) Section 3.04(d) of the Company Disclosure
Schedule sets forth the following information with respect to each Option
outstanding as of the date of this Agreement: (i) the name and address of the
optionee of record on the stock books of the Company, (ii) the particular plan
pursuant to which such Option was granted, (iii) the number of shares of Company
Common Stock subject to such Option, (iv) the exercise price of such Option and
(v) the date on which such Option was granted. The Company has made available to
Parent accurate and complete copies of the Company Stock Option Plan pursuant to
which the Company has granted such Options that are currently outstanding and
the form of the stock option agreements evidencing such Options.

                           (e) Except as set forth on Section 3.04(e) of the
Company Disclosure Schedule, or as provided in the Stockholders' Agreement or
pursuant to the Company Stock Option Plan, there are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
capital stock of the Company or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any other Person.
Except for the Stockholders' Agreement, the Company Stock Option Plan and any
awards agreements thereunder, neither the Company nor GFI is a party to any
stockholders, voting or other agreement with respect to the Shares. All
outstanding shares of capital stock of the Company and all outstanding Options
have been issued and granted in compliance in all material respects with (i) all
applicable securities laws and other applicable material Laws (as defined below)
and (ii) all material requirements set forth in applicable contracts.

                           (f) Each Share and Option has been duly authorized
and validly issued. GFI is the record owner of 42,660,291 Shares, free and clear
of any and all Encumbrances other than Encumbrances under this Agreement and
restrictions on transfer under applicable Law.

                  Section 3.05 Authority Relative to This Agreement. Each of GFI
and the Company has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by GFI and the Company and the consummation by GFI and the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action, and no other proceedings on the part of GFI or the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by the DGCL). The
requisite Stockholders have duly approved and adopted this Agreement in
accordance with the DGCL. This Agreement has been duly and validly executed and
delivered by GFI or the Company and, assuming the due authorization, execution
and delivery by Parent and Merger Sub, constitutes a legal, valid and binding
obligation of GFI and the Company, enforceable against GFI and the Company in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency, moratorium or other terms relating to or limiting
creditors rights generally or by general principles of equity, regardless of
whether such enforceability is considered in law or equity.

                                       11



                  Section 3.06 No Conflict; Required Filings and Consents.
Except as set forth on Section 3.06(a) of the Company Disclosure Schedule,

                           (a) The execution and delivery of this Agreement by
GFI and the Company do not, and the performance of this Agreement by GFI and the
Company will not, (i) conflict with or violate the Organizational Documents of
GFI and the Company, (ii) assuming that all consents, approvals, authorizations
and other actions described in Section 3.06(b) have been obtained and all
filings and obligations described in Section 3.06(b) have been made, conflict
with or violate in any material respect any United States or non-United States
statute, law, ordinance, regulation, rule, code, executive order, injunction,
judgment, decree or other order ("Law") applicable to GFI and the Company or by
which any property or asset of the Company is bound or affected, or (iii) result
in any breach of or constitute a default (or an event which, with notice or
lapse of time or both, would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation, except, in
the case of clause (ii), such conflicts or violations, and in the case of clause
(iii), such breaches, defaults rights of termination, amendment, acceleration,
or cancellation or creations of liens or encumbrances as would not reasonably be
expected to have a Material Adverse Effect, or with respect to any Material
Contracts with customers of the Company, would not result in any material breach
of, or constitute a material default under, or give rise to a right to terminate
or materially amend, such Material Contracts.

                           (b) The execution and delivery of this Agreement by
GFI and the Company do not, and the performance of this Agreement by GFI and the
Company will not, require any material consent, approval, authorization or
permit of, or filing with or notification to, any United States federal, state,
county or local or non-United States government, governmental, regulatory or
administrative authority, agency, instrumentality or commission or any court,
tribunal, or judicial or arbitral body (a "Governmental Authority"), except
pursuant to applicable requirements, if any, of (i) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act") and (ii) filing and recordation of appropriate merger
documents as required by the DGCL.

                  Section 3.07 Licenses and Permits. Except as set forth in
Section 3.07 of the Company Disclosure Schedule or as would not reasonably be
expected to have a Material Adverse Effect, (i) the Company and each of its
Subsidiaries owns, holds or possesses all licenses, consents, franchises,
permits, approvals and other orders or authorizations of, or registrations,
declarations, notices or filings with (collectively, "Permits"), any
Governmental Authority and any other Person necessary to own or lease, operate
and use its assets and properties and to carry on and conduct its business and
operations as presently conducted and (ii) neither the Company nor any of its
Subsidiaries is in violation of or default under any Permit or

                                       12



any judgment, order, writ, injunction or decree of any court or administrative
agency issued against it or any law, ordinance, rule or regulation applicable to
it.

                  Section 3.08 Compliance with Law and Notices of Violation.
Except as set forth in Section 3.08 of the Company Disclosure Schedule, since
September 1, 2001, the Company and each of its Subsidiaries has complied in all
material respects with all applicable Laws of any Governmental Authority
material to them, and no material action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice ("Action") has been
filed or commenced against it or any of them alleging any failure so to comply.
Except as set forth in Section 3.08 of the Company Disclosure Schedule, since
September 1, 2001, neither the Company nor any of its Subsidiaries has received
written notice of a material violation of any Law of any Governmental Authority
material to them and, to the Knowledge of the Company, no investigation or
review by any Governmental Authority with respect to the Company or any of its
Subsidiaries, which would be material to the Company or any of its Subsidiaries,
is pending or threatened, nor, to the Knowledge of the Company, has any
Governmental Authority indicated in writing an intention to conduct any such
investigation or review.

                  Section 3.09 Financial Information; Books and Records;
Undisclosed Liabilities.

                           (a) True and complete copies of (i) the audited
consolidated balance sheet of the Company for the stub period ended as of
December 31, 2001 and the fiscal year ended as of December 31, 2002, and the
related audited consolidated statements of income and cashflows, together with
all related notes and schedules thereto, accompanied by the reports thereon of
the Company's Accountants (collectively referred to herein as the "Financial
Statements") and (ii) the unaudited consolidated balance sheet of the Company as
of September 30, 2003, and the related consolidated statements of income and
cashflows, of the Company (collectively referred to herein as the "Interim
Financial Statements") have been delivered by the Company to Parent. The
Financial Statements and the Interim Financial Statements: (i) were prepared in
accordance with the books of account and other financial records of the Company,
(ii) present fairly in all material respects the consolidated financial
condition of the Company as of the dates thereof and the income and cashflows
for the periods involved (subject, in the case of the Interim Financial
Statements, to normal and recurring year-end adjustments which, except as set
forth in Section 3.09(a) of the Company Disclosure Schedule, are not expected to
be material), and (iii) have been prepared in accordance with U.S. GAAP applied
on a basis consistent with the past practices of the Company (except, with
respect to the Interim Financial Statements, the absence of notes and normal and
recurring year-end adjustments which, except as set forth in Section 3.09(a) of
the Company Disclosure Schedule, are not expected to be material).

                           (b) There are no material Liabilities of the Company
and its Subsidiaries other than Liabilities (i) reflected or reserved against on
the unaudited consolidated balance sheet of the Company dated September 30,
2003, (ii) set forth in Section 3.09(b) of the Company Disclosure Schedule,
(iii) incurred since September 30, 2003 in the ordinary course of business,

                                       13



consistent with past practice, or (iv) not required to be reflected in the
Financial Statements in accordance with GAAP.

                  Section 3.10 Absence of Certain Changes or Events. Since
September 30, 2003 through the date of this Agreement, except as set forth in
Section 3.10 of the Company Disclosure Schedule, or as expressly contemplated by
this Agreement (a) the Company and the Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and (b) there has not been any Material Adverse Effect and (c) the
Company has not taken any action that, if taken after the date of this
Agreement, would constitute a breach of the covenants set forth in Section
5.01(c), (e), (f), (h) and (i).

                  Section 3.11 Absence of Litigation. Except as set forth in
Section 3.11(i) of the Company Disclosure Schedule, there is no Action (i)
seeking monetary damages in excess of $150,000 or (ii) seeking equitable or
injunctive relief, in each case, pending or, to the Knowledge of the Company,
threatened against the Company or any Subsidiary, or any property or asset of
the Company or any Subsidiary, before any Governmental Authority. Except as set
forth in Section 3.11(ii) of the Company Disclosure Schedule, none of the
Company, the Subsidiaries or any property or asset of the Company or any
Subsidiary is subject to any material continuing order of, consent decree,
settlement agreement or other similar material written agreement with any
Governmental Authority. None of the items set forth on Section 3.11(ii) of the
Company Disclosure Schedule would prevent or materially delay consummation of
the Merger or otherwise prevent or materially delay GFI and the Company from
performing their respective obligations under this Agreement or would reasonably
be expected to have a Material Adverse Effect. To the Knowledge of the Company,
except as set forth in Section 3.11(iii) of the Company Disclosure Schedule and
except for claims asserted in amounts less than the deductible under the
applicable insurance policy, as of the date hereof, (i) no claim submitted by
the Company or any Subsidiary for insurance coverage with respect to any Action
listed in Section 3.11(i) of the Company Disclosure Schedule has been denied and
(ii) coverage has not been exhausted under any of the insurance policies listed
in Section 3.22 of the Company Disclosure Schedule.

                  Section 3.12 Employee Benefit Plans.

                           (a) Section 3.12(a)(i) of the Company Disclosure
Schedule lists all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements to which the Company is
a party, with respect to which the Company has any obligation or which are
maintained, contributed to or sponsored by the Company for the benefit of any
current or former employee, officer, consultant, or director of the Company
(collectively, the "Plans"). Except as set forth in Section 3.12(a)(ii) of the
Company Disclosure Schedule, each Plan is in writing and the Company has made

                                       14



available to Parent a true and complete copy of each Plan and has delivered to
Parent, with respect to each Plan, a true and complete copy of (as applicable),
(i) each trust agreement or other funding arrangement, (ii) the most recent
summary plan description and any summary of material modifications issued with
respect to such summary plan description, (iii) the three most recently filed
annual reports on IRS Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan.
Except as provided for in this Agreement, the Company does not have any express
commitment (i) to create, incur liability with respect to or cause to exist any
other material Plan, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual for an amount greater than $50,000
per year, or (iii) to modify, change or terminate any Plan in a manner that
would materially increase the benefits provided under such Plan or the costs of
maintaining such Plan, other than with respect to a modification, change or
termination required by applicable Law.

                           (b) Except as disclosed in Section 3.12(b) of the
Company Disclosure Schedule, the Company has not at any time maintained,
sponsored or contributed to a plan that is (i) a multiemployer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA) or (ii) a single employer
pension plan (within the meaning of Section 4001(a)(15) of ERISA) that is
subject to Title IV of ERISA or Section 412 of the Code. No liability under
Title IV of ERISA has been incurred by the Company or any of its Subsidiaries
that has not been satisfied in full, and no condition exists that presents a
material risk to the Company or any of its Subsidiaries incurring any liability
under such Title.

                           (c) Except as disclosed in Section 3.12(c) of the
Company Disclosure Schedule, none of the Plans (i) provides for the payment of
separation, severance, termination or similar type benefits to any person or
(ii) obligates the Company to pay separation, severance, termination or similar
type benefits solely or partially as a result of any transaction contemplated by
this Agreement or as a result of a "change in control" within the meaning of
such term under Section 280G of the Code. None of the Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company. None of the Plans
provides benefits to persons other than residents of the United States.

                           (d) None of the Company, its parent, any of its
Subsidiaries, any of the Plans, any trust created thereunder, nor to the
Knowledge of the Company, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with which
the Company or any of its Subsidiaries would reasonably be subject to any
material liability for either a civil penalty assessed pursuant to Section 409
or 502(i) of ERISA or a tax imposed pursuant to Section 4975, 4976 or 4980B of
the Code.

                           (e) Each Plan has been operated in all material
respects in accordance with its terms and the requirements of all applicable
Laws including, without limitation, ERISA and the Code. No Action is pending or,
to the Knowledge of the Company, threatened with

                                       15



respect to any Plan (other than claims for benefits in the ordinary course) and,
to the Knowledge of the Company, no fact or event exists that would reasonably
give rise to any such Action.

                           (f) All contributions, premiums or payments required
to be made with respect to any Plan have in all material respects been made (or
will be made) on or before their due dates. All such contributions have been
fully deducted for income tax purposes and no such deduction has been challenged
or disallowed by any Governmental Authority and no fact or event exists which
would reasonably be expected to give rise to any such challenge or disallowance.

                           (g) Each Plan that is intended to be qualified under
Section 401(a) of the Code or Section 401(k) of the Code has received a
favorable determination letter from the IRS that considers Plan provisions
required by the "GUST" Amendments, indicating that the Plan is so qualified and
that the associated trust established in connection with such Plan is exempt
from federal income taxation under Section 501(a) of the Code and no fact or
event has occurred since the date of such determination letter or letters from
the IRS that would reasonably be expected to have an adverse effect on the
qualified status of any such Plan or the exempt status of any such trust.

                           (h) Section 3.12(h) of the Company Disclosure
Schedule set forth all current consultants, officers and employees of the
Company and each Subsidiary who have entered into a written obligation with the
Company or a Subsidiary to maintain in confidence all confidential or
proprietary information (as defined in such agreements) acquired by them in the
course of their employment and to assign to the Company or a Subsidiary all
inventions made by them within the scope of their employment during such
employment.

                           (i) The Company and its Subsidiaries are in
compliance with the requirements of the Workers Adjustment and Retraining
Notification Act and any similar state or local law ("WARN") and, to the
Knowledge of the Company, have no liabilities pursuant to WARN.

                  Section 3.13 Labor and Employment Matters.

                           (a) Except as set forth in Section 3.13(a) of the
Company Disclosure Schedule, (i) there are no material controversies pending or,
to the Knowledge of the Company, threatened in writing between the Company or
the Subsidiaries, on the one hand, and any of their respective employees or
consultants, on the other hand, and the Company and the Subsidiaries have not
experienced any controversy, strike, slowdown or work stoppage within the past
three years, (ii) neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any of its Subsidiaries, nor, to the
Knowledge of the Company, are there any activities or proceedings of any labor
union to organize any such employees (iii) there are no unfair labor practice
complaints pending against the Company or any of its Subsidiaries before the
National Labor

                                       16



Relations Board or any other Governmental Authority or any current portion under
representations and questions involving employees of the Company or any of its
Subsidiaries.

                           (b) Except as set forth in Section 3.13(b) of the
Company Disclosure Schedule (i) the Company and each Subsidiary is in compliance
in all material respects with all applicable Laws relating to the employment of
labor, including those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by the appropriate
Governmental Authority and have withheld and paid in all material respects to
the appropriate Governmental Authority or are holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Company and each Subsidiary and are not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing,
(ii) the Company and each Subsidiary has paid in full to all employees or
adequately accrued for in accordance with GAAP consistently applied all wages,
salaries, commissions, bonuses, benefits and other compensation due to or on
behalf of such employees and there is no claim with respect to payment of wages,
salary or overtime pay that has been asserted or is now pending or, to the
Knowledge of the Company, threatened before any Governmental Authority with
respect to any persons currently or formerly employed by the Company and each
Subsidiary, (iii) neither the Company nor any Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation by, any Governmental
Authority relating to employees or employment practices, (iv) there is no charge
or proceeding with respect to a violation of any occupational safety or health
standards that has been asserted or is now pending or, to the Knowledge of the
Company, threatened in writing with respect to the Company or any Subsidiary and
(v) there is no charge of discrimination in employment or employment practices
respecting any current or former employee of the Company or any Subsidiary, for
any reason, including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending or, to the
Knowledge of the Company, threatened before the United States Equal Employment
Opportunity Commission, or any other Governmental Authority in any jurisdiction
in which the Company or any Subsidiary has employed or employ any person.

                  Section 3.14 Key Employees. Section 3.14 of the Company
Disclosure Schedule lists as of October 31, 2003, the name, title, place of
employment, the current annual salary rates, bonuses earned, deferred
compensation (other than with respect to deferred salary or bonus or with
respect to Plans intended to be qualified under Section 401(a) of the Code),
accrued vacation, and the date of employment of each current salaried employee
of the Company and each Subsidiary whose salary in fiscal year 2003 is expected
to exceed $125,000.

                  Section 3.15 Real Property.

                           (a) Section 3.15(a) of the Company Disclosure
Schedule lists each parcel of real property currently owned by the Company or
any Subsidiary. Each parcel of real property owned by the Company or any
Subsidiary (i) is owned free and clear of all mortgages, pledges, liens,
security interests, conditional and installment sale agreements, encumbrances,

                                       17



charges or other claims of third parties of any kind, including, without
limitation, any easement, right of way or other encumbrance to title, or any
option, right of first refusal, or right of first offer (collectively, "Liens"),
other than (A) Liens for current taxes and assessments not yet past due, (B)
inchoate mechanics' and materialmen's Liens for construction in progress, (C)
workmen's, repairmen's, warehousemen's and carriers' Liens arising in the
ordinary course of business of the Company or such Subsidiary consistent with
past practice, and (D) all matters of record, Liens and other imperfections of
title and encumbrances that would not reasonably be expected to have a Material
Adverse Effect (collectively, "Permitted Liens") and (ii) is neither subject to
any governmental decree or order to be sold nor is being condemned, expropriated
or otherwise taken by any public authority with or without payment of
compensation therefore, nor, to the Knowledge of the Company, has any such
condemnation, expropriation or taking been proposed.

                           (b) Section 3.15(b) of the Company Disclosure
Schedule sets forth a list of each parcel of real property currently leased or
subleased, with a remaining term of at least 24 months or a monthly rental rate
greater than $5,000, by the Company or any Subsidiary, with the name of the
lessor and the date of the lease, sublease, assignment of the lease, any
guaranty given by the Company or any Subsidiary in connection therewith and each
amendment to any of the foregoing (collectively, the "Lease Documents"). True,
correct and complete copies of all Lease Documents have been delivered or made
available to Parent. All such current leases and subleases are in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default (or event which, with notice or lapse of time, or both, would
constitute a default) thereunder by the Company or any Subsidiary or, to the
Knowledge of the Company, by the other party to such lease or sublease, or
person in the chain of title to such leased premises, except as would not
reasonably be expected to have a Material Adverse Effect.

                           (c) To the Knowledge of the Company, (i) the use and
occupancy by the Company or any Subsidiary (and the conduct of its business
thereon) of any of its owned or leased real property does not violate any
applicable material contractual or legal restrictions affecting such real
property and (ii) the real property (including any improvements thereon) owned
or leased by the Company or any Subsidiary is in reasonably good operating
condition and repair.

                  Section 3.16 Intellectual Property.

                           (a) Section 3.16(a) of the Company Disclosure
Schedule sets forth a true and complete list of (other than off-the-shelf
commercial software) all Company IP Agreements.

                           (b) Except to the extent set forth in Section 3.16(b)
of the Company Disclosure Schedule, to the Knowledge of the Company, the
operation of the business as currently conducted by the Company or any
Subsidiary and the use of the Owned Intellectual Property and Licensed
Intellectual Property in connection therewith do not conflict with,

                                       18



infringe, misappropriate or otherwise in any material respect violate the
Intellectual Property or other proprietary rights, including rights of privacy,
publicity and endorsement, of any third party.

                           (c) Except as disclosed in Section 3.16(c) of the
Company Disclosure Schedule, the Company or one of its Subsidiaries is the
exclusive owner of the Owned Intellectual Property free and clear of all liens,
claims or encumbrances of others. The Company or one of its Subsidiaries has a
valid right to use the Owned Intellectual Property and, to the Knowledge of the
Company, has a valid right and license to use the Licensed Intellectual Property
in the ordinary course of its business as presently conducted.

                           (d) Except as disclosed in Section 3.16(d) of the
Company Disclosure Schedule and with respect to any off-the-shelf commercial
software to which the Company or one of its Subsidiaries has a license, no Owned
Intellectual Property, to the Knowledge of the Company, or Licensed Intellectual
Property is subject to any outstanding decree, order, injunction, judgment or
ruling restricting the use of such Intellectual Property by the Company or its
Subsidiaries.

                           (e) Except for off-the-shelf commercial software, (i)
the Owned Intellectual Property and the Licensed Intellectual Property include
all of the Intellectual Property used in the ordinary day-to-day conduct of the
Company's business, and (ii) there are no other items of Intellectual Property
of the Company that are material to the ordinary day-to-day conduct of such
businesses. The Owned Intellectual Property, and to the Knowledge of the
Company, the Licensed Intellectual Property, have not been adjudged invalid or
unenforceable in whole or part by a court of competent jurisdiction.

                           (f) Except as disclosed on Section 3.16(f) of the
Company Disclosure Schedule, (i) no Actions or claims have been asserted or are
pending or, to the Knowledge of the Company, threatened against the Company or
one of its Subsidiaries (A) based upon or challenging or seeking to deny or
restrict the use by the Company or one of its Subsidiaries of any of the Owned
Intellectual Property other than any use restrictions set forth in the Company
IP Agreements, or (B) alleging that the Licensed Intellectual Property is being
licensed or sublicensed, by the Company or any Subsidiary, in conflict with the
terms of any license or other agreement.

                           (g) To the Knowledge of the Company, no person is
engaging in any activity that infringes the Owned Intellectual Property or
Licensed Intellectual Property. Except as set forth in Section 3.16(g) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary has granted
any license or other right to any third party with respect to the Owned
Intellectual Property or Licensed Intellectual Property. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the material Owned Intellectual Property or of any
material Licensed Intellectual Property.

                                       19



                           (h) The Company and each Subsidiary has taken
reasonable steps in accordance with normal industry practice to maintain the
confidentiality of the trade secrets and other confidential Intellectual
Property used in connection with their respective businesses. Except as
disclosed on Section 3.16(h) of the Company Disclosure Schedule, to the
Knowledge of the Company, (i) there has been no misappropriation of any material
trade secrets or other material confidential Intellectual Property used in
connection with the business of the Company or one of its Subsidiaries by any
person, (ii) no employee, independent contractor or agent of the Company or one
of its Subsidiaries has misappropriated any trade secrets of any other person in
the course of their performance as an employee, independent contractor or agent
of their respective businesses and (iii) no employee, independent contractor or
agent of the Company or one of its Subsidiaries is in default or breach of any
term of any employment agreement, nondisclosure agreement, assignment of
invention agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of Intellectual Property.

                           (i) Except with respect to the Company IP Agreements
set forth on Section 3.16(a) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is obligated to pay any royalty payments or
licensing fees to a third party (except with respect to off-the-shelf commercial
software) or owes any past due royalty payments or licensing fees to a third
party.

                  Section 3.17 Taxes.

                           (a) Except as set forth in Section 3.17(a) of the
Company Disclosure Schedule, the Company and the Subsidiaries (i) have timely
filed or caused to be timely filed all material Tax Returns required to be filed
as of the date hereof, and all such filed Tax Returns are true, correct and
complete in all material respects; (ii) except for Taxes being contested in good
faith in appropriate proceedings and for which adequate reserves have been
maintained in accordance with U.S. GAAP, have paid all material amounts of Taxes
required to be paid (whether or not shown on such Tax Returns); and (iii) have
not waived any statute of limitations with respect to any Tax or agreed to an
extension of time with respect to a Tax assessment or deficiency. Except as set
forth in Section 3.17(a) of the Company Disclosure Schedule, all material
amounts of Taxes required to have been withheld by or with respect to the
Company and the Subsidiaries have been withheld and remitted to the applicable
Tax Authority.

                           (b) Except as set forth in Section 3.17(b) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary has (i) at
any time, been a member of any affiliated, consolidated, combined or unitary
group of corporations other than the affiliated group (within the meaning of
Section 1504(a)(1) of the Code) for which the Company files a consolidated
return as the common parent or (ii) any liability for Taxes of any other Person
(A) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign Tax Law), (B) as a transferee or successor, (C) by
contract or (D) otherwise. Neither the Company nor any Subsidiary is subject to
any agreement for the sharing of Taxes or is obligated

                                       20



to indemnify any other Person for Taxes pursuant to any agreement, which
agreement will remain in effect after the Closing Date.

                           (c) Except as set forth in Section 3.17(c) of the
Company Disclosure Schedule, as of the date hereof, there are no pending or, to
the Knowledge of the Company, threatened in writing, audits, examinations,
investigations or other proceedings in respect of any Tax matter of the Company
or any Subsidiary. Except as set forth in Section 3.17(c) of the Company
Disclosure Schedule, no deficiency for any Tax has been asserted or assessed by
any taxing authority against the Company or any Subsidiary, which deficiency has
not been satisfied by payment or been withdrawn. No claim in writing has been
made by a taxing authority in a jurisdiction where the Company or any Subsidiary
does not file Tax Returns that the Company or such Subsidiary is or may be
subject to taxation by such jurisdiction. No power of attorney has been granted
with respect to any matter relating to Taxes that could affect the Company or
any Subsidiary in any taxable period ending after the Closing Date.

                           (d) Except as set forth in Section 3.17(d) of the
Company Disclosure Schedule, there are no Tax liens on any assets of the Company
or any Subsidiary (other than any liens for Taxes not yet due and payable or for
which adequate reserves have been maintained in accordance with U.S. GAAP).
Neither the Company nor any Subsidiary has been required to recognize income as
a result of any adjustment following a change in accounting method initiated by
the Company or such Subsidiary, and no taxing authority has in writing initiated
or proposed any such adjustment or change in accounting method. Neither the
Company nor any Subsidiary is required to include in a taxable period ending
after the Closing Date any amount of taxable income attributable to income that
economically accrued in a prior taxable period but was not recognized for Tax
purposes in any prior taxable period, including as a result of the installment
method of accounting, the long-term contract method of accounting, the cash
method of accounting or Section 481 of the Code (or any comparable provision of
state or local Tax Law) or for any other reason. The federal income Tax Returns
of the Company and the Subsidiaries have disclosed any Tax positions of the
Company and the Subsidiaries that, if not disclosed, could give rise to
penalties under Section 6662 of the Code.

                           (e) At all times prior to its acquisition by the
Company, UtiliQuest LLC was treated as a partnership for federal, state and
local Tax purposes, and at all times since its acquisition by the Company,
UtiliQuest LLC has been treated as a disregarded entity for federal, state and
local Tax purposes.

                           (f) Section 3.17(f) of the Company Disclosure
Schedule indicates for which jurisdictions Tax Returns that include the Company
and any Subsidiary have been filed on a consolidated, combined, affiliated or
unitary group basis and indicates the most recent income, franchise or similar
Tax Return for each relevant jurisdiction for which an audit has been completed.

                                       21



                  Section 3.18 Environmental Matters.

                           (a) Except as described in Section 3.18(a) of the
Company Disclosure Schedule or as would not reasonably be expected to have a
Material Adverse Effect, (i) the Company and the Subsidiaries have not violated
or are not in violation of any Environmental Law, (ii) none of the properties
currently or, to the Knowledge of the Company, formerly owned, leased or
operated by the Company and the Subsidiaries (including, without limitation,
soils and surface and ground waters) are contaminated with any Hazardous
Substance in a manner requiring investigation, remediation or other action
pursuant to Environmental Law, (iii) there are no pending, or to the Knowledge
of the Company, threatened claims against the Company for actual, potential or
alleged liability for any off-site contamination by Hazardous Substances, (iv)
to the Knowledge of the Company, the Company and the Subsidiaries are not
actually, potentially or allegedly liable under any Environmental Law
(including, without limitation, pending or threatened liens), (v) the Company
has all permits, licenses and other authorizations required under any
Environmental Law ("Environmental Permits"), (vi) the Company and the
Subsidiaries are and have always been, in compliance with their Environmental
Permits and (vii) to the Knowledge of the Company, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby will
require any investigation, remediation or other action with respect to Hazardous
Substances or any notice to or consent of Governmental Authorities or third
parties pursuant to any applicable Environmental Law or Environmental Permit.

                           (b) The Company has provided or made available to
Parent copies of any Phase I environmental site assessments, environmental
compliance audits, and other similar reports in the Company's possession
addressing the Company's or any of its Subsidiaries' business or operations, or
any Owned Real Property or Leased Real Property, that have been conducted in the
past two years.

                  Section 3.19 Accounts Receivable. Schedule 3.19 is an aged
list of the Accounts Receivable as of the date hereof showing separately those
Accounts Receivable that as of October 31, 2003 have been outstanding for (a) 30
days or less, (b) 31 to 60 days, (c) 61 to 90 days and more than 90 days. All
Accounts Receivable (a) are valid and genuine and (b) arose out of bona fide
sales and deliveries of goods, performance of services or other transactions in
the ordinary course of business consistent with past practices.

                  Section 3.20 Inventories. All Inventory used in the business
(a) was acquired and has been maintained in accordance with regular business
practices of the Company, (b) consists of items of a quality and quantity
useable or saleable in the ordinary course of business consistent with past
practice and (c) is valued at the lower of cost or market value taking into
account the Company's allowance for excess and obsolete inventory. The Inventory
is in good and merchantable condition in all material respects, is suitable and
useable for the purposes for which it is intended and is in a condition such
that it can be sold in the ordinary course of business consistent with past
practice.

                                       22



                  Section 3.21 Material Contracts.

                           (a) Subsections (i) through (vii) of Section 3.21 of
the Company Disclosure Schedule contain a list of the contracts and agreements
to which the Company or any Subsidiary is a party that meet the criteria
enumerated below (such contracts, agreements and arrangements (whether written
or oral) as are required to be set forth in Section 3.21(a) of the Company
Disclosure Schedule being the "Material Contracts"):

                                    (i) each contract and agreement which
         provides for annual aggregate payments to or by the Company or its
         Subsidiaries of more than $1,000,000;

                                    (ii) all management contracts (excluding
         contracts for employment) and contracts with consultants including any
         contracts involving the payment of royalties or other amounts
         calculated based upon the revenues or income of the Company or the
         Subsidiaries to which the Company or the Subsidiaries are a party that
         are not terminable by the Company or the Subsidiaries on thirty (30)
         days' or less notice and which involve an annual payment of more than
         $125,000;

                                    (iii) all contracts and agreements
         evidencing Indebtedness except for capital leases for office equipment
         in an amount less than $20,000;

                                    (iv) all material contracts and agreements
         with any Governmental Authority to which the Company or the
         Subsidiaries is a party;

                                    (v) all contracts and agreements that limit,
         or purport to limit, the ability of the Company or the Subsidiaries to
         compete in any line of business or with any Person or in any geographic
         area or during any period of time;

                                    (vi) all contracts or arrangements that
         result in any Person holding a power of attorney from the Company that
         relates to the Company or its business; and

                                    (vii) the Lease Documents.

                           (b) (i) Each Material Contract is a legal, valid and
binding agreement of the Company and to the Knowledge of the Company, the other
parties thereto, (ii) to the Knowledge of the Company, no Material Contract has
been canceled by any other party thereto, (iii) neither the Company nor its
Subsidiaries are in material default under any Material Contract to which they
are a party, (iv) to the Knowledge of the Company, no other party is in material

                                       23



breach or violation of, or material default under, any Material Contract, (v)
neither the Company nor its Subsidiaries are in receipt of any written claim of
a material default under any such Material Contract and (vi) neither the
execution of this Agreement nor the consummation of any transaction contemplated
by this Agreement shall constitute a material default or give rise to
cancellation rights under any Material Contract. The Company has furnished or
made available to Parent true and complete copies of all written Material
Contracts, including any amendments thereto.

                  Section 3.22 Insurance.

                           (a) Section 3.22(a) of the Company Disclosure
Schedule sets forth, with respect to each material insurance policy under which
the Company or any Subsidiary is an insured, a named insured or otherwise the
principal beneficiary of coverage, (i) the names of the insurer, the principal
insured and each named insured, (ii) the policy number, (iii) the period, scope
and amount of coverage and (iv) the premium charged.

                           (b) With respect to each current material insurance
policy: (i) such policy is in full force and effect, (ii) neither the Company
nor any Subsidiary is in material breach or default (including any such breach
or default with respect to the payment of premiums or the giving of notice) and
(iii) no event has occurred which, with notice or the lapse of time, would
constitute such a material breach or default, or permit termination or
modification, under the policy.

                  Section 3.23 Related Party Transactions. Except for the
Stockholders' Agreement or as set forth in Section 3.23 of the Company
Disclosure Schedule, there are no contracts, commitments, agreements,
arrangements or other transactions (other than employment agreements, consulting
agreements, option agreements, confidentiality agreements, noncompetition
agreements, severance agreements, release agreements, or any Plan set forth on
Section 3.12(a) of the Company Disclosure Schedule) between the Company and any
Subsidiary, on the one hand, and any (i) officer, director, employee or
consultant of the Company and any Subsidiary, (ii) holder of Shares or Options
or (iii) an Affiliate of any such officer, director, employee, consultant or
security holder, on the other hand (any of the foregoing, a "Related Party
Transaction"). Neither the Company nor any Subsidiary has made any loans to any
of its respective officers, directors, employees or consultants except for
advances of expenses in the ordinary course of business.

                  Section 3.24 Board Approval; Vote Required.

                           (a) The Company board of directors, by resolutions
duly adopted and not subsequently rescinded or modified, has duly (i) determined
that this Agreement and the Merger are in the best interests of the Company and
its Stockholders, (ii) approved this Agreement and the Merger and declared their
advisability, (iii) recommended that the stockholders of the Company approve and
adopt this Agreement and approve the Merger and (iv) directed that this

                                       24



Agreement and the transactions contemplated hereby be submitted for
consideration by the Company's stockholders entitled to vote thereon.

                           (b) The only vote of the holders of any class or
series of capital stock of the Company necessary to approve this Agreement, the
Merger and the other transactions contemplated hereby is the affirmative vote of
the holders of at least a majority of the outstanding shares of Company Common
Stock. The Stockholders have approved and adopted the Merger, this Agreement,
and the other transactions contemplated hereby.

                  Section 3.25 Title to Assets.

                           (a) Except as set forth in Section 3.25 of the
Company Disclosure Schedule, each of the Company and its Subsidiaries has good
and marketable title to, or a valid leasehold interest in, the material
properties and assets used by it, or shown on the balance sheet of the Company
as of September 30, 2003 or acquired after the date thereof, free and clear of
all Encumbrances other than Permitted Liens and Encumbrances securing
Indebtedness that will not be prepaid as of the Closing Date, except for
properties and assets disposed of in the ordinary course of business since the
date of the balance sheet. Except as set forth in Section 3.25 of the Company
Disclosure Schedule and except as entered into in the ordinary course of
business, there are no outstanding options, warrants, commitments, agreements or
any other rights of any character, entitling any person other than as
contemplated in this Agreement to acquire any material interest in all, or any
substantial part of, such assets.

                           (b) The buildings, machinery, equipment and other
tangible assets constituting the assets that the Company and its Subsidiaries
own, lease and use in the conduct of their business, are, taken as a whole, in
good operating condition and repair (subject to normal wear and tear) and are
adequate for the uses to which they are being put. These assets constitute all
the material assets of the business and material rights necessary to operate the
business of the Company and its Subsidiaries as currently conducted.

                  Section 3.26 Customers. Section 3.26 of the Company Disclosure
Schedule sets forth a complete and accurate list of the top fourteen customers
of the Company and its Subsidiaries by revenue on a consolidated basis during
fiscal 2002 and for the nine months ended September 30, 2003 showing approximate
total revenue received in each such period from each such customer. Except as
set forth in Section 3.26 of the Company Disclosure Schedule, as of the date
hereof, to the Knowledge of the Company, none of such customers within the last
twelve months has cancelled, terminated or threatened in writing to cancel any
Material Contract.

                  Section 3.27 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company.

                                       25



                  Section 3.28 No Other Representations or Warranties. EXCEPT AS
SPECIFICALLY SET FORTH IN THIS ARTICLE III, NEITHER THE COMPANY NOR ANY OF ITS
STOCKHOLDERS, OFFICERS OR DIRECTORS IS MAKING, AND EACH OF THEM HEREBY EXPRESSLY
DISCLAIMS, ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED.

                                   ARTICLE IV

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

                  As an inducement to GFI and the Company to enter into this
Agreement, Parent and Merger Sub hereby, jointly and severally, represent and
warrant to GFI and the Company that:

                  Section 4.01 Corporate Organization. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted.

                  Section 4.02 Authority Relative to This Agreement. Each of
Parent and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement and the Escrow Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Escrow
Agreement, as applicable, by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or the Escrow Agreement or to consummate the
transactions contemplated hereby or thereby (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by the DGCL). This Agreement and the Escrow Agreement have been duly and validly
executed and delivered by Parent and Merger Sub, and, assuming due
authorization, execution and delivery by the other parties thereto, constitute
legal, valid and binding obligations of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms.

                  Section 4.03 No Conflict; Required Filings and Consents.

                           (a) The execution and delivery of this Agreement and
the Escrow Agreement by Parent and Merger Sub do not, and the performance of
this Agreement and the Escrow Agreement, by Parent and Merger Sub will not, (i)
conflict with or violate the Organizational Documents of either Parent or Merger
Sub, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 4.03(b) have been obtained and

                                       26



all filings and obligations described in Section 4.03(b) have been made,
conflict with or violate any law, applicable to Parent or Merger Sub or by which
any property or asset of either of them is bound or affected, or (iii) result in
any breach of, or constitute a default (or an event which, with notice or lapse
of time or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Parent or
Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Merger Sub is a party or by which Parent or Merger Sub or any
property or asset of either of them is bound or affected, except, with respect
to clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or materially delay
consummation of the transactions contemplated by this Agreement or the Escrow
Agreement or otherwise prevent or materially delay Parent or Merger Sub from
performing their obligations under this Agreement or the Escrow Agreement.

                           (b) The execution and delivery of this Agreement and
the Escrow Agreement by Parent and Merger Sub do not, and the performance of
this Agreement and the Escrow Agreement by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for applicable requirements,
if any, of (i) the HSR Act and (ii) filing and recordation of the appropriate
merger documents as required by the DGCL.

                  Section 4.04 No Vote Required. No vote of the stockholders of
Parent is required by Law, Parent's Organizational Documents or otherwise in
order for Parent and Merger Sub to consummate the transactions contemplated
hereby.

                  Section 4.05 Operations of Merger Sub. Merger Sub is a direct,
wholly owned subsidiary of Parent, was formed solely for the purpose of engaging
in the transactions contemplated by this Agreement, has engaged in no other
business activities and has conducted its operations only as contemplated by
this Agreement.

                  Section 4.06 Financing. As of the date hereof, Parent has
funds, or has access to committed bank funds, in amounts sufficient to pay the
Merger Consideration, and shall have at Closing, sufficient funds to cause the
Surviving Corporation to pay the Merger Consideration in connection with the
Merger Agreement and consummate the Merger.

                  Section 4.07 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Parent or Merger Sub.

                                       27



                                    ARTICLE V

                     CONDUCT OF BUSINESS PENDING THE MERGER

                  Section 5.01 Conduct of Business by the Company Pending the
Merger. The Company agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as expressly contemplated by any other provision of this Agreement,
unless Parent shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed):

                                    (i) the business of the Company shall be
         conducted only in, and the Company shall not take any action except in,
         the ordinary course of business and in a manner consistent with past
         practice; and

                                    (ii) the Company shall use its commercially
         reasonable efforts to preserve substantially intact the business
         organization of the Company and each Subsidiary and to keep available
         the current employees of the Company (taken as a whole) consistent with
         past practice, and to preserve the current relationships of the Company
         and each Subsidiary with customers, suppliers and other persons with
         which the Company and each Subsidiary has significant business
         relations consistent with past practice.

                  By way of amplification and not limitation, except as
expressly contemplated by any other provision of this Agreement or as set forth
in Section 5.01 of the Company Disclosure Schedule, the Company or any
Subsidiary shall not, between the date of this Agreement and the Effective Time,
directly or indirectly, do, any of the following without the prior written
consent of Parent (which shall not be unreasonably withheld or delayed):

                           (a) amend or otherwise change its Organizational
Documents;

                           (b) issue, sell, pledge, dispose of, grant or
encumber, or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of, (i) any shares of any class of capital stock of the Company, or
any options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company, except
for the issuance of options pursuant to the Company's Stock Option Plan and
shares issuable pursuant to the exercise of Options or (ii) except in the
ordinary course of business and in a manner consistent with past practice, sell
any material assets or property of the Company or any Subsidiary;

                           (c) authorize, declare, set aside, make or pay any
dividend or other distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock, except for dividends paid to the
Company, or enter into any Agreement with respect to the voting of its Capital
Stock;

                                       28



                           (d) reclassify, combine, split or subdivide, any of
its capital stock;

                           (e) (i) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or any
division thereof or, other than in the ordinary course of business, any material
amount of assets, (ii) other than in the ordinary course of business, incur any
Indebtedness or issue any debt securities or assume, guarantee or endorse, or,
otherwise become responsible for, the obligations of any Person (other than the
Company or any Subsidiary), or make any loans or advances or grant any security
interest in any of its assets except for any incurrence of Indebtedness under
the CapitalSource Credit Agreement, (iii) make or authorize any capital
expenditures other than capital expenditures reflected in the Company's budget
for the fiscal year ending December 31, 2003, previously delivered by the
Company to Parent or (iv) enter into or amend any contract, agreement,
commitment or arrangement with respect to any matter set forth in this Section
5.01(e);

                           (f) (i) increase the compensation payable or to
become payable or the benefits provided to its directors or officers generally,
or, except in the ordinary course of business and consistent with past practice,
employees, other than with respect to obligations incurred by the Company prior
to the date hereof, (ii) grant any severance or termination pay to or enter into
any employment, bonus, change of control or severance agreement or arrangement
with, any director, officer or other employee of the Company who receives annual
salary from the Company in excess of $125,000 per year, (iii) establish, adopt,
enter into, increase or promise to increase or amend any material bonus,
profit-sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, except as required by Law and (iv) hire or retain
any person with an annual salary greater than $125,000; provided that the
foregoing shall not restrict the Company from taking any action to accelerate
the vesting of outstanding stock options;

                           (g) waive any stock repurchase or acceleration rights
or materially amend or change the terms of any capital stock;

                           (h) take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past practice or
as required by GAAP, with respect to accounting policies or procedures;

                           (i) unless otherwise required by applicable Law, (i)
adopt or change any accounting method used by it, including any accounting
method relating to Taxes, (ii) make, change or revoke any material election
relating to Taxes, or (iii) enter into any closing agreement relating to Taxes,
settle any material claim or assessment relating to Taxes or consent to any
material claim or assessment relating to Taxes or any waiver of the statute of
limitations for any such claim or assessment;

                                       29



                           (j) enter into any contract or agreement providing
for aggregate payments to or by the Company or its Subsidiaries of more than $5
million per year, or amend, modify or consent to the termination of any Material
Contract;

                           (k) commence or settle (except a settlement in
connection with the Enron Claim) any Action other than any settlement which does
not subject the Company or any Subsidiary to injunctive or other equitable
relief;

                           (l) except as specifically contemplated by this
Agreement or entered into in connection herewith, enter into any Related Party
Transaction; or

                           (m) except as specifically contemplated by this
Agreement, enter into any agreement or otherwise make a commitment, to do any of
the foregoing.

                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS

                  Section 6.01 Access to Information; Confidentiality.

                           (a) Except as required pursuant to any
confidentiality agreement or similar agreement or arrangement to which the
Company or any Subsidiary is a party or pursuant to applicable Law, from the
date of this Agreement until the Effective Time, the Company and each Subsidiary
shall: (i) provide to Parent (and Parent's officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives,
collectively, "Parent's Representatives") reasonable access during normal
business hours to the officers, employees, agents, properties, offices and other
facilities of such party and its subsidiaries and to the books and records
thereof; and (ii) furnish to Parent such information concerning the business,
properties, contracts, assets, liabilities, personnel and other aspects of such
party and its subsidiaries as Parent or Parent's Representatives may reasonably
request.

                           (b) All information obtained by Parent pursuant to
this Section 6.01 shall be kept confidential in accordance with the
confidentiality agreement, dated July 18, 2003 (the "Confidentiality
Agreement"), between Parent and the Company.

                           (c) Notwithstanding anything herein to the contrary,
each party hereto (and its representatives, agents and employees) may consult
any tax advisor regarding the tax treatment and tax structure of the
transactions contemplated hereby and, from and after the date of execution of
this Agreement (or, if earlier, the date of public announcement of this
Agreement, or public announcement of discussions between the parties relating to
the transactions) may disclose to any Person, without limitation of any kind,
the tax treatment and tax structure of such transactions and all materials
(including opinions and other tax analyses) that are provided relating to such
treatment or structure provided, however, that neither party (nor

                                       30



any employee, representative or other agent thereof) may disclose any other
information that is not relevant to understanding the tax treatment and tax
structure of the transaction (including the identity of any party), or any other
information to the extent that such disclosure could result in a violation of
any federal or state securities law.

                           (d) No investigation pursuant to Section 6.01 shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.

                  Section 6.02 No Solicitation of Transactions. None of GFI, the
Company nor any of their Affiliates, or their Affiliates' respective officers,
employees, directors, agents or other representatives (collectively, the
"Representatives") will, and GFI and, the Company shall use their commercially
reasonable efforts to cause no Stockholders of the Company to, (i) solicit,
initiate, encourage or accept any other inquiries, proposals or offers from any
person (x) relating to any acquisition or purchase of all or any portion of the
capital stock of the Company or material portion of the assets of the Company
outside of the ordinary course of business consistent with past practice,
excluding the issuance of Shares upon the exercise of Options, (y) enter into
any merger, recapitalization, reorganization, joint venture or other business
combination with the Company or (z) enter into any other extraordinary business
transaction involving or otherwise relating to the Company (any of the
transactions described in clauses (x), (y) and (z) being referred to herein as a
"Business Combination") or (ii) other than to notify a person who has contacted
the Company or any of its Representatives in connection with a Business
Combination that the Company is unable to respond thereto, participate in any
discussions, conversations, negotiations or other communications with any other
person regarding, or furnish to any other person any information with respect to
a Business Combination. The Company shall notify Parent promptly if any proposal
or offer, or any inquiry or other contact with any other individual or entity
with respect to a Business Combination, is made or received by the Company or
any of its Representatives. The parties agree that irreparable harm would occur
in the event any obligation under this Section was not performed in accordance
with its terms and that Parent shall be entitled to specific performance of the
terms thereof, in addition to any other remedy available at law or in equity,
without the necessity of demonstrating the inadequacy of money damages.

                  Section 6.03 Further Action; Commercially Reasonable Efforts.

                           (a) Each of the parties hereto agrees to use its
commercially reasonable efforts to (i) take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Law or otherwise to consummate and make effective
the transactions contemplated hereby, (ii) obtain from Governmental Authorities
and third parties any material consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement, and (iii) make all necessary filings,
and thereafter make any other required submissions, with respect to this

                                       31



Agreement and the transactions contemplated hereby required under the HSR Act.
Subject to appropriate confidentiality protections, the parties hereto shall
cooperate with each other in connection with the making of all such filings,
will furnish to the other party such necessary information and assistance as
such other party may reasonably request with respect to the foregoing, will
provide the other party with copies of all filings made by such party with any
Governmental Authority and, upon request, any other information supplied by such
party to a Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.

                           (b) Parent and the Company shall have filed prior to
the date of this Agreement, or shall file as soon as practicable after the date
of this Agreement, notifications under the HSR Act and shall respond as promptly
as practicable to all inquiries or requests received from the Federal Trade
Commission or the Antitrust Division of the Department of Justice for additional
information or documentation and shall respond as promptly as practicable to all
inquiries and requests received from any State Attorney General or other
Governmental Authority in connection with antitrust matters. The parties shall
cooperate with each other in connection with the making of all such filings or
responses, including providing copies of all such documents to the other party
and its advisors prior to filing or responding. Notwithstanding anything to the
contrary contained herein, Parent shall not be required to take any action,
including entering into any consent decree, hold separate orders or other
arrangements, that (i) requires the divestiture of any assets of any of Parent,
the Company or any subsidiary of Parent or Subsidiary or (ii) limits Parent's
freedom of action with respect to, or its ability to retain, the Company or
Subsidiaries or any portion thereof or any of Parent's, Parent subsidiaries' or
their respective affiliates assets or businesses.

                           (c) The Company and Parent shall use their respective
commercially reasonable efforts to obtain any material third party consents (A)
necessary, proper, or advisable to consummate the transaction contemplated by
this Agreement, (B) required to be disclosed in the Disclosure Schedule or (C)
required to prevent a company Material Adverse Effect from occurring prior to
the Effective Time.

                  Section 6.04 Obligations of Merger Sub. Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.

                  Section 6.05 Public Announcements. Promptly following the
execution of this Agreement, the parties shall issue a press release regarding
the transactions contemplated by this Agreement in the form agreed upon by the
parties (the "Press Release"). Subject to compliance with applicable Law or
stock exchange regulations, no party hereto shall make, or cause to be made, any
press release or public announcement in respect of this Agreement, the Merger or
the transactions contemplated hereby or otherwise communicate with news media in
a manner inconsistent with the Press Release without the prior written consent
of the other parties hereto, subject to applicable Law. The parties shall
cooperate as to the timing and content of any press

                                       32



releases or public announcements made in connection with the Merger or the
transactions contemplated hereby, subject to applicable Law.

                  Section 6.06 Closing Date Debt. At the Effective Time, Parent
shall contribute to the capital of the Company an amount in cash equal to the
Closing Date Debt, less (i) any amounts included in the Closing Date Debt
attributable to the capital leases set forth on Exhibit 6.06 hereto, (ii) the
aggregate amount of Indebtedness of the Company under Promissory Note A and
(iii) the aggregate amount of Indebtedness of the Company under Promissory Note
B (including all accrued but unpaid interest), and the Company shall utilize
such contribution to repay the Closing Date Debt in full other than with respect
to the debt attributable to the capital leases set forth in Exhibit 6.06 hereto
and the Gerblick Notes.

                  Section 6.07 UQ Acquisition Claims. (a) In the event that all
UQ Acquisition Claims are not finally settled at least two (2) Business Days
prior to the Closing Date, the Company shall, prior to the Closing Date, assign
all of its right, title and interest in and to the UQ Acquisition Claims to GFI
(in its capacity as the Representative) pursuant to the terms of an Assignment
Agreement to be entered into among the Company, GFI in its capacity as
Representative, and Parent (the "Assignment Agreement"). The Assignment
Agreement (i) shall assign all of the Company's right, title and interest in and
to the UQ Acquisition Claims to GFI (in its capacity as the Representative),
(ii) shall contain further assurances consistent with the terms of this Section
6.07, (iii) shall provide for the distribution of any recovery from the UQ
Acquisition Claims (net of expenses) to the Stockholders and Optionholders in
accordance with their Applicable Percentage, and shall otherwise be in a form
reasonably satisfactory to GFI and Parent.

                  (b) In the event that any proceeds from the settlement of the
UQ Acquisition Claims are paid to the Company or the Surviving Corporation,
Parent shall cause the Surviving Corporation to, and the Surviving Corporation
shall, promptly remit such proceeds to GFI (in its capacity as the
Representative) to the extent such proceeds were not included in the calculation
of Working Capital, and GFI shall distribute such proceeds (net of expenses) to
the Stockholders and Optionholders in accordance with the terms of the
Assignment Agreement.

                  (c) In the event that GFI is prepared to enter into a
definitive written settlement agreement with respect to the UQ Acquisition
Claims subsequent to the Closing Date, the Parent shall cause the Surviving
Corporation to, and the Surviving Corporation shall, reasonably cooperate with
GFI to effect such settlement, including without limitation causing the
Surviving Corporation to provide general and unconditional releases to the
parties to the UPA of their obligations thereunder and a release to Byers of his
obligations pursuant to Section 1c. of the Seller Noncompetition Agreement,
dated as of August 31, 2001, by and between UtiliQuest, LLC and Byers.

                                       33



                  (d) The Parent shall cause the Surviving Corporation to, and
the Surviving Corporation shall, make reasonably available to GFI the employees
of the Surviving Corporation that GFI requires to pursue the UQ Acquisition
Claims; provided, however, that such availability shall not unreasonably
interfere with the duties of such employees at the Surviving Corporation.

                  (e) In the event that the UQ Acquisition Claims cannot be
assigned as contemplated by this Section 6.07, the Parent shall and shall cause
the Surviving Corporation to, cooperate with GFI in a mutually agreeable
arrangement under which GFI (in its capacity as the Representative) would
control the pursuit, prosecution and resolution of the UQ Acquisition Claims and
any recovery in respect thereof (net of expenses) would be for the account of
the Stockholders and the Optionholders in accordance with their Applicable
Percentages.

                  For purposes of this Section 6.07, "UQ Acquisition Claims"
means all claims of the Company against ECTMI Trutta Holdings LP, a Delaware
limited partnership ("Trutta"), Joint Energy Development Investments II, Limited
Partnership, a Delaware limited partnership ("JEDI"), Byers Engineering Company,
a Georgia corporation ("Byers"), Neal Allen Robertson, an individual
("Robertson"), and Enron North America Corp., a Delaware corporation ("Enron")
(collectively, Trutta, JEDI, Byers, Robertson and Enron are referred to as the
"Seller Parties"), pursuant to or in connection with (i) the Unit Purchase
Agreement (the "UPA") dated as of July 24, 2001, among Holdings, the Company,
the Seller Parties and OCM/GFI Power Opportunities Fund, L.P., a Delaware
limited partnership (the "Power Fund"), (ii) the Settlement Agreement and Mutual
General Release ("Settlement Agreement") entered into and effective April 9,
2002, among Holdings, the Company, the Seller Parties and the Power Fund, and
(iii) the Escrow Agreement ("UQ Escrow Agreement") entered into as of April 19,
2002, among Holdings, the Seller Parties (other than Enron) and JP Morgan Chase
Bank, a New York corporation, as escrow agent, including, without limiting the
generality of the foregoing, (A) all indemnification claims that may be asserted
against the Seller Parties pursuant to Article IX of the UPA (as modified by
Section 3(b) of the Settlement Agreement), and (B) all claims that may be
asserted against the escrow fund established pursuant to the UQ Escrow
Agreement.

                  Section 6.08 Termination of Enumerated Related Party
Agreements and Other Contracts. On or prior to the Effective Time, the Company
and each of the Subsidiaries shall have terminated the related party agreements
and the contracts, in each case, that are enumerated in Exhibit 6.08 hereto.

                  Section 6.09 Settlement Agreement and Mutual Release. In the
event that the Company and GFI do not enter into the Settlement Agreement and
Mutual Release by the Closing Date, the Parent shall and shall cause the
Surviving Corporation to, cooperate with GFI to enter into the Settlement
Agreement and Mutual Release. Any recoveries (inclusive of any reduction in the
amount of the Company's obligations) in connection with the Settlement Agreement
and Mutual Release (net of expenses) shall be for the account of the
Stockholders and the Optionholders in accordance with their Applicable
Percentages.

                                       34



                  Section 6.10 Estoppel Certificates. The Company agrees to use
its reasonable efforts to deliver to the Parent prior to the Closing Date an
estoppel certificate for each of the leased properties set forth in Exhibit 6.10
hereto.

                                   ARTICLE VII

                            CONDITIONS TO THE MERGER

                  Section 7.01 Conditions to the Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or written waiver, at or prior to the Closing, of each of the following
conditions:

                           (a) Representations, Warranties and Covenants. (i)
The representations and warranties of the Company contained in this Agreement
shall be true and correct (without giving effect to any limitation as to
materiality or Material Adverse Effect set forth herein) as of the Effective
Time, as though made on and as of the Effective Time (except to the extent
expressly made as of an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to materiality or
Material Adverse Effect set forth herein) would not have a Material Adverse
Effect and (ii) the covenants and agreements contained in this Agreement to be
complied with by GFI and the Company on or before the Closing shall have been
complied with in all material respects and Parent shall have received a
certificate from the Company with respect to the foregoing and from GFI with
respect to compliance with its covenants and agreements only;

                           (b) No Order. No Governmental Authority shall have
enacted, issued, promulgated, enforced or amended any Law, rule, regulation,
judgment, decree, executive order or demand (an "Order") which is then in effect
and has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger;

                           (c) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger contemplated by this
Agreement shall have expired or shall have been terminated;

                           (d) No Proceeding or Litigation. No Action shall have
been commenced or threatened by or before any Governmental Authority against
either GFI or the Company, seeking to restrain or materially and adversely alter
the transactions contemplated by this Agreement which, in the reasonable, good
faith determination of Parent, has a reasonable likelihood of success and would
reasonably be expected to render it impossible or unlawful to consummate such
transactions or have a Material Adverse Effect;

                                       35



                           (e) Consents and Approvals. The Company shall have
received, each in form and substance reasonably satisfactory to Parent, all
required material authorizations, consents, orders and approvals of all
Governmental Authorities and all such other third party consents as are set
forth in Section 3.06(b) of the Company Disclosure Schedule;

                           (f) Payoff Certificates/Letter. The Company shall
have delivered to Parent payoff certificates/letters for each repayment by the
Company of a portion of the Closing Date Debt.

                           (g) Resignations. Parent shall have received
resignations, in writing, of all the members of the Board of the Company
effective as of the Effective Time;

                           (h) Non-Disclosure Agreement. GFI shall have entered
into a confidentiality/non-disclosure agreement with Parent substantially in the
form of Exhibit 7.01(h) hereto.

                           (i) Dissenting Shares. The number of Dissenting
Shares shall be less than 1% of the issued and outstanding Company Common Stock.

                           (j) No Material Adverse Effect. Since the date of
this Agreement, no event or events shall have occurred, and none of GFI, the
Company or its Subsidiaries shall have received any notice or notices regarding
any event or events, which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole; and

                           (k) FIRPTA Certificate. Parent shall have received
from GFI a certificate in compliance with Treasury Regulation Section
1.1445-2(b), certifying that it is not a "foreign person" under Section 1445 of
the Code.

                  Section 7.02 Conditions to the Obligations of GFI and the
Company. The obligations of GFI and the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or written
waiver, at or prior to the Closing, of each of the following conditions:

                           (a) Representations, Warranties and Covenants. (i)
The representations and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct (without giving effect to any limitation as
to materiality or Material Adverse Effect set forth herein) in all material
respects as of the Effective Time, as though made on and as of the Effective
Time (except to the extent expressly made as of an earlier date, in which case
as of such earlier date), and (ii) the covenants and agreements contained in
this Agreement to be complied with by Parent and Merger Sub on or before the
Closing shall have been complied with in all material respects and GFI and the
Company shall have received a certificate from the Parent and Merger Sub with
respect to the foregoing;

                                       36



                           (b) No Order. No Governmental Authority shall have
enacted, issued, promulgated, enforced or amended any Law or Order which is then
in effect and has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger;

                           (c) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger contemplated by this
Agreement shall have expired or shall have been terminated;

                           (d) No Proceeding or Litigation. No Action shall have
been commenced or threatened by or before any Governmental Authority against any
party hereto, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good faith
determination of the Representative, has a reasonable likelihood of success and
would reasonably be expected to render it impossible or unlawful to consummate
such transactions or have a Material Adverse Effect.

                                  ARTICLE VIII

                        TERMINATION, AMENDMENT AND WAIVER

                  Section 8.01 Termination. This Agreement may be terminated and
the Merger and the other transactions contemplated hereby may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement and the transactions contemplated hereby by the
Stockholders, as follows:

                           (a) by mutual written consent of Parent and the
Company;

                           (b) by either Parent, on the one hand, or the
Company, on the other hand, if there shall be any Law that makes consummation of
the Merger illegal or otherwise prohibited or, notwithstanding the provisions of
Section 6.03(b), if consummation of the Merger would violate any nonappealable
final Order of any Governmental Entity having competent jurisdiction; provided,
however, that the right to terminate this Agreement under this Section 8.01(b)
shall not be available to any party who has not used its commercially reasonable
efforts to have such Order rescinded;

                           (c) by Parent, if (i) any of the conditions set forth
in Section 7.01 shall have become incapable of fulfillment and shall not have
been waived or (ii) GFI or the Company shall breach in any material respect any
of its obligations hereunder and such breach shall not have been cured in all
material respects or waived;

                           (d) by the Company or GFI, if (i) any of the
conditions set forth in Section 7.02 shall have become incapable of fulfillment
and shall not have been waived or (ii) either Parent or Merger Sub shall breach
in any material respect any of their representations, warranties

                                       37



or obligations hereunder and such breach shall not have been cured in all
material respects or waived; or

                           (e) by either Parent, on the one hand, or the Company
and GFI on the other hand, if the Effective Time shall not have occurred on or
before December 5, 2003; provided, however, that the right to terminate this
Agreement under this Section 8.01(e) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Effective Time to occur on or
prior to such date.

                  The party desiring to terminate this Agreement shall give
written notice of such termination to the other parties.

                  Section 8.02 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, and there shall be no liability under this Agreement on
the part of any party hereto, except as set forth in Sections 6.01(b)
(Confidentiality), 6.05 (Public Announcements) and 8.03 (Expenses); provided,
however, that nothing herein shall relieve any party from liability for any
willful breach of this Agreement.

                  Section 8.03 Expenses.

                           (a) The Company shall be responsible for and bear all
of the Expenses of the Representative and the Company and of their respective
legal counsel, accountants or other advisors incurred at anytime in connection
with this Agreement and the transactions contemplated hereby (collectively, the
"Closing Expenses"). Parent shall be responsible for and bear all of its own and
Merger Sub's Expenses and any Expenses of their respective legal counsel,
accountants or other advisors, incurred at any time in connection with this
Agreement and the transactions contemplated hereby. All Expenses relating to the
filing fee for the Notification and Report Forms filed under the HSR Act shall
be borne solely by Parent.

                           (b) In the event that after the Effective Time the
Surviving Corporation or Parent receives an invoice for any Closing Expenses
that were not deducted from the Merger Consideration or reflected as liabilities
in the calculation of Working Capital, the Surviving Corporation shall
immediately forward such invoices directly to the Representative and Parent and
the Representative shall direct the Escrow Agent to reimburse Parent or the
Surviving Corporation for the full amount of such invoices (as and when they are
paid) out of the Indemnity Escrow Account. Prior to ordering any such payment,
the Parent shall send the Representative a copy of any such invoice and allow
the Representative 20 days to review and, if appropriate, seek to reduce the
amount of the invoice.

                                       38



                                   ARTICLE IX

                                 INDEMNIFICATION

                  Section 9.01 Survival of Representations, Warranties and
Covenants.

                           (a) The representations and warranties contained in
this Agreement shall survive after the Effective Time until the first
anniversary of the Closing Date (the "Expiration Date"). If written notice of a
claim in accordance with Section 9.05(b) has been given prior to the expiration
of the applicable representations and warranties by a party hereto to another
party hereto, then the relevant representations and warranties shall survive,
but only with respect to such specific claim, until such claim has been finally
resolved.

                           (b) The covenants contained in this Agreement shall
survive indefinitely; provided, that the covenants in Sections 9.02(ii) (as it
pertains to Excluded Taxes) and the covenants in Section 9.02(iii) shall
terminate on the Expiration Date. If written notice of a claim in accordance
with Section 9.05(b) has been given prior to the expiration of the applicable
covenants by a party hereto to another party hereto, then the relevant covenants
shall survive, but only with respect to such specific claim, until such claim
has been finally resolved.

                  Section 9.02 Indemnification of Parent Indemnified Parties.
After the Effective Time, Parent and its Affiliates (including, after the
Effective Time, the Surviving Corporation), officers, directors, employees,
agents, successors and assigns (collectively, the "Parent Indemnified Parties",
shall be indemnified and held harmless for any and all liabilities, losses,
damages, claims, incidental damages, interest, awards, judgments and penalties
(including reasonable attorneys' and consultants' fees and expenses) actually
suffered or incurred by them (including, without limitation, in connection with
any action brought or otherwise initiated by any of them) (hereinafter, a "Loss"
and collectively, "Losses"), arising out of or resulting from (without
duplication):

                                    (i) excluding any matters related to Taxes,
         the breach of any representation or warranty made by the Company in
         this Agreement (provided that in calculating the amount of any Loss, as
         opposed to whether there has been a breach, such Loss shall be
         calculated without regard to qualifications as to "materiality"
         including the word "material" or Material Adverse Effect) and any other
         certificate delivered by GFI and the Company pursuant to this
         Agreement;

                                    (ii) the breach of any covenant or agreement
         made by GFI, the Representative and the Company in this Agreement and
         any other certificate delivered pursuant to this Agreement, which, in
         the case of the Company, is to be performed on or prior to the Closing
         Date;

                                       39



                                    (iii) the payment by Parent, the Surviving
         Corporation, any Subsidiary or any Affiliate thereof of any Excluded
         Taxes;

                                    (iv) any action by any Stockholder in
         respect of any Dissenting Shares, but only to the extent Losses in
         respect thereof exceed the Per Share Merger Consideration otherwise
         payable in respect of such Dissenting Shares;

                                    (v) any Closing Expenses to the extent such
         Closing Expenses were not (A) deducted from the Merger Consideration,
         (B) paid or (C) reflected as liabilities in the calculation of Working
         Capital; or

                                    (vi) the inaccuracy of the Per Share Merger
         Consideration Certificate to the extent it results in the payment of
         excess Merger Consideration.

                  Recovery under this indemnity shall be solely as provided in
Section 9.04.

                  Section 9.03 Indemnification by Parent. After the Effective
Time, the Stockholders and the Optionholders and their respective affiliates,
officers, directors, employees, agents, successors and assigns (collectively,
the "Stockholder Indemnified Parties") shall be indemnified and held harmless by
Parent for any and all Losses, arising out of or resulting from:

                                    (i) the breach of any representation or
         warranty made by Parent or Merger Sub in this Agreement (provided that
         in calculating the amount of any Loss, as opposed to whether there has
         been a breach, such Loss shall be calculated without regard to
         qualifications as to "materiality" including the word "material" or
         Material Adverse Effect) and any other certificate or document
         delivered by Parent or Merger Sub pursuant to this Agreement; or

                                    (ii) the breach of any covenant or agreement
         made by Parent or Merger Sub in this Agreement and any other
         certificate or document delivered pursuant to this Agreement.

                                    (iii) The inaccuracy of the Per Share Merger
         Consideration Certificate to the extent it results in an underpayment
         with respect to the Merger Consideration.

                  Section 9.04 Limits on Indemnification. Notwithstanding
anything to the contrary contained in this Agreement: (a) an Indemnifying Party
(as defined below) shall not be liable for any claim for indemnification and
Parent Indemnified Parties, or Shareholder Indemnified Parties, as the case may
be, shall not be entitled to indemnification under Section 9.02(i) or (iii)
(solely with respect to Non-Income Taxes other than any Non-Income Taxes

                                       40



included in the 2003 Tax Liability) or 9.03(i), unless and until the aggregate
amount of indemnifiable Losses which may be recovered from the Indemnifying
Party or the Indemnity Escrow, as applicable, equals or exceeds $1,200,000,
after which the Indemnifying Party shall be liable only for, or there may only
be recovered from the Indemnity Escrow, as applicable, those Losses in excess of
$1,200,000, (b) the maximum amount of indemnifiable Losses which may be
recovered (i) arising out of or resulting from the causes set forth in Section
9.02 or Section 9.03, shall be an amount equal to the Indemnity Escrow Amount.
The provisions of Section 9.04(a) shall not apply with respect to
indemnification of the Parent Indemnified Parties for any Income Taxes and the
2003 Tax Liability pursuant to Section 9.02(iii) hereof. The sole recourse for
indemnification claims made by the Parent Indemnified Parties pursuant to this
Agreement shall be recovery of amounts from the Indemnity Escrow Account in
accordance with the terms of this Agreement.

                  Section 9.05 Indemnification Procedures.

                           (a) For purposes of this Section 9.05, a party
against which indemnification may be sought (or, in the case of a claim for
indemnification pursuant to Section 9.02, the Representative) is referred to as
the "Indemnifying Party" and the party which may be entitled to indemnification
is referred to as the "Indemnified Party".

                           (b) The obligations of Indemnifying Parties under
this Article IX with respect to Losses arising from claims of any third party
which are subject to the indemnification provided for in this Article IX ("Third
Party Claims") shall be governed by and contingent upon the following additional
terms and conditions: if an Indemnified Party shall receive notice of any Third
Party Claim, the Indemnified Party shall promptly give all Indemnifying Parties
notice of such Third Party Claim; provided, however, that the failure to provide
such notice shall not release an Indemnifying Party from any of its obligations
under this Article IX except to the extent that such Indemnifying Party is
materially prejudiced by such failure. The notice of claim shall describe in
reasonable detail the facts known to the Indemnified Party giving rise to such
indemnification claim, and the amount or good faith estimate of the amount
arising therefrom. The Indemnified Party shall deliver to the Indemnifying
Party, promptly after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to a Third Party Claim.

                           (c) The Indemnifying Party shall be entitled to
assume and control the defense of such Third Party Claim at its expense and
through counsel of its choice if it gives notice of its intention to do so to
the Indemnified Party within thirty (30) days of the receipt of such notice from
the Indemnified Party in which case the Indemnifying Party shall not be liable
to the Indemnified Person for any fees of counsel or any other expenses with
respect to the defense of such Third Party Claim; provided, however, that, if
the Indemnified Party reasonably determines based upon advice of counsel that a
conflict of interest exists that would make it inappropriate for the same
counsel to represent both the Indemnified Party and the Indemnifying Party, then
the Indemnified Party shall be entitled to retain its own counsel at the expense
of the

                                       41



Indemnifying Party. In the event that the Indemnifying Party exercises the right
to undertake any such defense against such Third Party Claim as provided above,
the Indemnified Party shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party, at the Indemnifying
Party's expense, all witnesses, pertinent records, materials and information in
the Indemnified Party's possession or under the Indemnified Party's control
relating thereto as is reasonably required by the Indemnifying Party. Similarly,
in the event the Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party Claim, the Indemnifying Party shall
cooperate with the Indemnified Party in such defense and make available to the
Indemnified Party, at the Indemnifying Party's expense, all such witnesses,
records, materials and information in the Indemnifying Party's possession or
under the Indemnifying Party's control relating thereto as is reasonably
required by the Indemnified Party. No compromise or settlement of such Third
Party Claim may be effected by either the Indemnified Party or the Indemnifying
Parties without the other party's consent (which shall not be unreasonably
withheld or delayed) unless (i) there is no finding or admission of any
violation of Law and no effect on any other claims that may be made against such
other party and (ii) each Indemnified Party that is party to such claim is
unconditionally released from liability with respect to such claim.

                           (d) A claim for indemnification for any matter not
including a Third-Party Claim shall be asserted by notice to the party from whom
indemnification is sought.

                  Section 9.06 Delivery and Release of Indemnity Escrow.

                           (a) The Indemnity Escrow Amount (including all
accrued interest thereon) shall be used to satisfy indemnification claims,
finally determined by (x) mutual written agreement of Parent and the
Representative or (y) a final award of an arbitral tribunal in accordance with
Section 10.06, of the Parent Indemnified Parties for which such Persons are
entitled to recovery pursuant to the terms of this Article IX and shall be
disbursed in accordance with the procedures set forth in the Escrow Agreement.

                           (b) If, as of the Expiration Date, a Parent
Indemnified Party has asserted in writing any claim (and its good faith estimate
of its Losses in respect of such claim) that is reasonably expected to give rise
to a right of indemnification pursuant to this Article IX that is pending and
unresolved, Parent and the Representative shall give joint written instructions
to the Escrow Agent to retain an amount equal to the lesser of (x) the Indemnity
Escrow Amount as such amount may have been previously reduced pursuant to this
Article IX or (y) the amounts asserted in writing by Parent to be claimed to be
owing to the Parent Indemnified Parties under this Article IX (subject to
adjustment in accordance with the last proviso to this sentence), and the
remaining balance shall be released to the Stockholders and the Optionholders in
accordance with their respective Applicable Percentage; provided, however, that
to the extent that the Indemnity Escrow Amount had been previously reduced, and
such remaining claims exceed the current Indemnity Escrow Amount, no amount
shall be released, pursuant to this provision at such time; and provided further
that any dispute as to the appropriate amount of such good faith

                                       42



estimate shall be resolved in accordance with Section 10.06 hereof. Within one
(1) Business Day of the final resolution of each indemnity claim properly
brought and pending as of the Expiration Date by (x) mutual written agreement of
Parent and the Representative or (y) a final award of an arbitral tribunal in
accordance with Section 10.06, Parent and the Representative shall give joint
written instructions to the Escrow Agent to release to the Stockholders and the
Optionholders in accordance with their respective Applicable Percentage the
amount, if any, by which the estimated Losses in respect of such claim exceeded
the finally determined Losses in respect of such claim. Upon final resolution of
all indemnity claims properly brought and pending as of the Expiration Date by
(x) mutual written agreement of Parent and the Representative or (y) a final
award of an arbitral tribunal in accordance with Section 10.06, Parent and the
Representative shall give joint written instruction to the Escrow Agent to
release to the Stockholders and the Optionholders in accordance with their
respective Applicable Percentage the remaining balance, if any, of the Indemnity
Escrow Amount.

                  Section 9.07 No Right of Contribution. GFI acknowledges and
agrees that, upon and after the Closing, the Company shall not have any
liability or obligation to indemnify, save or hold harmless or otherwise pay,
reimburse or make GFI or any other Stockholder or Optionholder whole for or on
account of any claim for indemnification by Parent pursuant to this Article IX
or any untruth, inaccuracy or incorrectness of, or other breach of, any
representation or warranty or the nonfulfillment, nonperformance, nonobservance
or other breach or violation of, or default under, any covenant or agreement
made by GFI or the Company in this Agreement, and neither GFI nor any
Stockholder or Optionholder shall have any right of contribution against the
Company.

                  Section 9.08 Exclusive Remedy. Following the Closing the sole
and exclusive remedy for each of the Parent Indemnified Parties and Stockholder
Indemnified Parties with respect to any and all claims relating to a breach of
this Agreement (other than claims of, or causes of action, arising from, fraud)
shall be pursuant to the indemnification provisions set forth in this Article IX
which, in the case of the Parent Indemnified Parties, limit indemnification to
recovery of amounts from the Indemnity Escrow Account and which in the case of
the Shareholder Indemnified Parties, limit indemnification to an amount equal to
the Escrow Amount. In furtherance of the foregoing, each of the Parent
Indemnified Parties and the Stockholder Indemnified Parties hereby waives, to
the fullest extent permitted under applicable Law, any and all rights, claims
and causes of action (other than claims of, or causes of action arising from,
fraud) it may have against the other parties hereto, arising under or based upon
any Federal, state, local or foreign Law. Notwithstanding anything to the
contrary in this Agreement, this Section 9.08 shall not limit a party's right to
specific performance or injunctive relief in connection with the other party's
breach of its covenants in this Agreement.

                  Section 9.09 Losses Net of Insurance, Tax Benefits. The amount
of any Loss for which indemnification is provided to a Parent Indemnified Party
or a Stockholder Indemnified Party, as the case may be, under this Article IX
shall be (i) increased to take account

                                       43



of any net Tax cost (except as provided below) actually incurred by such
Indemnified Party or any Consolidated Tax Group of which it is a member arising
from the receipt of indemnity payments hereunder, (ii) reduced to take account
of any net Tax benefit actually realized by such Indemnified Party or any
Consolidated Tax Group of which it is a member arising from the incurrence or
payment of any such Loss, and (iii) net of any amounts recovered by, the such
Indemnified Party with respect to such Loss under insurance policies. For the
avoidance of doubt, the parties acknowledge and agree that (i) a net Tax cost
shall not include any portion of the gain or decrease in the loss, as the case
may be, that would be recognized by Parent or any Affiliate of Parent upon a
disposition of any shares of stock of the Company, and (ii) an Indemnified
Party, in accordance with Section 9.12(k) below, shall not treat the receipt of
any indemnity payment hereunder as taxable income to such Indemnified Party
unless required to do so by applicable Tax Law. In computing the amount of any
such net Tax cost or net Tax benefit, the Indemnified Party shall be deemed to
realize all other items of income, gain, loss, deduction or credit before
realizing any item arising from the receipt of any indemnity payment hereunder
or the incurrence or payment of any indemnified Loss. An Indemnified Party shall
be deemed to have "actually realized" a net Tax cost or a net Tax benefit to the
extent that, and at such time as, the amount of Taxes payable (as determined on
a present value basis in the taxable year in which such indemnity payment is
made using a discount rate of 7%) by such Indemnified Party is increased above
or reduced below, as the case may be, the amount of Taxes that such Indemnified
Party would be required to pay but for the receipt or accrual of the indemnity
payment or the incurrence or payment of such indemnified amount, as the case may
be. An Indemnified Party shall submit claims under and diligently pursue
recovery under all insurance policies under which any Losses may be insured.

                  Section 9.10 No Consequential Damages. Notwithstanding
anything to the contrary contained in this agreement, no Person shall be liable
to or otherwise responsible for consequential damages, punitive damages or for
diminution in value or lost profits (except with respect to payment of any such
damages in respect of Third-Party Claims).

                  Section 9.11 Subrogation of Rights. The Indemnifying Party
shall be subrogated to all rights and remedies of the Indemnified Party. Each
Indemnified Party shall take all commercially reasonable action to perfect the
above subrogation rights and, prior to seeking any indemnification from any
Indemnifying Party, the Indemnified Party shall pursue all claims of the
Company, the Surviving Corporation and the Subsidiaries under all of its
agreements and instruments, including without limitation, those agreements and
instruments relating to prior acquisitions by the Company or the Subsidiaries.
Notwithstanding the foregoing, nothing herein shall prevent an Indemnified Party
from asserting a claim pursuant to Sections 9.02 and 9.05 hereof prior to or in
conjunction with pursuing such claims against other parties; provided, however,
that the Indemnified Party may not pursue such claim against the Indemnifying
Party until it has complied with its obligations under this Section 9.11.

                                       44



                  Section 9.12 Tax Matters. (a) The Representative shall be
responsible for causing to be filed all Tax Returns required or permitted by
applicable Law to be filed by the Company and its Subsidiaries with respect to
taxable periods that end on or before the Closing Date (such periods, the
"Pre-Closing Periods" and such Tax Returns, the "Pre-Closing Period Tax
Returns"). All such Pre-Closing Period Tax Returns shall be prepared and filed
in a manner that is consistent with the prior practice of the Company and its
Subsidiaries, except as required by applicable Law. If any such Pre-Closing
Period Tax Returns are due after the Closing, (i) the Representative shall
prepare and submit such Tax Returns to Parent if the Representative is not
authorized to file such Pre-Closing Tax Returns by applicable law, and (ii)
Parent shall file (or cause to be filed) such Pre-Closing Period Tax Returns
with the appropriate taxing authority and pay (except as set forth below) the
Taxes shown as due and payable on such Tax Return as prepared by the
Representative. The Escrow Agent shall disburse to the Representative or the
Parent, as applicable, from the Indemnity Escrow Amount, at least three (3)
Business Days before the due date of the applicable Pre-Closing Period Tax
Return, an amount equal to the portion of the Taxes shown as due and payable on
such Tax Return as prepared by the Representative (or, in the case of a dispute
(as described below) that is not resolved by the due date for the filing of such
Tax Return (including extensions), such Tax Return shall be filed in accordance
with Parent's determination and the amount disbursed from the Indemnity Escrow
Amount shall include the amount in dispute) but only to the extent such Taxes
were not (i) taken into account as a liability in the determination of Final
Closing Working Capital or (ii) paid prior to the Closing, including as a
payment of an estimated Tax. For the avoidance of doubt, Parent shall be
responsible for the payment of any Taxes taken into account as a Liability in
the determination of the Final Closing Working Capital and shall remit such
amount to the relevant taxing authority (or, if the Representative files the
applicable Pre-Closing Period Tax Return, Parent shall remit such amount to the
Representative).

                           (b) The Representative shall submit to Parent a draft
of each Pre-Closing Period Tax Return (regardless of whether Parent or the
Representative, as the case may be, must file such Tax Return under applicable
Law) at least forty-five (45) days prior to the due date for the filing of such
Tax Return (taking into account any extensions thereof), together with the
Representative's calculation of the Tax for the Pre-Closing Period and the
details supporting such calculation. Such draft Tax Return and calculation shall
be subject to Parent's review and approval. Parent may, after receipt of such
draft Tax Return and calculation (with supporting details), notify the
Representative, in writing, of any disagreement with such Tax Return and/or
calculation. If Parent notifies the Representative, in writing, of any such
disagreement, Parent and the Representative shall proceed in good faith to
attempt to resolve such disagreement. If they do not resolve such disagreement
by the due date for the filing of such Tax Return (including extensions), the
Representative or Parent, as applicable, shall cause the Tax Return to be filed,
and the Neutral Auditors shall be retained to resolve such disagreement. In
resolving any such disagreement, the Neutral Auditor shall apply principles
consistent with the Company's or, as applicable, its Subsidiary's past practice
(in the case of any Subsidiary of the Company during the period that the Company
owned such Subsidiary); provided, however, that the Neutral

                                       45



Auditor shall not be required to follow past practice to the extent the Neutral
Auditor reasonably determines, in writing, that (i) the relevant past practice
is contrary to applicable Tax Law, or (ii) the applicable Tax Return could not
have been filed without being subject to penalties. The principles of Section
2.06(d) with respect to the scope and timing of determination, the effect of
such determination, and the payment of the fees and expenses of the Neutral
Auditor shall apply. If the Tax, as determined by the Neutral Auditors, for the
Pre-Closing Period is less than the amount of such Tax disbursed from the
Indemnity Escrow Amount, Parent shall pay to the Stockholders and Optionholders,
in accordance with their respective Applicable Percentages, the amount by which
the finally determined Tax for the Pre-Closing Period is less than the amount of
such Tax shown as payable on the applicable Pre-Closing Period Tax Return.
Parent shall make such payment on the later of the due date (taking into account
any extension thereof) of the Pre-Closing Period Tax Return or five (5) days
after the determination of the amount of the Tax by the Neutral Auditors for the
Pre-Closing Period, if such determination is made after such due date.

                           (c) Parent, the Company, or its Subsidiaries shall be
responsible for filing all Tax Returns required to be filed by the Company or
its Subsidiaries with respect to Straddle Periods and periods that begin after
the Closing Date. The Escrow Agent shall disburse to Parent from the Indemnity
Escrow Amount at least three (3) Business Days before the due date of the
applicable Tax Return for a Straddle Period an amount equal to the portion of
the Taxes shown as due and payable on such Tax Return that are allocable to the
Pre-Closing Straddle Period as determined under this Section 9.12(c) (including
any amounts remaining in dispute and for which resolution has not occurred (as
described below) prior to the due date for filing such Tax Return (including
extensions)) but only to the extent such Taxes were not (i) taken into account
as a liability in the determination of Final Closing Working Capital or (ii)
paid prior to the Closing, including as a payment of an estimated Tax. Parent
shall pay or cause to be paid all Taxes due and payable in respect of all such
Straddle Period Tax Returns. For the avoidance of doubt, Parent shall be
responsible for the payment of any Taxes taken into account as a liability in
the determination of the Final Closing Working Capital and shall remit such
amount to the relevant taxing authority. In order to apportion appropriately any
Taxes relating to a Straddle Period, the parties shall, to the extent permitted
under applicable Tax Law, elect with the relevant taxing authority to treat for
all Tax purposes the Closing Date as the last day of the taxable year or period
of the Company and its Subsidiaries. In any case where applicable Tax Law does
not permit the Company or its Subsidiaries to treat the Closing Date as the last
day of the taxable year or period, the portion of any Taxes that are allocable
to the portion of the Straddle Period ending on and including the Closing Date
(the "Pre-Closing Straddle Period") shall be: (A) in the case of Taxes that are
imposed on a periodic basis (and not based on invoices, receipts, sales or
payments), deemed to be the amount of such Taxes for the entire period
multiplied by a fraction the numerator of which is the number of calendar days
in the Straddle Period ending on (and including) the Closing Date and the
denominator of which is the number of calendar days in the entire relevant
Straddle Period, and (B) in the case of Taxes not described in (i) (such as
taxes that are either (x) based upon or related to income or receipts, or (y)
imposed in connection

                                       46



with any sale or other transfer or assignment of property (real or personal,
tangible or intangible)), deemed equal to the amount that would be payable if
the taxable year or period ended and the books closed at the close of the
Closing Date.

                           (d) Parent shall submit to the Representative a draft
of each Straddle Period Tax Return prepared, except as otherwise required by Law
or to the extent that counsel for Parent reasonably determines, in writing, that
such a Tax Return could not be so prepared and filed without being subjected to
penalties, in a manner that is consistent with the Company's or, as applicable,
any of its Subsidiary's past practice (in the case of any Subsidiary of the
Company during the period that the Company owned such Subsidiary) at least
forty-five (45) days prior to the due date for the filing of such Tax Return
(taking into account any extensions thereof), together with Parent's calculation
of the Tax for the Pre-Closing Straddle Period and the details supporting such
calculation. Such draft Tax Return and calculation shall be subject to the
Representative's review and approval. The Representative may, after receipt of
such draft Tax Return and calculation (with supporting details), notify Parent,
in writing, of any disagreement with such Tax Return and/or calculation. If the
Representative notifies Parent, in writing, of any such disagreement, Parent and
the Representative shall proceed in good faith to attempt to resolve such
disagreement. If they do not resolve such disagreement by the due date
(including extensions) for the filing of such Tax Return, Parent shall cause the
Tax Return to be filed, and the Neutral Auditors shall be retained to resolve
such disagreement. The principles of Section 2.06(d) with respect to the scope
and timing of determination, the effect of such determination, and the payment
of the fees and expenses of the Neutral Auditors shall apply. If the Tax, as
determined by the Neutral Auditors, for the Pre-Closing Straddle Period is less
than the amount of such Tax disbursed from the Indemnity Escrow Amount, Parent
shall pay to the Stockholders and Optionholders, in accordance with their
respective Applicable Percentages, the amount by which the finally determined
Tax for the Pre-Closing Straddle Period is less than the amount of such Tax.
Parent shall make such payment on the later of the due date (taking into account
extension thereof) of the Straddle Period Tax Return or five (5) days after the
determination of the amount of the Tax by the Neutral Auditors for the
Pre-Closing Straddle Period, if such determination is made after such due date.

                           (e) Notwithstanding any other provision in this
Agreement, the Parent Indemnified Parties shall have no recourse against the
Indemnity Escrow Amount for any liability for Taxes attributable to any action
taken on the Closing Date after the Closing by Parent or any Affiliate thereof
(other than any such action expressly required by this Agreement).

                           (f) After the Closing Date, each of Parent, the
Company and its Subsidiaries, on the one hand, and the Representative, on the
other, shall (i) provide, or cause to be provided, to each other's respective
subsidiaries, officers, employees, representatives and affiliates, such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return or any audit of the Company or its Subsidiaries in
respect of which Parent, the Company and its Subsidiaries, as the case may be,
is responsible pursuant to

                                       47



this Article IX, (ii) retain, or cause to be retained, for so long as any such
Taxable years or Audits shall remain open for adjustments, any records or
information which may be relevant to any such Tax Returns or audits, and (iii)
compensate the other party for all reasonable out-of-pocket costs incurred by
such other party in connection with providing any assistance requested pursuant
to (i). The assistance provided for in this Section 9.12(f) shall include,
without limitation, each of the Parent, the Company and its Subsidiaries, and
the Representative (x) making their agents and employees and the agents and
employees of their respective subsidiaries and Affiliates available to each
other on a mutually convenient basis to provide such assistance as might
reasonably be expected to be of use in connection with any such Tax Returns or
audits and (y) providing, or causing to be provided, such information as might
reasonably be expected to be of use in connection with any such Tax Returns or
audits, including without limitation records, returns, schedules, documents,
work papers, opinions, letters or memoranda, or other relevant materials
relating thereto.

                           (g) Each of Parent, the Company or its Subsidiaries,
and the Representative, shall promptly inform, keep regularly apprised of the
progress with respect to, and notify the other party in writing after the
receipt of any notice of any audit in respect of any Tax Liability for which it
was responsible hereunder which could affect the Tax liability of such other
party for any taxable year; provided, however, that a failure by a party to
provide such notice will not affect such party's right to indemnification for
Taxes under this Article IX except to the extent that the Indemnifying Party was
materially prejudiced by such failure.

                           (h) Any Tax refund or equivalent benefit actually
realized through a reduction in any Tax Liability (including any interest with
respect thereto) relating to the Company or any Subsidiary for any taxable
period shall be the property of Parent.

                           (i) Any Conveyance Taxes payable in connection with
the transactions contemplated by this Agreement shall be borne by Parent;
provided that the Representative shall execute and deliver all instruments and
certificates necessary to enable Parent to comply with the foregoing.

                           (j) All payments payable under any Tax sharing
agreement (or other similar arrangement) between GFI (or any Affiliate thereof)
and the Company (or any Subsidiary) shall be calculated on a basis consistent
with past practice and shall be payable in full prior to the Closing Date. Any
such agreement or arrangement between GFI (or any Affiliate thereof) and the
Company (or any Subsidiary) shall be terminated prior to the Closing Date.

                           (k) GFI and Parent agree to treat all payments made
by either of them to or for the benefit of the other (including any payments to
the Company or any Subsidiary) under any indemnity provision of this Agreement
and for any misrepresentations or breaches of warranties or covenants as
adjustments to the Merger Consideration for Tax purposes and that such treatment
shall govern for purposes hereof except to the extent that any applicable Tax
Law

                                       48



would not permit such treatment, in which case such payments shall be made in an
amount sufficient to indemnify the relevant party on an after-Tax basis to the
extent provided by Section 9.09 hereof.

                           (l) Except with respect to any action required to be
taken by the Parent or any Affiliate thereof under applicable Tax Law, neither
the Parent nor any Affiliate thereof shall take or allow to be taken any action
to contact a taxing authority regarding any Tax reporting position of the
Company or any Subsidiary of the Company in respect of a Pre-Closing Period or
Straddle Period the effect of which is to accelerate the making of any claim,
the commencement of any audit or other inquiry by a taxing authority or the
payment of (or increase in the amount of) any Excluded Tax. If Parent or any
Affiliate thereof takes or causes to be taken any such action, the indemnity
provided in this Article IX shall be void solely with respect to any associated
payment of (or increase in) Excluded Taxes; provided, that the participation by
(or the representation) of the Parent or any Affiliate thereof in a Tax audit,
examination or other proceeding shall have no effect on the Parent's right to
indemnification under this Section 9.12.

                           (m) Unless required by applicable Tax Law or after
receipt of the written consent of the Representative, neither the Parent nor any
Affiliate thereof shall amend any Pre-Closing Period Tax Return or Straddle
Period Tax Return of the Company or any Subsidiary, and, if the Parent or such
Affiliate amends any such Tax Return, the indemnity provided in this Article IX
shall be void solely with respect to any associated payment of (or increase in)
Excluded Taxes.

                           (n) With respect to Tax matters, nothing in this
Article IX or elsewhere in this Agreement shall require a party to reimburse
another party more than once for the same Tax benefit or to indemnify a party
more than once for the same Tax Liability.

                  Section 9.13 Stockholder Representative. In connection with
this Agreement, GFI, as stockholder representative (the "Representative"), shall
have exclusive power and authority with respect to any action taken pursuant to
this Agreement (including, without limitation, with respect to indemnification
claims, waivers and the Merger Consideration adjustment) and the Parent
Indemnified Parties shall be entitled to rely on such actions of GFI.

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

                  Section 10.01 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.01):

                                       49



                           (a) If to Parent or Merger Sub:

                               Dycom Industries, Inc.
                               First Union Center
                               Suite 500
                               4440 PGA Boulevard
                               Palm Beach Gardens, FL  33410
                               Facsimile:
                               Attention: Mike Miller, Esq.

                               With a copy to:

                               Shearman & Sterling LLP
                               599 Lexington Avenue
                               New York, New York  10022
                               Facsimile: (212) 848-7179
                               Attention: Stephen M. Besen, Esq.

                           (b) If to GFI, the Representative or the Company:

                               GFI Energy Ventures LLC
                               11611 San Vicente Blvd.
                               Suite 710
                               Los Angeles, CA  90047
                               Facsimile: (310) 442-0540
                               Attention: Ian Schapiro

                               With a copy to:

                               Skadden, Arps, Slate, Meagher & Flom LLP
                               310 S. Grand Avenue
                               Suite 3400
                               Los Angeles, CA  90071
                               Facsimile: (213) 687-5600
                               Attention: Jeffrey H. Cohen, Esq.

                  Section 10.02 Certain Definitions.

                           (a) For purposes of this Agreement and the Company
Disclosure Schedule:

                                       50



                  "2003 Tax Liability" means the aggregate Tax Liabilities that
are unpaid as of the Closing Date and otherwise constitute Excluded Taxes of the
Company and its Subsidiaries for any tax period beginning on or after January 1,
2003 and ending on or before the Closing Date and for any Pre-Closing Straddle
Period.

                  "Accounts Receivable" means any and all accounts receivable,
notes and other amounts receivable from third parties, including, without
limitation, customers and employees, arising from the conduct of the business of
the Company and its Subsidiaries.

                  "Additional Merger Consideration" has the meaning set forth in
Section 2.06(e)(i).

                  "Adjustment Escrow Amount" equals $500,000.

                  "Affiliate(s)" of a specified person means a person who,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person.

                  "Affiliated Group" means any consolidated, affiliated,
combined or unitary group of companies or corporations for federal, state, local
or foreign Tax purposes with respect to which the Company or any Subsidiary is
or has been a member.

                  "Aggregate Fully-Diluted Shares" shall have the meaning set
forth in Section 2.02 (b).

                  "Aggregate Option Exercise Price" shall have the meaning set
forth in Section 2.02(b).

                  "Applicable Percentage" of any Stockholder or Optionholder, as
the case may be, means the quotient (expressed as a percentage) of (i) the
amount such holder is entitled to receive pursuant to Section 2.04 or 2.03, as
the case may be, over (ii) the Merger Consideration.

                  "Business Day" means any day on which banks are not required
or authorized to close in the City of New York.

                  "Capital Source Credit Agreement" means the Revolving Credit,
Term Loan and Security Agreement, among the Company, UtiliQuest, LLC,
Underground Technology Incorporated and Capital Source Finance LLC, dated as of
December 6, 2002.

                  "Closing Date Debt" means (i) the aggregate amount of
Indebtedness of the Company and its Subsidiaries (including any current portion)
outstanding immediately prior to the Effective Time plus (ii) all accrued and
unpaid interest thereon plus (iii) the aggregate amount of premiums, prepayment
penalties, make-wholes or similar amounts payable in

                                       51



connection with the payment or redemption of such Indebtedness, including any
fees and expenses incurred in connection therewith.

                  "Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.

                  "Company Common Stock" means the shares of common stock,
$0.001 par value per share, of the Company.

                  "Company IP Agreements" means (a) licenses or assignments of
Intellectual Property by the Company to any third party, (b) licenses or
assignments of Intellectual Property by any third party to the Company, (c)
agreements between the Company and any third party relating to the development
or use of Intellectual Property, the development or transmission of data, or the
use, modification, framing, linking, advertisement or other practices with
respect to Internet web sites, and (d) consents, settlements, decrees, orders,
injunctions, judgments or rulings governing the use, validity or enforceability
of Owned Intellectual Property.

                  "Company Stock Option Plan" means the UtiliQuest Holdings
Corp. 2001 Omnibus Stock Incentive Plan.

                  "Consolidated Tax Group" shall mean any affiliated group
filing a consolidated federal income Tax Return within the meaning of Section
1504(a) of the Code or any similar state, local or foreign Tax Law.

                  "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise.

                  "Conveyance Taxes" means sales, use, value added, transfer,
stamp, share, stock transfer, real property transfer or gains and other similar
Taxes.

                  "Encumbrance" means any security interest, pledge,
hypothecation, mortgage, lien (including, without limitation, environmental and
Tax liens), charge, encumbrance, right of first refusal, option, servient
easement, adverse claim, reversion reverter, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.

                  "Environmental Law" means any applicable United States
federal, state or local or non-United States laws relating to (i) releases or
threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (ii) the manufacture, handling, transport, use, treatment, storage
or disposal of Hazardous Substances or materials containing Hazardous
Substances; or (iii) pollution or protection of the environment, human health or
natural resources.

                                       52



                  "Escrow Accounts" means the Adjustment Escrow Account and the
Indemnity Escrow Account.

                  "Excluded Taxes" means after taking into account with respect
to Income Taxes the deemed utilization of any net operating loss carrybacks or
carryforwards of the Company or any Subsidiary, as the case may be, as of the
Closing Date and unreduced by the Parent's or any Affiliate of Parent's,
including the Company or any Subsidiary, use of such net operating losses, (i)
Taxes imposed on or payable by the Company or any Subsidiary for any Pre-Closing
Period Tax Return or Pre-Closing Straddle Period and (ii) Taxes imposed on
Parent or the Company as a result of any breach of warranty or representation
relating to Taxes, or breach by GFI of any covenant relating to Taxes; provided,
however, that Excluded Taxes shall not include Taxes relating to the absence or
loss, in each case in whole or in part, of any Tax attribute, including, but not
limited to, any net operating loss of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, any such Taxes described in clause (i) or (ii) of
the preceding sentence shall be treated as Excluded Taxes only to the extent
that such Taxes exceed the amount, if any, specifically reserved for Taxes
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) on the face of the Final Closing
Working Capital.

                  "Expenses" shall include all reasonable out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party) incurred by a party or
on its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the solicitation of
stockholder approvals, the filing of any required notices under the HSR Act or
other similar regulations and all other matters related to the closing of the
merger and the other transactions contemplated by this Agreement.

                  "Gerblick Notes" means Promissory Note A and Promissory Note
B.

                  "Hazardous Substances" means (i) those substances defined in
or regulated under the following United States federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act, (ii) petroleum and petroleum products, including
crude oil and any fractions thereof, (iii) natural gas, synthetic gas, and any
mixtures thereof, (iv) polychlorinated biphenyls, asbestos and radon, and (v)
any contaminant, substance, material or waste regulated by any Governmental
Authority pursuant to any Environmental Law.

                  "Income Taxes" means Excluded Taxes imposed on or measured by
income or capital gain.

                                       53



                  "Indebtedness" means, with respect to any Person, (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (ii) any
other indebtedness that is evidenced by a note, bond, debenture or similar
instrument, (iii) all liabilities secured by any Encumbrances on any property,
(iv) all obligations of such Person as lessee under leases that have been or
should be, in accordance with U.S. GAAP, recorded as capital leases, (v) all
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities other than performance bonds or letters of credit
supporting insurance policies or programs and (vi) all guarantee obligations;
provided, that guarantee obligations entered into, or collateral posted in
connection with insurance policies or performance bonds, shall be deemed not to
constitute Indebtedness.

                  "Indemnity Escrow Account" means that account with the Escrow
Agent into which the Indemnity Escrow Amount is deposited in accordance with the
terms of this Agreement.

                  "Indemnity Escrow Amount" equals $10,000,000.

                  "Intellectual Property" means (i) United States, non-United
States and international patents, patent applications and statutory invention
registrations, (ii) trademarks, service marks, trade dress, logos, trade names,
corporate names and other identifiers of source or goodwill, and registrations
and applications for registration thereof, (iii) copyrightable works,
copyrights, and registrations and applications for registration thereof, and
(iv) confidential and proprietary information, including trade secrets, know-how
and invention rights.

                  "Inventory" means all stock in trade, merchandise, goods,
supplies and other products, raw materials, work-in-process and finished
products related primarily to the business, together with all rights against
suppliers of such inventories (including claims receivable for rejected
inventory), and all prepayments and amounts paid on deposit with respect to the
same (including any of the foregoing owned by the Company but at metered
customer locations or in the possession of manufacturers, suppliers or dealers
or in transit or returned goods).

                  "Knowledge of the Company" means the actual knowledge of the
persons listed on Schedule I hereto or the Knowledge such persons would have had
after reasonable inquiry of the persons responsible for the applicable area.

                  "Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, including, without limitation, those
arising under any Law, Action or Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.

                  "Licensed Intellectual Property" means Intellectual Property
licensed to the Company pursuant to a Company IP Agreement.

                                       54



                  "Material Adverse Effect" means any material adverse effect on
(i) the business, financial condition, assets, liabilities or results of
operations of the Company and its Subsidiaries taken as a whole or (ii) the
ability of the Company to consummate the transactions contemplated by this
Agreement; provided, however, that none of the following shall be considered a
Material Adverse Effect: (i) changes in general economic conditions,(ii) any
changes generally affecting the industries in which the Company and its
Subsidiaries operate, or (iii) the execution of this Agreement, the public
announcement of the transactions contemplated hereby or the consummation of the
transactions contemplated hereby.

                  "Merger Consideration" has the meaning set forth in Section
2.02(a).

                  "Non-Income Taxes" means any Excluded Taxes other than Income
Taxes.

                  "Owned Intellectual Property" means Intellectual Property
owned by the Company.

                  "Person" means an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act), trust, association or entity or government, political subdivision, agency
or instrumentality of a government.

                  "Per Share Merger Consideration" shall have the meaning set
forth in Section 2.02(b).

                  "Promissory Note A" means the promissory note, dated September
27, 2002, in favor of the James G. Gerblick Trust in the original principal
amount of $3 million, together with interest in arrears on the unpaid principal
balance at an annual rate of 6%, which is due on the third anniversary of its
issuance, as such is amended (or the obligations thereunder are revised)
pursuant to the Settlement Agreement and Mutual Release.

                  "Promissory Note B" means the promissory note, dated September
27, 2002, in favor of the James G. Gerblick Trust in the amount of $3.6 million,
together with interest in arrears on the unpaid principal balance at an annual
rate of 6%, which is due on the fifth anniversary of its issuance.

                  "Settlement Agreement and Mutual Release" means the agreement
to be entered into among UtiliQuest Holdings Corp., James G. Gerblick, and The
James G. Gerblick Trust, amending the terms of (or revising the obligations
under) Promissory Note A and releasing certain claims against James G. Gerblick
and the James G. Gerblick Trust.

                  "Straddle Period" shall mean any taxable period beginning
before the Closing Date and ending after the Closing Date.

                                       55



                  "Subsidiary" or "Subsidiaries" means any person controlled by
the Company, directly or indirectly, through one or more intermediaries.

                  "Targeted Working Capital" equals $800,000.

                  "Tax" or "Taxes" means (i) any and all taxes, fees, levies,
duties, tariffs, imposts, and other similar charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority, including
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, share capital, capital
stock, payroll, employment, social security, workers' compensation, unemployment
compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; (ii) any
liability for the payment of any Tax as a result of membership in any Affiliated
Group and (iii) any transferee or secondary liability in respect of any Tax
(whether imposed by Law or contractual arrangement).

                  "Tax Returns" means any return, declaration, report, election,
claim for refund or information return or other statement or form relating to,
filed or required to be filed with any taxing authority, including any schedule
or attachment thereto, and including any amendment thereof.

                  "U.S. GAAP" means United States generally accepted accounting
principles and practices in effect from time to time applied consistently
throughout the periods involved.

                  "Working Capital" means the consolidated net current assets
(including current assets relating to tax refunds and cash and deposits to the
extent not applied to reduce Indebtedness prior to the Closing) less the
consolidated net current liabilities of the Company and its Subsidiaries, plus
all cash used by the Company or any of its Subsidiaries to support insurance
programs or policies or performance bonds regardless of the GAAP
characterization of such cash, excluding (i) the current portion of any
Indebtedness to the extent included in Closing Date Debt, (ii) any accrued but
unpaid management fees, (iii) any interest accrued or fees payable on
Indebtedness to the extent included in Closing Date Debt and (iv) any deferred
taxes shown on the Closing Balance Sheet but including as a fixed amount (not
subject to adjustment) $7,764,000 of deferred taxes as a current asset, all,
except as otherwise provided above, as determined in accordance with GAAP and
applied in a manner consistent with the Company's past practice.

                  (c) The following terms have the meaning set forth in the
Sections set forth below:

                                       56





                       Defined Term                                  Location of Definition
                       ------------                                  ----------------------
                                                                  
AAA...........................................................           Section 10.06

Action........................................................           Section 3.08

Agreement.....................................................           Preamble

Assignment Agreement..........................................           Section 6.07(a)

Business Combination..........................................           Section 6.02

Byers.........................................................           Section 6.07

Certificates..................................................           Section 2.04(a)

Certificate of Merger.........................................           Section 1.02

Closing.......................................................           Section 1.02

Closing Balance Sheet.........................................           Section 2.06(a)

Closing Date..................................................           Section 1.02

Closing Expenses..............................................           Section 8.03(a)

Closing Financial Data........................................           Section 2.06(b)

Closing Working Capital.......................................           Section 2.06(a)

Company.......................................................           Preamble

Company Disclosure Schedule...................................           Article III

Confidentiality Agreement.....................................           Section 6.01(b)

DGCL..........................................................           Recitals

Dispute.......................................................           Section 10.06(a)

Dissenting Shares.............................................           Section 2.10

Effective Time................................................           Section 1.02


                                       57





                       Defined Term                                    Location of Definition
                       ------------                                    ----------------------
                                                                    
Enron.........................................................           Section 6.07

Environmental Permits.........................................           Section 3.18(a)

ERISA.........................................................           Section 3.12(a)

Escrow Agent..................................................           Recitals

Escrow Agreement..............................................           Recitals

Estimated Balance Sheet.......................................           Section 2.06(a)

Estimated Working Capital.....................................           Section 2.06(a)

Expiration Date...............................................           Section 9.01(a)

Financial Statements..........................................           Section 3.09(a)(i)

GFI...........................................................           Preamble

Governmental Authority........................................           Section 3.06(b)

HSR Act.......................................................           Section 3.06(b)

Indemnified Party.............................................           Section 9.05

Indemnifying Party............................................           Section 9.05

Interim Financial Statements..................................           Section 3.09(a)(ii)

JEDI..........................................................           Section 6.07

Law...........................................................           Section 3.06(a)

Lease Documents...............................................           Section 3.15(b)

Liens.........................................................           Section 3.15(a)

Loss..........................................................           Section 9.02

Losses........................................................           Section 9.02


                                       58





                       Defined Term                                    Location of Definition
                       ------------                                    ----------------------
                                                                    
Material Contracts............................................           Section 3.21(a)

Merger........................................................           Recitals

Merger Payment................................................           Section 2.04(a)

Merger Sub....................................................           Preamble

Neutral Auditor...............................................           Section 2.06(d)

New York Courts...............................................           Section 10.06(e)

Optionholders.................................................           Section 2.03

Option........................................................           Section 2.03

Order.........................................................           Section 7.01(b)

Organizational Documents......................................           Section 3.03

Parent........................................................           Preamble

Parent Indemnified Parties....................................           Section 9.02

Parent's Representatives......................................           Section 6.01(a)(i)

Permits.......................................................           Section 3.07

Permitted Liens...............................................           Section 3.15(a)

Per Share Merger Consideration Certificate....................           Section 2.05

Plans.........................................................           Section 3.12(a)

Power Fund....................................................           Section 6.07

Pre-Closing Periods...........................................           Section 9.12(a)

Pre-Closing Period Tax Returns................................           Section 9.12(a)

Pre-Closing Straddle Period...................................           Section 9.12(c)


                                       59





                       Defined Term                                    Location of Definition
                       ------------                                    ----------------------
                                                                    
Press Release.................................................           Section 6.05

Related Party Transaction.....................................           Section 3.23

Representatives...............................................           Section 6.02

Resolution Period.............................................           Section 2.06(c)

Robertson.....................................................           Section 6.07

Rules.........................................................           Section 10.06(a)

Seller Parties................................................           Section 6.07

Settlement Agreement..........................................           Section 6.07

Shares........................................................           Section 2.01(a)

Stockholder...................................................           Section 2.01(a)

Stockholder Indemnified Parties...............................           Section 9.03

Surviving Corporation.........................................           Section 1.01

Third Party Claims............................................           Section 9.05(b)

Trutta........................................................           Section 6.07

UPA...........................................................           Section 6.07

UQ Acquisition Claims.........................................           Section 6.07

UQ Escrow Agreement...........................................           Section 6.07

WARN..........................................................           Section 3.12(h)(i)


                  Section 10.03 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other

                                       60



provision is invalid, illegal or incapable of being enforced, 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 in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.

                  Section 10.04 Entire Agreement; Assignment. This Agreement,
the Escrow Agreement and the Confidentiality Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned, except that Parent and Merger Sub may assign
all or any of their rights and obligations hereunder to any Affiliate of Parent,
provided that no such assignment shall relieve Parent of its obligations
hereunder if such assignee does not perform such obligations.

                  Section 10.05 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.

                  Section 10.06 Arbitration; Legal Proceedings.

                           (a) Submission of Controversy to Arbitration. Except
as provided in Section 2.06 and 9.12, any dispute, claim or controversy arising
out of or relating to this Agreement, including the breach, termination or
validity thereof and the arbitrability of any claim thereunder (a "Dispute"),
shall be settled by final and binding arbitration in the Borough of Manhattan of
the City of New York, under the then-effective Commercial Arbitration Rules of
the American Arbitration Association ("AAA"), (the "Rules") as modified by this
Agreement. Judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction. The award rendered by the arbitrator shall be
final and binding on the parties. There shall be one arbitrator who shall be
appointed by the parties within twenty (20) days of receipt by the respondent(s)
of the demand for arbitration. If the parties are unable to timely agree on one
arbitrator, they shall ask the AAA to appoint one in accordance with the
listing, striking and ranking procedure in the Rules and such appointment shall
be binding on the parties. Parent and the Surviving Corporation shall act and be
treated as one party for all purposes in any arbitration, including selection of
the arbitrator. The arbitrator shall have the authority to award any remedy or
relief that a court in the State of New York could order or grant, including
specific performance of any obligation created under this Agreement, the
issuance of an injunction or other provisional relief, or the imposition of
sanctions for abuse or frustration of the arbitration process. The arbitral
tribunal shall apply the law of the state of New York in deciding the merits of
any Dispute. The arbitration award will be in writing.

                           (b) Arbitration to Be Expeditious. It is the intent
of the parties that any arbitration shall be concluded as quickly as reasonably
practicable. Unless the parties otherwise

                                       61



agree, once commenced, the hearing on the disputed matters shall be held four
(4) days a week until concluded, with each hearing date to begin at 9:00 a.m.
and to conclude at 5:00 p.m. The arbitrator shall use all reasonable efforts to
issue the final award or awards within a period of five (5) Business Days after
closure of the proceedings. Failure of the arbitrator to meet the time limits of
this Section 10.6 shall not be a basis for challenging the award.

                           (c) Discovery and Certain Evidentiary Matters.
Consistent with the expedited nature of arbitration, each party will, upon the
timely written request of the other party, promptly provide the other with
copies of documents relevant to the issues raised by any claim or counterclaim.
Upon the timely request of a party, the arbitrator shall have the discretion to
order examination by deposition of witnesses to the extent the arbitrator deems
such discovery relevant and appropriate. In considering the relevancy,
materiality, and admissibility of evidence, the arbitrators shall take into
account, among other things, applicable principles of legal privilege, including
the attorney-client privilege, the work product doctrine, and the
self-evaluative privilege, and appropriate protection of confidential
information.

                           (d) Costs of Arbitration. The parties shall share
equally the fees and expenses of the arbitrator.

                           (e) Jurisdiction and Process. Each party hereto
hereby submits to the exclusive jurisdiction of any New York federal court in
the Borough of Manhattan, City of New York and if the court lacks jurisdiction
over such proceeding, to the exclusive jurisdiction of any New York state court
in the Borough of Manhattan, City of New York (collectively, the "New York
Courts"), for the purpose of an order to compel arbitration and for provisional
remedies or other relief in aid of arbitration, and to the non-exclusive
jurisdiction of the New York Courts for the enforcement of any award issued
hereunder. Each party hereby submits to personal jurisdiction in the New York
Courts and irrevocably waives any objection as to venue therein, and further
agrees not to plead or claim in any such court that any such proceeding has been
brought in an inconvenient forum.

                  Section 10.07 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
were not performed in accordance with the terms hereof and that the parties
shall be entitled to seek specific performance of the terms hereof, in addition
to any other remedy at law or equity.

                  Section 10.08 Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of,
Parent, the Company and GFI or (b) by a waiver in accordance with Section 10.08.

                  Section 10.09 Waiver. Any party hereto may (a) extend the time
for the performance of any obligations or other acts of any other party hereto,
(b) waive any inaccuracies in the representations and warranties of any other
party hereto contained herein or in any document delivered by such other party
pursuant hereto or (c) waive compliance with any of

                                       62



the agreements of any other party hereto or conditions to such party's
obligations contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
such rights.

                  Section 10.10 Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.

                  Section 10.11 Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of the nouns and pronouns shall
include the plural and vice versa.

                  Section 10.12 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.

                     [REST OF PAGE INTENTIONALLY LEFT BLANK]

                                       63



                  IN WITNESS WHEREOF, Parent, Merger Sub, the Company and GFI
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.

                                    DYCOM INDUSTRIES, INC.

                                    By: /s/ Steven Nielsen
                                       -----------------------------------------
                                    Name:  Steven Nielsen
                                    Title: President and Chief Executive Officer

                                    UTILIQUEST ACQUISITION CORP.

                                    By: /s/ Steven Nielsen
                                       -----------------------------------------
                                    Name:  Steven Nielsen
                                    Title: President

                                    UTILIQUEST HOLDINGS CORP.

                                    By: /s/ Rob Karam
                                       -----------------------------------------
                                    Name:  Rob Karam
                                    Title: Vice President

                                    OCM/GFI POWER OPPORTUNITIES FUND, L.P.

                                    (in its own capacity and as Representative)

                                    By: GFI Energy Ventures LLC, its Co-General
                                    Partner

                                       64



                                    By: /s/ Ian Schapiro
                                       ------------------------------
                                    Name:  Ian Schapiro
                                    Title: Principal

                                       65

EX-31.1

                                                                    EXHIBIT 31.1

                             DYCOM INDUSTRIES, INC.
                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Steven E. Nielsen, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Dycom Industries,
         Inc.;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         a)       designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         c)       disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         a)       all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: December 5, 2003

/s/ Steven E. Nielsen
- ----------------------
Steven E. Nielsen
President and Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

                             DYCOM INDUSTRIES, INC.
                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Richard L. Dunn, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Dycom Industries,
         Inc.;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         a)       designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this quarterly report is being
                  prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         c)       disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         a)       all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: December 5, 2003

/s/ Richard L. Dunn
- -------------------
Richard L. Dunn
Senior Vice-President and Chief Financial Officer

EX-32.1

                                                                    EXHIBIT 32.1

                             DYCOM INDUSTRIES, INC.

              CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Dycom Industries, Inc. (the
"Company") on Form 10-Q for the period ending October 25, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned hereby certifies that to the best of my knowledge:

         1.       The Report fully complies with the requirements of Section
                  13(a) of the Securities Exchange Act of 1934; and

         2.       the information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company.



Date: December 5, 2003                    /s/ Steven E. Nielsen
                                          ---------------------
                                          Steven E. Nielsen
                                          President and Chief Executive Officer

EX-32.2

                                                                    EXHIBIT 32.2

                             DYCOM INDUSTRIES, INC.

              CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Dycom Industries, Inc. (the
"Company") on Form 10-Q for the period ending October 25, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned hereby certifies that to the best of my knowledge:

         1.       The Report fully complies with the requirements of Section
                  13(a) of the Securities Exchange Act of 1934; and

         2.       the information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company.



Date: December 5, 2003                        /s/ Richard L. Dunn
                                              -------------------
                                              Richard L. Dunn
                                              Senior Vice-President
                                              and Chief Financial Officer